0:'united states government accountability office office of the general counsel gao february 2006 principles of federal appropriations law third edition',
1:'volume ii as of march 10, 2016, gao, principles of federal appropriations law, 4th ed., 2016 rev., ch. 1, gao16463sp',
2:'washington, d.c.: mar. 2016, and gao, principles of federal appropriations law, 4th ed., 2016 rev., ch. 2, gao16464sp washington, d.c.:',
3:'mar. 2016, supersede chapters 1, 2, and 3 of gao, principles of federal appropriations law, 3rd ed., gao04261sp washington, d.c.:',
4:'jan. 2004. chapters 4 through 15 of the third edition of principles of federal appropriations law, in conjunction with gao,',
5:'principles of federal appropriations law: annual update to the third edition, gao15303sp washington, d.c.: mar. 2015, remain the most currently',
6:'available material on the topics discussed therein. both principles and the annual update to the third edition are available at',
7:'www.gao.gov/legal/redbook/overview. this volume supersedes the volume ii, second edition of the principles of federal appropriations law, 1992. the security of',
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10:'enable the additional functions. a gao06382sp abbreviations apa administrative procedure act blm bureau of land management cda contract disputes act',
11:'of 1978 ccc commodity credit corporation c.f.r. code of federal regulations eaja equal access to justice act eeoc equal employment',
12:'opportunity commission far federal acquisition regulation fy fiscal year gao government accountability office gsa general services administration hud department of',
13:'housing and urban development irs internal revenue service nrc nuclear regulatory commission omb office of management and budget sba small',
14:'business administration tfm treasury financial manual u.s.c. united states code ura uniform relocation assistance and real property acquisition policies act',
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18:'foreword this is volume ii of principles of federal appropriations law, third edition. as we explained in the foreword to',
19:'the third edition of volume i, publication of this volume continues our process of revising and updating the second edition',
20:'of the “red book” and reissuing it in what will ultimately be a 3volume looseleaf set with cumulative annual updates.',
21:'this volume and all other volumes of principles, including the annual updates, are available on gao’s web site www.gao.gov under',
22:'“legal products.” the annual updates are only available online. the online updated versions contain hyperlinks to the gao material cited.',
23:'check the gao web site for other interesting information, for example, materials from our annual appropriations law forum. our objective',
24:'in principles is to present a basic reference work covering those areas of law in which the comptroller general issues',
25:'decisions, using text discussion with specific legal authorities to illustrate the principles discussed, their application, and exceptions. as we noted',
26:'in our first volume, principles should be used as a general guide and starting point, not as a substitute for',
27:'original legal research. we measure our success in this endeavor by principles’ daytoday utility to its federal and nonfederal audience.',
28:'in this regard, we appreciate the many comments and suggestions we have received to date, and hope that our publication',
29:'will continue to serve as a useful reference. anthony h. gamboa general counsel february 2006 page i gao06382sp appropriations law—vol.',
30:'ii [this page is intended to be blank. please do not read it.] page ii gao06382sp appropriations law—vol. ii detailed',
31:'table of contents volume ii chapters 611 chapter 6 a. introduction . . . . . . . . .',
32:'. . . . . . . . . . . . . . . . . . . .',
33:'. . . . . . . . . . . . . . . . 64 b. types of',
34:'appropriation language . . . . . . . . . . . . . . . . . .',
35:'.65 availability of 1. lumpsum appropriations . . . . . . . . . . . . . .',
36:'. . . . . . . . . . . . . . . . . . 65 appropriations:',
37:'a. effect of budget estimates . . . . . . . . . . . . . . .',
38:'. . . . . . . . . . . . . . 610 b. restrictions in legislative history',
39:'. . . . . . . . . . . . . . . . . . . .',
40:'. . . 612 amount c. “zero funding” under a lumpsum appropriation . . . . . . . .',
41:'. 624 2. lineitem appropriations and earmarks . . . . . . . . . . . . .',
42:'. . . . . . . 626 c. the antideficiency act . . . . . . . .',
43:'. . . . . . . . . . . . . . . . . . .634 1.',
44:'introduction and overview . . . . . . . . . . . . . . . . .',
45:'. . . . . . . . . . . . . . 634 2. obligation/expenditure in excess or',
46:'advance of appropriations . . . . . . . . . . . . . . . . .',
47:'. . . . . . . . . . . . . . . . . . . .',
48:'. . . . 638 a. exhaustion of an appropriation . . . . . . . . . .',
49:'. . . . . . . . . . . . . . . 641 1 making further payments',
50:'. . . . . . . . . . . . . . . . . . . .',
51:'. . . . . . 641 2 limitations on contractor recovery . . . . . . . .',
52:'. . . . . . . . . . 643 b. contracts or other obligations in excess or advance',
53:'of appropriations . . . . . . . . . . . . . . . . . .',
54:'. . . . . . . . . . . . . . . . . . . .',
55:'. 646 1 proper recording of obligations . . . . . . . . . . . . .',
56:'. . . . . . . . 646 2 obligation in excess of appropriations . . . . .',
57:'. . . . . . . . . . 647 3 variable quantity contracts . . . . .',
58:'. . . . . . . . . . . . . . . . . . . .',
59:'648 4 multiyear or “continuing” contracts . . . . . . . . . . . . . .',
60:'. . . 651 c. indemnification . . . . . . . . . . . . . .',
61:'. . . . . . . . . . . . . . . . . . . .',
62:'. . . . . 659 1 prohibition against unlimited liability . . . . . . . . .',
63:'. . . . . . . 661 2 when indemnification may be permissible . . . . . .',
64:'. . . . . 671 3 statutorily authorized indemnification . . . . . . . . . .',
65:'. . . . . 677 d. specific appropriation limitations/purpose violations . . . . . 679 e. amount of',
66:'available appropriation or fund . . . . . . . . . . . . . . 684 f.',
67:'intent/factors beyond agency control . . . . . . . . . . . . . . . .',
68:'. . . 686 g. exceptions . . . . . . . . . . . . . .',
69:'. . . . . . . . . . . . . . . . . . . .',
70:'. . . . . . . . . 688 1 contract authority . . . . . . .',
71:'. . . . . . . . . . . . . . . . . . . .',
72:'. . . . . 688 2 other obligations “authorized by law” . . . . . . . .',
73:'. . . . . . . 691 3. voluntary services prohibition . . . . . . . .',
74:'. . . . . . . . . . . . . . . . . . . .',
75:'693 a. introduction . . . . . . . . . . . . . . . . .',
76:'. . . . . . . . . . . . . . . . . . . .',
77:'. . . . 693 b. appointment without compensation and waiver of salary . . 695 1 the rules—general discussion',
78:'. . . . . . . . . . . . . . . . . . . .',
79:'. . 695 2 student interns . . . . . . . . . . . . . .',
80:'. . . . . . . . . . . . . . . . . . . .',
81:'6102 3 program beneficiaries . . . . . . . . . . . . . . . .',
82:'. . . . . . . . . . . . 6104 4 applicability to legislative and judicial branches',
83:'. . . . . 6105 c. other voluntary services . . . . . . . . . .',
84:'. . . . . . . . . . . . . . . . . . . .',
85:'6105 d. exceptions . . . . . . . . . . . . . . . . .',
86:'. . . . . . . . . . . . . . . . . . . .',
87:'. . . . . 6110 1 safety of human life . . . . . . . . .',
88:'. . . . . . . . . . . . . . . . . . . .',
89:'. 6111 2 protection of property . . . . . . . . . . . . . .',
90:'. . . . . . . . . . . . . . 6111 page iii gao06382sp appropriations law—vol.',
91:'ii contents 3 recent developments . . . . . . . . . . . . . . .',
92:'. . . . . . . . . . . . . 6112 e. voluntary creditors . . .',
93:'. . . . . . . . . . . . . . . . . . . .',
94:'. . . . . . . . . . . 6116 4. apportionment of appropriations . . . .',
95:'. . . . . . . . . . . . . . . . . . . .',
96:'6116 a. statutory requirement for apportionment . . . . . . . . . . . . . .',
97:'. 6117 b. establishing reserves . . . . . . . . . . . . . . .',
98:'. . . . . . . . . . . . . . . . . 6122 c. method',
99:'of apportionment . . . . . . . . . . . . . . . . . .',
100:'. . . . . . . . . . . 6125 d. control of apportionments . . . .',
101:'. . . . . . . . . . . . . . . . . . . .',
102:'. . . . 6127 e. apportionments requiring deficiency estimate . . . . . . . . . .',
103:'6129 f. exemptions from apportionment requirement . . . . . . . . . . . 6134 g. administrative',
104:'division of apportionments . . . . . . . . . . . . . . 6136 h. expenditures',
105:'in excess of apportionment . . . . . . . . . . . . . . . 6139',
106:'5. penalties and reporting requirements . . . . . . . . . . . . . . .',
107:'. . . . . 6143 a. administrative and penal sanctions . . . . . . . . .',
108:'. . . . . . . . . . . 6143 b. reporting requirements . . . . .',
109:'. . . . . . . . . . . . . . . . . . . .',
110:'. . . . . 6144 6. funding gaps . . . . . . . . . . .',
111:'. . . . . . . . . . . . . . . . . . . .',
112:'. . . . . . . . . . 6146 d. supplemental and deficiency appropriations . . . .',
113:'. . .6159 e. augmentation of appropriations. . . . . . . . . . . . . .',
114:'. . . .6162 1. the augmentation concept . . . . . . . . . . . .',
115:'. . . . . . . . . . . . . . . . . . 6162 2.',
116:'disposition of moneys received: repayments and miscellaneous receipts . . . . . . . . . . . .',
117:'. . . . . . . . . . . . . . . . . . . .',
118:'. 6166 a. general principles . . . . . . . . . . . . . . .',
119:'. . . . . . . . . . . . . . . . . . . .',
120:'6166 1 the “miscellaneous receipts” statute . . . . . . . . . . . . . .',
121:'. 6166 2 exceptions . . . . . . . . . . . . . . . .',
122:'. . . . . . . . . . . . . . . . . . . .',
123:'. 6170 3 timing of deposits . . . . . . . . . . . . . .',
124:'. . . . . . . . . . . . . . . . . 6175 4 money',
125:'received or not received “for the government” 6177 b. contract matters . . . . . . . . .',
126:'. . . . . . . . . . . . . . . . . . . .',
127:'. . . . . . . . 6184 1 excess reprocurement costs . . . . . . .',
128:'. . . . . . . . . . . . . . . 6184 2 other damage claims',
129:'. . . . . . . . . . . . . . . . . . . .',
130:'. . . . . . . . . 6188 3 refunds and credits . . . . . .',
131:'. . . . . . . . . . . . . . . . . . . .',
132:'. . . . 6189 4 “nocost” contracts . . . . . . . . . . . .',
133:'. . . . . . . . . . . . . . . . . . 6191 c.',
134:'damage to government property and other tort liability . 6194 d. fees and commissions . . . . . .',
135:'. . . . . . . . . . . . . . . . . . . .',
136:'. . . . . 6199 e. economy act . . . . . . . . . . .',
137:'. . . . . . . . . . . . . . . . . . . .',
138:'. . . . . . . . . 6202 f. setoff . . . . . . . .',
139:'. . . . . . . . . . . . . . . . . . . .',
140:'. . . . . . . . . . . . . . . . . . 6205 g.',
141:'revolving funds . . . . . . . . . . . . . . . . . .',
142:'. . . . . . . . . . . . . . . . . . . 6206',
143:'h. trust funds . . . . . . . . . . . . . . . . .',
144:'. . . . . . . . . . . . . . . . . . . .',
145:'. . . . 6208 i. fines and penalties . . . . . . . . . . .',
146:'. . . . . . . . . . . . . . . . . . . .',
147:'. . . 6211 j. miscellaneous cases: money to treasury . . . . . . . . . .',
148:'. . . . . . 6212 k. miscellaneous cases: money retained by agency . . . . . .',
149:'. . . 6214 l. money erroneously deposited as miscellaneous receipts . 6216 3. gifts and donations to the government',
150:'. . . . . . . . . . . . . . . . . . . 6222',
151:'a. donations to the government . . . . . . . . . . . . . . .',
152:'. . . . . . . . . . 6222 page iv gao06382sp appropriations law—vol. ii contents b. donations',
153:'to individual employees . . . . . . . . . . . . . . . . .',
154:'. . . . 6231 1 contributions to salary or expenses . . . . . . . . .',
155:'. . . . . . . 6231 2 travelrelated promotional items . . . . . . . .',
156:'. . . . . . . . . . 6234 4. other augmentation principles and cases . . .',
157:'. . . . . . . . . . . . . . 6235 chapter 7 a. introduction: nature',
158:'of an obligation . . . . . . . . . . . . . . .72 b. criteria',
159:'for recording obligations obligation of 31 u.s.c. § 1501 . . . . . . . . . . .',
160:'. . . . . . . . . . . . . . . . . . . .',
161:'.76 appropriations 1. section 1501a1: contracts . . . . . . . . . . . . . .',
162:'. . . . . . . . . . . . . . . 710 a. binding agreement .',
163:'. . . . . . . . . . . . . . . . . . . .',
164:'. . . . . . . . . . . . . . . 710 b. contract “in writing”',
165:'. . . . . . . . . . . . . . . . . . . .',
166:'. . . . . . . . . . . . . . 714 c. requirement of specificity .',
167:'. . . . . . . . . . . . . . . . . . . .',
168:'. . . . . . . . 717 d. invalid award/unauthorized commitment . . . . . . .',
169:'. . . . . . . . . 718 e. variations in quantity to be furnished . . .',
170:'. . . . . . . . . . . . . . . . 719 f. amount to',
171:'be recorded . . . . . . . . . . . . . . . . . .',
172:'. . . . . . . . . . . . . 723 g. administrative approval of payment .',
173:'. . . . . . . . . . . . . . . . . . . .',
174:'726 h. miscellaneous contractual obligations . . . . . . . . . . . . . . .',
175:'. . . . 727 i. interagency transactions . . . . . . . . . . . .',
176:'. . . . . . . . . . . . . . . . . . 728 1',
177:'economy act agreements . . . . . . . . . . . . . . . . .',
178:'. . . . . . . . . 729 2 noneconomy act agreements . . . . . .',
179:'. . . . . . . . . . . . . . . 730 3 “binding agreement” requirement',
180:'. . . . . . . . . . . . . . . . . . . 731',
181:'4 orders from stock . . . . . . . . . . . . . . . .',
182:'. . . . . . . . . . . . . . . . 733 5 project orders',
183:'. . . . . . . . . . . . . . . . . . . .',
184:'. . . . . . . . . . . . . . . . 733 2. section 1501a2:',
185:'loans . . . . . . . . . . . . . . . . . . .',
186:'. . . . . . . . . . . . . 735 3. section 1501a3: interagency orders required',
187:'by law . . . . . 737 4. section 1501a4: orders without advertising . . . . . .',
188:'. . . . . . . . 739 5. section 1501a5: grants and subsidies . . . . .',
189:'. . . . . . . . . . . . . . 739 a. grants . . .',
190:'. . . . . . . . . . . . . . . . . . . .',
191:'. . . . . . . . . . . . . . . . . . . .',
192:'. . . . 740 b. subsidies . . . . . . . . . . . . .',
193:'. . . . . . . . . . . . . . . . . . . .',
194:'. . . . . . . . . . . 742 6. section 1501a6: pending litigation . . .',
195:'. . . . . . . . . . . . . . . . . . 744 7.',
196:'section 1501a7: employment and travel . . . . . . . . . . . . . . .',
197:'. . 745 a. wages, salaries, annual leave . . . . . . . . . . . .',
198:'. . . . . . . . . . . . . . 746 b. compensation plans in foreign',
199:'countries . . . . . . . . . . . . . . . . 748 c. training',
200:'. . . . . . . . . . . . . . . . . . . .',
201:'. . . . . . . . . . . . . . . . . . . .',
202:'. . . . . 749 d. uniform allowance . . . . . . . . . . .',
203:'. . . . . . . . . . . . . . . . . . . .',
204:'. . . . 749 e. travel expenses . . . . . . . . . . . .',
205:'. . . . . . . . . . . . . . . . . . . .',
206:'. . . . . 749 f. state department: travel outside continental united states 751 g. employee transfer/relocation costs .',
207:'. . . . . . . . . . . . . . . . . . . 752',
208:'8. section 1501a8: public utilities . . . . . . . . . . . . . . .',
209:'. . . . . . . . . 754 9. section 1501a9: other legal liabilities . . . .',
210:'. . . . . . . . . . . . . . 755 c. contingent liabilities. . .',
211:'. . . . . . . . . . . . . . . . . . . .',
212:'. . . . .755 page v gao06382sp appropriations law—vol. ii contents d. reporting requirements . . . . .',
213:'. . . . . . . . . . . . . . . . . . . .758',
214:'e. deobligation . . . . . . . . . . . . . . . . . .',
215:'. . . . . . . . . . . . . . . . .759 chapter 8 continuing',
216:'resolutions a. introduction . . . . . . . . . . . . . . . . .',
217:'. . . . . . . . . . . . . . . . . . .82 1.',
218:'definition and general description . . . . . . . . . . . . . . . .',
219:'. . . . . . . . . 82 2. use of appropriation warrants . . . . .',
220:'. . . . . . . . . . . . . . . . . . . .',
221:'. . . . 89 b. rate for operations . . . . . . . . . . .',
222:'. . . . . . . . . . . . . . . . . .810 1. current',
223:'rate . . . . . . . . . . . . . . . . . . .',
224:'. . . . . . . . . . . . . . . . . . . .',
225:'. . . . 810 2. rate not exceeding current rate . . . . . . . . .',
226:'. . . . . . . . . . . . . . . . 812 3. spending pattern',
227:'under continuing resolution . . . . . . . . . . . . . . 815 a. pattern',
228:'of obligations . . . . . . . . . . . . . . . . . .',
229:'. . . . . . . . . . . . . . . 815 b. apportionment . .',
230:'. . . . . . . . . . . . . . . . . . . .',
231:'. . . . . . . . . . . . . . . . . 818 4. liquidation',
232:'of contract authority . . . . . . . . . . . . . . . . .',
233:'. . . . . . . . 819 5. rate for operations exceeds final appropriation . . . .',
234:'. . . . . . . . 819 c. projects or activities. . . . . . . .',
235:'. . . . . . . . . . . . . . . . . . . .821',
236:'d. relationship to other legislation . . . . . . . . . . . . . . .',
237:'.827 1. not otherwise provided for . . . . . . . . . . . . . .',
238:'. . . . . . . . . . . . . . . . 827 2. status of',
239:'bill or budget estimate used as reference . . . . . . . . . 827 3. more restrictive',
240:'authority . . . . . . . . . . . . . . . . . . .',
241:'. . . . . . . . . . . . 829 4. lack of authorizing legislation . .',
242:'. . . . . . . . . . . . . . . . . . . .',
243:'. . . . . 831 e. duration . . . . . . . . . . . .',
244:'. . . . . . . . . . . . . . . . . . . .',
245:'. . . . . .835 1. duration of continuing resolution . . . . . . . . .',
246:'. . . . . . . . . . . . . . . 835 2. duration of appropriations',
247:'. . . . . . . . . . . . . . . . . . . .',
248:'. . . . . . . . . . . 836 3. impoundment . . . . . .',
249:'. . . . . . . . . . . . . . . . . . . .',
250:'. . . . . . . . . . . . . . . . 838 chapter 9 a.',
251:'introduction . . . . . . . . . . . . . . . . . . .',
252:'. . . . . . . . . . . . . . . . .94 b. general principles',
253:'. . . . . . . . . . . . . . . . . . . .',
254:'. . . . . . . . . . .95 liability and relief of 1. the concepts of liability',
255:'and relief . . . . . . . . . . . . . . . . . .',
256:'. . . . . . 95 accountable officers a. liability . . . . . . . . .',
257:'. . . . . . . . . . . . . . . . . . . .',
258:'. . . . . . . . . . . . . . . . . 95 b. surety',
259:'bonding . . . . . . . . . . . . . . . . . . .',
260:'. . . . . . . . . . . . . . . . . . . .',
261:'. 98 c. relief . . . . . . . . . . . . . . . .',
262:'. . . . . . . . . . . . . . . . . . . .',
263:'. . . . . . . . . . . . 99 2. who is an accountable officer? .',
264:'. . . . . . . . . . . . . . . . . . . .',
265:'. . . . . . 911 a. certifying officers . . . . . . . . . .',
266:'. . . . . . . . . . . . . . . . . . . .',
267:'. . . . . . 913 b. disbursing officers . . . . . . . . . .',
268:'. . . . . . . . . . . . . . . . . . . .',
269:'. . . . . 914 c. cashiers . . . . . . . . . . . .',
270:'. . . . . . . . . . . . . . . . . . . .',
271:'. . . . . . . . . . . . . 915 d. collecting officers . . .',
272:'. . . . . . . . . . . . . . . . . . . .',
273:'. . . . . . . . . . . . . 916 e. other agents and custodians .',
274:'. . . . . . . . . . . . . . . . . . . .',
275:'. . . . . . 917 3. funds to which accountability attaches . . . . . . .',
276:'. . . . . . . . . . . . 920 a. appropriated funds . . . .',
277:'. . . . . . . . . . . . . . . . . . . .',
278:'. . . . . . . . . . . 920 1 imprest funds . . . . .',
279:'. . . . . . . . . . . . . . . . . . . .',
280:'. . . . . . . . . . . 920 2 flash rolls . . . . .',
281:'. . . . . . . . . . . . . . . . . . . .',
282:'. . . . . . . . . . . . . . 923 page vi gao06382sp appropriations law—vol.',
283:'ii contents 3 travel advances . . . . . . . . . . . . . . .',
284:'. . . . . . . . . . . . . . . . . . . 925',
285:'b. receipts . . . . . . . . . . . . . . . . . .',
286:'. . . . . . . . . . . . . . . . . . . .',
287:'. . . . . . . 926 c. funds held in trust . . . . . . .',
288:'. . . . . . . . . . . . . . . . . . . .',
289:'. . . . . . . . 927 d. items which are the equivalent of cash . . .',
290:'. . . . . . . . . . . . . . . 928 4. what kinds of',
291:'events produce liability? . . . . . . . . . . . . . . . . .',
292:'. . 929 5. amount of liability . . . . . . . . . . . . .',
293:'. . . . . . . . . . . . . . . . . . . .',
294:'. . . . . 931 6. effect of criminal prosecution . . . . . . . . .',
295:'. . . . . . . . . . . . . . . . . . . 933',
296:'a. acquittal . . . . . . . . . . . . . . . . . .',
297:'. . . . . . . . . . . . . . . . . . . .',
298:'. . . . . . . 933 b. order of restitution . . . . . . . .',
299:'. . . . . . . . . . . . . . . . . . . .',
300:'. . . . . . . 934 c. physical loss or deficiency . . . . . . .',
301:'. . . . . . . . . . . . . . . .935 1. statutory provisions .',
302:'. . . . . . . . . . . . . . . . . . . .',
303:'. . . . . . . . . . . . . . . . 935 a. civilian agencies',
304:'. . . . . . . . . . . . . . . . . . . .',
305:'. . . . . . . . . . . . . . . . . 935 b. military',
306:'disbursing officers . . . . . . . . . . . . . . . . . .',
307:'. . . . . . . . . . 938 2. who can grant relief? . . . .',
308:'. . . . . . . . . . . . . . . . . . . .',
309:'. . . . . . . . . . . 940 a. 31 u.s.c. § 3527a . . .',
310:'. . . . . . . . . . . . . . . . . . . .',
311:'. . . . . . . . . . . . . 940 b. 31 u.s.c. § 3527b .',
312:'. . . . . . . . . . . . . . . . . . . .',
313:'. . . . . . . . . . . . . . . 942 c. role of administrative',
314:'determinations . . . . . . . . . . . . . . . . . . .',
315:'943 3. standards for granting relief . . . . . . . . . . . . . .',
316:'. . . . . . . . . . . . . . . 945 a. standard of negligence',
317:'. . . . . . . . . . . . . . . . . . . .',
318:'. . . . . . . . . . . . 945 b. presumption of negligence/burden of proof .',
319:'. . . . . . . . . . . . . 946 c. actual negligence . . .',
320:'. . . . . . . . . . . . . . . . . . . .',
321:'. . . . . . . . . . . . . . 948 d. proximate cause . .',
322:'. . . . . . . . . . . . . . . . . . . .',
323:'. . . . . . . . . . . . . . . 951 e. unexplained loss or',
324:'shortage . . . . . . . . . . . . . . . . . . .',
325:'. . . . . . . 954 f. compliance with regulations . . . . . . . .',
326:'. . . . . . . . . . . . . . . . . . . 957',
327:'g. losses in shipment . . . . . . . . . . . . . . . .',
328:'. . . . . . . . . . . . . . . . . . . .',
329:'959 h. fire, natural disaster . . . . . . . . . . . . . . .',
330:'. . . . . . . . . . . . . . . . . . . 960',
331:'i. loss by theft . . . . . . . . . . . . . . . .',
332:'. . . . . . . . . . . . . . . . . . . .',
333:'. . . . . 961 1 burglary: forced entry . . . . . . . . . .',
334:'. . . . . . . . . . . . . . . . . . . 962',
335:'2 robbery . . . . . . . . . . . . . . . . . .',
336:'. . . . . . . . . . . . . . . . . . . .',
337:'. . . 963 3 riot, public disturbance . . . . . . . . . . . .',
338:'. . . . . . . . . . . . . . . 963 4 evidence less than',
339:'certain . . . . . . . . . . . . . . . . . . .',
340:'. . . . . . 964 5 embezzlement . . . . . . . . . . .',
341:'. . . . . . . . . . . . . . . . . . . .',
342:'. . . . 968 j. agency security . . . . . . . . . . . .',
343:'. . . . . . . . . . . . . . . . . . . .',
344:'. . . . . . 969 k. extenuating circumstances . . . . . . . . . .',
345:'. . . . . . . . . . . . . . . . . . 973 d.',
346:'illegal or improper payment . . . . . . . . . . . . . . . .',
347:'. . . . . .975 1. disbursement and accountability . . . . . . . . . .',
348:'. . . . . . . . . . . . . . . 975 a. statutory framework: disbursement',
349:'under executive order no. 166 . . . . . . . . . . . . . . .',
350:'. . . . . . . . . . . . . . . . . . . .',
351:'. . . . . 975 b. automated payment systems . . . . . . . . . .',
352:'. . . . . . . . . . . . . . . . . 978 c. statistical',
353:'sampling . . . . . . . . . . . . . . . . . . .',
354:'. . . . . . . . . . . . . . . . 981 d. provisional vouchers',
355:'and related matters . . . . . . . . . . . . . . . . 982',
356:'e. facsimile signatures and electronic certification . . . . . . . . . 984 page vii gao06382sp appropriations',
357:'law—vol. ii contents f. gao audit exceptions . . . . . . . . . . . . .',
358:'. . . . . . . . . . . . . . . . . . . .',
359:'986 2. certifying officers . . . . . . . . . . . . . . . .',
360:'. . . . . . . . . . . . . . . . . . . .',
361:'. . 988 a. duties and liability . . . . . . . . . . . . .',
362:'. . . . . . . . . . . . . . . . . . . .',
363:'. . 988 b. applicability of 31 u.s.c. § 3528 . . . . . . . . . .',
364:'. . . . . . . . . . . . . . . 994 c. relief . .',
365:'. . . . . . . . . . . . . . . . . . . .',
366:'. . . . . . . . . . . . . . . . . . . .',
367:'. . . . . 995 3. disbursing officers . . . . . . . . . . .',
368:'. . . . . . . . . . . . . . . . . . . .',
369:'. . . . . . 9101 a. standards of liability and relief . . . . . . .',
370:'. . . . . . . . . . . . . . . . 9101 b. some specific',
371:'applications . . . . . . . . . . . . . . . . . . .',
372:'. . . . . . . . 9108 1 fraudulent travel claims . . . . . . .',
373:'. . . . . . . . . . . . . . . . . . . 9109',
374:'2 other cash payments fraudulently obtained . . . . . . . . . 9110 3 military separation vouchers',
375:'. . . . . . . . . . . . . . . . . . . .',
376:'. . 9111 4 assignment of contract payments . . . . . . . . . . . .',
377:'. . . . . . 9111 5 improper purpose/payment beyond scope of legal authority . . . . .',
378:'. . . . . . . . . . . . . . . . . . . .',
379:'. . . . . . . . . . . . . . 9112 4. check losses . .',
380:'. . . . . . . . . . . . . . . . . . . .',
381:'. . . . . . . . . . . . . . . . . . . .',
382:'9113 a. check cashing operations . . . . . . . . . . . . . . .',
383:'. . . . . . . . . . . . . 9113 b. duplicate check losses . .',
384:'. . . . . . . . . . . . . . . . . . . .',
385:'. . . . . . . . . 9118 c. errors in check issuance process . . . .',
386:'. . . . . . . . . . . . . . . . . . 9123 5.',
387:'statute of limitations . . . . . . . . . . . . . . . . .',
388:'. . . . . . . . . . . . . . . . . . 9125 e.',
389:'other relief statutes. . . . . . . . . . . . . . . . . .',
390:'. . . . . . . . .9128 1. statutes requiring affirmative action . . . . . .',
391:'. . . . . . . . . . . . . . . 9128 a. united states court',
392:'of federal claims . . . . . . . . . . . . . . . . .',
393:'. 9128 b. the legislative and judicial branches . . . . . . . . . . . .',
394:'. . . . . . 9129 c. savings bond redemption losses . . . . . . . .',
395:'. . . . . . . . . . . . . . 9130 2. statutes providing “automatic” relief',
396:'. . . . . . . . . . . . . . . . . . . .',
397:'. 9130 a. waiver of indebtedness . . . . . . . . . . . . . .',
398:'. . . . . . . . . . . . . . . . . 9130 b. compromise',
399:'of indebtedness . . . . . . . . . . . . . . . . . .',
400:'. . . . . . . . 9130 c. foreign exchange transactions . . . . . . .',
401:'. . . . . . . . . . . . . . . . . 9131 d. check',
402:'forgery insurance fund . . . . . . . . . . . . . . . . .',
403:'. . . . . . . 9132 e. secretary of the treasury . . . . . . .',
404:'. . . . . . . . . . . . . . . . . . . .',
405:'. . 9133 f. other statutes . . . . . . . . . . . . . .',
406:'. . . . . . . . . . . . . . . . . . . .',
407:'. . . . . 9133 f. procedures. . . . . . . . . . . . .',
408:'. . . . . . . . . . . . . . . . . . . .',
409:'. . .9134 1. reporting of irregularities . . . . . . . . . . . . .',
410:'. . . . . . . . . . . . . . . . . 9134 2. obtaining',
411:'relief . . . . . . . . . . . . . . . . . . .',
412:'. . . . . . . . . . . . . . . . . . . 9135',
413:'3. de minimis rule: payments of $100 or less . . . . . . . . . . .',
414:'. . . . . 9136 4. relief versus grievance procedures . . . . . . . . .',
415:'. . . . . . . . . . . . . 9136 g. collection action. . . .',
416:'. . . . . . . . . . . . . . . . . . . .',
417:'. . . . . .9137 1. against recipient . . . . . . . . . . .',
418:'. . . . . . . . . . . . . . . . . . . .',
419:'. . . . . . . 9137 2. against accountable officer . . . . . . . .',
420:'. . . . . . . . . . . . . . . . . . . .',
421:'. 9139 h. restitution, reimbursement, and restoration . . . . . . .9141 1. restitution and reimbursement . .',
422:'. . . . . . . . . . . . . . . . . . . .',
423:'. . . . 9141 2. restoration . . . . . . . . . . . . .',
424:'. . . . . . . . . . . . . . . . . . . .',
425:'. . . . . . . . . . 9142 page viii gao06382sp appropriations law—vol. ii contents a. adjustment',
426:'incident to granting of relief . . . . . . . . . . . . . . .',
427:'9142 b. other situations . . . . . . . . . . . . . . . .',
428:'. . . . . . . . . . . . . . . . . . . .',
429:'. 9143 chapter 10 a. introduction . . . . . . . . . . . . . .',
430:'. . . . . . . . . . . . . . . . . . . .',
431:'.103 b. grants versus procurement contracts . . . . . . . . . . . . . .106',
432:'federal assistance: 1. judicial and gao decisions on the nature of grants . . . . . . . .',
433:'. 106 grants and a. contractual aspects of grants . . . . . . . . . . .',
434:'. . . . . . . . . . . . . . 106 b. differences between grants and',
435:'contracts . . . . . . . . . . . . . . . 109 cooperative c. grants',
436:'as “hybrids” . . . . . . . . . . . . . . . . . .',
437:'. . . . . . . . . . . . . . . . 1011 agreements 2. the',
438:'federal grant and cooperative agreement act . . . . . . . . . 1013 a. purposes and provisions',
439:'of the act . . . . . . . . . . . . . . . . .',
440:'. . . . 1013 b. agency implementation of the act . . . . . . . . .',
441:'. . . . . . . . . . . . . 1017 c. decisions interpreting the act .',
442:'. . . . . . . . . . . . . . . . . . . .',
443:'. . . . 1018 3. competition for discretionary grant awards . . . . . . . . .',
444:'. . . . . . 1025 c. some basic concepts. . . . . . . . . .',
445:'. . . . . . . . . . . . . . . . .1027 1. the grant',
446:'as an exercise of congressional spending power . . 1028 a. constitutionality of grant conditions . . . . .',
447:'. . . . . . . . . . . . . . 1028 1 conditions must be in',
448:'pursuit of the general welfare and related to the purpose of the expenditure . . . . . . .',
449:'1029 2 conditions must be unambiguous . . . . . . . . . . . . . .',
450:'. . . . 1030 3 conditions must be otherwise constitutional . . . . . . . . 1032',
451:'b. effect of grant conditions . . . . . . . . . . . . . . .',
452:'. . . . . . . . . . . . . 1034 2. availability of appropriations . .',
453:'. . . . . . . . . . . . . . . . . . . .',
454:'. . . . . . 1036 a. purpose . . . . . . . . . . .',
455:'. . . . . . . . . . . . . . . . . . . .',
456:'. . . . . . . . . . . . . 1036 b. time . . . .',
457:'. . . . . . . . . . . . . . . . . . . .',
458:'. . . . . . . . . . . . . . . . . . . .',
459:'. . . 1039 c. amount . . . . . . . . . . . . . .',
460:'. . . . . . . . . . . . . . . . . . . .',
461:'. . . . . . . . . . 1043 3. agency regulations . . . . . .',
462:'. . . . . . . . . . . . . . . . . . . .',
463:'. . . . . . . . . . 1045 a. general principles . . . . . .',
464:'. . . . . . . . . . . . . . . . . . . .',
465:'. . . . . . . . . 1045 b. office of management and budget circulars and the “common',
466:'rules” . . . . . . . . . . . . . . . . . . .',
467:'. . . . . . . . . . . . . . . . . 1047 c. the',
468:'federal financial assistance management improvement act . . . . . . . . . . . . . .',
469:'. . . . . . . . . . . . . . . . . . . .',
470:'. . 1051 d. the “cognizant agency” concept . . . . . . . . . . . .',
471:'. . . . . . . . . . 1052 4. contracting by grantees . . . . .',
472:'. . . . . . . . . . . . . . . . . . . .',
473:'. . . . . . . 1053 5. liability for acts of grantees . . . . . .',
474:'. . . . . . . . . . . . . . . . . . . .',
475:'. . 1054 a. liability to grantee’s contractors . . . . . . . . . . . .',
476:'. . . . . . . . . . 1055 b. liability for grantee misconduct . . . .',
477:'. . . . . . . . . . . . . . . . . . . 1058',
478:'6. types of grants: categorical versus block . . . . . . . . . . . . .',
479:'. . . . 1060 7. the single audit act . . . . . . . . . .',
480:'. . . . . . . . . . . . . . . . . . . .',
481:'. . . . . . 1063 d. funds in hands of grantee: status and application of appropriation restrictions .',
482:'. . . . . . . . . . . . . . . . . . .1068 page',
483:'ix gao06382sp appropriations law—vol. ii contents e. grant funding . . . . . . . . . . .',
484:'. . . . . . . . . . . . . . . . . . . .',
485:'. .1076 1. advances of grant/assistance funds . . . . . . . . . . . . .',
486:'. . . . . . . . . 1077 2. cash management of grants . . . . .',
487:'. . . . . . . . . . . . . . . . . . . .',
488:'. . . 1078 a. general rule on interest on grant advances . . . . . . . .',
489:'. . . . . 1078 b. state governments and interest on grant advances . . . . . .',
490:'. 1082 1 intergovernmental cooperation act . . . . . . . . . . . . . .',
491:'. . 1082 2 decisions under the intergovernmental cooperation act . . . . . . . . . .',
492:'. . . . . . . . . . . . . . . . . . . .',
493:'. . . . . . . . . . . . . . 1084 c. other cash management requirements',
494:'. . . . . . . . . . . . . . . . . 1087 3. program',
495:'income . . . . . . . . . . . . . . . . . . .',
496:'. . . . . . . . . . . . . . . . . . . .',
497:'1089 4. costsharing . . . . . . . . . . . . . . . . .',
498:'. . . . . . . . . . . . . . . . . . . .',
499:'. . . . . 1092 a. local or matching share . . . . . . . . .',
500:'. . . . . . . . . . . . . . . . . . . .',
501:'. 1093 1 general principles . . . . . . . . . . . . . . .',
502:'. . . . . . . . . . . . . . . . 1093 2 hard and',
503:'soft matches . . . . . . . . . . . . . . . . . .',
504:'. . . . . . . . . 1096 3 matching one grant with funds from another . .',
505:'. . . . . . 1097 4 relocation allowances . . . . . . . . . .',
506:'. . . . . . . . . . . . . . . . . 1099 5 payments',
507:'by other than grantor agency . . . . . . . . . . . . 10100 b. maintenance',
508:'of effort . . . . . . . . . . . . . . . . . .',
509:'. . . . . . . . . . . . . 10102 f. obligation of appropriations for grants',
510:'. . . . . . . . . .10106 1. requirement for obligation . . . . . .',
511:'. . . . . . . . . . . . . . . . . . . .',
512:'. . . 10106 2. changes in grants . . . . . . . . . . . .',
513:'. . . . . . . . . . . . . . . . . . . .',
514:'. . . . . 10107 g. grant costs . . . . . . . . . . .',
515:'. . . . . . . . . . . . . . . . . . . .',
516:'. . .10111 1. allowable versus unallowable costs . . . . . . . . . . . .',
517:'. . . . . . . . . 10111 a. the concept of allowable costs . . . .',
518:'. . . . . . . . . . . . . . . . . . 10111 b.',
519:'grant cost cases . . . . . . . . . . . . . . . . .',
520:'. . . . . . . . . . . . . . . . . . 10117 1',
521:'scope of judicial review . . . . . . . . . . . . . . . .',
522:'. . . . . . . . . 10117 2 court case examples . . . . . .',
523:'. . . . . . . . . . . . . . . . . . . .',
524:'. . 10119 3 gao case examples . . . . . . . . . . . . .',
525:'. . . . . . . . . . . . . . . 10124 c. note on accounting',
526:'. . . . . . . . . . . . . . . . . . . .',
527:'. . . . . . . . . . . . . 10126 2. preaward costs retroactive funding .',
528:'. . . . . . . . . . . . . . . . . 10129 h. recovery',
529:'of grantee indebtedness . . . . . . . . . . . . . . .10132 1. government’s',
530:'duty to recover . . . . . . . . . . . . . . . . .',
531:'. . . . . . . . . 10132 2. offset and withholding of claims under grants . .',
532:'. . . . . . . . . 10144 chapter 11 federal assistance: guaranteed and insured loans a. introduction',
533:'. . . . . . . . . . . . . . . . . . . .',
534:'. . . . . . . . . . . . . . .113 1. general description . .',
535:'. . . . . . . . . . . . . . . . . . . .',
536:'. . . . . . . . . . . . . . . 113 2. sources of guarantee',
537:'authority . . . . . . . . . . . . . . . . . . .',
538:'. . . . . . . . 118 b. budgetary and obligational treatment . . . . . .',
539:'. . . . . .1112 1. prior to federal credit reform act . . . . . . .',
540:'. . . . . . . . . . . . . . . . 1112 2. federal credit',
541:'reform act of 1990 . . . . . . . . . . . . . . . .',
542:'. . . . . . . . 1115 a. post1991 guarantee commitments . . . . . . .',
543:'. . . . . . . . . . . . . . 1116 page x gao06382sp appropriations law—vol.',
544:'ii contents b. pre1992 commitments . . . . . . . . . . . . . . .',
545:'. . . . . . . . . . . . . . . . 1124 c. entitlement programs',
546:'. . . . . . . . . . . . . . . . . . . .',
547:'. . . . . . . . . . . . 1125 d. certain insurance programs . . .',
548:'. . . . . . . . . . . . . . . . . . . .',
549:'. . . . 1126 c. extension of guarantees . . . . . . . . . . .',
550:'. . . . . . . . . . . . .1126 1. coverage of lenders initial and subsequent',
551:'. . . . . . . . . . . . . . 1126 a. eligibility of lender/debt instrument',
552:'. . . . . . . . . . . . . . . . . . . 1126',
553:'b. substitution of lender . . . . . . . . . . . . . . . .',
554:'. . . . . . . . . . . . . . . . 1128 c. existence of',
555:'valid guarantee . . . . . . . . . . . . . . . . . .',
556:'. . . . . . . . 1129 d. small business investment companies . . . . . .',
557:'. . . . . . . . . . . . 1135 e. the federal financing bank . .',
558:'. . . . . . . . . . . . . . . . . . . .',
559:'. . . . . 1137 2. coverage of borrowers . . . . . . . . . .',
560:'. . . . . . . . . . . . . . . . . . . .',
561:'. . . 1141 a. eligibility of borrowers . . . . . . . . . . . .',
562:'. . . . . . . . . . . . . . . . . . . 1141',
563:'b. substitution of borrowers . . . . . . . . . . . . . . . .',
564:'. . . . . . . . . . . . . 1142 c. loan purpose . . .',
565:'. . . . . . . . . . . . . . . . . . . .',
566:'. . . . . . . . . . . . . . . . 1143 d. change in',
567:'loan purpose . . . . . . . . . . . . . . . . . .',
568:'. . . . . . . . . . . . 1145 3. terms and conditions of guarantees .',
569:'. . . . . . . . . . . . . . . . . . . .',
570:'. 1146 a. introduction . . . . . . . . . . . . . . . .',
571:'. . . . . . . . . . . . . . . . . . . .',
572:'. . . . 1146 b. property insurance programs under the national housing act . . . . . .',
573:'. . . . . . . . . . . . . . . . . . . .',
574:'. . . . . . . . . . . . . . . 1147 1 maximum amount of',
575:'loan . . . . . . . . . . . . . . . . . . .',
576:'. . . . . . 1147 2 maximum loan maturity . . . . . . . . .',
577:'. . . . . . . . . . . . . . . . . 1149 3 owner/lessee',
578:'requirement . . . . . . . . . . . . . . . . . . .',
579:'. . . . . 1151 4 execution of the note . . . . . . . . .',
580:'. . . . . . . . . . . . . . . . . . . 1153',
581:'5 reporting requirement . . . . . . . . . . . . . . . . .',
582:'. . . . . . . . . . 1154 6 payment of premiums . . . . .',
583:'. . . . . . . . . . . . . . . . . . . .',
584:'. . . 1155 c. small business administration business loan program . . . 1156 1 payment of guarantee fee',
585:'. . . . . . . . . . . . . . . . . . . .',
586:'. . . . . 1156 2 notice of default . . . . . . . . . .',
587:'. . . . . . . . . . . . . . . . . . . .',
588:'. . 1158 d. rights and obligations of government upon default .1159 1. nature of the government’s obligation . .',
589:'. . . . . . . . . . . . . . . . . . 1159 2.',
590:'scope of the government’s guarantee . . . . . . . . . . . . . . .',
591:'. . . . . 1162 3. amount of government’s liability . . . . . . . . .',
592:'. . . . . . . . . . . . . . . 1164 4. liability of the',
593:'borrower . . . . . . . . . . . . . . . . . . .',
594:'. . . . . . . . . . . . . 1165 a. veterans’ home loan guarantee program',
595:'. . . . . . . . . . . . . . . 1166 1 loans closed prior',
596:'to 1990 . . . . . . . . . . . . . . . . . .',
597:'. . . . . . 1166 2 loans closed after december 31, 1989 . . . . . .',
598:'. . . . . . . . 1170 b. debt collection procedures . . . . . . .',
599:'. . . . . . . . . . . . . . . . . . . .',
600:'1171 5. collateral protection . . . . . . . . . . . . . . . .',
601:'. . . . . . . . . . . . . . . . . . . 1173',
602:'page xi gao06382sp appropriations law—vol. ii [this page is intended to be blank. please do not read it.] page xii',
603:'gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount a. introduction . . . . . . . .',
604:'. . . . . . . . . . . . . . . . . . . .',
605:'. . . . . . . .64 b. types of appropriation language . . . . . . .',
606:'. . . . . . . . . . . .65 1. lumpsum appropriations . . . . .',
607:'. . . . . . . . . . . . . . . . . . . .',
608:'. . . . . . . 65 a. effect of budget estimates . . . . . . .',
609:'. . . . . . . . . . . . . . . . . . . .',
610:'. . 610 b. restrictions in legislative history . . . . . . . . . . . .',
611:'. . . . . . . . . . . 612 c. “zero funding” under a lumpsum appropriation .',
612:'. . . . . . . . 624 2. lineitem appropriations and earmarks . . . . . .',
613:'. . . . . . . . . . . . . . 626 c. the antideficiency act .',
614:'. . . . . . . . . . . . . . . . . . . .',
615:'. . . . . .634 1. introduction and overview . . . . . . . . . .',
616:'. . . . . . . . . . . . . . . . . . . .',
617:'. 634 2. obligation/expenditure in excess or advance of appropriations . . . . . . . . . .',
618:'. . . . . . . . . . . . . . . . . . . .',
619:'. . . . . . . . . . . 638 a. exhaustion of an appropriation . . .',
620:'. . . . . . . . . . . . . . . . . . . .',
621:'. . 641 1 making further payments . . . . . . . . . . . . .',
622:'. . . . . . . . . . . . . 641 2 limitations on contractor recovery .',
623:'. . . . . . . . . . . . . . . . . 643 b. contracts',
624:'or other obligations in excess or advance of appropriations . . . . . . . . . . .',
625:'. . . . . . . . . . . . . . . . . . . .',
626:'. . . . . . . . 646 1 proper recording of obligations . . . . . .',
627:'. . . . . . . . . . . . . . . 646 2 obligation in excess',
628:'of appropriations . . . . . . . . . . . . . . . 647 3 variable',
629:'quantity contracts . . . . . . . . . . . . . . . . . .',
630:'. . . . . . . 648 4 multiyear or “continuing” contracts . . . . . . .',
631:'. . . . . . . . . . 651 c. indemnification . . . . . . .',
632:'. . . . . . . . . . . . . . . . . . . .',
633:'. . . . . . . . . . . . 659 1 prohibition against unlimited liability . .',
634:'. . . . . . . . . . . . . . 661 2 when indemnification may be',
635:'permissible . . . . . . . . . . . 671 3 statutorily authorized indemnification . . .',
636:'. . . . . . . . . . . . 677 d. specific appropriation limitations/purpose violations . .',
637:'. . . 679 e. amount of available appropriation or fund . . . . . . . . .',
638:'. . . . . 684 f. intent/factors beyond agency control . . . . . . . . .',
639:'. . . . . . . . . 686 g. exceptions . . . . . . . .',
640:'. . . . . . . . . . . . . . . . . . . .',
641:'. . . . . . . . . . . . . . 688 1 contract authority . .',
642:'. . . . . . . . . . . . . . . . . . . .',
643:'. . . . . . . . . . 688 2 other obligations “authorized by law” . . .',
644:'. . . . . . . . . . . . 691 3. voluntary services prohibition . . .',
645:'. . . . . . . . . . . . . . . . . . . .',
646:'. . . . . 693 a. introduction . . . . . . . . . . . .',
647:'. . . . . . . . . . . . . . . . . . . .',
648:'. . . . . . . . . 693 b. appointment without compensation and waiver of salary . .',
649:'695 1 the rules—general discussion . . . . . . . . . . . . . . .',
650:'. . . . . . . 695 2 student interns . . . . . . . . .',
651:'. . . . . . . . . . . . . . . . . . . .',
652:'. . . . . 6102 3 program beneficiaries . . . . . . . . . . .',
653:'. . . . . . . . . . . . . . . . . 6104 4 applicability',
654:'to legislative and judicial branches . . . . . 6105 c. other voluntary services . . . . .',
655:'. . . . . . . . . . . . . . . . . . . .',
656:'. . . . . 6105 d. exceptions . . . . . . . . . . . .',
657:'. . . . . . . . . . . . . . . . . . . .',
658:'. . . . . . . . . . 6110 1 safety of human life . . . .',
659:'. . . . . . . . . . . . . . . . . . . .',
660:'. . . . . . 6111 2 protection of property . . . . . . . . .',
661:'. . . . . . . . . . . . . . . . . . . 6111',
662:'3 recent developments . . . . . . . . . . . . . . . . .',
663:'. . . . . . . . . . . 6112 page 61 gao06382sp appropriations law—vol. ii chapter 6',
664:'availability of appropriations: amount e. voluntary creditors . . . . . . . . . . . . .',
665:'. . . . . . . . . . . . . . . . . . . .',
666:'. 6116 4. apportionment of appropriations . . . . . . . . . . . . . .',
667:'. . . . . . . . . . 6116 a. statutory requirement for apportionment . . . .',
668:'. . . . . . . . . . . 6117 b. establishing reserves . . . . .',
669:'. . . . . . . . . . . . . . . . . . . .',
670:'. . . . . . . 6122 c. method of apportionment . . . . . . . .',
671:'. . . . . . . . . . . . . . . . . . . .',
672:'. 6125 d. control of apportionments . . . . . . . . . . . . . .',
673:'. . . . . . . . . . . . . . 6127 e. apportionments requiring deficiency estimate',
674:'. . . . . . . . . . 6129 f. exemptions from apportionment requirement . . . .',
675:'. . . . . . . 6134 g. administrative division of apportionments . . . . . . .',
676:'. . . . . . . 6136 h. expenditures in excess of apportionment . . . . . .',
677:'. . . . . . . . . 6139 5. penalties and reporting requirements . . . . .',
678:'. . . . . . . . . . . . . . . 6143 a. administrative and penal',
679:'sanctions . . . . . . . . . . . . . . . . . . .',
680:'. 6143 b. reporting requirements . . . . . . . . . . . . . . .',
681:'. . . . . . . . . . . . . . . 6144 6. funding gaps .',
682:'. . . . . . . . . . . . . . . . . . . .',
683:'. . . . . . . . . . . . . . . . . . . .',
684:'6146 d. supplemental and deficiency appropriations . . . . . . .6159 e. augmentation of appropriations. . . .',
685:'. . . . . . . . . . . . . .6162 1. the augmentation concept . .',
686:'. . . . . . . . . . . . . . . . . . . .',
687:'. . . . . . . . 6162 2. disposition of moneys received: repayments and miscellaneous receipts . .',
688:'. . . . . . . . . . . . . . . . . . . .',
689:'. . . . . . . . . . . 6166 a. general principles . . . . .',
690:'. . . . . . . . . . . . . . . . . . . .',
691:'. . . . . . . . . . 6166 1 the “miscellaneous receipts” statute . . . .',
692:'. . . . . . . . . . . 6166 2 exceptions . . . . . .',
693:'. . . . . . . . . . . . . . . . . . . .',
694:'. . . . . . . . . . . 6170 3 timing of deposits . . . .',
695:'. . . . . . . . . . . . . . . . . . . .',
696:'. . . . . . . 6175 4 money received or not received “for the government” 6177 b. contract',
697:'matters . . . . . . . . . . . . . . . . . . .',
698:'. . . . . . . . . . . . . . . . . . 6184 1',
699:'excess reprocurement costs . . . . . . . . . . . . . . . . .',
700:'. . . . . 6184 2 other damage claims . . . . . . . . . .',
701:'. . . . . . . . . . . . . . . . . . . 6188',
702:'3 refunds and credits . . . . . . . . . . . . . . . .',
703:'. . . . . . . . . . . . . . 6189 4 “nocost” contracts . .',
704:'. . . . . . . . . . . . . . . . . . . .',
705:'. . . . . . . . 6191 c. damage to government property and other tort liability . 6194',
706:'d. fees and commissions . . . . . . . . . . . . . . . .',
707:'. . . . . . . . . . . . . . . 6199 e. economy act .',
708:'. . . . . . . . . . . . . . . . . . . .',
709:'. . . . . . . . . . . . . . . . . . . 6202',
710:'f. setoff . . . . . . . . . . . . . . . . . .',
711:'. . . . . . . . . . . . . . . . . . . .',
712:'. . . . . . . . 6205 g. revolving funds . . . . . . . .',
713:'. . . . . . . . . . . . . . . . . . . .',
714:'. . . . . . . . . 6206 h. trust funds . . . . . . .',
715:'. . . . . . . . . . . . . . . . . . . .',
716:'. . . . . . . . . . . . . . 6208 i. fines and penalties .',
717:'. . . . . . . . . . . . . . . . . . . .',
718:'. . . . . . . . . . . . . 6211 j. miscellaneous cases: money to treasury',
719:'. . . . . . . . . . . . . . . . 6212 k. miscellaneous cases:',
720:'money retained by agency . . . . . . . . . 6214 l. money erroneously deposited as miscellaneous',
721:'receipts . 6216 3. gifts and donations to the government . . . . . . . . . .',
722:'. . . . . . . . . 6222 a. donations to the government . . . . .',
723:'. . . . . . . . . . . . . . . . . . . .',
724:'6222 b. donations to individual employees . . . . . . . . . . . . . .',
725:'. . . . . . . 6231 page 62 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount',
726:'1 contributions to salary or expenses . . . . . . . . . . . . . .',
727:'. . 6231 2 travelrelated promotional items . . . . . . . . . . . . .',
728:'. . . . . 6234 4. other augmentation principles and cases . . . . . . . .',
729:'. . . . . . . . . 6235 page 63 gao06382sp appropriations law—vol. ii chapter 6 availability of',
730:'appropriations: amount the two preceding chapters have discussed the purposes for which a. introduction appropriated funds may be used and',
731:'the time limits within which they may be obligated and expended. this chapter will discuss the third major concept of',
732:'the “legal availability” of appropriations—restrictions relating to amount. it is not enough to know what you can spend appropriated funds',
733:'for and when you can spend them. you also must know how much you have available for a particular object.',
734:'in this respect, the legal restrictions on government expenditures are different from those governing your spending as a private individual.',
735:'for example, as an individual, you can buy a house and finance it with a mortgage that may run for',
736:'25 or 30 years. since you do not have enough money to cover your full legal obligation under the mortgage,',
737:'you sign the mortgage papers on the assumption that you will continue to have an income adequate to cover the',
738:'mortgage. if your income diminishes substantially or, heaven forbid, disappears, and you are unable to make the payments, you lose',
739:'the house. a government agency cannot operate this way. the main reason why is the antideficiency act, discussed in section',
740:'c of this chapter. under the constitution, congress makes the laws and provides the money to implement them; the executive',
741:'branch carries out the laws with the money congress provides. under this system, congress has the “final word” as to',
742:'how much money can be spent by a given agency or on a given program. congress may give the executive',
743:'branch considerable discretion concerning how to implement the laws and hence how to obligate and expend funds appropriated, but it',
744:'is ultimately up to congress to determine how much the executive branch can spend. in applying these concepts to the',
745:'daytoday operations of the federal government, it should be readily apparent that restrictions on purpose, time, and amount are very',
746:'closely related. again, the antideficiency act is one of the primary “enforcement devices.” its importance is underscored by the fact',
747:'that it is the only one of the fiscal statutes to include both civil and criminal penalties for violation. to',
748:'ensure that the antideficiency act’s prohibition against overobligating or overspending an appropriation remains meaningful, agencies must be restricted to the',
749:'appropriations congress provides. the rule prohibiting the unauthorized “augmentation” of appropriations, covered in section e of this chapter, is thus',
750:'a crucial complement to the antideficiency act. page 64 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount while',
751:'congress retains, as it must, ultimate control over how much an agency can spend, it does not attempt to control',
752:'the disposition of every dollar. we began our general discussion of administrative discretion in chapter 3 by quoting justice holmes’',
753:'statement that “some play must be allowed to the joints if the machine is to work.”1 this is fully applicable',
754:'to the expenditure of appropriated funds. an agency’s discretion under a lumpsum appropriation is discussed in section f of this',
755:'chapter. b. types of appropriation language congress has been making appropriations since the beginning of the republic. in earlier times',
756:'when the federal government was much smaller and federal programs were or at least seemed much simpler, very specific lineitem',
757:'appropriations were more common.2 in recent decades, however, as the federal budget has grown in both size and complexity, a',
758:'lumpsum approach has become a virtual necessity.3 for example, an appropriation act for an establishment the size of the defense',
759:'department structured solely on a lineitem basis would rival the telephone directory in bulk. over the course of this time,',
760:'certain forms of appropriation language have become standard. this section will point out the more commonly used language with respect',
761:'to amount. 1. lumpsum a lumpsum appropriation is one that is made to cover a number of specific programs, projects,',
762:'or items. the number may be as small as appropriations two. in contrast, a lineitem appropriation is available only for',
763:'the specific object described. 1 tyson & brother united theater ticket offices v. banton, 273 u.s. 418 1927 holmes, j.,',
764:'dissenting. 2 for fiscal year 1905, for example, congress appropriated to the department of justice a specific line item of',
765:'$3,000 for stationery. legislative, executive and judicial appropriations act, 1905, ch. 716, 33 stat. 85, 134 mar. 18, 1904. for',
766:'fiscal year 2005, congress appropriated to the department of justice a lumpsum appropriation of $124,100,000 for administrative expenses. departments of',
767:'commerce, justice, and state, the judiciary, and related agencies appropriations act, 2005, pub. l. no. 108447, div. b, title i,',
768:'118 stat. 2809, 2853 dec. 8, 2004. 3 as a result of appropriation account consolidation over the years, 200 accounts',
769:'now cover 90 percent of all federal expenditures. allen schick, the federal budget: politics, policy, and process, 229 2000. page',
770:'65 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount lumpsum appropriations come in many forms. many smaller agencies',
771:'receive only a single appropriation, usually termed “salaries and expenses” or “operating expenses.” all of the agency’s operations must be',
772:'funded from this single appropriation. cabinetlevel departments and larger agencies receive several appropriations, often based on broad object categories such',
773:'as “operations and maintenance” or “research and development.” for purposes of this discussion, a lumpsum appropriation is simply one that',
774:'is available for more than one specific object. the amount of a lumpsum appropriation is not derived through guesswork. it',
775:'is the result of a lengthy budget and appropriation process. the agency first submits its appropriation request to congress through',
776:'the office of management and budget, supported by detailed budget justifications. congress then reviews the request and enacts an appropriation',
777:'which may be more, less, or the same as the amount requested. variations from the amount requested are usually explained',
778:'in the appropriation act’s legislative history, most often in committee reports.4 all of this leads logically to a question which',
779:'can be phrased in various ways: how much flexibility does an agency have in spending a lumpsum appropriation? is it',
780:'legally bound by its original budget estimate or by expressions of intent in legislative history? how is the agency’s legitimate',
781:'need for administrative flexibility balanced against the constitutional role of the congress as controller of the public purse? the answer',
782:'to these questions is one of the most important principles of appropriations law. the rule, simply stated, is this: restrictions',
783:'on a lumpsum appropriation contained in the agency’s budget request or in legislative history are not legally binding on the',
784:'department or agency unless they are carried into specified in the appropriation act itself, or unless some other statute restricts',
785:'the agency’s spending flexibility. this is an application of the fundamental principle of statutory construction that legislative history is not',
786:'law and carries no legal significance unless “anchored in the text of 4 see chapter 1, section d. see also',
787:'gao, a glossary of terms used in the federal budget process, gao05734sp washington, d.c.: september 2005, appendixes i and ii,',
788:'for an overview of the budget and appropriations process. page 66 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations:',
789:'amount the statute.” shannon v. united states, 512 u.s. 573, 583 1994.5 of course, the agency cannot exceed the total',
790:'amount of the lumpsum appropriation, and its spending must not violate other applicable statutoryrestrictions.6 the rule applies equally whether the',
791:'legislative history is mere acquiescence in the agency’s budget request or an affirmative expression of intent. the rule recognizes the',
792:'agency’s need for flexibility to meet changing or unforeseen circumstances, yet preserves congressional control in several ways. first, the rule',
793:'merely says that the restrictions are not legally binding. the practical wisdom of making the expenditure is an entirely separate',
794:'question. an agency that disregards the wishes of its oversight or appropriations committees will most likely be called upon to',
795:'answer for its digressions before those committees next year. an agency that fails to “keep faith” with the congress may',
796:'find its next appropriation reduced or limited by lineitem restrictions. as professor schick put it: “what gives the appropriations reports',
797:'special force is not their legal status but the fact that the next appropriations cycle is always less than one',
798:'year away. an agency that willfully violates report language risks retribution the next time it asks for money. it may',
799:'find this year’s report language relocated to the next appropriations act, thereby giving it even less leeway than it had',
800:'before. or it may find the next time that the appropriations committees’ guidance is more detailed and onerous or that',
801:'its appropriation has been cut.”7 that congress is fully aware of these dynamics is evidenced by the following statement from',
802:'a 1973 house appropriations committee report: 5 see chapter 2, section d.6 for a general discussion of the uses and',
803:'limits of legislative history. 6 for example, agencies and their employees are, of course, legally bound by apportionments and subdivisions',
804:'of lumpsum appropriations. see 31 u.s.c. §§ 1517–1519. see also sections c.4 and c.5 of this chapter for a discussion',
805:'of these requirements. 7 allen schick, the federal budget: politics, policy, and process, 238 2000. see also john c. roberts,',
806:'are congressional committees constitutional? : radical textualism, separation of powers, and the enactment process, 52 case western reserve l. rev.',
807:'489, 563–64 2001. page 67 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount “in a strictly legal sense,',
808:'the department of defense could utilize the funds appropriated for whatever programs were included under the individual appropriation accounts, but',
809:'the relationship with the congress demands that the detailed justifications which are presented in support of budget requests be followed.',
810:'to do otherwise would cause congress to lose confidence in the requests made and probably result in reduced appropriations or',
811:'line item appropriation bills.”8 justice souter made the same point, writing for the court in lincoln v. vigil, 508 u.s.',
812:'182 1993: “congress may always circumscribe agency discretion to allocate resources by putting restrictions in the operative statutes though not,',
813:'as we have seen, just in the legislative history. and, of course, we hardly need to note that an agency’s',
814:'decision to ignore congressional expectations may expose it to grave political consequences.” id. at 193 citations omitted. second, restrictions on',
815:'an agency’s spending flexibility exist through the operation of other laws. for example, a “salaries and expenses” appropriation may be',
816:'a large lump sum, but much of it is in fact nondiscretionary because the salaries and benefits e.g., health insurance',
817:'and retirement contributions of agency employees constitute mandatory expenditures once fixed in accordance with the parameters established by law.9 third,',
818:'reprogramming arrangements with the various committees provide another safeguard against abuse.10 finally, congress always holds the ultimate trump card. it',
819:'has the power to make any restriction legally binding simply by including it in the 8 report of the house',
820:'committee on appropriations on the 1974 defense department appropriation bill, h.r. rep. no. 93662, at 16 1973. 9 louis fisher,',
821:'presidential spending power, 72 1975. 10 see chapter 2, section b.3.b for an overview of reprogramming concepts and practices, and',
822:'schick, supra, at 247–250. page 68 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount appropriation act.11 thus, the',
823:'treatment of lumpsum appropriations may be regarded as yet another example of the efforts of our legal and political systems',
824:'to balance the conflicting objectives of executive flexibility and congressional control.12 two common examples of devices congress uses when it',
825:'wants to restrict an agency’s spending flexibility are lineitem appropriations and earmarks. congress uses other tools as well. the following',
826:'are just two examples taken from the consolidated appropriations resolution, 2003, pub. l. no. 1087, 117 stat. 11 feb. 20,',
827:'2003, the omnibus appropriation act for fiscal year 2003. the first is an example of a notice requirement: “[f]unds made',
828:'available under this heading [salaries and expenses, department of housing and urban development] shall only be allocated in the manner',
829:'specified in the report accompanying this act unless the committees on appropriations . . . are notified of any changes',
830:'in an operating plan or reprogramming. . .” 117 stat. 499. the second is a proviso that incorporates by reference',
831:'instructions found in a conference report: “provided, that notwithstanding any other provision of law, the office of economic adjustment .',
832:'. . is authorized to make grants using funds made available under the heading ‘operation and maintenance, defensewide’ in accordance',
833:'11 this assumes, of course, that congress is acting within its constitutional authority. see chapter 1, section b for a',
834:'general discussion of congress’s constitutional authority to appropriate and the limits on that authority. legal services corp. v. velasquez, 531',
835:'u.s. 533 2001, provides an example of restrictive appropriation language that was declared unconstitutional. 12 the effort has not always',
836:'been free from controversy. one senator, concerned with what he felt was excessive flexibility in a 1935 appropriation, tried to',
837:'make his point by suggesting the following: “section 1. congress hereby appropriates $4,880,000,000 to the president of the united states',
838:'to use as he pleases. “section 2. anybody who does not like it is fined $1,000.” 79 cong. rec. 2014',
839:'1935 remarks of sen. arthur vandenberg, quoted in fisher, supra, at 62–63. page 69 gao06382sp appropriations law—vol. ii a. effect',
840:'of budget estimates chapter 6 availability of appropriations: amount with the guidance provided in the joint explanatory statement of the',
841:'committee of conference for the conference report to accompany h.r. 5010 . . . and these projects shall hereafter be',
842:'considered to be authorized by law.” 117 stat. 533. the 1983 appropriation act for the department of housing and urban',
843:'development contained a restriction incorporating by reference budget estimates that the administration had provided: “where appropriations in titles i and',
844:'ii of this act are expendable for travel expenses and no specific limitation has been placed thereon, the expenditures for',
845:'such travel expenses may not exceed the amounts set forth therefor in the budget estimates submitted for the appropriations .',
846:'. . .”13 a provision prohibiting the use of a construction appropriation to start any new project for which an',
847:'estimate was not included in the president’s budget submission is discussed in 34 comp. gen. 278 1954. also, the availability',
848:'of a lumpsum appropriation may be restricted by provisions appearing in statutes other than appropriation acts, such as authorization acts.14',
849:'for example, if an agency receives a lineitem authorization and a lumpsum appropriation pursuant to the authorization, the lineitem restrictions',
850:'and earmarks in the authorization act will apply just as if they appeared in the appropriation act itself. the topic',
851:'is discussed in more detail in chapter 2, section c. perhaps the easiest case is the effect of the agency’s',
852:'own budget estimate. the rule here was stated in 17 comp. gen. 147, 150 1937 as follows: 13 pub. l.',
853:'no. 97272, § 401, 96 stat. 1160, 1178 sept. 30, 1982. 14 a recent example is section 1004d of the',
854:'bob stump national defense authorization act for fiscal year 2003, pub. l. no. 107314, 116 stat. 2458, 2629–30 dec. 2,',
855:'2002, which imposes conditions on the department’s spending for financial system improvements. page 610 gao06382sp appropriations law—vol. ii chapter 6',
856:'availability of appropriations: amount “the amounts of individual items in the estimates presented to the congress on the basis of',
857:'which a lumpsum appropriation is enacted are not binding on administrative officers unless carried into the appropriation act itself.” see',
858:'also thompson v. cherokee nation of oklahoma, 334 f.3d 1075, 1085–86 fed. cir. 2003, aff’d sub nom., 543 u.s. ,',
859:'125 s. ct. 1172 2005; b63539, june 6, 1947; b55277, jan. 23, 1946; b35335, july, 17, 1943; b48120o.m., oct. 21,',
860:'1948. this is essentially the same rule as applied to allocations of amounts in congressional committee reports and other specifications',
861:'in the legislative history concerning the use of lumpsum appropriations, which, as discussed later in this section, likewise have no',
862:'legally binding effect unless tied to the appropriation language itself. it follows that the lack of a specific budget request',
863:'will not preclude an expenditure from a lumpsum appropriation which is otherwise legally available for the item in question. e.g.,',
864:'b278968, may 28, 1998; 72 comp. gen. 317, 319 1993; 71 comp. gen. 411, 413 1992.15 to illustrate, the administrative',
865:'office of the u.s. courts asked for a supplemental appropriation of $11,000 in 1962 for necessary salaries and expenses of',
866:'the judicial conference in revising and improving the federal rules of practice and procedure. the house of representatives did not',
867:'allow the increase but the senate included the full amount. the bill went to conference but the conference was delayed',
868:'and the agency needed the money. the administrative office then asked whether it could take the $11,000 out of its',
869:'regular 1962 appropriation even though it had not specifically included this item in its 1962 budget request. citing 17 comp.',
870:'gen. 147, and noting that the study of the federal rules was a continuing statutory function of the judicial conference,',
871:'the comptroller general concluded as follows: “[i]n the absence of a specific limitation or prohibition in the appropriation under consideration',
872:'as to the amount which may be expended for revising and improving the federal rules of practice and procedure, you',
873:'would not be legally bound by your budget estimates or absence thereof. “if the congress desires to restrict the availability',
874:'of a particular appropriation to the several items and amounts 15 on the other hand, inclusion of a budget estimate',
875:'for a particular purpose can strengthen the case that the appropriation is available for that purpose. see b285066.2, aug. 9,',
876:'2000. page 611 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount b. restrictions in legislative history thereof submitted',
877:'in the budget estimates, such control may be effected by limiting such items in the appropriation act itself. or, by',
878:'a general provision of law, the availability of appropriations could be limited to the items and the amounts contained in',
879:'the budget estimates. in the absence of such limitations an agency’s lumpsum appropriation is legally available to carry out the',
880:'functions of the agency.” b149163, june 27, 1962. see also 20 comp. gen. 631 1941; b198234, mar. 25, 1981; b69238,',
881:'sept. 23, 1948. the same principle would apply where the budget request was for an amount less than the amount',
882:'appropriated, or for zero. 2 comp. gen. 517 1923; b126975, feb. 12, 1958. often issues are raised when there are',
883:'changes to or restrictions on a lumpsum appropriation imposed during the legislative process but not in the legislation itself. the',
884:'“leading case” in this area is 55 comp. gen. 307 1975, the socalled “ltv case.” the department of the navy',
885:'had selected the mcdonnell douglas corporation to develop a new fighter aircraft. ltv aerospace corporation protested the selection, arguing that',
886:'the aircraft mcdonnell douglas proposed violated the 1975 defense department appropriation act. the appropriation in question was a lumpsum appropriation',
887:'of slightly over $3 billion under the heading “research, development, test, and evaluation, navy.” this appropriation covered a large number',
888:'of projects, including the fighter aircraft in question. the conference report on the appropriation act had stated that $20 million',
889:'was being provided for a navy combat fighter, but that “[a]daptation of the selected air force air combat fighter to',
890:'be capable of carrier operations is the prerequisite for use of the funds provided.” the navy conceded that the mcdonnell',
891:'douglas aircraft was not a derivative of the air force fighter and that its selection was not in accord with',
892:'the instructions in the conference report. the issue, therefore, was whether the conference report was legally binding on the navy.',
893:'in other words, did the navy act illegally by not choosing to follow the conference report? the ensuing decision is',
894:'gao’s most comprehensive statement on the legal availability of lumpsum appropriations. pertinent excerpts are set forth below: “[c]ongress has recognized',
895:'that in most instances it is desirable to maintain executive flexibility to shift around funds within a particular lumpsum appropriation',
896:'account so that agencies can make necessary adjustments for page 612 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations:',
897:'amount ‘unforeseen developments, changing requirements, . . . and legislation enacted subsequent to appropriations.’ [citation omitted.] this is not to',
898:'say that congress does not expect that funds will be spent in accordance with budget estimates or in accordance with',
899:'restrictions detailed in committee reports. however, in order to preserve spending flexibility, it may choose not to impose these particular',
900:'restrictions as a matter of law, but rather to leave it to the agencies to ‘keep faith’ with the congress.',
901:'. . . “on the other hand, when congress does not intend to permit agency flexibility, but intends to impose',
902:'a legally binding restriction on an agency’s use of funds, it does so by means of explicit statutory language. .',
903:'. . “accordingly, it is our view that when congress merely appropriates lumpsum amounts without statutorily restricting what can be',
904:'done with those funds, a clear inference arises that it does not intend to impose legally binding restrictions, and indicia',
905:'in committee reports and other legislative history as to how the funds should or are expected to be spent do',
906:'not establish any legal requirements on federal agencies. . . . “we further point out that congress itself has often',
907:'recognized the reprogramming flexibility of executive agencies, and we think it is at least implicit in such [recognition] that congress',
908:'is well aware that agencies are not legally bound to follow what is expressed in committee reports when those expressions',
909:'are not explicitly carried over into the statutory language. . . . “we think it follows from the above discussion',
910:'that, as a general proposition, there is a distinction to be made between utilizing legislative history for the purpose of',
911:'illuminating the intent underlying language used in a statute and resorting to that history for the purpose of writing into',
912:'the law that which is not there. . . . “as observed above, this does not mean agencies are free',
913:'to ignore clearly expressed legislative history applicable to the page 613 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations:',
914:'amount use of appropriated funds. they ignore such expressions of intent at the peril of strained relations with the congress.',
915:'the executive branch . . . has a practical duty to abide by such expressions. this duty, however, must be',
916:'understood to fall short of a statutory requirement giving rise to a legal infraction where there is a failure to',
917:'carry out that duty.” 55 comp. gen. at 318, 319, 321, 325. accordingly, gao concluded that navy’s award did not',
918:'violate the appropriation act and the contract therefore was not illegal. the same volume of the decisions of the comptroller',
919:'general contains another oftencited case, 55 comp. gen. 812 1976, the newport news case. this case also involved the navy.',
920:'this time, navy wanted to exercise a contract option for construction of a nuclear powered guided missile frigate, designated dlgn',
921:'41. the contractor, newport news shipbuilding and dry dock company, argued that exercising the contract option would violate the antideficiency',
922:'act by obligating more money than navy had in its appropriation. the appropriation in question, the “naval vessels” appropriation, provided',
923:'a lump sum for vessels, much of which was earmarked, including an earmark for dlgn: “for naval vessels: for the',
924:'navy, $3,156,400,000, of which sum $244,300,000 shall be used only for the dlgn nuclear powered guided missile frigate program; .',
925:'. .” the committee reports on the appropriation act and the related authorization act indicated that, out of the $244',
926:'million appropriated, $152 million was for construction of the dlgn 41 and the remaining $92 million was for long lead',
927:'time activity on the dlgn 42. clearly, if the $152 million specified in the committee reports for the dlgn 41',
928:'was legally binding, obligations resulting from exercise of the contract option would exceed the available appropriation. the comptroller general applied',
929:'the “ltv principle” and held that the $152 million was not a legally binding limit on obligations for the dlgn',
930:'41. as a matter of law, the entire $244 million was legally available for the dlgn 41 because the appropriation',
931:'act did not include any restriction. therefore, in evaluating potential violations of the antideficiency act, the relevant appropriation amount is',
932:'the total amount of the lumpsum appropriation minus sums already obligated, not the lower figure derived page 614 gao06382sp appropriations',
933:'law—vol. ii chapter 6 availability of appropriations: amount from the legislative history.16 as the decision recognized, congress could have imposed',
934:'a legally binding limit by the very simple device of appropriating a specific amount only for the dlgn 41, appropriating',
935:'a specific amount only for the dlgn 42, or by incorporating the committee reports in the appropriation language. this decision',
936:'illustrates another important point: the terms “lumpsum” and “lineitem” are relative concepts. the $244 million appropriation in the newport news',
937:'case could be viewed as a lineitem appropriation in relation to the broader “shipbuilding and conversion” category, but it was',
938:'also a lumpsum appropriation in relation to the two specific vessels included. this factual distinction does not affect the applicable',
939:'legal principle. as the decision explained: “contractor urges that ltv is inapplicable here since ltv involved a lumpsum appropriation whereas',
940:'the dlgn appropriation is a more specific ‘line item’ appropriation. while we recognize the factual distinction drawn by contractor, we',
941:'nevertheless believe that the principles set forth in ltv are equally applicable and controlling here. . . . [i]mplicit in',
942:'our holding in ltv and in the other authorities cited is the view that dollar amounts in appropriation acts are',
943:'to be interpreted differently from statutory words in general. this view, in our opinion, pertains whether the dollar amount is',
944:'a lumpsum appropriation available for a large number of items, as in ltv, or, as here, a more specific appropriation',
945:'available for only two items.” 55 comp. gen. at 821–22. a precursor of ltv and newport news provides another interesting',
946:'illustration. in 1974, controversy and funding uncertainties surrounded the navy’s “project sanguine,” a communications system for sending command and control',
947:'messages to submerged submarines from a single transmitting location in the united states. the navy had requested $16.6 million for',
948:'project sanguine for fiscal year 1974. the house deleted the request; the senate restored it; the conference committee compromised and',
949:'approved 16 of course, all this meant was that there would be no antideficiency act violation at the time the',
950:'option was exercised. the decision recognized that subsequent actions could still produce a violation. 55 comp. gen. at 826. page',
951:'615 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount $8.3 million. the sanguine funds were included in a',
952:'$2.6 billion lumpsum research and development appropriation. navy spent more than $11 million for project sanguine in fiscal year 1974.',
953:'the question was whether navy violated the antideficiency act by spending more than the $8.3 million provided in the conference',
954:'report. gao found that it did not, because the conference committee’s action was not specified in the appropriation act and',
955:'was therefore not legally binding. significantly, the appropriation act did include a proviso prohibiting use of the funds for “full',
956:'scale development” of project sanguine not involved in the $11 million expenditure, illustrating that congress knows perfectly well how to',
957:'impose a legally binding restriction when it desires to do so. gao, legality of the navy’s expenditures for project sanguine',
958:'during fiscal year 1974, lcd75315 washington, d.c.: jan. 20, 1975. see also b168482o.m., aug. 15, 1974. similarly, the department of',
959:'health, education, and welfare received a $12 billion lumpsum appropriation for public assistance in 1975. committee reports indicated that $9.2',
960:'million of this amount was being provided for research and development activities of the social and rehabilitation service. since this',
961:'earmarking of the $9.2 million was not carried into the appropriation act itself, it did not constitute a statutory limit',
962:'on the amount available for the program. b164031.3, apr. 16, 1975. gao has applied the rule of the ltv and',
963:'newport news decisions in a number of additional cases and reports, several of which involve variations on the basic theme.17',
964:'one variation involves something of a reverse ltv theme when agencies attempt to invoke legislative history to supply a legal',
965:'basis for their action that is absent from the relevant statutory language. in b278121, nov. 7, 1997, the library of',
966:'congress took the position that appropriation language earmarking $9,619,000 for a particular purpose, to remain available until expended, did not',
967:'require the entire amount to be used exclusively for that purpose. rather, the library maintained, the figure constituted merely a',
968:'“cap” or upper limit on the amount available for 17 see b285725, sept. 29, 2000; b278968, may 28, 1998; b278121,',
969:'nov. 7, 1997; b277241, oct. 21, 1997; b271845, aug. 23, 1996; 71 comp. gen. 411, 413 1992; 64 comp. gen.',
970:'359 1985; 59 comp. gen. 228 1980;b258000, aug. 31, 1994; b248284, sept. 1, 1992; b247853.2, july 20, 1992; b231711, mar.',
971:'28, 1989; b222853, sept. 29, 1987; b204449, nov. 18, 1981; b204270, oct. 13, 1981; b202992, may 15, 1981; b157356, aug.',
972:'17, 1978; b159993, sept. 1, 1977; b163922, oct. 3, 1975; gao, internal controls: funding of international defense research and development',
973:'projects, gao/nsiad9127 washington, d.c.: oct. 30, 1990. page 616 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount the',
974:'stated purpose. the library pointed to the way in which the conference committee described the figures relative to this appropriation',
975:'as implicitly supporting its position. gao rejected the library’s interpretation of the statutory language and, in particular, its reliance on',
976:'implications from the legislative history: “because the language of the law is clear, we have no basis to resort to',
977:'assumptions or inferences drawn from inexplicit statements contained in the conference report. when the congress appropriates lumpsum amounts without statutorily',
978:'restricting what can be done with these funds, a clear inference arises that it does not intend to impose legally',
979:'binding restrictions, and indicia in committee reports and other legislative history as to how the funds should or are expected',
980:'to be spent do not establish any legal requirements on federal agencies. 55 comp. gen. 307, 319 1975. implicit within',
981:'this holding is the more basic proposition that an existing statutory provision cannot be superseded or repealed by statements, explanations,',
982:'recommendations, or tables contained in committee reports or in other legislative history. id. in other words, if explanations or other',
983:'comments in committee reports do not create any legally binding restrictions on an agency’s discretionary authority to spend a lumpsum',
984:'appropriation as it chooses, such comments certainly cannot supersede an existing statutory provision that establishes a legally binding amount that',
985:'the agency may dispose of as an available appropriation.” b278121, at 2 emphasis supplied. similarly, the comptroller general flatly rejected',
986:'the notion that otherwise illegal agency actions could be ratified and thereby validated when the agency notified congressional committees of',
987:'the actions and the committees expressed no objection. see b285725, sept. 29, 2000; b248284, sept. 1, 1992. the decision in',
988:'b285725 observed: “[n]othing we reviewed clearly communicates to the congress that the district [of columbia] was requesting that congress ratify',
989:'or otherwise validate an unauthorized disbursement made by the district in excess of an available appropriation let alone that the',
990:'congress enact legislation page 617 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount that expressly or impliedly authorizes',
991:'the otherwise unauthorized action. while legislative history may be useful to clarify an ambiguity in legislative language, one may not',
992:'refer to the legislative history to write into the law that which is not there. 55 comp. gen. 307, 325',
993:'1975. the district would have us write into the language of the law something that is not even mentioned in',
994:'the relevant committee reports.” the treatment of lumpsum appropriations as described above has been considered by the courts as well',
995:'as gao, and they reached the same result.18 the united states court of appeals for the district of columbia circuit',
996:'noted that lumpsum appropriations have a “well understood meaning” and stated the rule as follows: “a lumpsum appropriation leaves it',
997:'to the recipient agency as a matter of law, at least to distribute the funds among some or all of',
998:'the permissible objects as it sees fit.” international union v. donovan, 746 f.2d 855, 861 d.c. cir. 1984, cert. denied,',
999:'474 u.s. 825 1985. the court in that case refused to impose a “reasonable distribution” requirement on the exercise of',
1000:'the agency’s discretion, and found that discretion unreviewable. id. at 862–63. see also mccarey v. mcnamara, 390 f.2d 601 3rd',
1001:'cir. 1968; blackhawk heating & plumbing co. v. united states, 622 f.2d 539, 547 n.6 ct. cl. 1980. one court,',
1002:'at odds with the weight of authority, concluded that an agency was required by 31 u.s.c. § 1301a purpose statute',
1003:'to spend money in accordance with an earmark appearing only in legislative history. blue ocean preservation society v. watkins, 767',
1004:'f. supp. 1518 d. haw. 1991. the supreme court’s 1993 decision in lincoln v. vigil, 508 u.s. 182, put to',
1005:'rest any lingering uncertainty that might have existed on this point. writing for a unanimous court, justice souter quoted the',
1006:'rule stated in the ltv 18 the justice department’s office of legal counsel also reached the same conclusion. see, e.g.,',
1007:'memorandum for the general counsel, united states marshals service, usms obligation to take steps to avoid anticipated appropriations deficiency, olc',
1008:'opinion, may 11, 1999; 16 op. off. legal counsel 77 1992; 4b op. off. legal counsel 702 1980; 4b op.',
1009:'off. legal counsel 674 1980. page 618 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount decision and described',
1010:'it as “a fundamental principle of appropriations law.” id. at 192. specifically, the court held that reprogrammings under lumpsum appropriations',
1011:'fall within the administrative procedure act’s exemption for actions “committed to agency discretion” 5 u.s.c. § 701a2 and, therefore, are',
1012:'not subject to judicial review. the court said that the administrative procedure act “makes clear that ‘review is not to',
1013:'be had’ in these rare circumstances where the relevant statute ‘is drawn so that a court would have no meaningful',
1014:'standard against which to judge the agency’s exercise of discretion.’” lincoln, 508 u.s. at 191. lincoln concerned a decision by',
1015:'the indian health service to discontinue a health program that had exclusively assisted indian children in the southwestern united states',
1016:'and to channel the funds into a nationwide program for similar purposes. while the program had been funded for some',
1017:'years under a lumpsum appropriation, it was never mentioned in the language of the appropriation acts. the court stated in',
1018:'this regard: “the allocation of funds from a lumpsum appropriation is . . . traditionally regarded as committed to agency',
1019:'discretion. after all, the very point of a lumpsum appropriation is to give an agency the capacity to adapt to',
1020:'changing circumstances and meet its statutory responsibilities in what it sees as the most effective or desirable way. “[a]n agency’s',
1021:'allocation of funds from a lumpsum appropriation requires a complicated balancing of a number of factors which are peculiarly within',
1022:'its expertise: whether its resources are best spent on one program or another; whether it is likely to succeed in',
1023:'fulfilling its statutory mandate; whether a particular program best fits the agency’s overall policies; and, indeed, whether the agency has',
1024:'enough resources to fund a program at all. . . . [t]he agency is far better equipped than the courts',
1025:'to deal with the many variables involved in the proper ordering of its priorities. of course, an agency is not',
1026:'free simply to disregard statutory responsibilities: congress may always circumscribe agency discretion to allocate resources by putting restrictions in the',
1027:'operative statutes though not, as we have seen, just in the legislative history. and, of course, page 619 gao06382sp appropriations',
1028:'law—vol. ii chapter 6 availability of appropriations: amount we hardly need to note that an agency’s decision to ignore congressional',
1029:'expectations may expose it to grave political consequences. but as long as the agency allocates funds from a lumpsum appropriation',
1030:'to meet permissible statutory objectives, [5 u.s.c.] § 701a2 gives the courts no leave to intrude.” 508 u.s. at 192–93',
1031:'citations and internal quotations omitted. the court noted that while the agency had repeatedly informed congress about the program in',
1032:'question, “as we have explained, these representations do not translate through the medium of legislative history into legally binding obligations.”',
1033:'id. at 194. subsequent judicial decisions have, of course, followed this approach. e.g., state of california v. united states, 104',
1034:'f.3d 1086, 1093–94 9th cir., cert. denied, 522 u.s. 806 1997; state of new jersey v. united states, 91 f.3d',
1035:'463, 470–71 3rd cir. 1996; vizenor v. babbitt, 927 f. supp. 1193 d. minn. 1996; allred v. united states, 33',
1036:'fed. cl. 349 1995. but see ramah navajo school board, inc. v. babbitt, 87 f.3d 1338 d.c. cir. 1996.19 while',
1037:'lincoln, ltv, and related decisions clearly affirm that agencies have very broad legal discretion when allocating funds under lumpsum appropriations,',
1038:'an important caveat must be noted: such discretion obviously does not extend to allowing an agency to avoid contractual or',
1039:'other legal obligations imposed upon it. in other words, the agency cannot reprogram funds otherwise available for payments under a',
1040:'contract and then claim at least successfully that its hands are tied from making the contract payments. the supreme court’s',
1041:'recent decision in cherokee nation of oklahoma v. leavitt, 543 u.s. 631, 125 s. ct. 1172 2005, illustrates this point.',
1042:'19 in ramah, congress had capped the amount appropriated for contract support cost payments under the indian selfdetermination and education',
1043:'assistance act, as amended, 25 u.s.c. §§ 450–450n, at less than the total amount all recipients would have received if',
1044:'paid their full allocations under the act. the court rejected the government’s argument and the lower court’s conclusion that lincoln',
1045:'precluded judicial review of the method the agency devised to distribute the reduced allocations. distinguishing lincoln, the court held that',
1046:'the act provided sufficient law to apply in order to determine the legality of the agency’s distribution method. indeed, the',
1047:'court further held that the agency’s distribution method violated the act. the ramah decision is discussed further in chapter 2,',
1048:'section c.2, and chapter 3, section c.5. page 620 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount cherokee',
1049:'nation of oklahoma v. leavitt addressed the indian health service’s obligation to pay contract support costs under the indian self',
1050:'determination and education assistance act, as amended, 25 u.s.c. §§ 450–450n.20 the act requires the secretary of health and human',
1051:'services,21 at the request of indian tribes, to enter into selfdetermination contracts whereby the tribes agree to administer programs and',
1052:'provide services that would otherwise be the responsibility of the federal government. see generally 25 u.s.c. § 450f. the federal',
1053:'government makes contract payments of not less than the amounts the government would have incurred in administering the programs directly,',
1054:'including, among other things, certain administrative contract support costs. id. § 450j1a. with respect to contract funding, 25 u.s.c. §',
1055:'450j1b includes the following proviso: “notwithstanding any other provision in this subchapter, the provision of funds under this subchapter is',
1056:'subject to the availability of appropriations and the secretary is not required to reduce funding for programs, projects, or activities',
1057:'serving a tribe to make funds available to another tribe or tribal organization under this subchapter.” the cherokee nation litigation',
1058:'grew out of the government’s refusal to pay the full support cost amounts claimed by the tribes under their contracts',
1059:'for certain fiscal years. the government maintained that appropriations for those fiscal years were insufficient to fund the full amounts.',
1060:'the court disagreed. the court noted that the selfdetermination contracts were no less legally binding than ordinary procurement contracts. cherokee',
1061:'nation of oklahoma v. leavitt, 125 s. ct. at 1178–79. the contracts for the fiscal years in question were funded',
1062:'from lumpsum appropriations to the indian health service that, the court pointed out, far exceeded the total payments 20 in',
1063:'cherokee nation of oklahoma v. leavitt, the court disposed of three decisions from different appellate courts: thompson v. cherokee nation',
1064:'of oklahoma, 334 f.3d 1075 fed. cir. 2003, which the court affirmed, as well as cherokee nation of oklahoma v.',
1065:'thompson, 311 f.3d 1054 10th cir. 2002, and shoshonebannock tribes of the fort hall reservation v. thompson, 279 f.3d 660',
1066:'9th cir. 2002, both of which the court reversed. ramah navajo school board, inc. v. babbitt, 87 f.3d 1338 d.c.',
1067:'cir. 1996, discussed previously, is another decision on this subject. 21 the act also applies to the secretary of the',
1068:'interior and programs administered by that department. however, the cherokee nation of oklahoma v. leavitt case concerned selfdetermination contracts for',
1069:'the provision of services by the department of health and human services’ indian health service. page 621 gao06382sp appropriations law—vol.',
1070:'ii chapter 6 availability of appropriations: amount due under the contracts and contained no restrictions on the amounts of such',
1071:'payments. id. at 1177. the court then recited two basic propositions asserted by the tribes that, it noted, the government',
1072:'had conceded. the first was the “fundamental principle of appropriations law” recognized in lincoln that when congress appropriates lumpsum amounts',
1073:'unaccompanied by restrictions, a clear inference arises that it does not intend to impose legally binding restrictions and committee reports',
1074:'and other legislative history do not establish legally binding requirements. cherokee nation of oklahoma v. leavitt, 125 s. ct. at',
1075:'1177. the second was that— “as long as congress has appropriated sufficient legally unrestricted funds to pay the contracts at',
1076:'issue, the government normally cannot back out of a promise to pay on grounds of ‘insufficient appropriations,’ even if the',
1077:'contract uses language such as ‘subject to the availability of appropriations,’ and even if an agency’s total lumpsum appropriation is',
1078:'insufficient to pay all the contracts the agency has made.” id. in support of this proposition, the court cited ferris',
1079:'v. united states, 27 ct. cl. 542 1892, and blackhawk heating & plumbing co. v. united states, 622 f.2d 539',
1080:'ct. cl. 1980. to the same effect, the court quoted the following statement from the government’s brief on the law',
1081:'applicable to ordinary procurement contracts: “[i]f the amount of an unrestricted appropriation is sufficient to fund the contract, the contractor',
1082:'is entitled to payment even if the agency has allocated the funds to another purpose or assumes other obligations that',
1083:'exhaust the funds.” cherokee nation of oklahoma v. leavitt, 125 s. ct. at 1179–80 emphasis supplied. the court rejected the',
1084:'government’s contentions that the provisos in 25 u.s.c. § 450j1b, quoted previously, precluded full payment under the contracts. the court',
1085:'observed that the first proviso making funding “subject to the availability of appropriations” is frequently used language that simply makes',
1086:'clear that contracts cannot become binding in advance of appropriations or otherwise without regard to the availability of page 622',
1087:'gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount appropriations. cherokee nation of oklahoma v. leavitt, 125 s. ct.',
1088:'at 1180–81. “since congress appropriated adequate funds here,” said the court, the first proviso, “if interpreted as ordinarily understood, would',
1089:'not help the government.” id. at 1181. the court concluded that the second proviso, stating that the government need not',
1090:'reduce funding benefiting other tribes in order to fund selfdetermination contracts was likewise unavailing to the government: “the government argues',
1091:'that these other funds, though legally unrestricted as far as the appropriations statutes’ language is concerned were nonetheless unavailable to',
1092:'pay ‘contract support costs’ because the government had to use those funds to satisfy a critically important need, namely, to',
1093:'pay the costs of ‘inherent federal functions,’ such as the cost of running the indian health service’s central washington office.',
1094:'this argument cannot help the government, however, for it amounts to no more than a claim that the agency has',
1095:'allocated the funds to another purpose, albeit potentially a very important purpose. if an important alternative need for funds cannot',
1096:'rescue the government from the binding effect of its promises where ordinary procurement contracts are at issue, it cannot rescue',
1097:'the government here, for we can find nothing special in the statute’s language or in the contracts. “we recognize that',
1098:'agencies may sometimes find that they must spend unrestricted appropriated funds to satisfy needs they believe more important than fulfilling',
1099:'a contractual obligation. but the law normally expects the government to avoid such situations, for example, by refraining from making',
1100:'less essential contractual commitments; or by asking congress in advance to protect funds needed for more essential purposes with statutory',
1101:'earmarks; or by seeking added funding from congress; or, if necessary, by using unrestricted funds for the more essential purpose',
1102:'while leaving the contractor free to pursue appropriate legal remedies arising because the government broke its contractual promise. the government,',
1103:'without denying that this is so as a general matter of procurement law, says page 623 gao06382sp appropriations law—vol. ii',
1104:'chapter 6 availability of appropriations: amount c. “zero funding” under a lumpsum appropriation nothing to convince us that a different',
1105:'legal rule should apply here.” id. at 1180 citations omitted; emphasis supplied.22 finally, the court declined to construe an appropriation',
1106:'act provision enacted in a subsequent fiscal year as creating a statutory cap on funding for the years covered by',
1107:'the litigation. this laterenacted provision stated in part: “notwithstanding any other provision of law . . . amounts appropriated to',
1108:'or earmarked in committee reports for the indian health service . . . [for] payments to tribes . . .',
1109:'for contract support costs . . . are the total amounts available for fiscal years 1994 through 1998 for such',
1110:'purposes.”23 the court acknowledged that it was reasonable to interpret the language as restricting payments for the prior years. however,',
1111:'it opted not to do so since such an interpretation would treat the language as retroactively repudiating a binding government',
1112:'contract and thereby raising constitutional concerns. cherokee nation of oklahoma v. leavitt, 125 s. ct. at 1182. the court also',
1113:'rejected the government’s contention that the language simply clarified that the prior ambiguous appropriation language was not unrestricted, concluding that',
1114:'there was nothing ambiguous about the prior language. id. rather, the court treated the laterenacted language as affecting only unobligated',
1115:'carryover balances from the prior year appropriations. does discretion under a lumpsum appropriation extend so far as to permit an',
1116:'agency to “zero fund” a particular program? although there are few cases, the answer would appear, for the most part,',
1117:'to be yes, as long as the program is not mandatory and the agency uses the funds for other authorized',
1118:'purposes to avoid impoundment complications. e.g., b209680, 22 the logical conclusion from the court’s finding that the indian selfdetermination act',
1119:'contracts are no different from ordinary procurement contracts is that the indian health service, at the time it entered into',
1120:'the contracts, should have recorded an obligation against its appropriations for the full amount of the support costs to which',
1121:'the tribes were entitled. 23 section 314 of the omnibus consolidated and emergency supplemental appropriations act, 1999, pub. l. no.',
1122:'105277, 112 stat. 2681, 2681288 oct. 21, 1998. page 624 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount',
1123:'feb. 24, 1983 agency could properly decide not to fund a program where committee reports on appropriation stated that no',
1124:'funds were being provided for that program, although agency would have been equally free to fund the program under the',
1125:'lumpsum appropriation; b167656, june 18, 1971 agency has discretion to discontinue a function funded under a lumpsum appropriation to cope',
1126:'with a shortfall in appropriations; 4b op. off. legal counsel 701, 704 n.7 1980 same point. the more difficult question',
1127:'is whether the answer is the same where there is no shortfall problem and where it is clear that congress',
1128:'wants the program funded. in international union v. donovan, 746 f.2d 855, 861 d.c.cir. 1984, cert. denied, 474 u.s. 825',
1129:'1985, discussed previously, the court upheld an agency’s decision to allocate no funds to a program otherwise authorized for funding',
1130:'under a lumpsum appropriation. although there was in that case a “congressional realization, if not a congressional intent, that nothing',
1131:'would be expended” for the program in question, 746 f.2d at 859, it seems implicit from the court’s discussion of',
1132:'applicable law that the answer would have been the same if legislative history had “directed” that the program be funded.',
1133:'the same result would seem to follow from 55 comp. gen. 812 1976, discussed above, holding that the entire unobligated',
1134:'balance of a lumpsum appropriation should be considered available for one of the objects included in the appropriation, at least',
1135:'for purposes of assessing potential violations of the antideficiency act. in b114833, july 21, 1978, the department of agriculture wanted',
1136:'to use its 1978 lumpsum resource conservation and development appropriation to fund existing projects rather than starting any new ones,',
1137:'even though the appropriations committee reports indicated that the funds were for certain new projects. since the language referring to',
1138:'new projects was stated in committee reports but not in the statute itself, the department’s proposed course of action was',
1139:'legally permissible. in a very early, 1922 decision, 1 comp. gen. 623 1922, gao seemed to suggest that there are',
1140:'constraints on an agency’s discretion. the appropriation in question provided for “rent of offices of the recorder of deeds, including',
1141:'services of cleaners as necessary, not to exceed 30 cents per hour, . . . $6,000.” the comptroller general held',
1142:'that the entire $6,000 could not be spent for rent. the decision stated: “[s]ince [the appropriation act] provides that the',
1143:'amount appropriated shall cover both rent and cleaning services, it page 625 gao06382sp appropriations law—vol. ii chapter 6 availability of',
1144:'appropriations: amount must be held that the entire amount can not be used for rent alone. “. . . the',
1145:'law leaves to the discretion of the commissioners the question as to what portion of the amount appropriated shall be',
1146:'paid for rent and what portion shall be paid for services of cleaners, but it does not vest in the',
1147:'commissioners the discretion to determine that the entire amount shall be paid for rent and that the cleaning services shall',
1148:'be left unprovided for, or be provided for from other funds.” id. at 624. as a practical matter it would',
1149:'not have been possible to rent office space and totally eliminate cleaning services, and the use of any other appropriation',
1150:'would have been clearly improper. a factor which apparently influenced the decision was that the “regular office force” was somehow',
1151:'being coerced to do the cleaning, and these were employees paid from a separate appropriation. id. 2. lineitem appropriations and',
1152:'earmarks congress may wish to specifically designate, or “earmark,” part of a more general lumpsum appropriation for a particular object,',
1153:'as either a maximum, a minimum, or both. an earmark refers to the portion of a lumpsum appropriation designated for',
1154:'a particular purpose.24 the term earmark often is used interchangeably with the term “line item.” in appropriations language, however, a',
1155:'line item is an appropriation that is dedicated for a specific purpose, rather than an amount within a lumpsum appropriation.25',
1156:'the following example of earmarking language in a lumpsum appropriation can be found in the consolidated appropriations act of 2004:',
1157:'24 see gao, a glossary of terms used in the federal budget process, gao05734sp washington, d.c.: september 2005, at 46–47.',
1158:'25 see glossary, at 64. page 626 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount “for necessary administrative',
1159:'expenses of the domestic nutrition assistance programs funded under this act, $138,304,000, of which $5,000,000 shall be available only for',
1160:'simplifying procedures, reducing overhead costs, . . . and prosecution of fraud and other violations of law . . .”26',
1161:'in this example, the $5 million is an earmark. often, cases interpreting earmarks turn on congressional intent. see, e.g., b285794,',
1162:'dec. 5, 2000 use of statutory interpretation to determine whether the community development block grant cdbg heading requiring competition for',
1163:'assistance “under this heading” applied to an earmark within the cdbg lumpsum appropriation. for simplicity of illustration, let us assume',
1164:'that we have a lumpsum appropriation of $1 million for “general construction” and a particular object within that appropriation is',
1165:'“renovation of office space.” if the appropriation specifies “not to exceed” $100,000 for renovation of office space or “not more',
1166:'than” $100,000 for renovation of office space, then $100,000 is the maximum available for renovation of office space. 64 comp.',
1167:'gen. 263 1985.27 a specifically earmarked maximum may not be supplemented with funds from the general appropriation. statutory authority to',
1168:'transfer funds between appropriations may permit the augmentation of a “not to exceed” earmark in some cases. in 12 comp.',
1169:'gen. 168 1932, it was held that general transfer authority could be used to increase maximum earmarks for personal services,',
1170:'subject to the percentage limitations specified in the transfer statute because, in this case, the transfer authority was remedial legislation',
1171:'designed to mitigate the impact of reduced appropriations. the decision pointed out that if the personal services earmark had been',
1172:'a separate lineitem appropriation, the transfer authority would clearly apply. id. at 170. somewhat similarly, in 36 comp. gen. 607',
1173:'1957, funds transferred to an operating appropriation from a civil defense appropriation could be used to exceed an administrative expense',
1174:'limitation in the operating appropriation. congress 26 pub. l. no. 108199, div. a, title iv, 118 stat. 3, 27 jan.',
1175:'23, 2004. 27 a “not to exceed” earmark was held not to constitute a maximum in 19 comp. gen. 61',
1176:'1939, where the earmarking language was inconsistent with other language in the general appropriation. this holding was based on an',
1177:'interpretation of the statute as a whole. see section d of chapter 2 for additional information on statutory interpretation. page',
1178:'627 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount had imposed new civil defense functions but had neglected',
1179:'to adjust the administrative expenses limitation. however, in 33 comp. gen. 214 1953, the comptroller general held that general transfer',
1180:'authority could not be used to exceed a maximum earmark on an emergency assistance program where it was clear that',
1181:'congress, aware of the emergency, intended that the program be funded only from the earmark. see also 18 comp. gen.',
1182:'211 1938. as in many cases, these decisions turned on congressional intent. under a “not to exceed” earmark, the agency',
1183:'is not required to spend the entire amount on the object specified. see, e.g., brown v. ruckelshaus, 364 f. supp.',
1184:'258, 266 c.d. cal. 1973 “the phrase ‘not to exceed’ connotes limitation, not disbursement”. if, in our hypothetical, the entire',
1185:'$100,000 is not used for renovation of office space, unobligated balances may—within the time limits for obligation—be applied to other',
1186:'unrestricted objects of the appropriation. b290659, july 24, 2002; 31 comp. gen. 578, 579 1952; 15 comp. dec. 660 1909;',
1187:'b4568, june 27, 1939. if later in the fiscal year a supplemental appropriation is made for “renovation of office space,”',
1188:'the funds provided in the supplemental may not be used to increase the $100,000 maximum for general construction unless the',
1189:'supplemental appropriation act so specifies. see section d of this chapter for a further discussion of supplemental appropriations. an earmark',
1190:'that authorizes an agency to use a lumpsum appropriation for “not more than” a certain dollar amount has the same',
1191:'effect as a “not to exceed” earmark. for example, when the department of state received a lumpsum appropriation for “international',
1192:'organizations and programs” authorizing it to make “not more than” $34 million of that lump sum available for the united',
1193:'nations population fund unfpa, the comptroller general concluded: “[w]hile the appropriation limits the state department’s use of the lumpsum appropriation',
1194:'for ‘international organizations and programs’ for unfpa to no more than $34 million, it does not require by law that',
1195:'any amounts be used for unfpa.” page 628 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount b290659, july',
1196:'24, 2002. in this case, the state department could use the funds for unfpa only after the department ensured that',
1197:'unfpa practices satisfied three statutory conditions, one of which was that unfpa would not fund abortions. pub. l. no. 107115,',
1198:'§ 576, 115 stat. 2118, 2168 jan. 10, 2002. the department had delayed obligating funds for unfpa pending an analysis',
1199:'of a report of a team reviewing unfpa’s involvement in chinese family planning practices, including the funding of abortions.28 words',
1200:'like “not more than” or “not to exceed” are not the only ways to establish a maximum limitation. if the',
1201:'appropriation includes a specific amount for a particular object such as “for renovation of office space, $100,000”, then the appropriation',
1202:'establishes a maximum that may not be exceeded. 36 comp. gen. 526 1957; 19 comp. gen. 892 1940; 16 comp.',
1203:'gen. 282 1936. another device congress has used to designate earmarks as maximum limitations is the following general provision: “whenever',
1204:'in this act, an amount is specified within an appropriation for particular purposes or objects of expenditure, such amount, unless',
1205:'otherwise specified, shall be considered as the maximum amount that may be expended for said purpose or object rather than',
1206:'an amount set apart exclusively therefor.” emphasis added.29 by virtue of the “unless otherwise specified” clause, the provision does not',
1207:'apply to amounts within an appropriation which have their own specific earmarking “words of limitation,” such as “exclusively.” 31 comp.',
1208:'gen. 578 1952. if a lumpsum appropriation includes several particular objects and provides further that the appropriation “is to be',
1209:'accounted for as one fund” or “shall constitute one fund,” then the individual amounts are not limitations, the only limitation',
1210:'being that the total amount of the lumpsum 28 while the comptroller general concluded that the department did not have',
1211:'to use funds for unfpa, he cautioned that whenever an agency withholds fiscal year funds from obligation, it must release',
1212:'the funds with sufficient time remaining in the fiscal year to obligate them before the end of the fiscal year.',
1213:'b290659, july 24, 2002. 29 district of columbia appropriations act, 2005, pub. l. no. 108335, § 301, 118 stat. 1322,',
1214:'1399 oct. 18, 2004. page 629 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount appropriation cannot be exceeded.',
1215:'however, individual items within that lumpsum appropriation that include the “not to exceed” language will still constitute maximum limitations. 22',
1216:'comp. dec. 461 1916; 3 comp. dec. 604 1897; a79741, aug. 7, 1936. the “one fund” language is generally used',
1217:'when congress authorizes an agency to transfer unexpended balances of prior appropriations to a current appropriation. for example, the energy',
1218:'and water development appropriations act for 2002 states that— “the unexpended balances of prior appropriations provided for activities in the',
1219:'act may be transferred to appropriation accounts for such activities established pursuant to the title. balances so transferred may be',
1220:'merged with funds in the applicable established accounts and thereafter may be accounted for as one fund for the same',
1221:'period as originally enacted.”30 if congress wishes to specify a minimum for the particular object but not a maximum, the',
1222:'appropriation act may provide “general construction, $1 million, of which not less than $100,000 shall be available for renovation of',
1223:'office space.” b137353, dec. 3, 1959. see also 64 comp. gen. 388 1985; b131935, mar. 17, 1986. if the phrase',
1224:'“not less than” is used, in contrast with the “not to exceed” language, portions of the $100,000 not obligated for',
1225:'renovation of office space may not be applied to the other objects of the appropriation. 64 comp. gen. at 394–95;',
1226:'b128943, sept. 27, 1956. another phrase congress often uses to earmark a portion of a lumpsum appropriation is “shall be',
1227:'available.” there are variations. for example, our hypothetical $1 million “renovation of office space” appropriation may provide that, out of',
1228:'the $1 million, $100,000 “shall be available” or “shall be available only” or “shall be available exclusively” for renovation of',
1229:'office space. still another variation is “$1 million, including $100,000 for renovation of office space.” if the “shall be available”',
1230:'phrase is combined with the maximum or minimum language noted above “not to exceed,” “not less than,” etc., then the',
1231:'above rules apply and the phrase “shall be available” adds little. see, e.g., b137353, dec. 3, 1959. however, if the',
1232:'earmarking phrase “shall be 30 pub. l. no. 10766, § 305, 115 stat. 486, 509 nov. 12, 2001. page 630',
1233:'gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount available” is used without the “not to exceed” or “not',
1234:'less than” modifiers, the rules are not quite as firm. cases interpreting the “shall be available” and “shall be available',
1235:'only” earmarks are somewhat less than consistent. the earlier decisions proclaimed “shall be available” to constitute a maximum but not',
1236:'a minimum b5526, sept. 14, 1939, although it could be a minimum if congress clearly expressed that intent b128943, sept.',
1237:'27, 1956. later cases held the earmark to constitute both a maximum and a minimum which could neither be augmented',
1238:'nor diverted to other objects within the appropriation. b137353, dec. 3, 1959; b137353o.m., oct. 14, 1958. another early decision held',
1239:'summarily that “shall be available only” results in a maximum which cannot be augmented. 18 comp. gen. 1013 1939. later',
1240:'decisions, however, have expressed the view that the effect of “shall be available only”—whether it is a maximum or a',
1241:'minimum—depends on the underlying congressional intent. 53 comp. gen. 695 1974; b142190, mar. 23, 1960. applying this test, the earmark',
1242:'in 53 comp. gen. 695 was found to be a maximum; similar language had been found a minimum in b142190,',
1243:'which could be exceeded. if the phrase “shall be available” may be said to contain an element of ambiguity, addition',
1244:'of the word “only” does not produce a plain meaning. the claims court, reviewing an authorization earmark for a navy',
1245:'project known as racer, commented: “[i]t is not apparent from the language of the authorization $45 million ‘is available only',
1246:'for’ that congress necessarily mandated the navy to spend all $45 million on the racer system. rather, congress may have',
1247:'merely intended to preclude the navy from spending that $45 million on any other activities, i.e., the money would be',
1248:'forfeited if not spent on the racer system.” solar turbines, inc. v. united states, 23 cl. ct. 142, 158 1991.',
1249:'use of the word “exclusively” is somewhat more precise. the earmark “shall be available exclusively” is both a maximum which',
1250:'cannot be augmented from the general appropriation, and a minimum which cannot be diverted to other objects within the appropriation.',
1251:'b102971, aug. 24, 1951. once again, however, clearly expressed congressional intent can produce a different result. b113272o.m., may 21, 1953;',
1252:'b111392o.m., oct. 17, 1952 earmark held to be a minimum only in both cases. page 631 gao06382sp appropriations law—vol. ii',
1253:'chapter 6 availability of appropriations: amount similarly, the term “including” has been held to establish both a maximum and a',
1254:'minimum. a99732, jan. 13, 1939. as such, it cannot be augmented from a more general appropriation 19 comp. gen. 892',
1255:'1940, nor can it be diverted to other uses within the appropriation 67 comp. gen. 401 1988. to sum up,',
1256:'the most effective way to establish a maximum but not minimum earmark is by the words “not to exceed” or',
1257:'“not more than.” the words “not less than” most effectively establish a minimum but not maximum. these are all phrases',
1258:'with wellsettled plain meanings. the “shall be available” family of earmarking language presumptively “fences in” the earmarked sum both maximum',
1259:'and minimum, but is more subject to variation based upon underlying congressional intent. our discussion thus far has centered on',
1260:'the use of earmarking language to prescribe the amount available for a particular object. earmarking language also may be used',
1261:'to vary the period of availability for obligation. an earmarked amount within a lumpsum appropriation that is available without fiscal',
1262:'year limitation is neither a maximum nor a minimum if the funds have not been designated for a specific purpose.',
1263:'the earmark addresses only the time availability of the earmarked amount. for example, in the legislative branch appropriations act for',
1264:'2004, the salaries, officers and employees appropriations lumpsum account contained the following language: “for compensation and expenses of officers and',
1265:'employees, as authorized by law, $156,896,000, including: . . . for salaries and expenses of the office of the chief',
1266:'administrative officer, $111,141,000, of which $8,400,000 shall remain available until expended . . .”31 in this instance, the earmark extended',
1267:'the time period availability of $8,400,000 of the $111,141,000 appropriated for salaries and expenses but did not prescribe the amount',
1268:'available for a particular object. in a 1997 decision, gao determined that an earmark extending the time period also constituted',
1269:'a minimum for the purpose for which it was 31 pub. l. no. 10883, 117 stat. 1007, 1015 sept. 30,',
1270:'2003. page 632 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount earmarked. b278121, nov. 7, 1997 nondecision letter.',
1271:'the library of congress salaries and expenses lumpsum appropriation stated as follows: “for necessary expenses of the library of congress',
1272:'not otherwise provided for . . . $227,016,000 . . . provided further, that of the total amount appropriated, $9,619,000',
1273:'is to remain available until expended for acquisition of books, periodicals, newspapers, and all other materials including subscriptions for bibliographic',
1274:'services for the library . . .”32 gao determined that the library of congress was required to make the entire',
1275:'$9,619,000 available for acquisition of books and materials, even if this required reducing other expenditures within the lumpsum appropriation.33 finally,',
1276:'earmarking language may be found in authorization acts as well as appropriation acts. the same meanings apply. several of the',
1277:'cases cited above involve authorization acts. see, e.g., 64 comp. gen. 388 1985; b131935, mar. 17, 1986. 32 pub. l.',
1278:'no. 10555, 111 stat. 1177, 1191–92 oct. 7, 1997. 33 but see b231711, mar. 28, 1989 appropriation provision earmarked portion',
1279:'of lump sum to remain available for an additional fiscal year for a specific purpose, but was neither maximum nor',
1280:'minimum limitation on amount available for particular object. while b231711 was not explicitly overruled by b278121, nov. 7, 1997, it',
1281:'has little precedential value. page 633 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount c. the antideficiency act',
1282:'1. introduction and overview the antideficiency act is one of the major laws in the statutory scheme by which congress',
1283:'exercises its constitutional control of the public purse. it has been termed “the cornerstone of congressional efforts to bind the',
1284:'executive branch of government to the limits on expenditure of appropriated funds.”34 as with the series of funding statutes as',
1285:'a whole, the antideficiency act did not hatch fully developed but evolved over a period of time in response to',
1286:'various abuses. as we noted in chapter 1, as late as the postcivil war period, it was not uncommon for',
1287:'agencies to incur obligations in excess, or in advance, of appropriations. perhaps most egregious of all, some agencies would spend',
1288:'their entire appropriations during the first few months of the fiscal year, continue to incur obligations, and then return to',
1289:'congress for appropriations to fund these “coercive deficiencies.”35 these were obligations to others who had fulfilled their part of the',
1290:'bargain with the united states and who now had at least a moral—and in some cases also a legal—right to',
1291:'be paid. congress felt it had no choice but to fulfill these commitments, but the frequency of deficiency appropriations played',
1292:'havoc with the united states budget. the congressional response to abuses of this nature was the antideficiency act. its history',
1293:'is summarized in the following paragraphs:36 “control in the execution of the government’s budgetary and financial programs is based on',
1294:'the provisions of section 3679 of the revised statutes, as amended . . ., commonly referred to as the antideficiency',
1295:'act. as the name . . . 34 hopkins & nutt, the antideficiency act revised statutes 3679 and funding federal',
1296:'contracts: an analysis, 80 mil. l. rev. 51, 56 1978. 35 hopkins & nutt, at 57–58; louis fisher, presidential spending',
1297:'power, 232 1975. 36 senate committee on government operations, financial management in the federal government, s. doc. no. 8711, at',
1298:'45–46 1961. in the senate document, the antideficiency act is cited as “section 3679 of the revised statutes,” a designation',
1299:'that is now obsolete. page 634 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount implies, one of the',
1300:'principal purposes of the legislation was to provide effective control over the use of appropriations so as to prevent the',
1301:'incurring of obligations at a rate which will lead to deficiency or supplemental appropriations and to fix responsibility on those',
1302:'officials of government who incur deficiencies or obligate appropriations without proper authorization or at an excessive rate. “the original section',
1303:'3679 . . . was derived from legislation enacted in 1870 [16 stat. 251] and was designed solely to prevent',
1304:'expenditures in excess of amounts appropriated. in 1905 [33 stat. 1257] and 1906 [34 stat. 48], section 3679 . .',
1305:'. was amended to provide specific prohibitions regarding the obligation of appropriations and required that certain types of appropriations be',
1306:'so apportioned over a fiscal year as to ‘prevent expenditures in one portion of the year which may necessitate deficiency',
1307:'or additional appropriations to complete the service of the fiscal year for which said appropriations are made.’ under the amended',
1308:'section, the authority to make, waive, or modify apportionments was vested in the head of the department or agency concerned.',
1309:'by executive order 6166 of june 10, 1933, this authority was transferred to the director of the [office of management',
1310:'and budget]. . . . “during and following world war ii, with the expansion of government functions and the increase',
1311:'in size and complexities of budgetary and operational problems, situations arose highlighting the need for more effective control and conservation',
1312:'of funds. in order to effectively cope with these conditions it was necessary to seek legislation clarifying certain technical aspects',
1313:'of section 3679 of the revised statutes, and strengthening the apportionment procedures, particularly as regards to agency control systems. section',
1314:'1211 of the general appropriation act, 1951 [64 stat. 765], amended section 3679 . . . to provide a basis',
1315:'for more effective control and economical use of appropriations. following a recommendation of the second hoover commission that agency allotment',
1316:'systems should be simplified, congress passed legislation in 1956 [70 stat. 783] further amending section 3679 to provide that each',
1317:'agency work toward the page 635 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount objective of financing each',
1318:'operating unit, at the highest practical level, from not more than one administrative subdivision for each appropriation or fund affecting',
1319:'such unit. in 1957 [71 stat. 440] section 3679 was further amended, adding a prohibition against the requesting of apportionments',
1320:'or reapportionments which indicate the necessity for a deficiency or supplemental estimate except on the determination of the agency head',
1321:'that such action is within the exceptions expressly set out in the law. the revised antideficiency act serves as the',
1322:'primary foundation for the government’s administrative control of funds systems.” in its current form, the law prohibits: making or authorizing',
1323:'an expenditure from, or creating or authorizing an obligation under, any appropriation or fund in excess of the amount available',
1324:'in the appropriation or fund unless authorized by law. 31 u.s.c. § 1341a1a. involving the government in any contract or',
1325:'other obligation for the payment of money for any purpose in advance of appropriations made for such purpose, unless the',
1326:'contract or obligation is authorized by law. 31 u.s.c. § 1341a1b. accepting voluntary services for the united states, or employing',
1327:'personal services in excess of that authorized by law, except in cases of emergency involving the safety of human life',
1328:'or the protection of property. 31 u.s.c. § 1342. page 636 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations:',
1329:'amount making obligations or expenditures in excess of an apportionment or reapportionment, or in excess of the amount permitted by',
1330:'agency regulations. 31 u.s.c. § 1517a.37 subsequent sections of this chapter will explore these concepts in detail. however, the fiscal',
1331:'principles inherent in the antideficiency act are really quite simple. government officials may not make payments or commit the united',
1332:'states to make payments at some future time for goods or services unless there is enough money in the “bank”',
1333:'to cover the cost in full. the “bank,” of course, is the available appropriation. the combined effect of the antideficiency',
1334:'act, in conjunction with the other funding statutes discussed throughout this publication, was summarized in a 1962 decision. the summary',
1335:'has been quoted in numerous later antideficiency act cases and bears repeating here: “these statutes evidence a plain intent on',
1336:'the part of the congress to prohibit executive officers, unless otherwise authorized by law, from making contracts involving the government',
1337:'in obligations for expenditures or liabilities beyond those contemplated and authorized for the period of availability of and within the',
1338:'amount of the appropriation under which they are made; to keep all the departments of the government, in the matter',
1339:'of incurring obligations for expenditures, within the limits and purposes of appropriations annually provided for conducting their lawful functions, and',
1340:'to prohibit any officer or employee of the government from involving the government in any contract or other obligation for',
1341:'the payment of money for any purpose, in advance of appropriations made for such 37 see s. doc. no. 8711,',
1342:'at 48; b131361, apr. 12, 1957. further discussion of the antideficiency act from varying perspectives will be found in the',
1343:'following sources: james a. harley, multiyear contracts: pitfalls and quandaries, 27 public contract l.j. 555 1998; col. james w. mcbride,',
1344:'avoiding antideficiency act violations on fixed price incentive contracts the hunt for red ink, june army lawyer 1994; fenster &',
1345:'volz, the antideficiency act: constitutional control gone astray, 11 public contract l.j. 155 1979; rollee h. efros, statutory restrictions on',
1346:'funding of government contracts, 10 public contract l.j. 254 1978; hopkins & nutt, the antideficiency act revised statutes 3679 and',
1347:'funding federal contracts: an analysis, 80 mil. l. rev. 51 1978; william j. spriggs, the antideficiency act comes to life',
1348:'in u.s. government contracting, 10 national contract management journal 33 1976–77; col. john r. frazier, use of annual funds with',
1349:'conditional, option, or indefinite delivery contracts, 8 a.f. jag l. rev. 50 1966. page 637 gao06382sp appropriations law—vol. ii chapter',
1350:'6 availability of appropriations: amount purpose; and to restrict the use of annual appropriations to expenditures required for the service',
1351:'of the particular fiscal year for which they are made.” 42 comp. gen. 272, 275 1962. to the extent it',
1352:'is possible to summarize appropriations law in a single paragraph, this is it. viewed in the aggregate, the antideficiency act',
1353:'and related funding statutes “[restrict] in every possible way the expenditures and expenses and liabilities of the government, so far',
1354:'as executive offices are concerned, to the specific appropriations for each fiscal year.” wilder’s case, 16 ct. cl. 528, 543',
1355:'1880. 2. obligation/expenditure in excess or advance of appropriations the key provision of the antideficiency act is 31 u.s.c. §',
1356:'1341a1:38 “a1 an officer or employee of the united states government or of the district of columbia government may not—',
1357:'“a make or authorize an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure',
1358:'or obligation; or “b involve either government in a contract or obligation for the payment of money before an appropriation',
1359:'is made unless authorized by law.” not only is section 1341a1 the key provision of the act, it was originally',
1360:'the only provision, the others being added to ensure enforcement of the basic prohibitions of section 1341. the law is',
1361:'not limited to the executive branch, but applies to any “officer or employee of the united states government” and thus',
1362:'extends to all branches. examples of legislative branch applications are b303964, feb. 3, 38 prior to the 1982 recodification of',
1363:'title 31 of the united states code, the antideficiency act consisted of nine lettered subsections of what was then 31',
1364:'u.s.c. § 665. the recodification scattered the law among several new sections. to better show the relationship of the material,',
1365:'our organization in this chapter retains the sequence of the former subsections. page 638 gao06382sp appropriations law—vol. ii chapter 6',
1366:'availability of appropriations: amount 2005 capitol police use of the legislative branch emergency response fund; b303961, dec. 6, 2004 architect',
1367:'of the capitol; b107279, jan. 9, 1952 office of legislative counsel, house of representatives; b78217, july 21, 1948 appropriations to',
1368:'senate for expenses of office of vice president; 27 op. att’y gen. 584 1909 government printing office. within the judicial',
1369:'branch, it applies to the administrative office of the united states courts. e.g., 50 comp. gen. 589 1971. however, whether',
1370:'a federal judge is an officer or employee for purposes of 31 u.s.c. § 1341a1 appears to remain an open',
1371:'question, at least in some contexts. see armster v. united states district court, 792 f.2d 1423, 1427 n.7 9th cir.',
1372:'1986 the seventh amendment of the constitution prohibits suspension of civil jury trials for lack of funds, whether or not',
1373:'a judge is considered an employee or officer under the antideficiency act. the antideficiency act also applies to officers of',
1374:'the district of columbia courts. b284566, apr. 3, 2000. some government corporations are also classified as agencies of the united',
1375:'states government, and to the extent they operate with funds which are regarded as appropriated funds, they too are subject',
1376:'to 31 u.s.c. § 1341a1. e.g., b223857, feb. 27, 1987 commodity credit corporation; b135075o.m., feb. 14, 1975 interamerican foundation. it',
1377:'follows that section 1341a1 does not apply to a government corporation that is not an agency of the united states',
1378:'government. e.g., b175155o.m., july 26, 1976 amtrak. these principles are, of course, subject to variation if and to the extent',
1379:'provided in the relevant organic legislation. there are two distinct prohibitions in section 1341a1. unless otherwise authorized by law, no',
1380:'officer or employee of the united states may 1make any expenditure or incur an obligation in excess of available appropriations,',
1381:'or 2 make an expenditure or incur an obligation in advance of appropriations. the distinction between obligating in excess of',
1382:'an appropriation and obligating in advance of an appropriation is clear in the majority of cases, but can occasionally become',
1383:'blurred. for example, an agency which tries to meet a current shortfall by “borrowing” from i.e., obligating against the unenacted',
1384:'appropriation for the next fiscal year is clearly obligating in advance of an appropriation. e.g., b236667, jan. 26, 1990. however,',
1385:'it is also obligating in excess of the currently available appropriation. since both are equally illegal, determining precisely which subsection',
1386:'of 31 u.s.c. § 1341a has been violated is of secondary importance. in any page 639 gao06382sp appropriations law—vol. ii',
1387:'chapter 6 availability of appropriations: amount event, the point to be stressed here is that the law is violated not',
1388:'just when there are insufficient funds in an account when a payment becomes due. the very act of obligating the',
1389:'united states to make a payment when the necessary funds are not already in the account is also a violation',
1390:'of 31 u.s.c. § 1341a. e.g., b300480, apr. 9, 2003. in b290600, july 10, 2002, both the office of management',
1391:'and budget omb and the airline transportation stabilization board atsb violated the antideficiency act when omb apportioned, and atsb obligated',
1392:'an appropriation, in advance of, and thus in excess of, its availability. the air transportation safety and system stabilization act',
1393:'authorized the president to issue up to $10 billion in loan guarantees, and to provide the subsidy amounts necessary for',
1394:'such guarantees,39 to assist air carriers who incurred losses resulting from the september 11, 2001, terrorist attacks on the united',
1395:'states. pub. l. no. 10742, title i, § 101a1, 115 stat. 230 sept. 22, 2001. congress established the atsb to',
1396:'review and decide on applications for these loan guarantees. the budget authority for the guarantees was available only “to the',
1397:'extent that a request, that includes designation of such amount as an emergency requirement . . . is transmitted by',
1398:'the president to congress.” id. at § 101b. the president had not submitted such a request at the time omb',
1399:'apportioned the funds to atsb and the atsb obligated the funds; therefore, both omb and atsb made funds available in',
1400:'advance of their availability, violating the antideficiency act. see section c of this chapter for a discussion of the apportionment',
1401:'process. note that 31 u.s.c. § 1341a refers to overobligating and overspending the amount available in an “appropriation or fund.”',
1402:'the phrase “appropriation or fund” refers to appropriation and fund accounts. an appropriation account is the basic unit of an',
1403:'appropriation generally reflecting each unnumbered paragraph in an appropriation act. fund accounts include general fund accounts, intragovernmental fund accounts, special',
1404:'fund accounts, and trust fund accounts.40 see, e.g., 72 comp. gen. 59 1992 corps of engineers was prohibited by the',
1405:'antideficiency act from overobligating its civil works revolving fund’s available budget authority. 39 pursuant to the federal credit reform act,',
1406:'agencies are required to have budget authority in advance to cover the longterm costs i.e., subsidy costs of direct loans',
1407:'and loan guarantees. 2 u.s.c. § 661cb. 40 see gao, a glossary of terms used in the federal budget process,',
1408:'gao05734sp washington, d.c.: september 2005, at 3–5. page 640 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount a.',
1409:'exhaustion of an appropriation thus, for example, the antideficiency act applies to indian trust funds managed by the bureau of',
1410:'indian affairs. however, the investment of these funds in certificates of deposit with federally insured banks under authority of 25',
1411:'u.s.c. § 162a does not, in gao’s opinion, constitute an obligation or expenditure for purposes of 31 u.s.c. § 1341.',
1412:'accordingly, overinvested trust funds do not violate the antideficiency act unless the overinvested funds, or any attributable interest income, are',
1413:'obligated or expended by the bureau. b207047o.m., june 17, 1983. cf. b303413, nov. 8, 2004 the federal communications commission’s fcc',
1414:'regulatory action to provide spectrum rights through a license modification instead of an auction did not violate section 1341; spectrum',
1415:'licenses that impose costs and expenses on the licensee do not constitute an obligation and expenditure of the fcc. gao',
1416:'also views the antideficiency act as applicable to presidential and vicepresidential “unvouchered expenditure” accounts. b239854, june 21, 1990 internal memorandum.',
1417:'when we talk about an appropriation being “exhausted,” we are really alluding to any of several different but related situations:',
1418:'depletion of appropriation account i.e., fully obligated and/or expended. similar depletion of a maximum amount specifically earmarked in a lumpsum',
1419:'appropriation.41 depletion of an amount subject to a monetary ceiling imposed by some other statute usually, but not always, the',
1420:'relevant program legislation. 1 making further payments in simple terms, once an appropriation is exhausted, the making of any further',
1421:'payments, apart from using expired balances to liquidate or make adjustments to valid obligations recorded against that appropriation, violates 31',
1422:'u.s.c. § 1341. when the appropriation is fully expended, no further payments may be made in any case. if an',
1423:'agency finds itself in this position, unless it has transfer authority or other clear statutory basis for 41 see section',
1424:'b of this chapter for a discussion of earmarking. page 641 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations:',
1425:'amount making further payments, it has little choice but to seek a deficiency42 or supplemental appropriation from congress, and to',
1426:'adjust or curtail operations as may be necessary. e.g., b285725, sept. 29, 2000; 61 comp. gen. 661 1982; 38 comp.',
1427:'gen. 501 1959. for example, when the corporation for national and community service obligated funds in excess of the amount',
1428:'available to it in the national service trust, the corporation suspended participant enrollment in the americorps program and requested a',
1429:'deficiency appropriation from congress.43 in many ways, the prohibitions in the adequacy of appropriations act, 41 u.s.c. § 11, parallel',
1430:'those of 31 u.s.c. § 1341a. the adequacy of appropriations act states in part that— “no contract or purchase on',
1431:'behalf of the united states shall be made, unless the same is authorized by law or is under an appropriation',
1432:'adequate to its fulfillment, except in the department of defense and in the department of transportation with respect to the',
1433:'coast guard when it is not operating as a service in the navy, for clothing, subsistence, forage, fuel, quarters, transportation,',
1434:'or medical and hospital supplies, which, however, shall not exceed the necessities of the current year.” 41 u.s.c. § 11a.',
1435:'for example, a contract in excess of the available appropriation violates both statutes. e.g., 9 comp. dec. 423 1903. however,',
1436:'a contract in compliance with 41 u.s.c. § 11 can still result in a violation of the antideficiency act. assessment',
1437:'of antideficiency act violations is not frozen at the point when the obligation is incurred. even if the initial obligation',
1438:'was well within available funds, the antideficiency act can still be violated if upward adjustments cause the obligation to exceed',
1439:'available funds. e.g., 55 comp. gen. 812, 826 1976. 42 see 31 u.s.c. §§ 1552a, 1553a, 1554a, and chapter 5,',
1440:'section d, for a discussion of expired and closed appropriation accounts. 43 gao, corporation for national and community service: better',
1441:'internal control and revised practices would improve the management of americorps and the national service trust, gao04225 washington, d.c.: jan.',
1442:'16, 2004. page 642 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount what one authority termed the “granddaddy',
1443:'of all violations”44 occurred when the navy overobligated and overspent nearly $110 million from its “military personnel, navy” appropriation during',
1444:'the years 1969–1972. gao summarized the violation in a letter report, b177631, june 7, 1973. while there may have been',
1445:'some concealment, gao concluded that the violation was not the result of some evil scheme; rather, the “basic cause of',
1446:'the violation was the separation of the authority to create obligations from the responsibility to control them.” the authority to',
1447:'create obligations had been decentralized while control was centralized in the bureau of naval personnel. granddaddy was soon to lose',
1448:'his place of honor on the totem pole. around november of 1975, the department of the army discovered that, for',
1449:'a variety of reasons, it had overobligated four procurement appropriations in the aggregate amount of more than $160 million and',
1450:'consequently had to halt payments to some 900 contractors. the army requested the comptroller general’s advice on a number of',
1451:'potential courses of action it was considering. the resulting decision was 55 comp. gen. 768 1976. the army recognized its',
1452:'duty to mitigate the antideficiency act violation.45 it was clear that without a deficiency appropriation, all the contractors could not',
1453:'be paid. one option—to use current appropriations to pay the deficiencies—had to be rejected because there is no authority to',
1454:'apply current funds to pay off debts incurred in a previous year. id. at 773. an option gao endorsed was',
1455:'to reduce the amount of the deficiencies by terminating some of the contracts for convenience, although the termination costs would',
1456:'still have to come from a deficiency appropriation unless there was enough left in the appropriation accounts to cover them.',
1457:'id. 2 limitations on contractor recovery if the antideficiency act prohibits any further payments when the appropriation is exhausted, where',
1458:'does this leave the contractor? is the contractor expected to know how and at what rate the agency is spending',
1459:'its money? there is a small body of judicial case law which discusses the effect of the exhaustion of appropriations',
1460:'on government obligations. the 44 louis fisher, presidential spending power, 236 1975. 45 “we believe it is obvious that, once',
1461:'an antideficiency act violation has been discovered, the agency concerned must take all reasonable steps to mitigate the effects of',
1462:'the violation insofar as it remains executory.” 55 comp. gen. at 772. page 643 gao06382sp appropriations law—vol. ii chapter 6',
1463:'availability of appropriations: amount fate of the contractor seems to depend on the type of appropriation involved and the presence',
1464:'or absence of notice, actual or constructive, to the contractor on the limitations of the appropriation. where a contractor is',
1465:'but one party out of several to be paid from a general appropriation, the contractor is under no obligation to',
1466:'know the status or condition of the appropriation account on the government’s books. if the appropriation becomes exhausted, the antideficiency',
1467:'act may prevent the agency from making any further payments, but valid obligations will remain enforceable in the courts. for',
1468:'example, in ferris v. united states, 27 ct. cl. 542 1892, the plaintiff had a contract with the government to',
1469:'dredge a channel in the delaware river. the corps of engineers made him stop work halfway through the job because',
1470:'it had run out of money. in discussing the contractor’s rights in a breach of contract suit, the court said:',
1471:'“a contractor who is one of several persons to be paid out of an appropriation is not chargeable with knowledge',
1472:'of its administration, nor can his legal rights be affected or impaired by its maladministration or by its diversion, whether',
1473:'legal or illegal, to other objects. an appropriation per se merely imposes limitations upon the government’s own agents; it is',
1474:'a definite amount of money entrusted to them for distribution; but its insufficiency does not pay the government’s debts, nor',
1475:'cancel its obligations, nor defeat the rights of other parties.” id. at 546. the rationale for this rule is that',
1476:'“a contractor cannot justly be expected to keep track of appropriations where he is but one of several being paid',
1477:'from the fund.” ross construction corp. v. united states, 392 f.2d 984, 987 ct. cl. 1968. other illustrative cases are',
1478:'dougherty ex rel. slavens v. united states, 18 ct. cl. 496 1883, and joplin v. united states, 89 ct. cl.',
1479:'345 1939. the antideficiency act may “apply to the official, but [does] not affect the rights in this court of',
1480:'the citizen honestly contracting with the government.” dougherty, 18 ct. cl. at 503. thus, it is settled that contractors paid',
1481:'from a general appropriation are not barred from recovering for breach of contract even though the appropriation is exhausted. page',
1482:'644 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount however, under a specific lineitem appropriation, the answer is',
1483:'different. the contractor in this situation is deemed to have notice of the limits on the spending power of the',
1484:'government official with whom he contracts. a contract under these circumstances is valid only up to the amount of the',
1485:'available appropriation. exhaustion of the appropriation will generally bar any further recovery beyond that limit. e.g., sutton v. united states,',
1486:'256 u.s. 575 1921; hooe v. united states, 218 u.s. 322 1910; shipman v. united states, 18 ct. cl. 138',
1487:'1883; dougherty, 18 ct. cl. at 503. the distinction between the ferris and sutton lines of cases follows logically from',
1488:'the old maxim that ignorance of the law is no excuse. if congress appropriates a specific dollar amount for a',
1489:'particular contract, that amount is specified in the appropriation act and the contractor is deemed to know it. it is',
1490:'certainly not difficult to locate. if, on the other hand, a contract is but one activity under a larger appropriation,',
1491:'it is not reasonable to expect the contractor to know how much of that appropriation remains available for it at',
1492:'any given time. a requirement to obtain this information would place an unreasonable burden on the contractor, not to mention',
1493:'a nuisance for the government as well. in two cases in the 1960s, the court of claims permitted recovery on',
1494:'contractor claims in excess of a specific monetary ceiling. see anthony p. miller, inc. v. united states, 348 f.2d 475',
1495:'ct. cl. 1965 claim by capehart housing act contractor; ross construction corp. v. united states, 392 f.2d 984 ct. cl.',
1496:'1968 claim by contractor for “offsite” construction ancillary to capehart act housing. the court distinguished between matters not the fault',
1497:'or responsibility of the contractor for example, defective plans or specifications or changed conditions under the “changed conditions” clause, in',
1498:'which case aboveceiling claims are allowable, and excess costs resulting from what it termed “simple extras,” in which case they',
1499:'are not. without attempting to detail the fairly complex capehart legislation here, we note merely that ross is more closely',
1500:'analogous to the ferris situation 392 f.2d at 986, while anthony p. miller is more closely analogous to the sutton',
1501:'situation 392 f.2d at 987. the extent to which the approach reflected in these cases will be applied to the',
1502:'more traditional form of exhaustion of appropriations remains to be developed, although the ross court intimated that it saw no',
1503:'real distinction for these purposes between a specific appropriation and a specific monetary ceiling imposed by other legislation id.. page',
1504:'645 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount b. contracts or other obligations in excess or advance',
1505:'of appropriations it is easy enough to say that the antideficiency act prohibits you from obligating a million dollars when',
1506:'you have only half a million left in the account, or that it prohibits you from entering into a contract',
1507:'in september purporting to obligate funds for the next fiscal year that have not yet been appropriated. many of the',
1508:'situations that actually arise from day to day, however, are not quite that simple. a useful starting point is the',
1509:'relationship of the antideficiency act to the recording of obligations under 31 u.s.c. § 1501. 1 proper recording of obligations',
1510:'proper recording practices are essential to sound funds control. an amount of recorded obligations in excess of the available appropriation',
1511:'is prima facie evidence of a violation of the antideficiency act, but is not conclusive. b134474o.m., dec. 18, 1957. 46',
1512:'an example of this is b300480, apr. 9, 2003, in which the corporation for national and community services failed to',
1513:'recognize and record obligations for national service educational benefits of americorps participants when it incurred that obligation. in that case,',
1514:'the corporation made grant awards to state corporations, who, in turn, made subgrants to nonprofit entities, who enrolled participants. in',
1515:'its grant awards to the state corporations, the corporation approved the enrollment of a specified number of new program participants.',
1516:'because the corporation in the grant agreement had committed to a specified number of new participants, the corporation incurred an',
1517:'obligation for the participants’ educational benefits at that time; without further action by the corporation, the corporation was legally required',
1518:'to pay education benefits of all participants, up to the number the corporation had specified in the grant agreement, if',
1519:'the grantee and subgrantee, who needed no further approval from the corporation, enrolled that number of new participants, and if',
1520:'they satisfied the criteria for benefits. the corporation’s failure to recognize and record its obligation did not ameliorate its violation',
1521:'of the act. see also b300480.2, june 6, 2003. also, in many situations, the amount of the government’s liability is',
1522:'not definitely fixed at the time the obligation is incurred. an example is a 46 gao has cautioned, however, that',
1523:'an antideficiency act violation should not be determined solely on the basis of yearend reports prior to reconciliation and adjustment.',
1524:'b114841.2o.m., jan. 23, 1986. page 646 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount contract with price escalation',
1525:'provisions. a violation would occur if sufficient budget authority is not available when an agency must adjust a recorded obligation.',
1526:'see, e.g., b240264, feb. 7, 1994 an agency would incur an antideficiency act violation if it must adjust an obligation',
1527:'for an incrementally funded contract to fully reflect the extent of the bona fide need contracted for and sufficient appropriations',
1528:'are not available to support the adjustment. this is illustrated in b289209, may 31, 2002. after holding that the coast',
1529:'guard had wrongly used noyear funds from the oil spill liability trust fund for administrative expenses, gao concluded that the',
1530:'agency should adjust its accounting records by deobligating the incorrectly charged expenses and charging them instead to the proper appropriation.',
1531:'gao advised the coast guard that these adjustments could result in a violation of the antideficiency act to the extent',
1532:'that there was insufficient budget authority, and that the agency should report any deficiency in accordance with the antideficiency act.',
1533:'the incurring of an obligation in excess or advance of appropriations violates the act, and this is not affected by',
1534:'the agency’s failure to record the obligation. e.g., 71 comp. gen. 502, 509 1992; 65 comp. gen. 4, 9 1985;',
1535:'62 comp. gen. 692, 700 1983; 55 comp. gen. 812, 824 1976; b245856.7, aug. 11, 1992. 2 obligation in excess',
1536:'of appropriations incurring an obligation in excess of the available appropriation violates 31 u.s.c. § 1341a1.47 as the comptroller of',
1537:'the treasury advised an agency head many years ago, “your authority in the matter was strictly limited by the amount',
1538:'of the appropriation; otherwise there would be no limit to your power to incur expenses for the service of a',
1539:'particular fiscal year.” 9 comp. dec. 423, 425 1903. if you want higher authority, the supreme court has stated that,',
1540:'absent statutory authorization, “it is clear that the head of the department cannot involve the government in an obligation to',
1541:'pay any thing in excess of the appropriation.” bradley v. united states, 98 u.s. 104, 114 1878. 47 determining the',
1542:'amount of available budget authority against which obligations may be incurred is covered later in this chapter in section c.2.e',
1543:'under the heading “amount of available appropriation or fund.” page 647 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations:',
1544:'amount to take a fairly simple illustration, the statute was violated by an agency’s acceptance of an offer to install',
1545:'automatic telephone equipment for $40,000 when the unobligated balance in the relevant appropriation was only $20,000. 35 comp. gen. 356',
1546:'1955. in a 1969 case, the air force wanted to purchase computer equipment but did not have sufficient funds available.',
1547:'it attempted an arrangement whereby it made an initial down payment, with the balance of the purchase price to be',
1548:'paid in installments over a period of years, the contract to continue unless the government took affirmative action to terminate.',
1549:'this was nothing more than a sale on credit, and since the contract constituted an obligation in excess of available',
1550:'funds, it violated the antideficiency act. 48 comp. gen. 494 1969. 3 variable quantity contracts a leading case discussing the',
1551:'antideficiency act ramifications of “variable quantity” contracts requirements contracts, indefinite quantity contracts, and similar arrangements is 42 comp. gen. 272',
1552:'1962.48 that decision considered a 3year contract the air force had awarded to a firm to provide any service or',
1553:'maintenance work necessary for government aircraft landing on wake island. gao questioned the legality of entering into a contract of',
1554:'more than 1 year since the air force had only a 1year appropriation available. the air force argued that it',
1555:'was a “requirements” contract, that no obligation would arise unless or until some maintenance work was ordered, and that the',
1556:'only obligation was a negative one—not to buy service from anyone else but the contractor should the services be needed.',
1557:'gao disagreed. the services covered were “automatic incidents of the use of the air field.” there was no place for',
1558:'a true administrative determination that the services were or were not needed. there was no true “contingency” as the services',
1559:'would almost certainly be needed if the base were to remain operational. accordingly, the contract was not a true requirements',
1560:'contract but amounted to a firm obligation for the needs of future years, and was therefore an unauthorized multiyear contract.',
1561:'as such, it violated the antideficiency act. the solution was to contract on an annual basis with renewal options from',
1562:'year to year, and, if that did not 48 we cover the obligational treatment of contracts of this type in',
1563:'chapter 7, section b.1.e, which should be read in conjunction with this section. page 648 gao06382sp appropriations law—vol. ii chapter',
1564:'6 availability of appropriations: amount meet the air force’s needs, then ask congress for multiyear procurement authority.49 the wake island',
1565:'decision noted that the contract contained no provision permitting the air force to reduce or eliminate requirements short of a',
1566:'termination for convenience. id. at 277. if the contract had included such a provision—and in the unlikely event that, given',
1567:'the nature of the contract, such a provision could have been meaningful—a somewhat different analysis might have resulted. compare, for',
1568:'example, the situation in 55 comp. gen. 812 1976. the exercise of a contract option required the navy to furnish',
1569:'various items of governmentfurnished property gfp, but another contract clause authorized the navy to unilaterally delete items of gfp. if',
1570:'the entire quantity of gfp had to be treated as a firm obligation at the time the option was exercised,',
1571:'the obligation would have exceeded available appropriations, resulting in an antideficiency act violation. however, since the navy was not absolutely',
1572:'obligated to furnish all the gfp items at the time the option was exercised, the navy could avert a violation',
1573:'if it were able to delete enough gfp to stay within the available appropriation; if it found that it could',
1574:'not do so, the violation would then exist.50 see also b134474o.m., dec. 18, 1957. in 47 comp. gen. 155 1967,',
1575:'gao considered an air force contract for mobile generator sets which specified minimum and maximum quantities to be purchased over',
1576:'a 12month period. since the contract committed the air force to purchase only the minimum quantity, it was necessary to',
1577:'obligate only sufficient funds to cover that minimum. see also b287619, july 5, 2001. subsequent orders for additional quantities up',
1578:'to the maximum were not legally objectionable as long as the air force had sufficient funds to cover the cost',
1579:'when it placed those orders. see also 49 the authority was subsequently sought and granted. see 10 u.s.c. § 2306g.',
1580:'for a discussion of multiyear contracting authority for defense and civilian agencies, which authorize obligating annual funds in advance of',
1581:'appropriations, see chapter 5, section b.9.b. 50 the rationale worked in that case because the navy could stay within the',
1582:'appropriation by deleting a relatively small percentage of gfp. if the numbers had been different, such that the amount of',
1583:'gfp to be deleted was so large as to effectively preclude contractor performance, the analysis might well have been different.',
1584:'in a 1964 report, for example, gao found the antideficiency act violated where the air force, to keep within a',
1585:'“minor military construction” ceiling, deleted needed plumbing, heating, and lighting from a building alteration contract, resulting in an incomplete facility,',
1586:'and subsequently charged the deleted items to operation and maintenance appropriations. gao, continuing inadequate control over programming and financing of',
1587:'construction, b133316 washington, d.c.: july 23, 1964, at 12–15. page 649 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations:',
1588:'amount 19 comp. gen. 980 1940. the fact that the air force, at the time it entered into the contract,',
1589:'did not have sufficient funds available to cover the maximum quantity was, for antideficiency act purposes, irrelevant. the decision distinguished',
1590:'the wake island case on the basis that nothing in the mobile generator contract purported to commit the air force',
1591:'to obtain any requirements over and above the specified minimum from the contractor. in 63 comp. gen. 129 1983, gao',
1592:'found no antideficiency act problems with a general services administration “multiple award schedule” contract under which no minimum purchases were',
1593:'guaranteed and no binding obligation would arise unless and until a using agency made an administrative determination that it had',
1594:'a requirement for a scheduled item. regardless of whether we are dealing with a requirements contract, indefinite quantity contract, or',
1595:'some variation, two points apply as far as the antideficiency act is concerned: whether or not there is a violation',
1596:'at the time the contract is entered into depends on exactly what the government is obligated to do under the',
1597:'contract. even if there is no violation at the time the contract is entered into, a violation may occur later',
1598:'if the government subsequently incurs an obligation under the contract in excess of available funds, for example, by electing to',
1599:'order a maximum quantity without sufficient funds to cover the quantity ordered. a conceptually related situation is a contract that',
1600:'gives the government the option of two performances at different prices. the government can enter into such a contract without',
1601:'violating the antideficiency act as long as it has sufficient appropriations available at the time the contract is entered into',
1602:'to pay the lesser amount. for example, the defense production act of 1950 authorizes the president to contract for synthetic',
1603:'fuels, but the contract must give the president the option to refuse delivery and instead pay the contractor the amount',
1604:'by which the contract price exceeds the prevalent market price at the time of the delivery. such a contract would',
1605:'not violate the antideficiency act at the time it is entered into as long as sufficient appropriations are available to',
1606:'pay any anticipated difference between the contract price and the estimated market price at the time of performance. 60 comp.',
1607:'gen. 86 1980. of course, the government could page 650 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount',
1608:'choose not to accept delivery unless there were sufficient appropriations available at that time to cover the full cost of',
1609:'the fuel under the contract. an agreement to pay “special termination” costs under an incrementally funded contract creates a firm',
1610:'obligation, not a contingent liability, to pay the contractor because the contracting agency remains liable for the costs even if',
1611:'it decides not to fund the contract further. b238581, oct. 31, 1990. 4 multiyear or “continuing” contracts a multiyear contract',
1612:'is a contract covering the needs or requirements of more than one fiscal year. our discussion here presupposes a general',
1613:'familiarity with relevant portions of chapter 5, primarily the nature of a fixedterm appropriation and the bona fide needs rule',
1614:'as it applies to multiyear contracts. we start with some very basic propositions: a fixedterm appropriation fiscal year or multiple',
1615:'year may be obligated only during its period of availability. a fixedterm appropriation may be validly obligated only for the',
1616:'bona fide needs of that fixed term. the antideficiency act prohibits the making of contracts which exceed currently available appropriations',
1617:'or which purport to obligate appropriations not yet made. as we have seen in chapter 5, performance may extend into',
1618:'a subsequent fiscal year in certain situations. also, as long as a contract is properly obligated against funds for the',
1619:'year in which it was made, actual payment can extend into subsequent years. apart from these situations, and unless the',
1620:'agency either has specific multiyear contracting authority e.g., 62 comp. gen. 569 1983, is contracting in compliance with the multiyear',
1621:'contracting provisions of the federal acquisition streamlining act of 1994 discussed below and in chapter 5 in relation to the',
1622:'bona fide needs rule, or is operating under a noyear appropriation e.g., 43 comp. gen. 657 1964, the antideficiency act,',
1623:'together with the bona fide needs rule, prohibits contracts purporting to bind the government beyond the page 651 gao06382sp appropriations',
1624:'law—vol. ii chapter 6 availability of appropriations: amount obligational duration of the appropriation.51 this is because the current appropriation is',
1625:'not available for future needs, and appropriations for those future needs have not yet been made. citations to support this',
1626:'proposition are numerous.52 the rule applies to any attempt to obligate the government beyond the end of the fiscal year,',
1627:'even where the contract covers a period of only a few months. 24 comp. gen. 195 1944. an understanding of',
1628:'the principles applicable to multiyear contracting begins with a discussion of a 1926 decision of the united states supreme court.',
1629:'an agency had entered into a longterm lease for office space with 1year i.e., fiscal year funds, but its contract',
1630:'specifically provided that payment for periods after the first year was subject to the availability of future appropriations. in leiter',
1631:'v. united states, 271 u.s. 204 1926, the supreme court specifically rejected that theory. the court held that the lease',
1632:'was binding on the government only for one fiscal year, and it ceased to exist at the end of the',
1633:'fiscal year in which the obligation was incurred. it takes affirmative action to bring the obligation back to life. the',
1634:'court stated its position as follows: “it is not alleged or claimed that these leases were made under any specific',
1635:'authority of law. and since at the time they were made there was no appropriation available for the payment of',
1636:'rent after the first fiscal year, it is clear that in so far as their terms extended beyond that year',
1637:'they were in violation of the express provisions of the [antideficiency act]; and, being to that extent executed without authority',
1638:'of law, they created no binding obligation against the united states after the first year. [citations omitted.] a lease to',
1639:'the government for a term of years, when entered into under an appropriation available for but one fiscal year, is',
1640:'binding on the government only for that year. [citations omitted.] and it is plain that, to make it binding for',
1641:'any subsequent year, it is necessary, not only that an appropriation be made 51 every violation of the bona fide',
1642:'needs rule does not necessarily violate the antideficiency act as well. determinations must be made on a casebycase basis. 71',
1643:'comp. gen. 428, 431 1992; b235086.2, jan. 22, 1992 nondecision letter. 52 e.g., 67 comp. gen. 190 1988; 66 comp.',
1644:'gen. 556 1987; 61 comp. gen. 184, 187 1981; 48 comp. gen. 471, 475 1969; 42 comp. gen. 272 1962;',
1645:'37 comp. gen. 60 1957; 36 comp. gen. 683 1957; 33 comp. gen. 90 1953; 29 comp. gen. 91 1949;',
1646:'27 op. att’y gen. 584 1909. page 652 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount available for',
1647:'the payment of the rent, but that the government, by its duly authorized officers, affirmatively continue the lease for such',
1648:'subsequent year; thereby, in effect, by the adoption of the original lease, making a new lease under the authority of',
1649:'such appropriation for the subsequent year.” id. at 206–07. the federal acquisition streamlining act of 1994 fasa supplied the “specific',
1650:'authority of law” missing in leiter to enable agencies to enter into multiyear contracts using fiscal year funds.53 the multiyear',
1651:'contracts provision, codified at 41 u.s.c. § 254c, authorizes executive agencies, using fiscal year funds, to enter into multiyear contracts',
1652:'defined as contracts for more than 1 but not more than 5 years for the acquisition of property or services.',
1653:'to take advantage of fasa, the agency must either 1 obligate the full amount of the contract to the appropriation',
1654:'current at the time it enters into the contract, or 2 obligate the costs of the first year of the',
1655:'contract plus termination costs. of course, if the agency elects to obligate only the costs of the individual years for',
1656:'each year of the contract, the agency needs to obligate the costs of each such year against the appropriation current',
1657:'for that year. contracts relying on fasa must provide that the contract will be terminated if funds are not made',
1658:'available for the continuation of the contract in any fiscal year covered by the contract. funds available for termination costs',
1659:'remain available for such costs until the obligation for termination costs has been satisfied. 41 u.s.c. § 254cb. importantly, fasa',
1660:'does not apply to all contracts that are intended to meet the needs of more than one fiscal year. obviously,',
1661:'if multiple year or noyear appropriations are legally available for the full contract period, an agency need not rely on',
1662:'fasa. also, certain contract forms do not constitute multiyear contracts within the scope of fasa. for example, in b302358, dec.',
1663:'27, 2004, gao determined that a bureau of customs and border protection procurement constituted an “indefinitedelivery, indefinitequantity” idiq contract that',
1664:'was not subject to fasa. the 53 see also 10 u.s.c. §§ 2306b and 2306c, which provide similar authority for',
1665:'defense agencies and the other agencies listed in 10 u.s.c. § 23021. fasa does not affect these authorities. 41 u.s.c.',
1666:'§ 254ce. page 653 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount decision explained that, unlike a contract',
1667:'covered by fasa, an idiq contract does not obligate the government beyond its initial year. rather, it obligates the government',
1668:'only to order a minimum amount of supplies or services. the cost of that minimum amount is recorded as an',
1669:'obligation against the appropriation current when the contract is entered into.54 leiter provides the general framework governing the legality of',
1670:'contracts carrying potential liabilities beyond the fiscal year availability of the appropriations that funded them. while fasa provides the necessary',
1671:'authority to avoid the leiter problems, the leiter analysis remains relevant to the extent that fasa does not apply. thus,',
1672:'gao decisions interpreting leiter before enactment of fasa still need to be considered. for example, gao refused to approve an',
1673:'automatic, annual renewal of a contract for repair and storage of automotive equipment, even though the contract provided that the',
1674:'government had a right to terminate. the reservation of a right to terminate does not save the contract from the',
1675:'prohibition against binding the government in advance of appropriations. 28 comp. gen. 553 1949. the post office wanted to enter',
1676:'into a contract for services and storage of governmentowned highway vehicles for periods up to 4 years because it could',
1677:'obtain a more favorable flat rate per mile of operations instead of an item by item charge required if the',
1678:'contract was for 1 year only. gao held that any contract for continuous maintenance and storage of the vehicles would',
1679:'be prohibited by 31 u.s.c. § 1341 because it would obligate the government beyond the extent of the existing appropriation.',
1680:'however, there would be no legal objection to including a provision that gave the government an affirmative option to renew',
1681:'the contract from year to year, not to exceed 4 years as specified in the statute authorizing the postmaster to',
1682:'enter into these types of contracts. 29 comp. gen. 451 1950.55 where a contract gives the government a renewal option,',
1683:'it may not be exercised until appropriations for the subsequent fiscal year actually become available. 61 comp. gen. 184, 187',
1684:'1981. under a 1year contract 54 see chapter 7, section b.1.e for a further discussion of recording obligations under idiq',
1685:'and similar contracts. 55 some additional cases are 67 comp. gen. 190 1988; 66 comp. gen. 556 1987; 42 comp.',
1686:'gen. 272, 276 1962; 37 comp. gen. 155, 160 1957; 37 comp. gen. 60, 62 1957; 36 comp. gen. 683',
1687:'1957; 9 comp. gen. 6 1929; b116427, sept. 27, 1955. see also cray research v. united states, 44 fed. cl.',
1688:'327 1999. page 654 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount with renewal options, the fact that',
1689:'funds become available in subsequent years does not place the government under an obligation to exercise the renewal option. government',
1690:'systems advisors, inc. v. united states, 13 cl. ct. 470 1987, aff’d, 847 f.2d 811 fed. cir. 1988.56 note that,',
1691:'in leiter, the inclusion of a contract provision conditioning the government’s obligation on the subsequent availability of funds was to',
1692:'no avail. in this regard, see also 67 comp. gen. 190, 194 1988; 42 comp. gen. 272, 276 1962; 36',
1693:'comp. gen. 683 1957. if a “subject to availability” clause were sufficient to permit multiyear contracting, the effect would be',
1694:'automatic continuation from year to year unless the government terminated. if funds were not available and the government nevertheless permitted',
1695:'or acquiesced in the continuation of performance, the contractor would obviously be performing in the expectation of being paid.57 apart',
1696:'from questions of legal liability, the failure by congress to appropriate the money might be viewed as a serious breach',
1697:'of faith. congress, as a practical if not a legal matter, would have little real choice but to appropriate funds',
1698:'to pay the contractor. this is another example of a type of “coercive deficiency” the antideficiency act was intended to',
1699:'prohibit.58 thus, it is not enough for the government to retain the option to terminate at any time if sufficient',
1700:'funds are not available. under leiter and its progeny, the contract “dies” at the end of the fiscal year, and',
1701:'may be revived only by affirmative action by the government. this “new” contract is then chargeable to appropriations for the',
1702:'subsequent year. although today fasa and the federal acquisition regulation recognize “subject to availability” clauses, such a clause, by itself,',
1703:'is not sufficient. fasa provides that a multiyear contract for purposes of fasa— “may provide that performance under the contract',
1704:'during the second and subsequent years of the contract is 56 the claims court based its conclusion in part on',
1705:'leiter and the antideficiency act; the federal circuit relied on the language of the contract. 57 the federal acquisition regulation',
1706:'states that encouraging a contractor to continue performance in the absence of funds violates the antideficiency act. 48 c.f.r. §',
1707:'32.704c 2005. in this regard, section c.3 of this chapter discusses how the antideficiency act’s prohibition against acceptance of voluntary',
1708:'services, 31 u.s.c. § 1342, prohibits contracting officers from soliciting or permitting a contractor to continue performance on a “temporarily',
1709:'unfunded” basis. 58 see section c.1 of this chapter for a discussion of the coercive deficiency concept. page 655 gao06382sp',
1710:'appropriations law—vol. ii chapter 6 availability of appropriations: amount contingent upon the appropriation of funds and if it does so',
1711:'provide may provide for a cancellation payment to be made to the contractor if such appropriations are not made.” 41',
1712:'u.s.c. § 254cd. if an agency decides to include a “subject to availability” clause for the second and subsequent years,',
1713:'the agency also has to provide for possible termination. availability clauses are required by the federal acquisition regulation in several',
1714:'situations. while the prescribed contract clauses vary in complexity, they all have one thing in common—each requires the contracting officer',
1715:'to specifically notify the contractor in writing that the contractor may resume performance. for example: 1 contract actions initiated prior',
1716:'to the availability of funds;59 2 certain requirements and indefinitequantity contracts;60 3 fully funded costreimbursement contracts;61 4 facilities acquisition and',
1717:'use;62 and 5incrementally funded costreimbursement contracts.63 see 48 c.f.r. subpt. 32.7. the objective of these clauses is compliance with the',
1718:'antideficiency act and other fiscal statutes. see itt federal laboratories, asbca no. 12987, 692 bca ¶ 7,849 1969, rev’d and',
1719:'remanded on other grounds, itt v. united states, 453 f.2d 1283 1972. what is not sufficient is a simple “subject',
1720:'to availability” clause which would permit automatic continuation subject to the government’s right to terminate. in b259274, may 22, 1996,',
1721:'the air force exercised an option to a severable service contract that extended the contract from september 1, 1994, to',
1722:'august 31, 1995, using fiscal year 1994 funds.64 however, the air force only had enough fiscal year 1994 budget authority',
1723:'to finance 4 months of the option period, leaving the remaining 8 months unfunded. the air force modified the agreement',
1724:'by adding a clause stating that the government’s obligation beyond december 31, 1994, was subject to the availability of appropriations.',
1725:'significantly, however, the clause further stated that no 59 availability of funds, 48 c.f.r. § 52.23218. 60 availability of funds',
1726:'for the next fiscal year, 48 c.f.r. § 52.23219. 61 limitation of cost, 48 c.f.r. § 52.23220. 62 limitation of',
1727:'cost facilities, 48 c.f.r. § 52.23221. 63 limitation of funds, 48 c.f.r. § 52.23222. 64 see section b.9.a of chapter',
1728:'5 for a discussion of severable service contracts that cross fiscal years. page 656 gao06382sp appropriations law—vol. ii chapter 6',
1729:'availability of appropriations: amount legal liability on the part of the government would arise for contract performance beyond december 31,',
1730:'1994, unless and until the contractor received notice in writing from the air force contracting officer that the contractor could',
1731:'continue work. gao held that this clause converted the government’s obligation for the remaining 8 months to no more than',
1732:'a negative obligation not to procure services elsewhere should such services be needed. since this contractual obligation created no financial',
1733:'exposure on the part of the government, the air force had not violated the antideficiency act. it may be useful',
1734:'at this point to reiterate the basic principle that, in the context of contractual obligations, compliance with the antideficiency act',
1735:'is determined first on the basis of when an obligation occurs, not when actual payment is scheduled to be made.',
1736:'in the case of a contract with an option to renew, for example, as long as sufficient funds are available',
1737:'to cover the initial contract, there is no violation at the time the contract is made. no obligation accrues for',
1738:'future option years unless and until the government exercises its option. another issue to consider with respect to multiyear contracts',
1739:'is the relationship between termination charges and the antideficiency act. as a general proposition, the government has the right to',
1740:'terminate a contract “for the convenience of the government” if that action is determined to be in the government’s best',
1741:'interests. the federal acquisition regulation prescribes the required contract clauses. 48 c.f.r. subpt. 49.5.65 under a termination for convenience, the',
1742:'contractor is entitled to be compensated, including a reasonable profit, for the performed portion of the contract, but may not',
1743:'recover anticipatory profits on the terminated portion. e.g., 48 c.f.r. §§ 49.201, 49.202. total recovery may not exceed the contract',
1744:'price. id. § 49.207. in the typical contract covering the needs of only one fiscal year, termination does not pose',
1745:'a problem. under 48 c.f.r. § 49.207, the contractor’s recovery cannot exceed the contract price; thus, the basic contract obligation',
1746:'will be sufficient to cover potential termination costs. under a contract with options to renew, however, the situation may differ.',
1747:'a contractor who must incur substantial capital costs at the outset has a 65 where a termination for convenience clause',
1748:'is required by regulation, it will be read into the contract whether expressly included or not. g.l. christian & associates',
1749:'v. united states, 312 f.2d 418 and 320 f.2d 345 ct. cl., cert. denied, 375 u.s. 954 1963. page 657',
1750:'gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount legitimate concern over recovering these costs if the government does',
1751:'not renew. a device sometimes used to address this problem, albeit with limited success, is a clause requiring the government',
1752:'to pay termination charges or “separate charges” upon early termination. as discussed in chapter 5, section b.8.c, separate charges have',
1753:'been found to violate the bona fide needs rule to the extent they do not reasonably relate to the value',
1754:'of current fiscal year requirements. e.g., 36 comp. gen. 683 1957, aff’d, 37 comp. gen. 155 1957. separate charges also',
1755:'have been held to violate the antideficiency act. the leading case in this area is 56 comp. gen. 142 1976,',
1756:'aff’d, 56 comp. gen. 505 1977. the burroughs corporation protested the award of a contract to the honeywell corporation to',
1757:'provide automatic data processing adp equipment to the mine enforcement and safety administration. if all renewal options were exercised, the',
1758:'contract would run for 60 months after equipment installation. the contract included a “separate charges” provision under which, if the',
1759:'government failed to exercise any renewal option or otherwise terminated prior to the end of the 60month systems life, the',
1760:'government would pay a percentage of all future years’ rentals based on honeywell’s “list prices” at the time of failure',
1761:'to renew or of termination. this provision violated the antideficiency act for two reasons. first, it would amount to an',
1762:'obligation of fiscal year funds for the requirements of future years. and second, it would commit the government to indeterminate',
1763:'liability because the contractor could raise its list or catalog prices at any time. the government had no way of',
1764:'knowing the amount of its commitment. similar cases involving separate charges are 56 comp. gen. 167 1976; b216718.2, nov. 14,',
1765:'1984; and b190659, oct. 23, 1978.66 the burroughs decision also offers guidance on when separate charges may be acceptable. one',
1766:'instance is where it is the only way the government can obtain its needs. cited in this regard was 8',
1767:'comp. gen. 654 1929, a case involving the installation of equipment and the 66 the burroughs case was decided before',
1768:'the enactment of the fasa multiyear contracts provision. as discussed above, that provision now enables agencies to enter into contracts',
1769:'like the one at issue in the burroughs case without running afoul of the antideficiency act as long as they',
1770:'follow the terms of the statute by either obligating the full contract amount against appropriations available at the time of',
1771:'the contract or obligating the first year costs plus estimated termination costs. with reference to termination costs, fasa requires the',
1772:'contract to include a clause stating that the contract shall be terminated if funds are not made available for its',
1773:'continuation in any fiscal year and provides that amounts obligated for termination costs shall remain available until the costs are',
1774:'paid. 41 u.s.c. § 254cb. page 658 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount procurement of a',
1775:'water supply from a town. there, however, the town was the only source of a water supply, a situation clearly',
1776:'inapplicable to a competitive industry like adp. 56 comp. gen. at 157. in addition, separate charges are permissible if they,',
1777:'together with payments already made, reasonably represent the value of requirements actually performed. thus, where the contractor has discounted its',
1778:'price based on the government’s stated intent to exercise all renewal options, separate charges may be based on the “reasonable',
1779:'value e.g., adp schedule price of the actually performed work at termination based upon the shortened term.” id. at 158.',
1780:'however, termination charges may not be inconsistent with the termination for convenience clause remedy; for example, they may not exceed',
1781:'the value of the contract or include costs not cognizable under a “t for c.” id. at 157. where termination',
1782:'charges are otherwise proper, the antideficiency act also requires that the agency have sufficient funds available to pay them if',
1783:'and when the contingency materializes. e.g., 62 comp. gen. 143 1983; 8 comp. gen. 654, 657 1929. see also aerolease',
1784:'long beach v. united states, 31 fed. cl. 342, 362 1994, aff’d, 39 f.3d 1198 fed. cir. 1994 agency complied',
1785:'with antideficiency act requirements by including termination costs as current obligations. this requirement is sometimes specified in multiyear contracting legislation.',
1786:'an example is 40 u.s.c. § 322, the information technology fund. in operating the fund, the general services administration is',
1787:'authorized to enter into information technology multiyear contracts if “amounts are available and adequate to pay the costs of the',
1788:'contract for the first fiscal year and any costs of cancellation or termination.” id. § 322e1a. congress may also, of',
1789:'course, provide exceptions. e.g.,b174839, mar. 20, 1984. c. indemnification under an indemnification agreement, one party promises, in effect, to cover',
1790:'another party’s losses. it is no surprise that the government is often asked to enter into indemnification agreements. the problem',
1791:'is that such agreements create a risk that the government, at some point in the future, may have to pay',
1792:'amounts in excess of available funds. consequently, with one very limited exception discussed below, gao and numerous courts have adhered',
1793:'to the rule that, absent express statutory authority, the government may not enter into an agreement to indemnify where the',
1794:'amount of the government’s liability is indefinite, indeterminate, or page 659 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations:',
1795:'amount potentially unlimited.67 such an agreement would violate both the antideficiency act, 31 u.s.c. § 1341, and the adequacy of',
1796:'appropriations act, 41 u.s.c. § 11, since it can never be said that sufficient funds have been appropriated to cover',
1797:'the government’s indemnification exposure. as discussed in this section, indemnity clauses have been upheld under certain conditions: where the potential',
1798:'liability of the government was limited to a definite amount known at the time of the agreement, was within the',
1799:'amount of available appropriations, and was not otherwise prohibited by statute; where the indemnification agreement is a legitimate object of',
1800:'an appropriation, the agreement specifically provides that the amount of liability is limited to available appropriations, and there is no',
1801:'implication that congress will, at a later date, appropriate funds to meet deficiencies; or where congress has specifically authorized the',
1802:'agency to indemnify. although a provision limiting liability to appropriations available at the time a loss arises would prevent any',
1803:'overt antideficiency act or adequacy of appropriations act violation by removing the “unlimited liability” objection, it could have disastrous fiscal',
1804:'consequences for the agency as well as present other, practical problems. for example, payment of an especially large indemnity obligation',
1805:'at the beginning of a fiscal year could wipe out the entire unobligated balance of the agency’s appropriation for the',
1806:'rest of the fiscal year, forcing the agency to seek a supplemental appropriation to finance basic program activities. conversely, if',
1807:'a liability arises toward the end of the fiscal year it is quite possible that no unobligated balance would be',
1808:'available for an indemnity payment, which means indemnification could prove largely illusory from the standpoint of the contractor or other',
1809:'“beneficiary.” another practical problem concerns recording the obligations that may arise under indemnity clauses. the indemnity is a potential liability',
1810:'that may become an actual liability when some event outside of the 67 the prohibition against incurring indefinite liabilities is',
1811:'not limited to indemnification agreements. it applies as well to types of liabilities such as contract termination charges. the cases',
1812:'are included in our preceding discussion of multiyear contracting. see section c.2.b of this chapter. page 660 gao06382sp appropriations law—vol.',
1813:'ii chapter 6 availability of appropriations: amount government’s control is triggered, at which point the liability becomes a recordable obligation.',
1814:'this creates a fiscal dilemma, however. while the liability is not sufficiently definite at the time the indemnity agreement is',
1815:'made to formally record an obligation, good financial management requires that the agency recognize its contingent liability.68 although most of',
1816:'our cases do not directly address this issue, the ones that do, discussed below, have recommended either the obligation or',
1817:'administrative reservation69 of sufficient funds to cover the potential liability. clearly, however, this could create a fiscal nightmare where an',
1818:'estimate of potential liability could encompass the entire appropriation for the agency for that fiscal year, and tying up that',
1819:'entire sum would prevent the agency from meeting its mission. what follows is a discussion of indemnification proposals in decisions',
1820:'issued over the years. as you will see, we have struggled with the practical problems posed by the inclusion of',
1821:'indemnity clauses in government contracts and agreements. for the past several years it has been our view that even if',
1822:'indemnification clauses are rewritten to meet the minimum requirements of the antideficiency act or adequacy of appropriations act, there should',
1823:'be a clear governmentwide policy restricting their use. given the potential liability of the government created by such clauses, exceptions',
1824:'to this policy should not be made without express congressional acquiescence, as has been done whenever congress has decided that',
1825:'it was in the best interests of the government to assume the risks of having to pay off on an',
1826:'indemnity obligation. see, for example, 10 u.s.c. § 2354, 42 u.s.c. § 2210, and other examples given below. 1 prohibition',
1827:'against unlimited liability as noted above, absent specific statutory authority, the government generally may not enter into an indemnification agreement',
1828:'which would impose an indefinite or potentially unlimited liability on the government. in plain english, you cannot purport to bind',
1829:'the government to unlimited liability. the rule is not some arcane gao concoction. the court of claims stated in californiapacific',
1830:'utilities co. v. united states, 194 ct. cl. 703, 715 1971: 68 see section c.2.b of this chapter for a',
1831:'discussion of recording obligations. 69 see section c.4.b of this chapter for a discussion on establishing reserves. page 661 gao06382sp',
1832:'appropriations law—vol. ii chapter 6 availability of appropriations: amount “the united states supreme court, the court of claims, and the',
1833:'comptroller general have consistently held that absent an express provision in an appropriation for reimbursement adequate to make such payment,',
1834:'[the antideficiency act, 31 u.s.c. § 1341] proscribes indemnification on the grounds that it would constitute the obligation of funds',
1835:'not yet appropriated. [citations omitted. ]” for example, in an early case, the interior department, as licensee, entered into an',
1836:'agreement with the southern pacific company under which the department was to lay telephone and telegraph wires on property owned',
1837:'by the licensor in new mexico. the agreement included a provision that the department was to indemnify the company against',
1838:'any liability resulting from the operation. upon reviewing the indemnity provision, the comptroller general found that it purported to impose',
1839:'indeterminate contingent liability on the government in violation of revised statutes § 3732, the predecessor to the adequacy of appropriations',
1840:'act, 41 u.s.c. § 11. by including the indemnity provision, the contracting officer had exceeded his authority, and the provision',
1841:'was held void. 16 comp. gen. 803 1937. similarly, an indefinite and unlimited indemnification provision in a lease entered into',
1842:'by the general services administration without statutory authority was held to impose no legal liability on the government since it',
1843:'violated the provisions of 31 u.s.c. § 1341 and 41 u.s.c. § 11. 35 comp. gen. 85 1955. in 59',
1844:'comp. gen. 369 1980, the national oceanic and atmospheric administration noaa desired to undertake a series of hurricane seeding experiments',
1845:'off the coast of australia in cooperation with its australian counterpart. the state department, as negotiator, sought gao’s opinion on',
1846:'an australian proposal under which the united states would agree to indemnify australia against all damages arising from the activities.',
1847:'state recognized that an unlimited agreement would violate the antideficiency act and asked whether the proposal would be acceptable if',
1848:'it specified that the government’s liability would be subject to the appropriation of funds by congress for that purpose. gao',
1849:'expressed dissatisfaction with this proposal because, even though it would impose no legal obligation unless or until funds are appropriated,',
1850:'it would impose a moral obligation on the page 662 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount',
1851:'united states to make good on its promise.70 there was a way out, however—insurance. ordinarily, appropriations are not available to',
1852:'acquire insurance,71 but gao concluded that the government’s policy of selfinsurance did not apply here since the insurance would not',
1853:'be for the purpose of protecting against a risk to which the united states would be exposed but rather is',
1854:'the price exacted by australia, as the united states’ partner in an international venture, to protect australia’s interests. gao said',
1855:'that noaa could therefore purchase private insurance, with the premiums to be shared by the government of australia, provided that',
1856:'the united states’ liability under the agreement was limited to its share of the insurance premiums. noaa’s use of its',
1857:'appropriation for the united states’ share of the insurance premium would simply be a necessary expense of the project. another',
1858:'decision applying the general rule held that the federal emergency management agency72 could not agree to provide indeterminate indemnification to',
1859:'agents and brokers under the national flood insurance act. b201394, apr. 23, 1981. if the agency considered indemnification necessary to',
1860:'the success of its program, it could either insert a provision limiting the government’s liability to available appropriations or seek',
1861:'broader authority from congress. in b201072, may 3, 1982, the department of health and human services questioned the use of',
1862:'a contract clause entitled “insurance—liability to third persons,” found in the federal procurement regulations predecessor to the federal acquisition regulation.',
1863:'the clause purported to permit federal agencies to agree to reimburse contractors, without limit, for liabilities to third persons for',
1864:'death, personal injury, or property damage, arising out of performance of the contract and not compensated by insurance, whether or',
1865:'not caused by the contractor’s negligence. since the clause purported to commit the government to an indefinite liability which could',
1866:'exceed available appropriations, the comptroller general 70 this is still another example of a socalled “coercive deficiency,” particularly in light',
1867:'of the fact that the potential claimant was another sovereign nation and failure to honor the agreement would have international',
1868:'consequences. see section c.2.b of this chapter for a discussion of the “coercive deficiency” concept. 71 for further information on',
1869:'the government’s policy regarding selfinsurance, see chapter 4, section c.10. 72 on march 1, 2003, the federal emergency management agency',
1870:'became part of the u.s. department of homeland security. page 663 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations:',
1871:'amount found it in violation of the antideficiency act and the adequacy of appropriations act. this decision was affirmed upon',
1872:'reconsideration in 62 comp. gen. 361 1983, one of gao’s more comprehensive discussions of the indemnification problem. for other cases',
1873:'applying or discussing the general rule, see b260063, june 30, 1995; 35 comp. gen. 85 1955; 20 comp. gen. 95,',
1874:'100 1940; 7 comp. gen. 507 1928; 15 comp. dec. 405 1909; b242146, aug. 16, 1991; b117057, dec. 27, 1957;',
1875:'a95749, oct. 14, 1938; 8 op. off. legal counsel 94 1984; 2 op. off. legal counsel 219, 223–24 1978. a',
1876:'brief letter report making the same point is gao, agreements describing liability in undercover operations should limit the government’s liability,',
1877:'ggd8353 washington, d.c.: mar. 15, 1983. in some of the earlier gao cases—for example, 7 comp. gen. 507 and 16',
1878:'comp. gen. 803 1937—the comptroller general offered as further support for the indemnification prohibition the thenexisting principle that the united',
1879:'states was not liable for the tortious conduct of its employees. of course, since the enactment of the federal tort',
1880:'claims act in 1946,73 this is no longer true. thus, the reader should disregard any discussion of the government’s lack',
1881:'of tort liability appearing in the earlier cases. the thrust of those cases, namely, the prohibition against openended liability, remains',
1882:'valid. the comptroller general recognized a limited exception to the rule in 59 comp. gen. 705 1980. in that decision,',
1883:'the comptroller general held that the general services administration could agree to certain indemnity provisions in procuring public utility services',
1884:'for government agencies under the federal property and administrative services act, 40 u.s.c. § 501. to apply the general rule',
1885:'against indemnification in this situation, the comptroller general suggested, would constitute “an overly technical and literal reading of the antideficiency',
1886:'act.” id. at 707. the decision reasoned as follows: “the procurement of goods or services from stateregulated utilities which are',
1887:'virtually monopolies is unique in important ways. as a practical matter, there is no other source for the needed goods',
1888:'or services. moreover, the tariff requirements, such as this indemnification 73 the act is now codified at 28 u.s.c. §§',
1889:'2671–2680. page 664 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount undertaking, are applicable generally to all of',
1890:'the same class of customers of the utility, and are included in the tariff only after administrative proceedings in which',
1891:'the government has the opportunity to participate. the united states is not being singled out for discriminatory treatment nor, presumably,',
1892:'can it complain that the objectionable provision was imposed without notice and the opportunity for a hearing. “under the circumstances,',
1893:'we have not objected in the past to the procurement of power by gsa under tariffs containing the indemnity clause',
1894:'and there is no reason to object to the purchase of power under contracts containing essentially the same indemnity clause.',
1895:'as noted already, this has of necessity been the practice in the past. the possibility of liability under the clause',
1896:'is in our judgment remote. in any event, we see little purpose to be served by a rule which prevents',
1897:'the united states from procuring a vital commodity under the same restrictions as other customers are subject to under the',
1898:'tariff if the utility insists that the restrictions are nonnegotiable. however, because the possibility exists, however remote, that these agreements',
1899:'could result in future liability in excess of available appropriations, gsa should inform the congress of the situation.” id. subsequent',
1900:'decisions emphasize that the extent of the exception carved out by 59 comp. gen. 705 is limited to its facts.',
1901:'see, e.g., b260063, june 30, 1995; 62 comp. gen. 361 1983; b242146, aug. 16, 1991. in b197583, jan. 19, 1981,',
1902:'gao once again applied the general rule and held that the architect of the capitol could not agree to indemnify',
1903:'the potomac electric power company pepco for loss or damages resulting from pepco’s performance of tests on equipment installed in',
1904:'government buildings or from certain other equipment owned by pepco which could be installed in government buildings to monitor electricity',
1905:'use for conservation purposes. gao pointed to two distinguishing factors that justified—and limited—the exception in 59 comp. gen. 705. first,',
1906:'in 59 comp. gen. 705, there was no other source from which the government could obtain the needed utility services.',
1907:'here, the testing and monitoring could be performed by page 665 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations:',
1908:'amount government employees. the second factor is summarized in the following excerpt from b197583, jan. 19, 1981: “an even more',
1909:'important distinction, though, is that unlike the situation in the gsa case [59 comp. gen. 705], the architect has not',
1910:'previously been accepting the testing services or using the impulse device from pepco and has therefore not previously agreed to',
1911:'the liability represented by the proposed indemnity agreements. in the gsa case, gsa merely sought to enter a contract accepting',
1912:'the same service and attendant liability, previously secured under a nonnegotiable tariff, at a rate more advantageous to the government.',
1913:'here, however, the government has other means available to provide the testing and monitoring desired.” thus, the case did not',
1914:'fall within the “narrow exception created by the gsa decision,” and the proposed indemnity agreement was improper. more recent decisions',
1915:'likewise reaffirm the general rule against openended indemnification agreements and reemphasize the limited application of the exception in 59 comp.',
1916:'gen. 705. in b242146, aug. 16, 1991, gao held that the united states park police could not include in mutual',
1917:'assistance agreements with local law enforcement agencies a clause that the united states would indemnify the latter agencies against claims',
1918:'arising from police actions they took in national parks. citing 62 comp. gen. 361 1983 and other cases, the decision',
1919:'observed: “this office has long held that absent statutory authority, indemnity provisions which subject the united states to indefinite or',
1920:'potentially unlimited contingent liability contravene the antideficiency act, 31 u.s.c. § 1341a . . . since it can never be',
1921:'said that sufficient funds have been appropriated to cover the contingency. “here, the potential liability of the park police is',
1922:'unknown because the clause in question provides an indemnity for property damage and personal injury. there is no possible way',
1923:'to know at the time the [mutual assistance] memoranda are signed whether there are sufficient funds in the appropriation to',
1924:'cover a liability or when it arises under the page 666 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations:',
1925:'amount indemnification clause because no one knows in advance how much the liability may be.” footnote omitted. the decision rejected',
1926:'the argument that 59 comp. gen. 705 supported the indemnification clause in this case, stating: “[w]e were careful to point',
1927:'out in 62 comp. gen. at 364 . . . that 59 comp. gen. 705 should not serve as a',
1928:'precedent. indeed, except for 59 comp. gen. 705, ‘the accounting officers of the government have never issued a decision sanctioning',
1929:'the incurring of an obligation for an openended indemnity in the absence of statutory authority to the contrary.’ 62 comp.',
1930:'gen. 364–365.” in b260063, june 30, 1995, gao again distinguished 59 comp. gen. 705 in holding that a federal agency',
1931:'should not agree to indemnify a utility company for providing electricity to one of the agency’s remote facilities. the decision',
1932:'pointed out that, unlike the situation in 59 comp. gen. 705, the indemnity clause proposed here was not part of',
1933:'a generally applicable tariff but would discriminate against the agency. as indicated previously, the general rule against openended indemnity agreements',
1934:'has received consistent acceptance by the courts. examples of court cases endorsing the general rule against openended indemnification are frank',
1935:'v. united states, 797 f.2d 724, 727 9th cir. 1986; union pacific railroad corp. v. united states, 52 fed. cl.',
1936:'730, 732–735 2002; lopez v. johns manville, 649 f. supp. 149 w.d. wash. 1986, aff’d on other grounds, 858 f.2d',
1937:'712 fed. cir. 1988; in re all asbestos cases, 603 f. supp. 599 d. hawaii 1984; johnsmanville corp. v. united',
1938:'states, 12 cl. ct. 1 1987. several of these are asbestos cases in which the courts rejected claims of an',
1939:'implied agreement to indemnify. in johnsmanville corp., the court stated: “contractual agreements that create contingent liabilities for the government serve',
1940:'to create obligations of funds just as much as do agreements creating definite or certain liabilities. the contingent nature of',
1941:'the liability created by an indemnity agreement does not so lessen its effect on appropriations as to make it immune',
1942:'to the limitations of [the antideficiency act].” page 667 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount 12',
1943:'cl. ct. at 25. in hercules, inc. v. united states, 516 u.s. 417 1996, the supreme court rejected the argument',
1944:'by a manufacturer of the vietnam warera defoliant “agent orange” that it had an impliedinfact contract with the united states',
1945:'to indemnify it for tort damages arising from thirdparty claims against it. the court noted that an impliedinfact contract depends',
1946:'upon a meeting of the minds, and that such a meeting of the minds was unlikely given the rule against',
1947:'openended indemnity contracts: “there is . . . reason to think that a contracting officer would not agree to the',
1948:'openended indemnification alleged here. the antideficiency act bars a federal employee or agency from entering into a contract for future',
1949:'payment of money in advance of, or in excess of, an existing appropriation. 31 u.s.c. § 1341. ordinarily no federal',
1950:'appropriation covers contractors’ payments to thirdparty tort claimants in these circumstances, and the comptroller general has repeatedly ruled that government',
1951:'procurement agencies may not enter into the type of openended indemnity for thirdparty liability that petitioner thompson claims to have',
1952:'implicitly received under the agent orange contracts. we view the antideficiency act, and the contracting officer’s presumed knowledge of its',
1953:'prohibition, as strong evidence that the officer would not have provided, in fact, the contractual indemnification [petitioner] claims.” 516 u.s.',
1954:'at 426–427 footnotes omitted. the court cited several instances in which congress had enacted statutory authorizations for indemnification, and noted',
1955:'that the existence of these statutory authorizations further militated against finding an implied contract to indemnify in this case: “these',
1956:'statutes [authorizing indemnification], set out in meticulous detail and each supported by a panoply of implementing regulations, . . .',
1957:'would be entirely unnecessary if an implied agreement to indemnify could arise from the circumstances of contracting. we will not',
1958:'interpret the [agent orange] contracts so as to render these statutes and regulations superfluous.” page 668 gao06382sp appropriations law—vol. ii',
1959:'chapter 6 availability of appropriations: amount id. at 429.74 the federal circuit’s recent decision in e.i. dupont de nemours &',
1960:'company, inc. v. united states, 365 f.3d 1367 fed. cir. 2004, provides an interesting twist. the issue in that case',
1961:'was whether an indemnity clause contained in a world war iiera contract required the united states to reimburse the contractor',
1962:'for environmental cleanup costs it incurred at the contract site as a result of liability imposed on it under the',
1963:'comprehensive environmental response, compensation, and liability act of 1980 popularly known as “cercla” or the “superfund” law, 42 u.s.c. §§',
1964:'9601–9675.75 the court of federal claims had viewed the contract’s indemnity clause as extending to cercla liability, but concluded that',
1965:'the general rule against openended indemnification applied to invalidate the clause under the antideficiency act: “even though the indemnification clause',
1966:'was included in this contract and it is quite reasonable to assume that both the contracting officer and the contractor',
1967:'believed this clause to place the risk of virtually all liabilities on the government rather than the contractor, the state',
1968:'of the law compels us to hold this clause to be void and unenforceable. . . . “although we are',
1969:'of the opinion that the current state of the law compels the result expressed, this result is so totally at',
1970:'odds with the agreement the parties clearly made concerning reimbursement and indemnity, and plaintiff is so clearly entitled to the',
1971:'indemnity it seeks under the plain language of the contract it had with the government, made during truly emergency, wartime',
1972:'conditions, we suggest that plaintiff may want to consider the avenue for potential relief 74 the supreme court’s decision affirmed',
1973:'two claims court decisions that had similarly cited the general rule against indemnification agreements with respect to the agent orange',
1974:'contracts: wm. t. thompson co. v. united states, 26 cl. ct. 17, 29 1992; hercules inc. v. united states, 25',
1975:'cl. ct. 616 1992. 75 see major randall j. bunn, contractor recovery for current environmental cleanup costs under world war',
1976:'iiera government indemnification clauses, 41 air force l. rev. 163 1997, for an extensive background discussion and analysis of the',
1977:'issues addressed in the dupont case. this article also discusses at length the first war powers act and its successor,',
1978:'50 u.s.c. § 1431 pub. l. no. 85804, § 1, 72 stat. 972 aug. 28, 1958, which are referenced later',
1979:'in this section. page 669 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount available in a congressional reference',
1980:'case pursuant to 28 u.s.c. §§ 1492 & 2509.” e.i.dupont de nemours & company, inc. v. united states, 54 fed.',
1981:'cl. 361, 372–373 2002. the federal circuit reversed in e.i. dupont de nemours & company, inc., 365 f.3d 1367. the',
1982:'court did not question the general rule against openended indemnity provisions; nor did it dispute the lower court’s conclusion that',
1983:'the indemnity clause in the dupont contract was originally invalid under that rule. however, the court concluded that the government',
1984:'in effect ratified the clause through actions taken under a subsequent statute—the contract settlement act of 1944, at 41 u.s.c.',
1985:'§§ 101, 120a— that did permit such indemnity provisions. thus, the court reasoned, the indemnity clause in this case satisfied',
1986:'the “otherwise authorized by law” exception in the antideficiency act, 31 u.s.c. § 1341a1b. e.i. dupont de nemours & company,',
1987:'inc., 365 f.3d at 1375–80. executive branch adjudicative bodies such as boards of contract appeals and the federal labor relations',
1988:'authority have also applied the general antiindemnity rule. see appeals of national gypsum co., asbca no. 53259, 031 b.c.a. ¶',
1989:'32,054 2002 indemnity provision of world war ii contract unenforceable because in violation of the antideficiency act and the executive',
1990:'order under which the contract was entered into; kms development co. v. general services administration, gsbca no. 12584, 952 b.c.a.',
1991:'¶ 27, 663 1995 no impliedinfact contract of indemnity since such a contract would be ultra vires as a violation',
1992:'of the antideficiency act; national federation of federal employees and u.s. department of the interior, 35 f.l.r.a. 1034 1990 proposal',
1993:'to indemnify union against judgments and litigation expenses resulting from drug testing program held contrary to law and therefore nonnegotiable;',
1994:'american federation of state, county and municipal employees and u.s. department of justice, 42 f.l.r.a. 412, 515–17 1991 similar proposal',
1995:'for drug testing indemnification. in sum, the gao decisions, court cases, and other administrative decisions reflect a clear rule against',
1996:'openended indemnification agreements absent statutory authority. indeed, the supreme court’s opinion in hercules, inc. v. united states, 516 u.s. 417',
1997:'1996, discussed previously, commented upon the nearly uniform line of comptroller general decisions on this point, noting that 59 comp.',
1998:'gen. 705 stood as the “one peculiar exception.” 516 u.s. at 428. page 670 gao06382sp appropriations law—vol. ii chapter 6',
1999:'availability of appropriations: amount 2 when indemnification may be permissible indemnification agreements may be proper if they are limited to',
2000:'available appropriations and are otherwise authorized. before ever getting to the question of amount, for an indemnity agreement to be',
2001:'permissible in the first place, it must be authorized either expressly or under a necessary expense theory. 59 comp. gen.',
2002:'369 1980. the determination as to whether an expense is necessary as incident to the object of the applicable funding',
2003:'source is determined on a casebycase basis.76 although gao generally affords agencies broad discretion in determining whether a specific expenditure',
2004:'is reasonably related to the accomplishment of an authorized purpose, an agency’s discretion in such matters is not unlimited. 18',
2005:'comp. gen. 285, 292 1938. gao has had occasion both to approve and to disapprove contract indemnification provisions as necessary',
2006:'or incident to the object of the applicable funding source. see, e.g., 63 comp. gen. 145, 150 1984 all but',
2007:'one indemnity provision in contracts for vessels were approved as incidental expenses under the navy’s authorized prepositioning ship chartering program;',
2008:'59 comp. gen. 369 disapproved—general statutory authority to carry out international programs did not provide authority for the united states',
2009:'to agree to provide complete indemnification of another country for all damages resulting from an international weather modification project; 42',
2010:'comp. gen. 708, 712 1963 approved—obligation of an agency for damage or destruction that might arise under an indemnity clause',
2011:'in an aircraft rental contract was a necessary expense incident to the hiring of aircraft for which the agency’s appropriation',
2012:'was expressly available; b201394, apr. 23, 1981 disapproved—no specific appropriation was available to pay costs arising under a clause indemnifying',
2013:'agents and brokers under the national flood insurance program; b137976, dec. 4, 1958 disapproved— an obligation arising under an indemnity',
2014:'provision in an agency’s agreement for training with a nongovernment facility was not a necessary expense under the statute authorizing',
2015:'such training agreements. once you cross the purpose hurdle—that is, once you determine that the indemnification proposal you are considering',
2016:'is a legitimate object on which to spend your appropriations—you are ready to grapple with the unlimited liability issue. 76',
2017:'see chapter 4, section b for a discussion of the necessary expense rule. page 671 gao06382sp appropriations law—vol. ii chapter',
2018:'6 availability of appropriations: amount one way to deal with this issue is to specifically limit the amount of the',
2019:'liability assumed. such a limitation of an indemnity agreement may come about in either of two ways: it may follow',
2020:'necessarily from the nature of the agreement itself or it may be expressly written into the agreement, coupled with an',
2021:'appropriate obligation or administrative reservation of funds. the latter alternative is the only acceptable one where the government’s liability would',
2022:'otherwise be potentially unlimited. for example, where the government rented buses to transport selective service registrants for physical examination or',
2023:'induction, there was no objection to the inclusion of an indemnity provision for damage to the buses caused by the',
2024:'registrants. this was a standard provision in the applicable motor carrier charter coach tariff. 48 comp. gen. 361 1968. potential',
2025:'liability was not indefinite since it was necessarily limited to the value of the motor carrier’s equipment. similarly, under a',
2026:'contract for the lease of aircraft, the federal aviation administration faa could agree to indemnify the owner for loss or',
2027:'damage to the aircraft in order to eliminate the need to reimburse the owner for the cost of “hull insurance”',
2028:'and thereby secure a lower rental rate. the liability could properly be viewed as a necessary expense incident to hiring',
2029:'the aircraft, faa had noyear appropriations available to pay for any such liability, and, as in the selective service case,',
2030:'the agreement was not indefinite because maximum liability was measurable by the fair market value of the aircraft. 42 comp.',
2031:'gen. 708 1963. see also 22 comp. gen. 892 1943 maritime commission could amend contract to agree to indemnify contractor',
2032:'against liability to third parties, in lieu of reimbursing contractor for cost of liability insurance premiums, to the extent of',
2033:'available appropriations and provided liability was limited to the amount of coverage of the discontinued insurance policies replaced by the',
2034:'indemnity agreement.77 in b114860, dec. 19, 1979, the farmers home administration asked whether it could purchase surety bonds or enter',
2035:'into an indemnity agreement in order to obtain the release of deeds of trust for borrowers in colorado where the',
2036:'original promissory notes had been lost while in the 77 the decision in 22 comp. gen. 892 is discussed in',
2037:'62 comp. gen. 361, 362–63 1983, and johnsmanville corp. v. united states, 12 cl. ct. 1, 23 1987. the claims',
2038:'court noted the “significant deficiency” of 22 comp. gen. 892 in that it nowhere mentions the antideficiency act. page 672',
2039:'gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount administration’s custody. colorado law required one or the other where',
2040:'the canceled original note could not be delivered to the colorado public trustee. gao concluded that the indemnity agreement was',
2041:'permissible as long as it was limited to an amount not to exceed the original principal amount of the trust',
2042:'deed. the decision further advised that the administration should reserve sufficient funds to cover its potential liability. the latter aspect',
2043:'of the decision was reconsidered in b198161, nov. 25, 1980. reviewing the particular circumstances involved, gao was unable to foresee',
2044:'situations in which the government might be required to indemnify the public trustee, and accordingly advised the administration that the',
2045:'reservation of funds would not be necessary. while reservation of the funds may not have been necessary, gao did state:',
2046:'“although the liability which arises from an indemnity agreement to secure the release of a trust deed may be contingent,',
2047:'the maximum cost of liquidating that liability would normally be a recordable expense limited by the administration’s annual budget authority.”',
2048:'in 63 comp. gen. 145 1984, certain indemnification provisions in a shipchartering agreement were found not to impose indefinite or',
2049:'potentially unlimited contingent liability because liability could be avoided by certain separate actions solely under the government’s control. in cases',
2050:'like the selective service bus case 48 comp. gen. 361 and the faa aircraft case 42 comp. gen. 708, even',
2051:'though the government’s potential liability is limited and determinable, this fact alone does not guarantee that the agency will have',
2052:'sufficient funds available should the contingency ripen into an obligation. this concern is met in one of two ways. the',
2053:'first is either to obligate or to reserve administratively sufficient funds to cover the potential liability, although this point has',
2054:'not been completely explored in past decisions. in particular cases, reservation may be determined unnecessary, as in b198161, nov. 25,',
2055:'1980, discussed above. also, naturally, a specific directive from congress will render reservation of funds unnecessary. see b159141, aug. 18,',
2056:'1967 reservation of termination costs for supersonic aircraft contract. the second way is for the agreement to expressly limit the',
2057:'government’s liability to appropriations available at the time of the loss with no implication that congress will appropriate funds to',
2058:'make up any deficiency. this second device—the express limitation of the government’s liability to available appropriations—is sufficient to cure an',
2059:'otherwise fatally defective i.e., unlimited indemnity proposal. for example, the government may in limited circumstances assume the risk of loss',
2060:'to page 673 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount contractorowned property. while the maximum potential liability',
2061:'would be determinable, it could be very large and the administrative reservation of funds is not feasible. thus, without some',
2062:'form of limitation, such an agreement could result in obligations in excess of available appropriations. the rules concerning the government’s',
2063:'assumption of risk on property owned by contractors and used in the performance of their contracts are set forth in',
2064:'54 comp. gen. 824 1975, modifying b168106, july 3, 1974. the rules are summarized below:78 if administratively determined to be',
2065:'in the best interest of the government, the government may assume the risk for contractorowned property which is used solely',
2066:'in the performance of government contracts. the government may not assume the risk for contractorowned property which is used solely',
2067:'for nongovernment work. if the property is used for both government and nongovernment work and the nongovernment portion is separable,',
2068:'the government may not assume the risk relating to the nongovernment work. where the amount of a contractor’s commercial work',
2069:'is so insignificant when compared to the amount of the contractor’s government work that the government is effectively bearing the',
2070:'entire risk of loss by in essence paying the full insurance premiums, the government may assume the risk if administratively',
2071:'determined to be in the best interest of the government. any agreement for the assumption of risk by the government',
2072:'under the above rules must contain a clause to clearly provide that, in the event the government has to pay',
2073:'for losses, payments may not exceed appropriations available at the time of the losses, and that nothing in the contract',
2074:'may be considered as implying that congress will at a later date appropriate funds sufficient to meet deficiencies. 54 comp.',
2075:'gen. at 827. 78 the decision in 54 comp. gen. 824 overruled a portion of 42 comp. gen. 708 the',
2076:'faa aircraft lease case, discussed in the text, to the extent it held that there was no need to either',
2077:'obligate or reserve funds. thus, in a situation like 42 comp. gen. 708, the agency would presumably have to either',
2078:'obligate or administratively reserve funds or include a provision that payments for losses may not exceed appropriations available at the',
2079:'time of the loss and nothing in the contract may be construed as implying that congress will appropriate funds to',
2080:'meet any deficiencies at a later date. page 674 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount a',
2081:'somewhat different situation was discussed in 60 comp. gen. 584 1981, involving an “installment purchase plan” for automatic data processing',
2082:'equipment. under the plan, the general services administration would make monthly payments until the entire purchase price was paid, at',
2083:'which time gsa would acquire unencumbered ownership of the equipment. gsa’s obligation was conditioned on its exercising an option at',
2084:'the end of each fiscal year to continue payments for the next year. the contract contained a risk of loss',
2085:'provision under which gsa would be required to pay the full price for any equipment lost or damaged during the',
2086:'term of the contract. gao concluded that the equipment should be treated as contractorowned property for purposes of the risk',
2087:'of loss provision, and that the provision would be improper unless one of the following conditions were met: the contract',
2088:'includes the clause specified in 54 comp. gen. 824 limiting gsa’s liability to appropriations available at the time of the',
2089:'loss and expressly precluding any inference that congress would appropriate sufficient funds to meet any deficiency; or if the contract',
2090:'does not include these restrictions, then gsa must obligate sufficient funds to cover its possible liability under the risk of',
2091:'loss provision. if neither of these conditions is met, the assumption of risk clause could violate the antideficiency act by',
2092:'creating an obligation in excess of available appropriations if any equipment is lost or damaged during the term of the',
2093:'contract. in 1982, the defense department and the state of new york entered into a contract for new york to',
2094:'provide certain support functions for the 1980 winter olympic games at lake placid. the contract provided for federal reimbursement of',
2095:'any disability benefits which new york might be required to pay in case of death or injury of persons participating',
2096:'in the operation. the contract specified that the government’s liability could not exceed appropriations for assistance to the games available',
2097:'at the time of a disabling event, and that the contract did not imply that congress would appropriate funds sufficient',
2098:'to meet any deficiencies. since these provisions satisfied the test of 54 comp. gen. 824, the indemnity agreement was not',
2099:'legally objectionable. b202518, jan. 8, 1982. under this type of arrangement, gao noted that an estimated amount should have been',
2100:'recorded as an obligation when the agency was notified that a disabling event had occurred. however, no violation of the',
2101:'antideficiency act page 675 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount actually occurred in this case because',
2102:'sufficient funds remained available for obligation at the time new york filed its claim for indemnification under the contract. also,',
2103:'the decision in the national flood insurance act case mentioned above b201394, apr. 23, 1981 noted that the defect could',
2104:'have been cured by inserting a clause along the lines of the clause in 54 comp. gen. 824. the same',
2105:'point was made in b201072, may 3, 1982, also discussed earlier. see also national railroad passenger corp. v. united states,',
2106:'3 cl. ct. 516, 521 1983 indemnification agreement between the federal railroad administration and amtrak did not violate antideficiency act',
2107:'where liability was limited to amount of appropriation. however, as noted in the introduction to this section, over the years',
2108:'gao has expressed the view that indemnity agreements, even with limiting language, should not be entered into without congressional approval',
2109:'in view of their potentially disruptive fiscal consequences to the agency.79 63 comp. gen. 145, 147 1984; 62 comp. gen.',
2110:'361, 368 1983; b242146, aug. 16, 1991. if an agency thinks that indemnification agreements in a particular context are sufficiently',
2111:'in the government’s interest, the preferable approach is for the agency to go to congress and seek specific statutory authority.',
2112:'see b201394, apr. 23, 1981. as discussed below, congress has seen fit to enact legislation authorizing indemnification agreements when warranted',
2113:'by the circumstances. in 1986, the chairman of the subcommittee on nuclear regulation, senate committee on environment and public works,',
2114:'in connection with proposed priceanderson act amendments the committee was considering, asked gao to identify possible funding options for a',
2115:'statutory indemnification provision. gao’s response, b197742, aug. 1, 1986, listed several options and noted the benefits and drawbacks of each',
2116:'from the perspective of congressional flexibility. the options ranged from creating a statutory entitlement with a permanent indefinite appropriation for',
2117:'payment indemnity guaranteed but no congressional flexibility, to making payment fully dependent on the appropriations process full congressional flexibility but',
2118:'no guarantee of payment. in between were 79 to illustrate the potential fiscal consequences, an authorized indemnity agreement entered into',
2119:'in 1950 produced liability of over $64 million plus interest more than four decades later. see e.i. du pont de',
2120:'nemours & co. v. united states, 24 cl. ct. 635 1991, aff’d, 980 f.2d 1440 fed. cir. 1992. page 676',
2121:'gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount various other devices such as contract authority, use of contract',
2122:'provisions such as those in 54 comp. gen. 824, and various forms of limited funding authority.80 the discussion in b197742',
2123:'highlights the essence of the indemnification funding problem: “an indemnity statute should generally include two features—the indemnification provisions and a',
2124:'funding mechanism. indemnification provisions can range from a legally binding guarantee to a mere authorization. funding mechanisms can similarly vary',
2125:'in terms of the degree of congressional control and flexibility retained. it is impossible to maximize both the assurance of',
2126:'payment and congressional flexibility. either objective is enhanced only at the expense of the other. . . . “if payment',
2127:'is to be assured, congress must yield control over funding, either in whole or up to specified ceilings . .',
2128:'. . conversely, if congress is to retain funding control, payment cannot be assured in any legally binding form and',
2129:'the indemnification becomes less than an entitlement.” b197742 at 9, 11. 3 statutorily authorized indemnification when we first stated the',
2130:'antiindemnity rule at the outset of this discussion, we noted that the rule applies in the absence of express statutory',
2131:'authority to the contrary. naturally, an indemnification agreement, however openended it may be, will be “legal” if it is expressly',
2132:'authorized by statute. one statutory exception to the indemnification rules exists for certain defenserelated contracts by virtue of 50 u.s.c.',
2133:'§ 1431, often referred to by 80 note that the priceanderson act, at 42 u.s.c. § 2210j, provided contract rather',
2134:'than indemnity authority to the nuclear regulatory commission nrc to address indemnification and other financial protection that nrc is required',
2135:'to provide nuclear licensees, contractors, and others to cover the consequences of nuclear incidents. page 677 gao06382sp appropriations law—vol. ii',
2136:'chapter 6 availability of appropriations: amount its public law designation, public law 85804.81 the statute evolved from a temporary wartime',
2137:'measure, section 201 of the first war powers act, 1941, ch. 493, 55 stat. 838, 839 dec. 18, 1941. the',
2138:'implementing details on indemnification are found in executive order no. 10789, as amended,82 and federal acquisition regulation far, 48 c.f.r.',
2139:'part 50 2005. for example, while the decision to indemnify under public law 85804 is discretionary, b287121, mar. 20, 2001,',
2140:'such discretion must be exercised by the agency head and cannot be delegated. b257139, aug. 30, 1994, citing far, 48',
2141:'c.f.r. § 50.201d. other examples of statutory exceptions are: section 4 of the priceanderson act, 42 u.s.c. § 2210, which',
2142:'provides contract authority permitting, among other things, indemnification agreements with nuclear regulatory commission licensees and department of energy contractors to',
2143:'pay claims resulting from nuclear accidents; section 119 of the comprehensive environmental response, compensation, and liability act, 42 u.s.c. §',
2144:'9619, which authorizes indemnification of certain superfund cleanup contractors against negligence but not gross negligence or intentional misconduct; section 308',
2145:'of the national aeronautics and space act, 42 u.s.c. § 2458b, which authorizes the administrator of the national aeronautics and',
2146:'space administration nasa to indemnify users of nasa space vehicles against third party claims that are not covered by insurance;',
2147:'section 2354 of title 10, united states code, which authorizes the military departments to indemnify research and development contractors against',
2148:'liability not covered by insurance; and 81 pub. l. no. 85804, § 1, 72 stat. 972 aug. 28, 1958. 82',
2149:'exec. order no. 10789, contracting authority of government agencies in connection with national defense functions, 23 fed. reg. 8897 nov.',
2150:'14, 1958, as amended, 50 u.s.c. § 1431 note. a decision approving an indemnity agreement under authority of the first',
2151:'war powers act is b33801, apr. 19, 1943. a later related decision is b33801, oct. 27, 1943. both of these',
2152:'decisions involved the famed “manhattan project,” although that fact is wellconcealed. the decisions had been classified, but were declassified in',
2153:'1986. page 678 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount d. specific appropriation limitations/purpose violations section 74232',
2154:'of title 26, united states code, which authorizes indemnification of federal employees for damages awarded in suits involving their performance',
2155:'of duties under the internal revenue code. congress also may enact legislation to provide indemnification for a specific or onetime',
2156:'event. for example, congress specifically indemnified the manufacturers, distributors, and those who administered the swine flu vaccine purchased and used',
2157:'as part of the national swine flu immunization program of 1976 against liability for other than their own negligence to',
2158:'persons alleging personal injury or death arising out of the administration of such vaccine. pub. l. no. 94380, 90 stat.',
2159:'1113 aug. 12, 1976. in chapter 4 we covered in some detail 31 u.s.c. § 1301a, which prohibits the use',
2160:'of appropriations for purposes other than those for which they were appropriated. as seen in that chapter, violations of purpose',
2161:'availability can arise in a wide variety of contexts—charging an obligation or expenditure to the wrong appropriation, making an obligation',
2162:'or expenditure for an unauthorized purpose, violating a statutory prohibition or restriction, etc. the question we explore in this section',
2163:'is the relationship of purpose availability to the antideficiency act. in other words, when and to what extent does a',
2164:'purpose violation also violate the antideficiency act? why does it matter whether you have violated one statute or two statutes?',
2165:'one reason is that, if the second statute is the antideficiency act, there are statutory reporting requirements and potential penalties',
2166:'to consider in addition to any administrative sanctions that agencies may impose through internal processes for violations of section 1301',
2167:'alone. a useful starting point is the following excerpt from 63 comp. gen. 422, 424 1984: “not every violation of',
2168:'31 u.s.c. § 1301a also constitutes a violation of the antideficiency act. . . . even though an expenditure may',
2169:'have been charged to an improper source, the antideficiency act’s prohibition against incurring obligations in excess or in advance of',
2170:'available appropriations is not also violated unless no other funds were available for that expenditure. where, however, no other funds',
2171:'were authorized to be used for the purpose in question or where those authorized were already page 679 gao06382sp appropriations',
2172:'law—vol. ii chapter 6 availability of appropriations: amount obligated, both 31 u.s.c. § 1301a and § 1341a have been violated.',
2173:'in addition, we would consider an antideficiency act violation to have occurred where an expenditure was improperly charged and the',
2174:'appropriate fund source, although available at the time, was subsequently obligated, making readjustment of accounts impossible.” first, suppose an agency',
2175:'charges an obligation or expenditure to the wrong appropriation account, either charging the wrong appropriation for the same time period,',
2176:'or charging the wrong fiscal year. the above passage from 63 comp. gen. 422 provides the answer—if the appropriation that',
2177:'should have been charged in the first place has sufficient available funds to enable the adjustment of accounts, there is',
2178:'no antideficiency act violation. the decision in 73 comp. gen. 259 1994 illustrates this point. in that case, an agency',
2179:'had erroneously charged a furniture order to the wrong appropriation account, but had sufficient funds in the proper account to',
2180:'support an adjustment correcting the error. thus, gao concluded, there was no violation of the antideficiency act. id. at 261.',
2181:'on the other hand, a violation exists if the proper account does not have enough money to permit the adjustment,',
2182:'and this includes cases where sufficient funds existed at the time of the error but have since been obligated or',
2183:'expended. see also 70 comp. gen. 592 1991; b222048, feb. 10, 1987; b95136, aug. 8, 1979. other cases illustrating or',
2184:'applying this principle are 57 comp. gen. 459 1978 grant funds charged to wrong fiscal year; b224702, aug. 5, 1987',
2185:'contract modifications charged to expired accounts rather than current appropriations; and b208697, sept. 28, 1983 items charged to general services',
2186:'administration working capital fund which should have been charged to other operating appropriations. actually, the concept of “curing” a violation',
2187:'by making an appropriate adjustment of accounts is not new. see, e.g., 16 comp. dec. 750 1910; 4 comp. dec.',
2188:'314, 317 1897. the armed services board of contract appeals also has followed this principle. new england tank industries of',
2189:'new hampshire, inc., asbca no. 26474, 881 bca ¶ 20,395 1987.83 83 although the board’s decision was vacated and remanded',
2190:'on other grounds by the court of appeals for the federal circuit, new england tank industries of new hampshire v.',
2191:'united states, 861 f.2d 685 fed. cir. 1988, the court noted its agreement with the board’s antideficiency act conclusions. id.',
2192:'at 692 n.15. page 680 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount the next situation to consider',
2193:'is an obligation or expenditure in excess of a statutory ceiling. this may be an earmarked maximum in a more',
2194:'general appropriation or a monetary ceiling imposed by some other legislation. an obligation or expenditure in excess of the ceiling',
2195:'violates 31 u.s.c. § 1341a. see, for example, the following: monetary ceilings on minor military construction 10 u.s.c. § 2805:',
2196:'63 comp. gen. 422 1984; gao, continuing inadequate control over programming and financing of construction, b133316 washington, d.c.: july 23,',
2197:'1964; review of programming and financing of selected facilities constructed at army, navy, and air force installations, b133316 washington, d.c.:',
2198:'jan. 24, 1961.84 monetary ceiling on lease payments for family housing units in foreign countries 10 u.s.c. § 2828e: 66',
2199:'comp. gen. 176 1986; b227527, b227325, oct. 21, 1987 nondecision letter; gao, leased military housing costs in europe can be',
2200:'reduced by improving acquisition practices and using purchase contracts, gao/nsiad85113 washington, d.c.: july 24, 1985, at 7–8. ceiling in supplemental',
2201:'appropriation: b204270, oct. 13, 1981 dollar limit on standard level user charge payable by agency to general services administration.85 ceiling',
2202:'in authorizing legislation: 64 comp. gen. 282 1985 dollar limit on two small business administration direct loan programs. in a',
2203:'statutory ceiling case, the account adjustment concept described above may or may not come into play. if the ceiling represents',
2204:'a limit on the amount available for a particular object, then there generally will be no other funds available for',
2205:'that object and hence no “correct” funding source from which to reimburse the account charged. if, however, the ceiling represents',
2206:'only a limit on the amount available from a particular 84 another report in this series, making similar findings under',
2207:'a different statutory ceiling, is gao, illegal use of operation and maintenance funds for rehabilitation and construction of family housing',
2208:'and construction of a related facility, b133102 washington, d.c.: aug. 30, 1963. 85 this case also illustrates that the antideficiency',
2209:'act applies to interagency transactions the same as any other obligations or expenditures. cf. b247348, june 22, 1992 nonreimbursable interagency',
2210:'personnel detail. page 681 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount appropriation and not an absolute limit',
2211:'on expenditures for the object, as in the minor military construction cases, for example, then it may be possible to',
2212:'cure violations by an appropriate adjustment. 63 comp. gen. at 424. the final situation is an obligation or expenditure for',
2213:'an object that is prohibited or simply unauthorized. in 60 comp. gen. 440 1981, a proviso in the customs service’s',
2214:'1980 appropriation expressly prohibited the use of the appropriation for administrative expenses to pay any employee overtime pay in an',
2215:'amount in excess of $20,000. by allowing employees to earn overtime pay in excess of that amount, the customs service',
2216:'violated 31 u.s.c. § 1341. the comptroller general explained the violation as follows: “when an appropriation act specifies that an',
2217:'agency’s appropriation is not available for a designated purpose, and the agency has no other funds available for that purpose,',
2218:'any officer of the agency who authorizes an obligation or expenditure of agency funds for that purpose violates the antideficiency',
2219:'act. since the congress has not appropriated funds for the designated purpose, the obligation may be viewed either as being',
2220:'in excess of the amount zero available for that purpose or as in advance of appropriations made for that purpose.',
2221:'in either case the antideficiency act is violated.” id. at 441. in b201260, sept. 11, 1984, the comptroller general advised',
2222:'that expenditures in contravention of the boland amendment would violate the antideficiency act although none were found in that case.',
2223:'the boland amendment, an appropriation rider, provided that “[n]one of the funds provided in this act may be used” for',
2224:'certain activities in central america. in b229732, dec. 22, 1988, gao found the antideficiency act violated when the department of',
2225:'housing and urban development used its funds for commercial trade promotion activities in the soviet union, an activity beyond its',
2226:'statutory authority. similarly, a nonreimbursable interagency detail of an employee, contrary to a specific statutory prohibition, produced a violation in',
2227:'b247348, june 22, 1992 letter to public printer. all three cases also involved purpose violations and are consistent with page',
2228:'682 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount 60 comp. gen. 440, the rationale being that expenditures',
2229:'would be in excess of available appropriations, which were zero.86 more recent gao decisions likewise consistently apply the principle that',
2230:'the use of appropriated funds for unauthorized or prohibited purposes violates the antideficiency act absent an alternative funding source since',
2231:'zero funds are available for that purpose. b302710, may 19, 2004 use of funds in violation of statutory prohibition against',
2232:'publicity or propaganda; b300325, dec. 13, 2002 appropriations used for unauthorized technical assistance purposes; b300192, nov. 13, 2002 violation of',
2233:'appropriation rider prohibiting use of funds to implement an office of management and budget memorandum; b290005, july 1, 2002 appropriation',
2234:'used to procure unauthorized legal services; 71 comp. gen. 402, 406 1992 unauthorized use of training and employment services appropriation;',
2235:'b246304, july 31, 1992 potential violation of appropriation act “buy american” provision; b248284, sept. 1, 1992 nondecision letter reprogramming of',
2236:'funds to an unauthorized purpose. one court reached a result that appears to interpret the antideficiency act somewhat differently. in',
2237:'southern packaging and storage co. v. united states, 588 f. supp. 532 d.s.c. 1984, the court found that the defense',
2238:'department had purchased certain combat meal products “mre” in violation of a “buy american” appropriation rider, which provided that “[n]o',
2239:'part of any appropriation contained in this act . . . shall be available” to procure items not grown or',
2240:'produced in the united states. the court rejected the contention that the violation also contravened the antideficiency act, stating: “there',
2241:'is no evidence in this case to show that [the defense personnel supply center] authorized expenditures beyond the amount appropriated',
2242:'by congress for the procurement of the mre rations and the component foods thereof.” id. at 550. 86 there are',
2243:'also a few older cases finding violations of both statutes, but they are of little help in attempting to formulate',
2244:'a reasoned approach. examples are 39 comp. gen 388 1959, which does not discuss the relationship, and 22 comp. gen.',
2245:'772 1943, which includes a rationale, now obsolete, based on the thenexisting lack of authority to include interest stipulations in',
2246:'contracts. page 683 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount e. amount of available appropriation or fund',
2247:'given the sparse discussion in the decision, the fact that congress does not make specific appropriations for mre rations, and',
2248:'the fact that the antideficiency act regulates both obligations and expenditures in excess of available authority, it is difficult to',
2249:'discern precisely how the southern packaging court would apply the antideficiency act. in any event, we have found no subsequent',
2250:'judicial or administrative decision that cites this aspect of the southern packaging opinion. questions occasionally arise over precisely what assets',
2251:'an agency may count for purposes of determining the amount of available resources against which it may incur obligations. the',
2252:'starting point, of course, is the unobligated balance of the relevant appropriation. in section f of this chapter, we discuss',
2253:'the rule that subdivisions of a lumpsum appropriation appearing in legislative history are not legally binding on the agency. they',
2254:'are binding only if carried into the appropriation act itself, or are made binding by some other statute. thus, the',
2255:'entire unobligated balance of an unrestricted lumpsum appropriation is available for antideficiency act purposes. 55 comp. gen. 812 1976. where',
2256:'an agency is authorized to retain certain receipts or collections for credit to an appropriation or fund under that agency’s',
2257:'control, those receipts are treated the same as direct appropriations for purposes of obligation and the antideficiency act, subject to',
2258:'any applicable statutory restrictions. e.g., 71 comp. gen. 224 1992 national technical information service may use subscription payments to defray',
2259:'its operating expenses but, under governing legislation, may use customer advances only for costs directly related to firm orders. in',
2260:'addition, certain other assets may be “counted” as available budget authority, that is, obligated against. for example, omb circular no.',
2261:'a11 includes certain spending authority from offsetting collections as a form of “budget authority.”87 see also b134474o.m., dec. 18, 1957.',
2262:'this does not mean anticipated receipts from transactions that have not yet occurred or orders that have not yet been',
2263:'placed. thus, the library of congress could 87 see generally omb circular no. a11, preparation, submission, and execution of the',
2264:'budget, §§ 20.4b, 20.7, and 20.12 june 21, 2005. see also the definitions of “budget authority” and “collections” in gao,',
2265:'a glossary of terms used in the federal budget process, gao05734sp washington, d.c.: september 2005, at 20–23, 28–30. page 684',
2266:'gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount not retain in a revolving fund advances from federal agencies',
2267:'in excess of amounts needed to cover current orders in anticipation of applying the excess amounts to future orders. b288142,',
2268:'sept. 6, 2001. obligations cannot be charged against anticipated proceeds from an anticipated sale of property. see, e.g., b209758, sept.',
2269:'29, 1983 nondecision memorandum sale of assets seized from embezzler. thus, the customs service violated the antideficiency act by obligating',
2270:'against anticipated receipts from future sales of seized property unless it had sufficient funds available from other sources to cover',
2271:'the obligation. b237135, dec. 21, 1989. similarly, the comptroller general found that the air force violated the antideficiency act by',
2272:'overobligating its industrial fund based on estimated or anticipated customer orders. see gao, the air force has incurred numerous overobligations',
2273:'in its industrial fund, afmd8153 washington, d.c.: aug. 14, 1981; 62 comp. gen. 143, 147 1983. even where receivables are',
2274:'properly included as budgetary resources, an agency may not incur obligations against receipts expected to be received after the end',
2275:'of the current fiscal year without specific statutory authority. 51 comp. gen. 598, 605 1972. in 60 comp. gen. 520',
2276:'1981, gao considered whether the general services administration gsa could obligate against the value of inventory in the general supply',
2277:'fund. gsa buys furniture and other equipment for other agencies through the general supply fund, a revolving fund established by',
2278:'statute. agencies pay gsa either in advance or by reimbursement. for reasons of economy, gsa normally makes consolidated and bulk',
2279:'purchases of commonly used items. concern over the application of the antideficiency act arose when, for several reasons, the fund',
2280:'began experiencing cash flow problems. to help remedy its “cash flow” problems gsa wanted to consider the amount of available',
2281:'budget authority to include inventory as well as cash assets and advances. the comptroller general held that inventory in the',
2282:'general supply fund did not constitute a budgetary resource against which obligations could be incurred. the items in the inventory',
2283:'had already been purchased and could not be counted again as a new budgetary resource. thus, for antideficiency act purposes,',
2284:'gsa could not incur obligations using the value of inventory as an available “budgetary resource.” supplemental appropriations requested but not',
2285:'yet enacted obviously may not be counted as a budgetary resource. b230117o.m., feb. 8, 1989. page 685 gao06382sp appropriations law—vol.',
2286:'ii chapter 6 availability of appropriations: amount f. intent/factors beyond agency control a violation of the antideficiency act does not',
2287:'depend on intent or lack of good faith on the part of contracting or other officials who obligate or pay',
2288:'in advance or in excess of appropriations. although these factors may influence the applicable penalty, they do not affect the',
2289:'basic determination of whether a violation has occurred. 64 comp. gen. 282, 289 1985. the comptroller general once expressed the',
2290:'principle in the following passage which, although stated in a slightly different context, is equally applicable here: “where a payment',
2291:'is prohibited by law, the utmost good faith on the part of the officer, either in ignorance of the facts',
2292:'or in disregard of the facts, in purporting to authorize the incurring of an obligation the payment of which is',
2293:'so prohibited, cannot take the case out of the statute, otherwise the purported good faith of an officer could be',
2294:'used to nullify the law.” a86742, june 17, 1937. to illustrate, a contracting officer at the united states mission to',
2295:'the north atlantic treaty organization accepted an offer for installation of automatic telephone equipment at twice the amount of the',
2296:'unobligated balance remaining in the applicable account. the department of state explained that the contracting officer had misinterpreted gao regulations',
2297:'and implementing state department procedures. but for this misinterpretation, additional funds could have been placed in the account. state therefore',
2298:'felt that the transaction should not be considered in violation of the act. gao did not agree and held that',
2299:'the overobligation must be immediately reported as required by 31 u.s.c. § 1517b. the official’s state of mind was not',
2300:'relevant in deciding whether a violation had occurred. 35 comp. gen. 356 1955. an overobligation may result from external factors',
2301:'beyond the agency’s control. whether this will produce an antideficiency act violation depends on the particular circumstances. in 58 comp.',
2302:'gen. 46 1978, the army asked whether it could make payments to a contractor under a contract requiring payment in',
2303:'local foreign currency where the original dollar obligation was well within applicable funding limitations but, due to subsequent exchange rate',
2304:'fluctuations, payment would exceed those limitations. the army argued that a payment under these circumstances should not be considered a',
2305:'violation of the act because currency fluctuations are totally beyond the control of the contracting officer or any page 686',
2306:'gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount other agency official. gao disagreed. the fact that the contracting',
2307:'officer was a victim of circumstances does not make a payment in excess of available appropriations any less illegal. it',
2308:'is, of course, as with state of mind, relevant in assessing penalties for the violation. see also 38 comp. gen.',
2309:'501 1959 severe adverse weather conditions or prolonged employee strikes generally are not sufficient to justify overobligation by former post',
2310:'office department, but facts in a particular case could justify deficiency apportionment. in apparent contrast, the comptroller general stated in',
2311:'62 comp. gen. 692, 700 1983 that an overobligation resulting from a judicial award of attorney’s fees under 28 u.s.c.',
2312:'§ 2412d, the equal access to justice act, would not violate the antideficiency act. see also 63 comp. gen. 308,',
2313:'312 1984 judgments or board of contract appeals awards under contract disputes act, same answer; b227527, b227325, oct. 21, 1987',
2314:'nondecision letter amounts awarded by court judgment not counted in determining whether statutory ceiling on lease payments has been exceeded',
2315:'and antideficiency act thereby violated. the distinction is based on the extent to which the agency can act to avoid',
2316:'the overobligation even though it is imposed by some external force beyond its control. thus, the currency fluctuation decision stated:',
2317:'“[w]hen a contracting officer finds that the dollars required to continue or make final payment on a contract will exceed',
2318:'a statutory limitation he may terminate the contract, provided the termination costs will not exceed the statutory limitations. alternatively, the',
2319:'contracting officer may issue a stop work order and the agency may ask congress for a deficiency appropriation citing the',
2320:'currency fluctuation as the reason for its request.” 58 comp. gen. at 48. similarly, the postmaster general could curtail operations',
2321:'if necessary. 38 comp. gen. 501, 504 1959. see also 66 comp. gen. 176 1986 antideficiency act would not preclude',
2322:'air force from entering into lease for overseas family housing without provision limiting annual payments to statutory ceiling, even though',
2323:'certain costs could conceivably escalate above ceiling, where good faith cost estimates were well below ceiling and lease included termination',
2324:'for convenience clause. where the agency could have acted to avert the overobligation but did not, there will be a',
2325:'violation. in contrast, in the case of a payment ordered by a court, comparable options apart from seeking a deficiency',
2326:'appropriation page 687 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount are not available. curtailing activities after the',
2327:'overobligation has occurred to avoid compounding the violation is a separate question. g. exceptions the antideficiency act by its own',
2328:'terms recognizes that congress can and may grant exceptions. 31 u.s.c. § 1341a. the statute prohibits contracts or other obligations',
2329:'in advance or excess of available appropriations, “unless authorized by law.” this is nothing more than the recognition that congress',
2330:'can authorize exceptions to the statutes it enacts. 1 contract authority at the outset, it is necessary to distinguish between',
2331:'“contract authority” and the “authority to enter into contracts.” a contract is simply a legal device employed by two or',
2332:'more parties to create binding and legally enforceable obligations in furtherance of some objective. the federal government uses contracts every',
2333:'day to procure a wide variety of goods and services. an agency does not need specific statutory authority to enter',
2334:'into contracts. it has long been established that a government agency has the inherent authority to enter into binding contracts',
2335:'in the execution of its duties. van brocklin v. tennessee, 117 u.s. 151, 154 1886; united states v. maurice, 26',
2336:'f. case 1211, 1216–17 no. 15,747 c.c.d. va. 1823. it should be apparent that these contracts, “authorized by law” though',
2337:'they may be, are not sufficient to constitute exceptions to the antideficiency act, else the act would be meaningless. for',
2338:'purposes of the antideficiency act exception, a contract authorized by law requires not only authority to enter into a contract,',
2339:'but authority to do so without regard to the availability of appropriations. while the former may be inherent, the latter',
2340:'must be conferred by statute. the most common example of this is “contract authority” as that term is defined and',
2341:'described in chapter 2—statutory authority to enter into binding contracts without the funds adequate to make payments under them. in',
2342:'some cases, the “exception” language will be unmistakably explicit. an example is the priceanderson act, which provides authority to “make',
2343:'contracts in advance of appropriations and incur obligations without regard to” the antideficiency act. 42 u.s.c. § 2210j. other examples',
2344:'of clear authority, although perhaps not as explicit as the priceanderson act, are discussed in 27 comp. gen. 452 1948',
2345:'longterm operatingdifferential subsidy agreements under the merchant marine act; b211190, apr. 5, 1983 contracts with states under the federal boat',
2346:'safety act; b164497.3, june 6, 1979 certain provisions of the federalaid highway act of 1973; page 688 gao06382sp appropriations law—vol.',
2347:'ii chapter 6 availability of appropriations: amount and b168313, nov. 21, 1969 interest subsidy agreements with educations institutions under the',
2348:'housing act of 1950. in an earlier case involving contract authority, gao insisted that the corps of engineers had to',
2349:'include a “no liability unless funds are later made available” clause for any work done in excess of available funds.',
2350:'2 comp. gen. 477 1923. the corps later had trouble with this clause because a court of claims decision, c.h.',
2351:'leavell & co. v. united states, 530 f.2d 878 ct. cl. 1976, allowed the contractor an equitable adjustment for suspension',
2352:'of work due to a delay in enacting an appropriation to pay him, notwithstanding the “availability of funds” clause. in',
2353:'56 comp. gen. 437 1977, gao overruled 2 comp. gen. 477, deciding that section 10 of the river and harbor',
2354:'act of 1922, 33 u.s.c. § 621, by expressly authorizing the corps to enter into large multiyear civil works projects',
2355:'without seeking a full appropriation in the first year, constituted the necessary exception to the antideficiency act and a “funds',
2356:'available” clause was not necessary. this applies as well to contracts financed from the corps’ civil works revolving fund. b242974.6,',
2357:'nov. 26, 1991 internal memorandum. the rationale of 56 comp. gen. 437 also has been applied to longterm fuel storage',
2358:'facilities contracts authorized by 10 u.s.c. § 2388. new england tank industries of new hampshire, inc., asbca no. 26474, 881',
2359:'bca ¶ 20,395 1987, vacated on other grounds, new england tank industries of new hampshire v. united states, 861 f.2d',
2360:'685 fed. cir. 1988. in 28 comp. gen. 163 1948, the comptroller general considered whether the commissioner of reclamation had',
2361:'budget authority to enter into certain contracts in advance of appropriations contract authority. congress had authorized the contract authority in',
2362:'an appropriation act but made it subject to a monetary ceiling. since the contract authority was explicit, with no language',
2363:'making it contingent on appropriations being made at some later date, the comptroller general concluded that the statute authorized the',
2364:'commissioner to enter into a firm and binding contract. the bureau of mines was authorized to enter into a contract',
2365:'in advance of the appropriation to construct and equip an anthracite research laboratory. the bureau asked the general services administration',
2366:'gsa to enter into the contract on its behalf pursuant to section 103 of the federal property and administrative services',
2367:'act of 1949, ch. 288, 63 stat. 377, 380 june 30, 1949, which provided that “funds appropriated to . .',
2368:'. other federal agencies for the foregoing purposes [execution of contracts and supervision of construction] shall be available for transfer',
2369:'to and page 689 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount expenditure by the [gsa].” gao held',
2370:'that the bureau’s contract authority provided a sufficient legal basis for gsa to enter into contracts for construction of the',
2371:'laboratory pursuant to section 103. 29 comp. gen. 504 1950.88 a somewhat different kind of contract authority is found in',
2372:'41 u.s.c. § 11, the socalled adequacy of appropriations act. an exception to the requirement to have adequate appropriations—or any',
2373:'appropriation at all—is made for procurements by the military departments for “clothing, subsistence, forage, fuel, quarters, transportation, or medical and',
2374:'hospital supplies, which, however, shall not exceed the necessities of the current year.” by administrative interpretation, the defense department has',
2375:'limited this authority to emergency circumstances where immediate action is necessary. department of defense financial management regulation 7000.14r, vol. 3,',
2376:'ch. 12, ¶ 120201 jan. 31, 2001. it should again be emphasized that to constitute an exception to 31 u.s.c.',
2377:'§ 1341a, the “contract authority” must be specific authority to incur the obligation in excess or advance of appropriations, not',
2378:'merely the general authority any agency has to enter into contracts to carry out its functions. also, an appropriation obviously',
2379:'is needed to liquidate the contract obligation. congress may grant authority to contract beyond the fiscal year in terms which',
2380:'amount to considerably less than the type of contract authority described above. an example is 43 u.s.c. § 388, which',
2381:'authorizes the secretary of the interior to enter into certain contracts relating to reclamation projects “which may cover such periods',
2382:'of time as the secretary may consider necessary but in which the liability of the united states shall be contingent',
2383:'upon appropriations being made therefore.” see pcl construction services, inc. v. united states, 41 fed. cl. 242, 257 1998, aff’d,',
2384:'96 fed. appx. 672 fed. cir. 2004 pursuant to 43 u.s.c. § 388, firm fixedprice contract awarded by the bureau',
2385:'of reclamation to construct a visitors center and parking structure at hoover dam could be incrementally funded without violating the',
2386:'antideficiency act. while this provision has been referred to as an exception to the antideficiency act b72020, jan. 9, 1948,',
2387:'it authorizes only “contingent contracts” under 88 the public buildings act of 1959, pub. l. no. 86249, 73 stat. 479',
2388:'sept. 9, 1959, superseded the provisions of the 1949 legislation discussed in 29 comp. gen. 504. the substance of the',
2389:'public buildings act of 1959 is codified in 40 u.s.c. §§ 3301–3315. page 690 gao06382sp appropriations law—vol. ii chapter 6',
2390:'availability of appropriations: amount which there is no legal obligation to pay unless and until appropriations are provided. 28 comp.',
2391:'gen. 163 1948. a similar example, discussed in b239435, aug. 24, 1990, is 38 u.s.c. § 230c supp. ii 1990',
2392:'subsequently recodified at 38 u.s.c. § 316 which authorized the department of veterans affairs to enter into certain leases for',
2393:'periods of up to 35 years but further provided that the government’s obligation to make payments was “subject to the',
2394:'availability of appropriations for that purpose.” for another example, see b248647.2, apr. 24, 1995, which discussed the federal triangle development',
2395:'act, 40 u.s.c. §§ 1101–1109. this act directed gsa to enter into a longterm lease and required the lease agreement',
2396:'to recognize that gsa could obligate funds for lease payments only on an annual basis. 40 u.s.c. § 1105. therefore,',
2397:'the gsa multiyear lease agreement at issue was specifically “authorized by law” and did not violate the antideficiency act. b248647.2',
2398:'at fn. 3. 2 other obligations “authorized by law” the “authorized by law” exception in 31 u.s.c. § 1341a applies',
2399:'to noncontractual obligations as well as to contracts. the basic approach is the same. the statutory authority must be more',
2400:'than just authority to undertake the particular activity. for example, statutory authority to acquire land and to pay for it',
2401:'from a specified fund is not an exception to the antideficiency act. 27 comp. gen. 662 1921. it merely authorizes',
2402:'acquisitions to the extent of funds available in the specified source at the time of purchase. id. similarly, the authority',
2403:'to conduct hearings, without more, does not confer authority to do so without regard to available appropriations. 16 comp. dec.',
2404:'750 1910. provisions in the district of columbia code requiring saint elizabeth’s hospital to treat all patients who meet admission',
2405:'eligibility requirements were held not to authorize the hospital to operate beyond the level of its appropriations. if mandatory expenditures,',
2406:'together with nonmandatory expenditures, would cause a deficiency, the hospital would have to reduce nonmandatory expenditures. 61 comp. gen. 661',
2407:'1982. congress may expressly state that an agency may obligate in excess of the amounts appropriated, or it may implicitly',
2408:'authorize an agency to do so by virtue of a law that necessarily requires such obligations. see b262069, aug. 1,',
2409:'1995. several cases have considered the effect of various statutory salary or compensation increases. if a statutory increase is mandatory',
2410:'and does not vest discretion in an administrative office to determine the amount, or if it gives some administrative body',
2411:'discretion to determine the amount, payment of which then becomes mandatory, the obligation is page 691 gao06382sp appropriations law—vol. ii',
2412:'chapter 6 availability of appropriations: amount deemed “authorized by law” for antideficiency act purposes. see, e.g., 39 comp. gen. 422',
2413:'1959 salary increases for wage board employees; b168796, feb. 2, 1970 mandatory statutory increase in retired pay for tax court',
2414:'judges; b107279, jan. 9, 1952 mandatory increases for certain legislative personnel. gao has not treated the granting of increases retroactively',
2415:'to correct past administrative errors as creating the same type of exception. see 24 comp. gen. 676 1945. increases which',
2416:'are discretionary do not permit the incurring of obligations in excess or advance of appropriations. 31 comp. gen. 238 1951',
2417:'discretionary pension increases; 28 comp. gen. 300 1948.89 some other examples of obligations authorized by law for antideficiency act purposes',
2418:'are: defense health program obligations for medical services. b287619, july 5, 2001. mandatory pilot program in vermont under farms for',
2419:'the future act of 1990 loan guarantees and interest assistance. b244093, july 19, 1991. mandatory transfer from one appropriation account',
2420:'to another where “donor” account contained insufficient unobligated funds. 38 comp. gen. 93 1958. provision in criminal justice act of',
2421:'1964 imposing unequivocal legislative directive for commencement of certain programs which would necessarily involve creation of financial obligations. b156932, aug.',
2422:'17, 1965. provision in district of columbia criminal justice act of 1974 cja, as amended, making attorney representation in cja',
2423:'cases a mandatory expense. b283599, sept. 15, 1999. see also b284566, apr. 3, 2000. statute authorizing interstate commerce commission to',
2424:'order a substitute rail carrier to serve shippers abandoned by their primary 89 the decision in 28 comp. gen. 300',
2425:'concerned increases to wage board employees under legislation which is now obsolete see 39 comp. gen. 422, cited in the',
2426:'text. however, it is still useful for the basic proposition that nonmandatory increases are not obligations “authorized by law” as',
2427:'that term is used in 31 u.s.c. § 1341a. 28 comp. gen. at 302. page 692 gao06382sp appropriations law—vol. ii',
2428:'chapter 6 availability of appropriations: amount carrier in emergency situations, and to reimburse certain costs of the substitute carrier. b196132,',
2429:'oct. 11, 1979. what are perhaps the outer limits of the “authorized by law” exception are illustrated in b159141, aug.',
2430:'18, 1967. the federal aviation administration faa had entered into longterm, incrementally funded contracts for the development of a civil',
2431:'supersonic aircraft sst. to ensure compliance with the antideficiency act, the faa each year budgeted for, and obligated, sufficient funds',
2432:'to cover potential termination liability. the appropriations committees became concerned that unnecessarily large amounts were being tied up this way,',
2433:'especially in light of the highly remote possibility that the sst contracts would be terminated. in considering the faa’s 1968',
2434:'appropriation, the house appropriations committee reduced the faa’s request by the amount of the termination reserve, and in its report',
2435:'directed the faa not to obligate for potential termination costs. the comptroller general advised that if the senate appropriations committee',
2436:'did the same thing—a specific reduction tied to the amount requested for the reserve, coupled with clear direction in the',
2437:'legislative history—then an overobligation resulting from a termination would be regarded as authorized by law and not in violation of',
2438:'the antideficiency act. 3. voluntary services prohibition a. introduction we previously discussed the antideficiency act prohibitions contained in section 1341',
2439:'of title 31, united states code. the next section of the antideficiency act is 31 u.s.c. § 1342: “an officer',
2440:'or employee of the united states government or of the district of columbia government may not accept voluntary services for',
2441:'either government or employ personal services exceeding that authorized by law except for emergencies involving the safety of human life',
2442:'or the protection of property. . . .” page 693 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount',
2443:'this provision first appeared, in almost identical form, in a deficiency appropriation act enacted in 1884.90 although the original prohibition',
2444:'read “hereafter, no department or officer of the united states shall accept . . .,” it was included in an',
2445:'appropriation for the then indian office of the interior department, and the court of claims held that it was applicable',
2446:'only to the indian office. glavey v. united states, 35 ct. cl. 242, 256 1900, rev’d on other grounds, 182',
2447:'u.s. 595 1901. the comptroller of the treasury continued to apply it across the board. see, e.g., 9 comp. dec.',
2448:'181 1902. in any event, the applicability of the 1884 statute soon became moot because congress reenacted it as part',
2449:'of the antideficiency act in 190591 and again in 1906.92 prior to the 1982 recodification of title 31, section 1342',
2450:'was subsection b of the antideficiency act, while the basic prohibitions of section 1341, previously discussed, constituted subsection a. the',
2451:'proximity of the two provisions in the united states code reflects their relationship, as section 1342 supplements and is a',
2452:'logical extension of section 1341. if an agency cannot directly obligate in excess or advance of its appropriations, it should',
2453:'not be able to accomplish the same thing indirectly by accepting ostensibly “voluntary” services and then presenting congress with the',
2454:'bill, in the hope that congress will recognize a “moral obligation” to pay for the benefits conferred—another example of the',
2455:'socalled “coercive deficiency.”93 in this connection, the chairman of the house committee responsible for what became the 1906 reenactment of',
2456:'the voluntary services prohibition stated: “it is a hard matter to deal with. we give to departments what we think',
2457:'is ample, but they come back with a deficiency. under the law they can [not] make these deficiencies, and congress',
2458:'can refuse to allow them; but 90 act of may 1, 1884, ch. 37, 23 stat. 17. 91 pub. l.',
2459:'no. 217, ch. 1484, § 4, 33 stat. 1214, 1257 mar. 3, 1905. 92 pub. l. no. 28, ch. 510,',
2460:'§ 3, 34 stat. 27, 48–49 feb. 27, 1906. 93 see section c.1 of this chapter for a discussion of',
2461:'the coercive deficiency concept. see also pcl construction services, inc. v. united states, 41 fed. cl. 242, 251–260 1998 incrementally',
2462:'funded contract did not raise coercive deficiency issues where contract clauses clearly provided that contractor assumed the sole risk of',
2463:'working at a rate that would exhaust funding. page 694 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount',
2464:'b. appointment without compensation and waiver of salary after they are made it is very hard to refuse to allow',
2465:'them . . . .”94 in addition, as we have noted previously, the antideficiency act was intended to keep an',
2466:'agency’s level of operations within the amounts congress appropriates for that purpose. the unrestricted ability to use voluntary services would',
2467:'permit circumvention of that objective. thus, without section 1342, section 1341 could not be fully effective. note that 31 u.s.c.',
2468:'§ 1342 contains two distinct although closely related prohibitions: it bans, first, the acceptance of any type of voluntary services',
2469:'for the united states, and second, the employment of personal services “exceeding that authorized by law.” 1 the rules—general discussion',
2470:'one of the evils that the “personal services” prohibition was designed to correct was a practice existing in 1884, whereby',
2471:'lowergrade government employees were being asked to “volunteer” their services for overtime periods in excess of the periods allowed by',
2472:'law. this enabled the agency to economize at the employees’ expense but nevertheless generated claims by the employees.95 currently, 31',
2473:'u.s.c. § 1342 serves a number of other purposes and is relevant in a number of contexts involving services by',
2474:'government employees or services which would otherwise have to be performed by government employees. for example, one court suggested that',
2475:'31 u.s.c. § 1342 also is based in part on the principle that only public officials should be allowed to',
2476:'perform governmental functions. see suss v. american society for the prevention of cruelty to animals, 823 f. supp. 181, 189',
2477:'s.d.n.y. 1993 “the risks of abuse of power by private parties exercising functions involving [the] exercise of sovereign compulsion is',
2478:'one reason for the limitations imposed by federal law on the use of volunteers in implementing public sector programs.”. however,',
2479:'as mentioned previously, the fundamental purposes embodied in section 1342 are to preserve the integrity of the appropriations process by',
2480:'avoiding “coercive deficiencies” and augmentations. 94 39 cong. rec. 3687 1906, quoted in 30 op. att’y gen. 51, 53–54 1913.',
2481:'95 see 30 op. att’y gen. 51, 54–55 1913, discussing the legislative history of the 1884 prohibition. page 695 gao06382sp',
2482:'appropriations law—vol. ii chapter 6 availability of appropriations: amount one of the earliest questions to arise under 31 u.s.c. §',
2483:'1342—and an issue that has generated many cases—was whether a government officer or employee, or an individual about to be',
2484:'appointed to a government position, could voluntarily work for nothing or for a reduced salary. initially, the comptroller of the',
2485:'treasury ducked the question on the grounds that it did not involve a payment from the treasury, and suggested that',
2486:'the question was appropriate to take to the attorney general. 19 comp. dec. 160, 163 1912. the very next year,',
2487:'the attorney general tackled the question when asked whether a retired army officer could be employed as superintendent of an',
2488:'indian school without additional compensation. in what has become the leading case construing 31 u.s.c. § 1342, the attorney general',
2489:'replied that the appointment would not violate the voluntary services prohibition. 30 op. att’y gen. 51 1913. in reaching this',
2490:'conclusion, the attorney general drew a distinction that the comptroller of the treasury thereafter adopted, and that gao and the',
2491:'justice department continue to follow to this day—the distinction between “voluntary services” and “gratuitous services.” the key passages from the',
2492:'attorney general’s opinion are set forth below: “[i]t seems plain that the words ‘voluntary service’ were not intended to be',
2493:'synonymous with ‘gratuitous service’ and were not intended to cover services rendered in an official capacity under regular appointment to',
2494:'an office otherwise permitted by law to be nonsalaried. in their ordinary and normal meaning these words refer to service',
2495:'intruded by a private person as a ‘volunteer’ and not rendered pursuant to any prior contract or obligation . .',
2496:'. . it would be stretching the language a good deal to extend it so far as to prohibit official',
2497:'services without compensation in those instances in which congress has not required even a minimum salary for the office. “the',
2498:'context corroborates the view that the ordinary meaning of ‘voluntary services’ was intended. the very next words ‘or employ personal',
2499:'service in excess of that authorized by law’ deal with contractual services, thus making a balance between ‘acceptance’ of ‘voluntary',
2500:'service’ i.e., the cases where there is no prior contract and ‘employment’ of ‘personal service’ i.e., the cases where there',
2501:'is such prior contract, though unauthorized by law. page 696 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount',
2502:'“thus it is evident that the evil at which congress was aiming was not appointment or employment for authorized services',
2503:'without compensation, but the acceptance of unauthorized services not intended or agreed to be gratuitous and therefore likely to afford',
2504:'a basis for a future claim upon congress. . . .” id. at 52–53, 55. the comptroller of the treasury',
2505:'agreed with this interpretation: “[the statute] was intended to guard against claims for compensation. a service offered clearly and distinctly',
2506:'as gratuitous with a proper record made of that fact does not violate this statute against acceptance of voluntary service.',
2507:'an appointment to serve without compensation which is accepted and properly recorded is not a violation of [31 u.s.c. §',
2508:'1342], and is valid if otherwise lawful.” 27 comp. dec. 131, 132–33 1920. two main rules emerge from 30 op.',
2509:'att’y gen. 51 and its progeny. first, if compensation for a position is fixed by law, an appointee may not',
2510:'agree to serve without compensation or to waive that compensation in whole or in part. id. at 56. this portion',
2511:'of the opinion did not break any new ground. the courts had already held, based on public policy, that compensation',
2512:'fixed by law could not be waived.96 second, and this is really just a corollary to the rule just stated,',
2513:'if the level of compensation is discretionary, or if the relevant statute prescribes only a maximum but not a minimum,',
2514:'the compensation can be set at zero, and an appointment without compensation or a waiver, entire or partial, is permissible.',
2515:'id. ; 27 comp. dec. at 133. 96 glavey v. united states, 182 u.s. 595 1901; miller v. united states,',
2516:'103 f. 413 c.c.s.d.n.y. 1900. see also 9 comp. dec. 101 1902. later cases following glavey are macmath v. united',
2517:'states, 248 u.s. 151 1918, and united states v. andrews, 240 u.s. 90 1916. the policy rationale is that to',
2518:'permit agencies to disregard compensation prescribed by statute could work to the disadvantage of those who cannot, or are not',
2519:'willing to, accept the position for less than the prescribed salary. see miller, 103 f. at 415–16. page 697 gao06382sp',
2520:'appropriations law—vol. ii chapter 6 availability of appropriations: amount both gao and the justice department have had frequent occasion to',
2521:'address these issues, and there are numerous decisions illustrating and applying the rules.97 in a 1988 opinion, the justice department’s',
2522:'office of legal counsel considered whether the irancontra independent counsel could appoint professor laurence tribe as special counsel under an',
2523:'agreement to serve without compensation. applying the rules set forth in 30 op. att’y gen. 51, the office of legal',
2524:'counsel concluded that the appointment would not contravene the antideficiency act since the statute governing the appointment set a maximum',
2525:'salary but no minimum. memorandum opinion for the acting associate attorney general, independent counsel’s authority to accept voluntary services—appointment of',
2526:'laurence h. tribe, olc opinion, may 19, 1988. similarly, the comptroller general held in 58 comp. gen. 383 1979 that',
2527:'members of the united states metric board could waive their salaries since the relevant statute merely prescribed a maximum rate',
2528:'of pay. in addition, since the board had statutory authority to accept gifts, a member who chose to do so',
2529:'could accept compensation and then return it to the board as a gift. both cases make the point that compensation',
2530:'is not “fixed by law” for purposes of the “no waiver” rule where the statute merely sets a maximum limit',
2531:'for the salary. a good illustration of the kind of situation 31 u.s.c. § 1342 is designed to prevent is',
2532:'54 comp. gen. 393 1974. members of the commission on marihuana and drug abuse had, apparently at the chairman’s urging,',
2533:'agreed to waive their statutory entitlement to $100 per day while engaged in commission business. the year after the commission',
2534:'ceased to exist, one of the former members changed his mind and filed a claim for a portion of the',
2535:'compensation he would have received but for the waiver. since the $100 per day had been a statutory entitlement, the',
2536:'purported waiver was invalid and the former commissioner was entitled to be paid. similar claims by any or all of',
2537:'the other former members would also have to be allowed. if insufficient funds remained in the commission’s nowexpired appropriation, a',
2538:'deficiency appropriation would be necessary. 97 some cases in addition to those cited in the text are 32 comp. gen.',
2539:'236 1952; 23 comp. gen. 109, 112 1943; 14 comp. gen. 193 1934; 34 op. att’y gen. 490 1925; 30',
2540:'op. att’y gen. 129 1913; 13 op. off. legal counsel 113 1989; 3 op. off. legal counsel 78 1979. page',
2541:'698 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount a few earlier cases deal with fact situations similar',
2542:'to that considered in 30 op. att’y gen. 51—the acceptance by someone already on the federal payroll of additional duties',
2543:'without additional compensation. in 23 comp. gen. 272 1943, for example, gao concluded that a retired army officer could serve,',
2544:'without additional compensation, as a courier for the state department. the voluntary services prohibition, said the decision, does not preclude',
2545:'“the assignment of persons holding office under the government to the performance of additional duties or the duties of another',
2546:'position without additional compensation.” id. at 274. another world war ii era decision held that american red cross volunteer nurses’',
2547:'aides who also happened to be fulltime federal employees could perform volunteer nursing services at veterans administration hospitals. 23 comp.',
2548:'gen. 900 1944. one thing the various cases discussed above have in common is that they involve the appointment of',
2549:'an individual to an official government position, permanent or temporary. services rendered prior to appointment are considered purely voluntary and,',
2550:'by virtue of 31 u.s.c. § 1342, cannot be compensated. lee v. united states, 45 ct. cl. 57, 62 1910;',
2551:'b181934, oct. 7, 1974.98 it also follows that postretirement services, apart from appointment as a reemployed annuitant, are not compensable.',
2552:'65 comp. gen. 21 1985. in that case, an alleged agreement to the contrary by the individual’s supervisor was held',
2553:'unauthorized and therefore invalid. it also has been held that experts and consultants employed under authority of 5 u.s.c. §',
2554:'3109 the basic governmentwide authority for procuring expert and consultant services may serve without compensation without violating the antideficiency act',
2555:'as long as it is clearly understood and agreed that no compensation is expected. 27 comp. gen. 194 1947; 6',
2556:'op. off. legal counsel 160 1982. cf. b185952, aug. 18, 1976 uncompensated participation in prebid conference, onsite inspection, and bid',
2557:'opening by contractor engineer who had prepared specifications regarded as “technical violation” of 31 u.s.c. § 1342. 98 while the',
2558:'principle in b181934 remains valid, the decision was overruled by 55 comp. gen. 109 1975 on factual grounds. additional information',
2559:'showed that the individual involved in that case was a “de facto employee” performing under color of appointment and with',
2560:'a claim of right to the position. a “voluntary” employee has no such “color of appointment” or indicia of lawful',
2561:'employment. page 699 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount several of the decisions note the requirement',
2562:'for a written record of the agreement to serve without compensation. proper documentation is important for evidentiary purposes should a',
2563:'claim subsequently be attempted. e.g., 27 comp. gen. at 195; 26 comp. gen. 956, 958 1947; 27 comp. dec. 131,',
2564:'132–33 1920; 2 op. off. legal counsel 322, 323 1977. specifically, the decisions state that the individuals should acknowledge in',
2565:'writing and in advance that they will receive no compensation and that they should explicitly waive any and all claims',
2566:'against the government on account of their service. the rule that compensation fixed by statute may not be waived does',
2567:'not apply if the waiver or appointment without compensation is itself authorized by statute. the comptroller general stated the principle',
2568:'as follows in 27 comp. gen. at 195: “[e]ven where the compensation for a particular position is fixed by or',
2569:'pursuant to law, the occupant of the position may waive his ordinary right to the compensation fixed for the position',
2570:'and thereafter forever be estopped from claiming and receiving the salary previously waived, if there be some applicable provision of',
2571:'law authorizing the acceptance of services without compensation.” emphasis in original. as noted above, the decision in 27 comp. gen.',
2572:'194 cited as the provision authorizing the acceptance of services without compensation in that case what is now section 3109b',
2573:'of title 5, united states code. under section 3109b, agencies may, when authorized by an appropriation or other act, procure',
2574:'the services of experts or consultants for up to 1 year without regard to other provisions of title 5 governing',
2575:'appointment and compensation. this authority is subject to a maximum rate of compensation in some cases, but there is no',
2576:'minimum rate. in b139261, june 26, 1959, gao reiterated the above principle, and gave several additional examples of statutes sufficient',
2577:'for this purpose. the examples included the following statutory provisions that remain essentially the same in substance as they were',
2578:'in 1959: section 204b of title 29, united states code, which authorizes the administrator of the labor department’s wage and',
2579:'hour division to utilize voluntary and uncompensated services; page 6100 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount',
2580:'section 4017 of title 39, united states code, which authorizes the postal service to accept gifts or donations of services',
2581:'or property; and section 210b of title 47, united states code, which states that no provision of law shall be',
2582:'construed to prohibit common carriers from rendering free service to any agency of the government in connection with preparation for',
2583:'the national defense, subject to rules prescribed by the federal communications commission. at this point a 1978 case, 57 comp.',
2584:'gen. 423, should be noted. the decision held that a statute authorizing the agency for international development aid to accept',
2585:'gifts of “services of any kind” 22 u.s.c. § 2395d did not permit waiver of salary by aid employees whose',
2586:'compensation was fixed by statute. section 2395d is very similar to one of the examples given in b139261, june 26,',
2587:'1959, discussed above, of statutes that would authorize the acceptance of voluntary services. see 39 u.s.c. § 4017. however, 57',
2588:'comp. gen. 423 is distinguishable from b139261, 27 comp. gen. 194, and the other voluntary services cases discussed previously. the',
2589:'question in 57 comp. gen. 423 was whether aid could invoke its giftacceptance authority to justify paying regular federal employees',
2590:'less than the salaries prescribed by law. the decision held that it did not: “section 2395d . . . authorizes',
2591:'the acceptance of gifts. therefore, aid may accept services from private sources either gratuitously or at a fraction of their',
2592:'value. however, section 2395d does not authorize individuals to be appointed to regular positions having compensation rates fixed by or',
2593:'pursuant to statute at rates less than those specified. it, therefore, differs from the statute, which was the subject of',
2594:'27 comp. gen. 194, supra, and accordingly is not a provision of law authorizing employees whose compensation is fixed by',
2595:'or pursuant to statute to waive any part of such compensation.” 57 comp. gen. at 424–25.99 99 further support for',
2596:'the decision’s conclusion that 22 u.s.c. § 2395d was addressed to services from private sources rather than federal employees can',
2597:'be found in the immediately preceding subsection, which states: “it is the sense of congress that the president, in furthering',
2598:'the purposes of this [chapter], shall use to the maximum extent practicable the services and facilities of voluntary, nonprofit organizations',
2599:'registered with, and approved by, the agency for international development.” 22 u.s.c. § 2395c. page 6101 gao06382sp appropriations law—vol. ii',
2600:'chapter 6 availability of appropriations: amount as noted earlier, 27 comp. gen. 194 concerned temporary experts or consultants. b139261 concerned',
2601:'civilian volunteers who sought to provide services for an air force reserve center. likewise, the other statutory examples cited in',
2602:'b139261 clearly were aimed at individuals other than regular federal employees. thus, 57 comp. gen. 423 appears to represent the',
2603:'sensible caveat that general statutory authorities to accept voluntary services or “gifts” of services do not supersede statutes providing for',
2604:'the compensation of federal employees and cannot be invoked to avoid the consequences of those statutes. the rules for waiver',
2605:'of salary or appointment without compensation may be summarized as follows: if compensation is not fixed by statute, that is,',
2606:'if it is fixed administratively or if the statute merely prescribes a maximum but no minimum, it may be waived',
2607:'as long as the waiver qualifies as “gratuitous.” there should be an advance written agreement waiving all claims. if compensation',
2608:'is fixed by statute, it may not be waived, the voluntary versus gratuitous distinction notwithstanding, without specific statutory authority. this',
2609:'authority generally may take the form of authority to accept donations of services or to employ persons without compensation. if',
2610:'the employing agency has statutory authority to accept gifts, the employee can accept the compensation and return it to the',
2611:'agency as a gift. even if the agency has no such authority, the employee can still accept the compensation and',
2612:'donate it to the united states treasury. 2 student interns in 26 comp. gen. 956 1947, the then civil service',
2613:'commission asked whether an agency could accept the uncompensated services of college students as part of a college’s internship program.',
2614:'the students “would be assigned to productive work, that is, to the regular work of the agency in a position',
2615:'which would ordinarily fall in the competitive civil service.” the answer was no. since the students would be used in',
2616:'positions the compensation for which was fixed by law, and since compensation fixed by law cannot be waived, the proposal',
2617:'would require legislative authority. page 6102 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount thirty years later, the',
2618:'justice department’s office of legal counsel considered another internship program and provided similar advice. without statutory authority, uncompensated student services',
2619:'that furthered the agency’s mission, that is, “productive work,” could not be accepted. 2 op. off. legal counsel 185 1978.',
2620:'in view of the longstanding rule, supported by decisions of the supreme court,100 prohibiting the waiver of compensation for positions',
2621:'required by law to be salaried, gao and justice had little choice but to respond as they did. clearly, however,',
2622:'this answer had its downside. it meant that uncompensated student interns could be used only for essentially “makework” tasks, a',
2623:'benefit to neither the students nor the agencies. the solution, apparent from both cases, was legislative authority, which congress provided',
2624:'later in 1978 by the enactment of 5 u.s.c. § 3111. the statute authorizes agencies, subject to regulations of the',
2625:'office of personnel management, to accept the uncompensated services of high school and college students, “[n]otwithstanding section 1342 of title',
2626:'31,” if the services are part of an agency program designed to provide educational experience for the student, if the',
2627:'student’s educational institution gives permission, and if the services will not be used to displace any employee. 5 u.s.c. §',
2628:'3111b. a paper entitled a parttime clerkship program in federal courts for law students by the honorable jack b. weinstein',
2629:'and william b. bonvillian, written in 1975 and printed at 68 f.r.d. 265, considered the use of law students as',
2630:'parttime law clerks, without pay, to mostly supplement the work of the regular law clerks in furtherance of the official',
2631:'duties of the courts. based on the statute’s legislative history and 30 op. att’y gen. 51 1913, previously discussed, judge',
2632:'weinstein concluded that the program did not violate the antideficiency act. although this aspect of the issue is not explicitly',
2633:'discussed in the paper, it appears that the compensation of regular law clerks is fixed administratively. see 28 u.s.c. §',
2634:'604a5. in any event, the administrative office of the united states courts was given authority in 1978 to “accept and',
2635:'utilize voluntary and incompensated gratuitous services.” 28 u.s.c. § 604a17. 100 see footnote number 96, supra, and accompanying text. page',
2636:'6103 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount 3 program beneficiaries programs are enacted from time to',
2637:'time to provide job training assistance to various classes of individuals. the training is intended, among other things, to enable',
2638:'participants to enter the labor market at a higher level of skill. questions have arisen under programs of this nature',
2639:'as to the authority of federal agencies to serve as employers. a 1944 case, 24 comp. gen. 314, considered a',
2640:'vocational rehabilitation program for disabled war veterans. gao concluded that 31 u.s.c. § 1342 did not preclude federal agencies from',
2641:'providing onthejob training, without payment of salary, to program participants. the decision is further discussed in 26 comp. gen. 956,',
2642:'959 1947. in 51 comp. gen. 152 1971, gao concluded that 31 u.s.c. § 1342 precluded federal agencies from accepting',
2643:'work by persons hired by local governments for public service employment under the emergency employment act of 1971.101 four years',
2644:'later, gao modified the 1971 decision, holding that a federal agency could provide work without payment of compensation to i.e.,',
2645:'accept the free services of trainees sponsored and paid by nonfederal organizations from federal grant funds under the comprehensive employment',
2646:'and training act of 1973.102 54 comp. gen. 560 1975. the decision stated: “[c]onsidering that the services in question will',
2647:'arise out of a program initiated by the federal government, it would be anomalous to conclude that such services are',
2648:'proscribed as being voluntary within the meaning of 31 u.s.c. § [1342]. that is to say, it is our opinion',
2649:'that the utilization of enrollees or trainees by a federal agency under the circumstances here involved need not be considered',
2650:'the acceptance of ‘voluntary services’ within the meaning of that phrase as used in 31 u.s.c. § [1342].” id. at',
2651:'561. 101 pub. l. no. 9254, 85 stat. 146 july 12, 1971. 102 pub. l. no. 93203, 87 stat. 839',
2652:'dec. 28, 1973. page 6104 gao06382sp appropriations law—vol. ii c. other voluntary services chapter 6 availability of appropriations: amount in',
2653:'b211079.2, jan. 2, 1987, the relevant program legislation expressly authorized program participants to perform work for federal agencies “notwithstanding section',
2654:'1342 of title 31.” the decision suggests that the statutory authority was necessary not because of the antideficiency act but',
2655:'to avoid an impermissible augmentation of appropriations. it is in any event consistent in result with 24 comp. gen. 314',
2656:'and 54 comp. gen. 560. the relationship between voluntary service and the augmentation concept is explored later in this chapter',
2657:'in our discussion of augmentation of appropriations. 4 applicability to legislative and judicial branches the applicability of 31 u.s.c. §',
2658:'1342 to the legislative and judicial branches of the federal government does not appear to have been seriously questioned. the',
2659:'salary of a member of congress is fixed by statute and therefore cannot be waived without specific statutory authority. b159835,',
2660:'apr. 22, 1975; b123424, mar. 7, 1975; b123424, apr. 15, 1955; a8427, mar. 19, 1925; b206396.2, nov. 15, 1988 nondecision',
2661:'letter. however, as each of these cases points out, nothing prevents a senator or representative from accepting the salary and',
2662:'then, as several have done, donate part or all of it back to the united states treasury. in 1977, gao',
2663:'was asked by a congressional committee chairman whether section 1342 applies to members of congress who use volunteers to perform',
2664:'official office functions. gao responded, first, that section 1342 seems clearly to apply to the legislative branch. gao then summarized',
2665:'the rules for appointment without compensation and advised that, to the extent that a particular employee’s salary could be fixed',
2666:'administratively by the member in any amount he or she chooses to set, that employee’s salary could be fixed at',
2667:'zero. this once again was essentially an application of the rules set down decades earlier in 30 op. att’y gen.',
2668:'51 1913 and 27 comp. dec. 131 1920. see also b69907, feb. 11, 1977. the salary of a federal judge',
2669:'is also “fixed by law”—even more so because of the constitutional prohibition against diminishing the compensation of a federal judge',
2670:'while in office. u.s. const. art iii, § 1. a case applying the standard “no waiver” rules to a federal',
2671:'judge is b157469, july 24, 1974. before entering the mainstream of the modern case law, two very early decisions should',
2672:'be noted. in 12 comp. dec. 244 1905, the comptroller of page 6105 gao06382sp appropriations law—vol. ii chapter 6 availability',
2673:'of appropriations: amount the treasury held that an offer by a meatpacking firm to pay the salaries of department of',
2674:'agriculture employees to conduct a preexport pork inspection could not be accepted because of the voluntary services prohibition.103 similar cases',
2675:'have since come up, but they have been decided under the augmentation theory without reference to 31 u.s.c. § 1342.',
2676:'see 59 comp. gen. 294 1980 and 2 comp. gen. 775 1923, discussed later in section e of this chapter.',
2677:'to restate, apart from the 1905 decision, which has not been followed since, the voluntary services prohibition has not been',
2678:'applied to donations of money. in another 1905 decision, a vendor asked permission to install an appliance on navy property',
2679:'for trial purposes at no expense to the government. presumably, if the navy liked the appliance, it would then buy',
2680:'it. the comptroller of the treasury pointed out an easily overlooked phrase in the voluntary service prohibition—the services that are',
2681:'prohibited are voluntary services “for the united states.” here, temporary installation by the vendor for trial purposes amounted to service',
2682:'for his own benefit and on his own behalf, “as an incident to or necessary concomitant of a proper exhibition',
2683:'of his appliance for sale.” therefore, the navy could grant permission without violating the antideficiency act as long as the',
2684:'vendor agreed to remove the appliance at his own expense if the navy chose not to buy it. 11 comp.',
2685:'dec. 622 1905. this case has not been cited since. for the most part, the subsequent cases have been resolved',
2686:'by applying the “voluntary versus gratuitous” distinction first enunciated by the attorney general in 1913 in 30 op. att’y gen.',
2687:'51, discussed above. the underlying philosophy is perhaps best conveyed in the following statement by the justice department’s office of',
2688:'legal counsel: “although the interpretation of § [1342] has not been entirely consistent over the years, the weight of authority',
2689:'does support the view that the section was intended to eliminate subsequent claims against the united states for compensation of',
2690:'the ‘volunteer,’ rather than to deprive the government of the benefit of truly gratuitous services.” 103 it would now also',
2691:'contravene 18 u.s.c. § 209, which prohibits payment of salaries of government employees from nongovernmental sources. this statute did not',
2692:'exist at the time of the 1905 decision. page 6106 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount',
2693:'6 op. off. legal counsel 160, 162 1982. in an early formulation that has often been quoted since, the comptroller',
2694:'general noted that: “the voluntary service referred to in [31 u.s.c. § 1342] is not necessarily synonymous with gratuitous service,',
2695:'but contemplates service furnished on the initiative of the party rendering the same without request from, or agreement with, the',
2696:'united states therefor. services furnished pursuant to a formal contract are not voluntary within the meaning of said section.” 7',
2697:'comp. gen. 810, 811 1928. in 7 comp. gen. 810, a contractor had agreed to prepare stenographic transcripts of federal',
2698:'trade commission public proceedings and to furnish copies to the commission without cost, in exchange for the exclusive right to',
2699:'report the proceedings and to sell transcripts to the public. the decision noted that consideration under a contract does not',
2700:'have to be monetary consideration, and held that the contract in question was supported by sufficient legal consideration. while the',
2701:'case is thus arguably not a true “voluntary services” case, it has often been cited since, not so much for',
2702:'the actual holding but for the abovequoted statement of the rule. for example, in b13378, nov. 20, 1940, the comptroller',
2703:'general held that the secretary of commerce could accept gratuitous services from a private agency, created by various social science',
2704:'associations, which had offered to assist in the preparation of official monographs analyzing census data. the services were to be',
2705:'rendered under a cooperative agreement which specified that they would be free of cost to the government. the commerce department',
2706:'agreed to furnish space and equipment, but the monographs would not otherwise have been prepared. applying the same approach, gao',
2707:'found no violation of 31 u.s.c. § 1342 for the commerce department to accept services by the business advisory council,',
2708:'which were agreed in advance to be gratuitous. b125406, nov. 4, 1955. likewise, the commission on federal paperwork could accept',
2709:'free services from the private sector as long as they were agreed in advance to be gratuitous. b182087o.m., nov. 26,',
2710:'1975. page 6107 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount in a 1982 decision, the american association',
2711:'of retired persons wanted to volunteer services to assist in crime prevention activities distribute literature, give lectures, etc. on army',
2712:'installations. gao found no antideficiency act problem as long as the services were agreed in advance, and so documented, as',
2713:'gratuitous. b204326, july 26, 1982. in b177836, apr. 24, 1973, the army had entered into a contract with a landowner',
2714:'under which it acquired the right to remove trees and other shrubs from portions of the landowner’s property incident to',
2715:'an easement. a subsequent purchaser of the property complained that some tree stumps had not been removed, and the army',
2716:'proceeded to contract to have the work done. the landowner then submitted a claim for certain costs he had incurred',
2717:'incident to some preliminary work he had done prior to the army’s contract. since the landowner’s actions had been purely',
2718:'voluntary and had been taken without the knowledge or consent of the government, 31 u.s.c. § 1342 prohibited payment. in',
2719:'7 comp. gen. 167 1927, a customs official had stored, in his own private boathouse, a boat which had been',
2720:'seized for smuggling whiskey. the customs official later filed a claim for storage charges. noting that “the united states did',
2721:'not expressly or impliedly request the use of the premises and therefore did not by implication promise to pay therefor,”',
2722:'gao concluded that the storage had been purely a voluntary service, payment for which would violate 31 u.s.c. § 1342.',
2723:'as if to prove the adage that there is nothing new under the sun, gao considered another storage case over',
2724:'50 years later, b194294, july 12, 1979. there, an agriculture department employee had an accident while driving a governmentowned vehicle',
2725:'assigned to him for his work. a department official ordered the damaged vehicle towed to the employee’s driveway, to be',
2726:'held there until it could be sold. since the government did have a role in the employee’s assumption of responsibility',
2727:'for the wreck, gao found no violation of 31 u.s.c. § 1342 and allowed the employee’s claim for reasonable storage',
2728:'charges on a quantum meruit basis.104 section 1342 covers any type of service which has the effect of creating a',
2729:'legal or moral obligation to pay the person rendering the service. naturally, this includes government contractors. see pcl construction services,',
2730:'104 see generally chapter 12, section c.2.b in volume iii of the second edition of principles of federal appropriations law.',
2731:'page 6108 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount inc. v. united states, 41 fed. cl. 242,',
2732:'257–260 1998, quoting with approval from the second edition of principles of federal appropriations law on this point. the prohibition',
2733:'includes arrangements in which government contracting officers solicit or permit—tacitly or otherwise—a contractor to continue performance on a “temporarily unfunded”',
2734:'basis while the agency, which has exhausted its appropriations and cannot pay the contractor immediately, seeks additional appropriations. this was',
2735:'one of the options considered in 55 comp. gen. 768 1976, discussed previously in connection with 31 u.s.c. § 1341a.',
2736:'the army proposed a contract modification which would explicitly recognize the government’s obligation to pay for any work performed under',
2737:'the contract, possibly including reasonable interest, subject to subsequent availability of funds. the government would use its best efforts to',
2738:'obtain a deficiency appropriation. certificates to this effect would be issued to the contractor, including a statement that any additional',
2739:'work performed would be done at the contractor’s own risk. in return, the contractor would be asked to defer any',
2740:'action for breach of contract. gao found this proposal “of dubious validity at best.” although the certificate given to the',
2741:'contractor would say that continued performance was at the contractor’s own risk, it was clear that both parties expected the',
2742:'contract to continue. the government expected to accept the benefits of the contractor’s performance and the contractor expected to be',
2743:'paid— eventually—for it. this is certainly not an example of a clear written understanding that work for the government is',
2744:'to be performed gratuitously. also, the proposal to pay interest was improper as it would compound the antideficiency act violation.',
2745:'although 55 comp. gen. 768 does not specifically discuss 31 u.s.c. § 1342, the relationship should be apparent. gao’s opinion',
2746:'in b302811, july 12, 2004, provides a recent example of an appropriate “gratuitous services” type contract that did not run',
2747:'afoul of the 31 u.s.c. § 1342 prohibition against voluntary services. this decision concerned the general services administration’s gsa proposed',
2748:'national brokers contract, under which gsa would award four real estate brokers exclusive rights to represent the united states with',
2749:'respect to all gsa real property leases. the brokers would be required to provide a range of services commonly offered',
2750:'in commercial leasing transactions such as assisting federal agencies in developing their space requirements, surveying the rental market, and negotiating',
2751:'and preparing leases. the proposal took the form of a “nocost” contract in which gsa would make no payments to',
2752:'the brokers for their services. rather, the brokers would page 6109 gao06382sp appropriations law—vol. ii d. exceptions chapter 6 availability',
2753:'of appropriations: amount collect commissions from the landlords who leased property to the federal agencies. in approving the legality of',
2754:'this proposed arrangement, the decision observed: “because the contract was constructed as a no cost contract, gsa will have no',
2755:'financial liability to brokers, and brokers will have no expectation of a payment from gsa. the acceptance of services without',
2756:'payment pursuant to a valid, binding nocost contract does not augment an agency’s appropriation nor does it violate the voluntary',
2757:'services prohibition. although the brokers contract clearly expects that brokers will be remunerated by commissions from landlords, as is a',
2758:'common practice in the real estate industry, gsa does not require landlords to pay commissions. if a landlord were to',
2759:'fail to pay a broker, the broker would have no claim against gsa.” id. at 7.105 two kinds of exceptions',
2760:'to 31 u.s.c. § 1342 have already been discussed— where acceptance of services without compensation is specifically authorized by law,',
2761:'and where the government and the volunteer have a written agreement that the services are to be rendered gratuitously with',
2762:'no expectation of future payment. there is a third exception, written into the statute itself: “emergencies involving the safety of',
2763:'human life or the protection of property.” the cases dealing with this statutory exception have arisen in a variety of',
2764:'contexts and are discussed below, along with recent developments. 105 the july 12, 2004, opinion clarified an earlier opinion on',
2765:'the subject of the national brokers contract, b291947, aug. 15, 2003. also, it distinguished another opinion, b300248, jan. 15, 2004,',
2766:'which held that the small business administration improperly augmented its appropriations by requiring certain lenders to pay fees to an',
2767:'agency contractor. see section e.2.a of this chapter for a detailed discussion of the small business administration opinion and how',
2768:'it compares with the gsa opinion. page 6110 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount 1 safety',
2769:'of human life in order to invoke this exception, the services provided to protect human life must have been rendered',
2770:'in a true emergency situation. what constitutes an emergency was discussed in several early decisions. in 12 comp. dec. 155',
2771:'1905, a municipal health officer disinfected several government buildings to prevent the further spread of diphtheria. several cases of diphtheria',
2772:'had already occurred at the government compound, including four that resulted in deaths. the comptroller of the treasury found that',
2773:'the services had been rendered in an emergency involving the loss of human life, and held accordingly that the doctor',
2774:'could be reimbursed for the cost of materials used and the fair value of his services. in another case, the',
2775:'s.s. rexmore, a british vessel, deviated from its course to london to answer a call for help from an army',
2776:'transport ship carrying over 1,000 troops. the ship had sprung a leak and appeared to be in danger of sinking.',
2777:'the comptroller general allowed a claim for the vessel’s actual operating costs plus lost profits attributable to the services performed.',
2778:'the rexmore had rendered a tangible service to save the lives of the people aboard the army transport, as well',
2779:'as the transport vessel itself. 2 comp. gen. 799 1923. on the other hand, gao denied payment to a man',
2780:'who was boating in the florida keys and saw a navy seaplane make a forced landing. he offered to tow',
2781:'the aircraft over two miles to the nearest island, and did so. his claim for expenses was denied. the aircraft',
2782:'had landed intact and the pilot was in no immediate danger. rendering service to overcome mere inconvenience or even to',
2783:'avoid a potential future emergency is not enough to overcome the statutory prohibition. 10 comp. gen. 248 1930. 2 protection',
2784:'of property the main thing to remember here is that the property must be either governmentowned property or property for',
2785:'which the government has some responsibility. the standard was established by the comptroller of the treasury in 9 comp. dec.',
2786:'182, 185 1902 as follows: “i think it is clear that the statute does not contemplate property in which the',
2787:'government has no immediate interest or concern; but i do not think it was intended to apply exclusively to property',
2788:'owned by the government. page 6111 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount the term ‘property’ is',
2789:'used in the statute without any qualifying words, but it is used in connection with the rendition of services for',
2790:'the government. the implication is, therefore, clear that the property in contemplation is property in which the government has an',
2791:'immediate interest or in connection with which it has some duty to perform.” in the cited decision, an individual had',
2792:'gathered up mail scattered in a train wreck and delivered it to a nearby town. the government did not “own”',
2793:'the mail but had a responsibility to deliver it. therefore, the services came within the statutory exception and the individual',
2794:'could be paid for the value of his services. applying the approach of 9 comp. dec. 182, the comptroller general',
2795:'held in b152554, feb. 24, 1975, that section 1342 did not permit the agency for international development to make expenditures',
2796:'in excess of available funds for disaster relief in foreign countries. a case clearly within the exception is 3 comp.',
2797:'gen. 979 1924, allowing reimbursement to a municipality which had rendered firefighting assistance to prevent the destruction of federal property',
2798:'where the federal property was not within the territory for which the municipal fire department was responsible. an exception was',
2799:'also recognized in 53 comp. gen. 71 1973, where a government employee brought in food for other government employees in',
2800:'circumstances which would justify a determination that the expenditure was incidental to the protection of government property in an extreme',
2801:'emergency. in this case, the general services administration had to assemble and maintain for 5 days a cadre of approximately',
2802:'175 special police in connection with the unauthorized occupation of a bureau of indian affairs building. the police officers were',
2803:'required to perform tours of duty that sometimes extended to 24 hours. they were kept at the ready to reoccupy',
2804:'the building and they were not permitted to leave the marshalling area because of the imminence of court orders and',
2805:'administrative directives. 3 recent developments during the past two decades, cases addressing the “emergencies involving the safety of human life',
2806:'or the protection of property” exception to 31 u.s.c. § 1342 have arisen primarily in the context of “funding gaps”',
2807:'where an agency is faced with an appropriations lapse or potential lapse page 6112 gao06382sp appropriations law—vol. ii chapter 6',
2808:'availability of appropriations: amount usually at the outset of a fiscal year. these cases are discussed in detail in section',
2809:'c.6 of this chapter. however, several points from that discussion are also relevant here. most notably, in 1990, congress amended',
2810:'31 u.s.c. § 1342 by adding the following language: “as used in this section, the term ‘emergencies involving the safety',
2811:'of human life or the protection of property’ does not include ongoing, regular functions of government the suspension of which',
2812:'would not imminently threaten the safety of human life or the protection of property.”106 two recent gao decisions have considered',
2813:'the emergency exception to 31 u.s.c. § 1342 including its 1990 amendment in a context other than a funding gap.',
2814:'the question in b262069, aug. 1, 1995, was whether the district of columbia could exceed its appropriation for certain programs,',
2815:'including aid to families with dependent children and medicaid, without violating the antideficiency act. the main issue in that decision',
2816:'was whether the “unless authorized by law exception” to the antideficiency act in 31 u.s.c. § 1341a1a applied. gao held',
2817:'that it did not. the decision also noted the existence of the emergencies exception to 31 u.s.c. § 1342, but',
2818:'held that it was likewise inapplicable: “an ‘emergency’ under section 1342 ‘does not include ongoing, regular functions of government the',
2819:'suspension of which would not imminently threaten the safety of human life or the protection of property.’ we are not',
2820:'presently aware of any facts or circumstances that would make this limited exception available to the district. see, 5 op.',
2821:'o.l.c. 1, 7–11 1981.” b262069 at 3, fn. 1. the decision in b262069 addressed a hypothetical situation; the district had',
2822:'not actually exceeded its appropriation there. unfortunately, a subsequent opinion, b285725, sept. 29, 2000, involved the real thing. in that',
2823:'case, the district of columbia health and hospitals public benefit corporation pbc had incurred obligations and made payments in excess',
2824:'106 as explained in section c.6, this amendment was intended to guard against what might have been viewed as an',
2825:'overly broad application of one of the attorney general’s funding gap opinions. page 6113 gao06382sp appropriations law—vol. ii chapter 6',
2826:'availability of appropriations: amount of its appropriations. the pbc maintained that the emergency exception to 31 u.s.c. § 1342 as',
2827:'construed by the attorney general applied; thus, there was no violation. gao disagreed: “the funding gap situations discussed by the',
2828:'attorney general arise typically at the beginning of a fiscal year because of the absence or expiration of budget authority',
2829:'under circumstances that are beyond an agency’s control. in the present situation, the exhaustion of appropriations occurred during the fiscal',
2830:'year because of a rate of operations and obligations in excess of available resources. viewed in this light, pbc’s failure',
2831:'to regulate its activities and spending so as to operate within its available budget resources is not the type of',
2832:'‘emergency’ covered either by the attorney general’s earlier opinions or 31 u.s.c. § 1342.” b285725, enclosure at 9. the opinion',
2833:'acknowledged that pbc’s ongoing functions of operating a hospital and clinics involved the provision of services essential to the protection',
2834:'of human life. however, the opinion observed that pbc, like many federal agencies engaged in protecting human life and safety,',
2835:'requested and received appropriations to cover these functions. it added: “once the congress enacts appropriation[s], it is incumbent on the',
2836:'pbc and similarly situated federal agencies to manage its resources to stay within the authorized level. nothing in the district’s',
2837:'submission demonstrates that the pbc’s exhaustion of appropriations prior to the end of the fiscal year was caused by some',
2838:'unanticipated event or events e.g., mass injuries resulting from hurricane, flood or other natural disasters requiring pbc to provide services',
2839:'for the protection of life beyond the level it should have reasonably been expected to anticipate when it prepared its',
2840:'budget.” id. by way of summary, the opinion observed: “while the failure of congress to enact appropriations at the beginning',
2841:'of the fiscal year may qualify as an emergency event for purposes of section 1342, it would be a novel',
2842:'page 6114 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount proposition, one that we are unwilling to endorse,',
2843:'to conclude that an agency’s failure to manage and live within the resources provided for an activity involved in protecting',
2844:'human life permits it to incur obligations in excess of amounts provided. nothing that we have been provided warrants the',
2845:'conclusion that the overobligations resulted from an unanticipated emergency rather than from the pbc’s failure to manage and live within',
2846:'its budgetary resources during the fiscal year.”107 b285725 at 3. in essence, b285725 held that the emergencies exception to 31',
2847:'u.s.c. § 1342 does not apply where an agency exceeds its appropriations—at least absent events beyond the agency’s control that',
2848:'the agency and presumably the congress could not have foreseen in determining the agency’s funding levels. in two opinions to',
2849:'the united states marshals service usms in 1999 and 2000, the office of legal counsel addressed a potential exhaustion of',
2850:'usms appropriations, which never materialized: memorandum opinion for the general counsel, united states marshals service, usms obligation to take steps',
2851:'to avoid anticipated appropriations deficiency, olc opinion, may 11, 1999, and memorandum opinion for the general counsel, united states marshals',
2852:'service, continuation of federal prisoner detention efforts in the face of a usms appropriations deficiency, olc opinion, apr. 5, 2000.',
2853:'the opinions dealt with a potential exhaustion of appropriations for usms prisonerdetention functions, but did not describe the circumstances giving',
2854:'rise to the potential exhaustion. while these opinions recognized the “affirmative obligation” on the part of agencies to manage available',
2855:'appropriations in order to avoid deficiencies, they did not address the important distinction between an exhaustion of appropriations or funding',
2856:'gap resulting from unforeseen circumstances and an exhaustion of appropriations resulting from the agency’s failure to manage its operations within',
2857:'the limits of enacted appropriations. we would disagree with the office of legal counsel opinions to the extent they could',
2858:'be read to suggest that regardless of the reasons for the exhaustion of 107 finally, the opinion noted that, even',
2859:'if the exception to section 1342 applied, it would not sanction the agency’s actual disbursement of funds in excess of',
2860:'its appropriations. thus, the agency violated the antideficiency act in any event. page 6115 gao06382sp appropriations law—vol. ii chapter 6',
2861:'availability of appropriations: amount e. voluntary creditors appropriations, whenever an agency like usms, whose statutory mission involves the protection of',
2862:'life and property, runs out of money, it has openended authority to continue to incur obligations under the antideficiency act’s',
2863:'emergencies exception.108 this is exactly the “coercive deficiency” that the congress legislated against in enacting the antideficiency act.109 see b285725,',
2864:'sept. 29, 2000. the antideficiency act was intended to keep agency operations at a level within the amounts that congress',
2865:'appropriates for that purpose. if an agency concludes that it needs more funds than congress has appropriated for a fiscal',
2866:'year, the agency should ask congress to enact a supplemental appropriation; it should not continue operations without regard to the',
2867:'antideficiency act. a related line of decisions are the socalled “voluntary creditor” cases. a voluntary creditor is an individual, government',
2868:'or private, who pays what he or she perceives to be a government obligation from personal funds. the rule is',
2869:'that the voluntary creditor cannot be reimbursed, although there are significant exceptions. for the most part, the decisions have not',
2870:'related the voluntary creditor prohibition to the antideficiency act, with the exception of one very early case 17 comp. dec.',
2871:'353 1910 and two more recent ones 53 comp. gen. 71 1973 and 42 comp. gen. 149 1962. the voluntary',
2872:'creditor cases are discussed in detail in chapter 12, section c.4.c in volume iii of the second edition of principles',
2873:'of federal appropriations law, dealing with claims against the united states. 4. apportionment of appropriations because of the apportionment and',
2874:'related provisions of the antideficiency act, 31 u.s.c. §§ 1511–1519, an agency generally does not have the full amount of',
2875:'its appropriations available to it at the beginning of the fiscal year. apportionment is an administrative process by which, as',
2876:'its name suggests, appropriated funds are distributed to agencies in portions over the period of their availability. the office of',
2877:'management and budget omb apportions funds for executive branch agencies. 31 u.s.c. § 1513b; exec. order no. 6166, § 16',
2878:'june 10, 1933, at 5 u.s.c. § 901 note. appropriations for legislative branch agencies, the judicial branch, 108 the opinions',
2879:'did acknowledge, of course, that usms could not actually spend funds if its appropriations were exhausted. they also noted that',
2880:'a determination whether particular obligations would satisfy the emergencies exception could not be made in the abstract and would require',
2881:'casebycase evaluation. 109 see section c.2.b of this chapter for a discussion of the “coercive deficiency” concept. page 6116 gao06382sp',
2882:'appropriations law—vol. ii chapter 6 availability of appropriations: amount a. statutory requirement for apportionment the district of columbia, and the',
2883:'international trade commission are apportioned by officials having administrative control of those funds. 31 u.s.c. § 1513a. in addition to',
2884:'apportionment, appropriations are subject to further administrative subdivision by the heads of the agencies to which the appropriations are made.',
2885:'31 u.s.c. § 1514. section 1517a of title 31 prohibits officers and employees of the federal and district of columbia',
2886:'governments from making or authorizing an expenditure or obligation that exceeds an apportionment or the amount permitted under certain other',
2887:'subdivisions of appropriated funds. agencies must report violations of section 1517a to the congress and the president. those who violate',
2888:'section 1517a are subject to administrative discipline as well as criminal penalties in the case of willful violations. see 31',
2889:'u.s.c. §§ 1517b, 1518, and 1519. subsection a of section 1512 establishes the basic requirement for the apportionment of appropriations:',
2890:'“a except as provided in this subchapter, an appropriation available for obligation for a definite period shall be apportioned to',
2891:'prevent obligation or expenditure at a rate that would indicate a necessity for a deficiency or supplemental appropriation for the',
2892:'period. an appropriation for an indefinite period and authority to make obligations by contract before appropriations shall be apportioned to',
2893:'achieve the most effective and economical use. an apportionment may be reapportioned under this section.” although apportionment was first required',
2894:'legislatively in 1905,110 the current form of the statute derives from a revision enacted in 1950 in section 1211 of',
2895:'the general appropriation act, 1951.111 the 1950 revision was part of an overall effort by congress to amplify and enforce',
2896:'the basic restrictions against incurring deficiencies in violation of the antideficiency act, 31 u.s.c. § 1341. 110 pub. l. no.',
2897:'217, ch. 1484, 33 stat. 1214, 1257 mar. 3, 1905. 111 pub. l. no. 759, ch. 896, 64 stat. 595,',
2898:'765 sept. 6, 1950. page 6117 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount section 1512a requires that',
2899:'all appropriations be administratively apportioned so as to ensure their obligation and expenditure at a controlled rate which will prevent',
2900:'deficiencies from arising before the end of a fiscal year. although section 1512 does not tell you who is to',
2901:'make the apportionment, section 1513 names the president as the apportioning official for most executive branch agencies. the president delegated',
2902:'the function to the director of the bureau of the budget in 1933,112 and it now reposes in the successor',
2903:'to that office, the director of the office of management and budget omb.113 legislative and judicial branch appropriations are apportioned',
2904:'by officials in those branches. 31 u.s.c. § 1513a. the term “apportionment” may be defined as follows: “the action by',
2905:'which [the apportioning official] distributes amounts available for obligation, including budgetary reserves established pursuant to law, in an appropriation or',
2906:'fund account. an apportionment divides amounts available for obligation by specific time periods usually quarters, activities, projects, objects, or a',
2907:'combination thereof. the amounts so apportioned limit the amount of obligations that may be incurred. an apportionment may be further',
2908:'subdivided by an agency into allotments, suballotments, and allocations. in apportioning any account, some funds may be reserved to provide',
2909:'for contingencies or to effect savings made possible pursuant to the antideficiency act. funds apportioned to establish a reserve must',
2910:'be proposed for deferral or rescission pursuant to the impoundment control act of 1974 2 u.s.c. §§ 681–688. “the apportionment',
2911:'process is intended to 1 prevent the obligation of amounts available within an appropriation or fund account in a manner',
2912:'that would require deficiency or supplemental appropriations and 2 achieve the most 112 exec. order no. 6166, § 16 june',
2913:'10, 1933, at 5 u.s.c. § 901 note. 113 reorganization plan no. 2 of 1970, 35 fed. reg. 7959, 84',
2914:'stat. 2085 effective july 1, 1970, designated the bureau of the budget as omb and transferred to the president all',
2915:'functions vested in the former bureau of the budget. executive order no. 11541, 35 fed. reg. 10737 july 1, 1970,',
2916:'31 u.s.c. § 501 note, transferred those functions to the director of omb. page 6118 gao06382sp appropriations law—vol. ii chapter',
2917:'6 availability of appropriations: amount effective and economical use of amounts made available for obligation.”114 apportionment is required not only',
2918:'to prevent the need for deficiency or supplemental appropriations, but also to ensure that there is no drastic curtailment of',
2919:'the activity for which the appropriation is made. 36 comp. gen. 699 1957. see also 38 comp. gen. 501 1959.',
2920:'in other words, the apportionment requirement is designed to prevent an agency from spending its entire appropriation before the end',
2921:'of the fiscal year and then putting congress in a position in which it must either enact an additional appropriation',
2922:'or allow the entire activity to come to a halt. 64 comp. gen. 728, 735 1985. see also memorandum opinion',
2923:'for the general counsel, united states marshals service, usms obligation to take steps to avoid anticipated appropriations deficiency, olc opinion,',
2924:'may 11, 1999 opining that 31 u.s.c. § 1512a imposes “an affirmative obligation” on federal agencies to take steps to',
2925:'use their available funds in a way that will avoid the need for a deficiency or supplemental appropriations, citing 64',
2926:'comp. gen. 728 and 36 comp. gen. 699. in 36 comp. gen. 699, post office funds had been reapportioned in',
2927:'such a way that the fourth quarter funds were substantially less than those for the third quarter. the comptroller general',
2928:'stated: “a drastic curtailment toward the close of a fiscal year of operations carried on under a fiscal year appropriation',
2929:'is a prima facie indication of a failure to so apportion an appropriation ‘as to prevent obligation or expenditure thereof',
2930:'in a manner which would indicate a necessity for deficiency or supplemental appropriations for such period.’ in our view, this',
2931:'is the very situation the amendment of the law in 1950 was intended to remedy.” 36 comp. gen. at 703.',
2932:'see also 64 comp. gen. 728, 735–36 1985. however, the mere fact that an agency faces a severe lack of',
2933:'funds and needs to curtail services late in a fiscal year does not necessarily mean that the apportioning authority has',
2934:'violated 31 u.s.c. § 1512a. programmatic 114 gao, a glossary of terms used in the federal budget process, gao05734sp washington,',
2935:'d.c.: september 2005, at 12–13. see also omb circular no. a11, pt. 4, instructions on budget execution, §§ 120.1–120.5 june',
2936:'21, 2005. for a discussion of the impoundment control act, see section d.3.b of chapter 1. page 6119 gao06382sp appropriations',
2937:'law—vol. ii chapter 6 availability of appropriations: amount factors that could not reasonably be foreseen at the time of an',
2938:'apportionment or reapportionment may affect the pattern or pace of spending over the course of the year. also, as discussed',
2939:'hereafter in section c.4.e, the statute itself permits apportionments indicating the need for a deficiency or supplemental appropriation in certain',
2940:'limited circumstances. a 1979 decision involved the department of agriculture’s food stamp program. the program was subject to certain spending',
2941:'ceilings which it seemed certain, given the rate at which the department was incurring expenditures, that the department was going',
2942:'to exceed. the department feared that, if it was bound by a formula in a different section of its authorizing',
2943:'act to pay the mandated amount to each eligible recipient, it would have to stop the whole program when the',
2944:'funds were exhausted. based on both the antideficiency act and the program legislation, gao concluded that there had to be',
2945:'an immediate pro rata reduction for all participants. discontinuance of the program when the funds ran out would violate the',
2946:'purpose of the apportionment requirement. a51604, mar. 28, 1979. this is not to say that every subactivity or project must',
2947:'be carried out for the full fiscal year, on a reduced basis, if necessary. section 1512a applies to amounts made',
2948:'available in an appropriation or fund. where, for example, the then veterans administration va nursing home program was funded from',
2949:'moneys made available in a general, lumpsum va medical care appropriation, the agency was free to discontinue the nursing home',
2950:'program and reprogram the balance of its funds to other programs also funded under that heading. b167656, june 18, 1971.',
2951:'the result would be different if the nursing home program had received a lineitem appropriation. the general rule against apportionments',
2952:'that indicate the need for a deficiency or supplemental appropriation does not preclude an agency from requesting an apportionment of',
2953:'all or most of its existing appropriations at the same time that it is seeking a supplemental so long as',
2954:'the agency has in place a plan that would enable it to function through the end of the fiscal year',
2955:'should congress not enact the supplemental. 64 comp. gen. 728, 735 1985. see also b255529, jan. 10, 1994. in 64',
2956:'comp. gen. 728, the former interstate commerce commission icc had requested an apportionment of the full annual amount available to',
2957:'it under a continuing resolution at the outset of fiscal year 1985. at the same time, the icc voted to',
2958:'seek a supplemental appropriation in order to avoid page 6120 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount',
2959:'severe staffing cuts that would have been required without it. the comptroller general held that the apportionment was not improper:',
2960:'“as we have indicated, at the recommendation of its managing director the icc adopted an operating plan for fiscal year',
2961:'1985 which included a request for a supplemental appropriation. however, part of that operating plan was an emergency plan which',
2962:'would enable the icc to operate for the entire fiscal year even without a supplemental. under the plan, if the',
2963:'congress did not enact a supplemental appropriation by the end of march, the commission was to furlough all its employees',
2964:'for 1 day per week for the remainder of the year. this would allow the commission to operate through the',
2965:'end of the fiscal year within the $48 million already appropriated. in fact a supplemental was not passed by the',
2966:'end of march and the furlough was implemented. . . . “[t]he actions taken by the icc . . .',
2967:'demonstrate that from the time at which the congress and the president approved legislation reducing icc’s funding below the requested',
2968:'level, every decision related to expenditures was made to avoid violation of the antideficiency act.” 64 comp. gen. at 735.',
2969:'the requirement to apportion applies not only to 1year appropriations and other appropriations limited to a fixed period of time,',
2970:'but also to “noyear” money and even to contract authority authority to contract in advance of appropriations. 31 u.s.c. §§',
2971:'1511a, 1512a. in the case of indefinite appropriations and contract authority, the requirement states only that the apportionment is to',
2972:'be made in such a way as “to achieve the most effective and economical use” of the budget authority. id.',
2973:'§ 1512a. prior to the 1982 recodification of title 31 of the united states code, the apportionment requirement applied explicitly',
2974:'to government corporations which are instrumentalities of the united states.115 while the applicability of the requirement has not changed, the',
2975:'recodification dropped the explicit 115 31 u.s.c. § 665d2 1976 ed.. page 6121 gao06382sp appropriations law—vol. ii b. establishing reserves',
2976:'chapter 6 availability of appropriations: amount language, viewing it as covered by the broad definition of “executive agency” in 31',
2977:'u.s.c. § 102.116 the authority of some government corporations to determine the necessity of their expenditures and the manner in',
2978:'which they shall be incurred is not sufficient to exempt a corporation from the apportionment requirement. 43 comp. gen. 759',
2979:'1964. the apportionment process provides a set of administrative controls over the use of appropriations in addition to those congress',
2980:'has imposed through the appropriations act itself. the apportionment process cannot alter or otherwise affect the operation of statutory requirements',
2981:'concerning the availability or use of appropriated funds. in this regard, omb’s guidance on apportionments states: “. . . the',
2982:'apportionment of funds should not be used as a means of resolving any question dealing with the legality of using',
2983:'funds for the purposes for which they are appropriated. any questions as to the legality of using funds for a',
2984:'particular purpose must be resolved through legal channels.” omb circ. no. a11, pt. 4, § 120.17.117 furthermore, an apportioning official',
2985:'cannot apportion funds in advance of their availability for obligation or expenditure. in b290600, july 10, 2002, omb had apportioned',
2986:'certain budget authority for loan guarantees to the air transportation stabilization board pursuant to the board’s request. the statute enacting',
2987:'this budget authority had conditioned its availability such that the budget authority “shall be available only to the extent that',
2988:'a request . . . that includes designation of such amount as an emergency requirement . . . is transmitted',
2989:'by the president to congress.” the president had not transmitted this designation at the time of the apportionment. therefore, gao',
2990:'concluded that omb and the board had violated the antideficiency act. omb and the board recognized the violation and had',
2991:'already taken steps to avoid a recurrence. section 1512c of 31 u.s.c. provides as follows: 116 see the codification note',
2992:'following 31 u.s.c. § 1511. 117 before 2002, omb’s guidance on apportionments was located in circular no. a34. page 6122',
2993:'gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount “c1 in apportioning or reapportioning an appropriation, a reserve may',
2994:'be established only— “a to provide for contingencies; “b to achieve savings made possible by or through changes in requirements',
2995:'or greater efficiency of operations; or “c as specifically provided by law. “2 a reserve established under this subsection may',
2996:'be changed as necessary to carry out the scope and objectives of the appropriation concerned. when an official designated in',
2997:'section 1513 of this title to make apportionments decides that an amount reserved will not be required to carry out',
2998:'the objectives and scope of the appropriation concerned, the official shall recommend the rescission of the amount in the way',
2999:'provided in chapter 11 of this title for appropriation requests. reserves established under this section shall be reported to congress',
3000:'as provided in the impoundment control act of 1974 2 u.s.c. 681 et seq..” section 1512c seeks to limit the',
3001:'circumstances in which the full appropriation is not apportioned or utilized and a reserve fund is established. under this provision,',
3002:'the apportioning official is authorized to establish reserves only to provide for contingencies or to effect savings, unless the reserve',
3003:'is specifically authorized by statute. at one time, this section was a battleground between the executive and legislative branches. the',
3004:'executive branch had relied on this portion of the antideficiency act to impound funds for general fiscal or economic policy',
3005:'reasons such as containment of federal spending and executive judgment of the relative merits, effectiveness, and desirability of competing federal',
3006:'programs often referred to as “policy impoundments”. see 54 comp. gen. 453, 458 1974; b135564, july 26, 1973. prior to',
3007:'1974, the predecessor of 31 u.s.c. § 1512c contained rather expansive language to the effect that a reserve fund could',
3008:'be established pursuant to “other developments subsequent to the date on which [the] appropriation was made available.” 31 u.s.c. §',
3009:'665c2 1970 ed.. page 6123 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount despite this expansive language, the',
3010:'comptroller general’s position had been that the authority to establish reserves under the antideficiency act was limited to providing for',
3011:'contingencies or effecting savings which are in furtherance of, or at least consistent with, the purposes of an appropriation. b130515,',
3012:'july 10, 1973. the comptroller general did not interpret the law as authorizing a reserve of funds i.e., an impoundment',
3013:'based upon general economic, fiscal, or policy considerations that were extraneous to the individual appropriation or were in derogation of',
3014:'the appropriation’s purpose. b125187, sept. 11, 1973; b130515, july 10, 1973. see also state highway commission of missouri v. volpe,',
3015:'479 f.2d 1099, 1118 8th cir. 1973, which held that the right to reserve funds in order to “effect savings”',
3016:'or due to “subsequent events,” etc., must be considered in the context of the applicable appropriation statute. the impoundment control',
3017:'act of 1974118 amended section 1512c by eliminating the “other developments” clause and by prohibiting the establishment of appropriation reserves',
3018:'except as provided under the antideficiency act for contingencies or savings, or as provided in other specific statutory authority. the',
3019:'intent was to preclude reliance on section 1512c as authority for “policy impoundments.” city of new haven v. united states,',
3020:'809 f.2d 900, 906 d.c. cir. 1987; 54 comp. gen. 453 1974; b148898o.m., aug. 28, 1974. the executive branch, however,',
3021:'continued to defer for policy reasons, arguing that section 1013 of the impoundment control act provided authority, independent of the',
3022:'antideficiency act, to withhold funds from obligation temporarily for fiscal policy reasons. gao agreed that this interpretation was consistent with',
3023:'the language of the impoundment control act and with the statutory scheme, pointing out that congress had reserved the power',
3024:'under the impoundment control act to disapprove any deferral, particularly deferrals for fiscal policy reasons, as a counterweight to the',
3025:'president’s power to defer. 54 comp. gen. at 455. at that time, the impoundment control act provided for disapproval using',
3026:'a onehouse veto. this counterweight vanished when the supreme court held onehouse legislative veto provisions unconstitutional. immigration & naturalization service',
3027:'v. chadha, 462 u.s. 919 1983. accordingly, in a decision issued on january 20, 1987, the u.s. court of appeals',
3028:'for the district of columbia invalidated section 1013, which was the sole general 118 pub. l. no. 93344, title x,',
3029:'§ 1002, 88 stat. 297, 332 july 12, 1974. page 6124 gao06382sp appropriations law—vol. ii c. method of apportionment chapter',
3030:'6 availability of appropriations: amount legislative authority for policy deferrals.119 city of new haven, 809 f.2d at 902, 905–09. in',
3031:'september of 1987, congress reenacted section 1013b of the impoundment control act, 2 u.s.c. § 684b, without the unconstitutional legislative',
3032:'veto provision and reiterated that the same limits on appropriation reserves that appear in 31 u.s.c. § 1512c are the',
3033:'sole justifications for deferrals. see pub. l. no. 100119, § 206, 101 stat. 754, 785 sept. 29, 1987. see chapter',
3034:'1, section d.3.b for a general discussion of impoundments and the impoundment control act. the comptroller general discussed examples of',
3035:'permissible i.e., nonpolicy reserves in 51 comp. gen. 598 1972 and 51 comp. gen. 251 1971. the first decision concerned',
3036:'the provisions of a longterm charter of several tankers for the navy. the contract contained options to renew the charter',
3037:'for periods of 15 years. in the event that the navy declined to renew the charter short of a full',
3038:'15year period, the vessels were to be sold by a board of trustees, acting for the owners and bondholders. any',
3039:'shortfall in the proceeds over the termination value was to be unconditionally guaranteed by the navy. gao held that it',
3040:'would not violate the antideficiency act to cover this contingent liability by setting up a reserve. 51 comp. gen. 598',
3041:'1972. in 51 comp. gen. 251 1971, gao said that it was permissible to provide in regulations for a clause',
3042:'to be inserted in future contracts for payment of interest on delayed payments of a contractor’s claim. reserving sufficient funds',
3043:'from the appropriation used to support the contract to cover these potential interest costs would protect against potential antideficiency act',
3044:'violations. in 1981, the community services administration established a reserve as a cushion against antideficiency act violations while the agency',
3045:'was terminating its operations. grantees argued that the reserve improperly reduced amounts available for discretionary grants. in rogers v. united',
3046:'states, 14 cl. ct. 39, 46–47 1987, aff’d, 801 f.2d 729 fed. cir. 1988, cert. denied, 490 u.s. 1034 1989,',
3047:'the court held that a reasonable reserve for contingencies was properly within the agency’s discretion. the remaining portions of 31',
3048:'u.s.c. § 1512 are subsections b and d, set forth below: 119 the court concluded that the onehouse legislative veto',
3049:'was not severable from the act’s deferral provision, and invalidated that provision as well. id. page 6125 gao06382sp appropriations law—vol.',
3050:'ii chapter 6 availability of appropriations: amount “b1 an appropriation subject to apportionment is apportioned by— “a months, calendar quarters,',
3051:'operating seasons, or other time periods; “b activities, functions, projects, or objects; or “c a combination of the ways referred',
3052:'to in clauses a and b of this paragraph. “d an apportionment or reapportionment shall be reviewed at least 4',
3053:'times a year by the official designated in section 1513 of this title to make apportionments.” subsection b and d',
3054:'are largely technical, implementing the basic apportionment requirement of 31 u.s.c. § 1512a. section 1512b makes it clear that apportionments',
3055:'need not be made strictly on a monthly, quarterly, or other fixed time basis, nor must they be for equal',
3056:'amounts in each time period. the apportioning officer is free to take into account the “activities, functions, projects, or objects”',
3057:'of the program being funded and the usual pattern of spending for such programs in deciding how to apportion the',
3058:'funds. absent some statutory provision to the contrary, omb’s determination is controlling. thus, in maryland department of human resources v.',
3059:'united states department of health & human services, 854 f.2d 40 4th cir. 1988, the court upheld omb’s quarterly apportionment',
3060:'of social services block grant funds, rejecting the state’s contention that it should receive its entire annual allotment at the',
3061:'beginning of the fiscal year. section 1512d requires a minimum of four reviews each year to enable the apportioning officer',
3062:'to make reapportionments or other adjustments as necessary. conversely, omb may decide to apportion all or most of an available',
3063:'appropriation at the outset of a fiscal year. in b255529, jan. 10, 1994, gao held that omb’s apportionments at the',
3064:'beginning of the fiscal year of the full amounts available for two state department appropriation “contributions to international organizations” and',
3065:'“contributions for international peacekeeping activities” constituted an appropriate exercise of omb’s discretion. quoting from an earlier opinion, b152554, feb. 17,',
3066:'page 6126 gao06382sp appropriations law—vol. ii d. control of apportionments chapter 6 availability of appropriations: amount 1972, the decision then',
3067:'observed that the amounts to be apportioned depended on the needs of the programs as determined by omb: “it must',
3068:'be recognized that, with respect to a number of programs, particularly where grant or other assistance funds are involved, a',
3069:'large portion of the funds normally are obligated during the early part of the fiscal year. the pattern of obligations',
3070:'is much different than where, for example, an appropriation is primarily available for salaries and administrative expenses. in such case',
3071:'the expenditures would be comparatively constant throughout the year. the pattern of obligations, however, is primarily an administrative matter .',
3072:'. . [for resolution through] the apportionment process.” the decision pointed out that, according to the state department, payments under',
3073:'the contributions to international organizations account traditionally were made in the first quarter of the fiscal year. payments under the',
3074:'peacekeeping account usually occurred as bills were received and funds were available, but the department advised gao that there was',
3075:'a large backlog of bills at the time funds became available, thereby justifying immediate apportionment of the entire annual appropriation.120',
3076:'section 1513 of title 31, united states code, specifies the authorities and timetables for making the apportionments or reapportionments of',
3077:'appropriations required by section 1512. section 1513a applies to appropriations of the legislative and judicial branches of the federal government,',
3078:'as well as appropriations of the international trade commission and the district of columbia government.121 it assigns authority to apportion',
3079:'to the “official having administrative control” of the 120 the two decisions cited concerned apportionments that omb made under continuing',
3080:'resolutions. as a general matter, the discussion of omb’s apportionment discretion would apply to any appropriation. for a discussion of',
3081:'continuing resolutions, see chapter 8. 121 a permanent provision of law included in the 1988 district of columbia appropriation act',
3082:'states that appropriations for the d.c. government “shall not be subject to apportionment except to the extent specifically provided by',
3083:'statute.” pub. l. no. 100202, § 135, 101 stat. 1329, 1329102 1987. this provision appears to implicitly repeal 31 u.s.c.',
3084:'§ 1513a as applied to the d.c. government. page 6127 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount',
3085:'appropriation.122 apportionment must be made 30 days before the start of the fiscal year for which the appropriation is made,',
3086:'or within 30 days after the enactment of the appropriation, whichever is later. the apportionment must be in writing. section',
3087:'1513b deals with apportionments for the executive branch. the president is designated as the apportioning authority. as we have seen,',
3088:'the function has been delegated to the director, office of management and budget omb.123 the director of omb has up',
3089:'to 20 days before the start of the fiscal year or 30 days after enactment of the appropriation act, whichever',
3090:'is later, to make the actual apportionment and notify the agency of the action taken. 31 u.s.c. § 1513b2. again,',
3091:'the apportionments must be in writing. although primary responsibility for a violation of section 1512 lies with the director of',
3092:'omb, the head of the agency concerned also may be found responsible if he or she fails to send the',
3093:'director accurate information on which to base an apportionment. in b163628, jan. 4, 1974, gao responded to a question from',
3094:'the chairman of a congressional committee about the power of omb to apportion the funds of independent regulatory agencies, such',
3095:'as the securities and exchange commission sec. the comptroller general agreed with the chairman that independent agencies should generally be',
3096:'free from executive control or interference. the response then stated: “[t]he apportionment power may not lawfully be used as a',
3097:'form of executive control or influence over agency functions. rather, it may only be exercised by omb in the manner',
3098:'and for the purposes prescribed in 31 u.s.c. § [1512]—i.e., to prevent obligation or expenditure in a manner which would',
3099:'give rise to a need for deficiency or supplemental appropriations, to achieve the most effective and economical use of appropriations',
3100:'and to establish reserves either to provide for contingencies or to effect savings which are in furtherance of or at',
3101:'least consistent with, the purposes of an appropriation. 122 neither section 1513 nor case law defines the phrase “official having',
3102:'administrative control.” consequently, the apportioning official for legislative and judicial appropriations is named by the head of the agency to',
3103:'whom the appropriation is made. 123 see footnote 113, supra, and accompanying text. page 6128 gao06382sp appropriations law—vol. ii chapter',
3104:'6 availability of appropriations: amount e. apportionments requiring deficiency estimate “as thus limited, the apportionment process serves a necessary purpose—the',
3105:'promotion of economy and efficiency in the use of appropriations. . . . “[s]ince a useful purpose is served by',
3106:'omb’s proper exercise of the apportionment power, we do not believe that the potential for abuse of the power is',
3107:'sufficient to justify removing it from omb.” thus, the appropriations of independent regulatory agencies like the securities and exchange commission',
3108:'sec are subject to apportionment by omb, but omb may not lawfully use its apportionment power to compromise the independence',
3109:'of those agencies. the impoundment control act may permit omb, in effect, to delay the apportionment deadlines prescribed in 31',
3110:'u.s.c. § 1513b. for example, when the president sends a rescission message to congress, the budget authority proposed to be',
3111:'rescinded may be withheld for up to 45 days pending congressional action on a rescission bill. 2 u.s.c. §§ 6823,',
3112:'683b. in b115398.33, aug. 12, 1976, gao responded to a congressional request to review a situation in which an apportionment',
3113:'had been withheld for more than 30 days after enactment of the appropriation act. the president had planned to submit',
3114:'a rescission message for some of the funds but was late in drafting and transmitting his message. if the full',
3115:'amount contained in the rescission message could be withheld for the entire 45day period, and congress ultimately declined to enact',
3116:'the full rescission, release of the funds for obligation would occur only a few days before the budget authority expired.',
3117:'the comptroller general suggested that, where congress has completed action on a rescission bill rescinding only a part of the',
3118:'amount proposed, omb should immediately apportion the amounts not included in the rescission bill without awaiting the expiration of the',
3119:'45day period. see also b115398.33, mar. 5, 1976. in our discussion of the basic requirement for apportionment, we quoted 31',
3120:'u.s.c. § 1512a to the effect that appropriations must be apportioned “to prevent obligation or expenditure at a rate that',
3121:'would indicate a necessity for a deficiency or supplemental appropriation.” the requirement that appropriations be apportioned so as to avoid',
3122:'the need for page 6129 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount deficiency or supplemental appropriations is',
3123:'fleshed out in 31 u.s.c. § 1515 formerly subsection e of the antideficiency act: “a an appropriation required to be',
3124:'apportioned under section 1512 of this title may be apportioned on a basis that indicates the need for a deficiency',
3125:'or supplemental appropriation to the extent necessary to permit payment of such pay increases as may be granted pursuant to',
3126:'law to civilian officers and employees including prevailing rate employees whose pay is fixed and adjusted under subchapter iv of',
3127:'chapter 53 of title 5 and to retired and active military personnel. “b1 except as provided in subsection a of',
3128:'this section, an official may make, and the head of an executive agency may request, an apportionment under section 1512',
3129:'of this title that would indicate a necessity for a deficiency or supplemental appropriation only when the official or agency',
3130:'head decides that the action is required because of— “a a law enacted after submission to congress of the estimates',
3131:'for an appropriation that requires an expenditure beyond administrative control; or “b an emergency involving the safety of human life,',
3132:'the protection of property, or the immediate welfare of individuals when an appropriation that would allow the united states government',
3133:'to pay, or contribute to, amounts equired to be paid to individuals in specific amounts fixed by law or under',
3134:'formulas prescribed by law, is insufficient. “2 if an official making an apportionment decides that an apportionment would indicate a',
3135:'necessity for a deficiency or supplemental appropriation, the official shall submit immediately a detailed report of the facts to congress.',
3136:'the report shall be referred to in submitting a proposed deficiency or supplemental appropriation.” page 6130 gao06382sp appropriations law—vol. ii',
3137:'chapter 6 availability of appropriations: amount section 1515 thus provides certain exceptions to the requirement of section 1512a that apportionments',
3138:'be made in such manner as to assure that the funds will last throughout the fiscal year and there will',
3139:'be no necessity for a deficiency appropriation. under subsection 1515a, deficiency apportionments are permissible if necessary to pay salary increases',
3140:'granted pursuant to law to federal civilian and military personnel. under subsection 1515b, apportionments can be made in an unbalanced',
3141:'manner e.g., an entire appropriation could be obligated by the end of the second quarter if the apportioning officer determines',
3142:'that 1 a law enacted subsequent to the transmission of budget estimates for the appropriation requires expenditures beyond administrative control,',
3143:'or 2there is an emergency involving safety of human life, protection of property, or immediate welfare of individuals in cases',
3144:'where an appropriation for mandatory payments to those individuals is insufficient. prior to 1957, what is now subsection 1515b prohibited',
3145:'only the making of an apportionment indicating the need for a deficiency or supplemental appropriation, so the only person who',
3146:'could violate this subsection was the director of omb. an amendment in 1957 made it equally a violation for an',
3147:'agency to request such an apportionment. see 38 comp. gen. 501 1959. the exception in subsection 1515b1a for expenditures “beyond',
3148:'administrative control” required by a statute enacted after submission of the budget estimate may be illustrated by statutory increases in',
3149:'compensation, although many of the cases would now be covered by subsection a. we noted several of the cases in',
3150:'our consideration of when an obligation or expenditure is “authorized by law” for purposes of 31 u.s.c. § 1341.124 those',
3151:'cases established the rule that a mandatory increase is regarded as “authorized by law” so as to permit overobligation, whereas',
3152:'a discretionary increase is not. the same rule applies in determining when an expenditure is “beyond administrative control” for purposes',
3153:'of 31 u.s.c. § 1515b. thus, statutory pay increases for wage board employees granted pursuant to a wage survey meet',
3154:'the test. 39 comp. gen. 422 1959; 38 comp. gen. 538, 542 1959. see also 45 comp. gen. 584, 587',
3155:'1966 severance pay in fiscal year 1966.125 discretionary increases, just as they are not “authorized by law” for purposes of',
3156:'31 u.s.c. § 1341, are not “beyond administrative control” for 124 see section c.2.g of this chapter. 125 the law',
3157:'mandating payment of severance pay was enacted after the start of fiscal year 1966, which is why the expenditures in',
3158:'that case would qualify under 31 u.s.c. § 1515b. page 6131 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations:',
3159:'amount purposes of section 1515b. 44 comp. gen. 89 1964 salary increases to central intelligence agency employees; 31 comp. gen.',
3160:'238 1951 pension increases to retired district of columbia police and firefighters. the wage board exception was separately codified in',
3161:'1957 and now appears at 31 u.s.c. § 1515a, quoted above. subsection 1515a reached its present form in 1987 when',
3162:'congress expanded it to include pay increases granted pursuant to law to nonwage board civilian officers and employees and to',
3163:'retired and active military personnel.126 the “emergency” exceptions in subsection 1515b1b have not been discussed in gao decisions, although a',
3164:'1989 internal memorandum suggested that the exception would apply to forest service appropriations for fighting forest fires. b230117o.m., feb. 8,',
3165:'1989. the exceptions for safety of human life and protection of property appear to be patterned after identical exceptions in',
3166:'31 u.s.c. § 1342 acceptance of voluntary services, so the case law under that section would likely be relevant for',
3167:'construing the scope of the exceptions under section 1515b. see 43 op. att’y gen. 293, 5 op. off. legal counsel',
3168:'1, 9–10 1981 “as provisions containing the same language, enacted at the same time, and aimed at related purposes, the',
3169:'emergency provisions of” sections 1342 and 1515b1b “should be deemed in pari materia and given a like construction”; memorandum for',
3170:'the general counsel, united states marshals service, continuation of federal prisoner detention efforts in the face of a usms appropriation',
3171:'deficiency, olc opinion, apr. 5, 2000 “we think it clear that, if an agency’s functions fall within § 1342’s exception',
3172:'for emergency situations, the standard for the ‘emergency’ exception under § [1515b1b] also will be met”. see also memorandum for',
3173:'the director, office of management and budget, government operations in the event of a lapse in appropriations, olc opinion, aug.',
3174:'16, 1995, at 7, fn. 6. it is less obvious that the converse would necessarily be true—that is, that an',
3175:'“emergency” for purposes of subsection 1515b1b automatically qualifies as an “emergency” for purposes of section 1342. as we pointed out',
3176:'in discussing section 1342, this section was amended in 1990 to add the following language: 126 pub. l. no. 100202,',
3177:'§ 105, 101 stat. 1329, 1329433 dec. 22, 1987 1988 continuing resolution. page 6132 gao06382sp appropriations law—vol. ii chapter 6',
3178:'availability of appropriations: amount “as used in this section, the term ‘emergencies involving the safety of human life or the',
3179:'protection of property’ does not include ongoing, regular functions of government the suspension of which would not imminently threaten the',
3180:'safety of human life or the protection of property.” such language was not added to subsection 1515b1b. thus, on its',
3181:'face, subsection 1515b1b may embody at least a slightly more flexible standard of “emergency” than section 1342, although we have',
3182:'found no cases addressing this point. importantly, the exceptions in 31 u.s.c. § 1515b are exceptions only to the prohibition',
3183:'against making or requesting apportionments requiring deficiency estimates; they are not exceptions to the basic prohibitions in 31 u.s.c. §',
3184:'1341 against obligating or spending in excess or advance of appropriations. the point was discussed at some length in b167034,',
3185:'sept. 1, 1976. legislation had been proposed in the senate to repeal 41 u.s.c. § 11 the adequacy of appropriations',
3186:'act,127 which prohibits the making of a contract, not otherwise authorized by law, unless there is an appropriation “adequate to',
3187:'its fulfillment,” except in the case of contracts made by a military department for “clothing, subsistence, forage, fuel, quarters, transportation,',
3188:'or medical and hospital supplies.” the question was whether, if 41 u.s.c. § 11 were repealed, the military departments would',
3189:'have essentially the same authority under section 1515b. the defense department expressed the view that section 1515b would not be',
3190:'an adequate substitute for the 41 u.s.c. § 11 exception which allows the incurring of obligations for limited purposes even',
3191:'though the applicable appropriation is insufficient to cover the expenses at the time the commitment is made. defense commented as',
3192:'follows: “the authority to apportion funds on a deficiency basis in [31 u.s.c. § 1515b] does not, as alleged, provide',
3193:'authority to incur a deficiency. it merely authorizes obligating funds at a deficiency rate under certain circumstances, e.g., a $2,000,000',
3194:'appropriation can be obligated in its entirety at the end of the third quarter, but it does not provide authority',
3195:'to obligate one dollar more than $2,000,000.” 127 see section c.2.a of this chapter for a further discussion of 41',
3196:'u.s.c. § 11. page 6133 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount f. exemptions from apportionment requirement',
3197:'letter from the deputy secretary of defense to the chairman, house armed services committee, apr. 2, 1976 quoted in b167034,',
3198:'sept. 1, 1976. the comptroller general agreed with the deputy secretary, stating: “[section 1515b] in no way authorizes an agency',
3199:'of the government actually to incur obligations in excess of the total amount of money appropriated for a period. it',
3200:'only provides an exception to the general apportionment rule set out in [31 u.s.c. § 1512a] that an appropriation be',
3201:'allocated so as to insure that it is not exhausted prematurely. [section 1515b] says nothing about increasing the total amount',
3202:'of the appropriation itself or authorizing the incurring of obligations in excess of the total amount appropriated. on the contrary,',
3203:'as noted above, apportionment only involves the subdivision of appropriations already enacted by congress. it necessarily follows that the sum',
3204:'of the parts, as apportioned, could not exceed the total amount of the appropriations being apportioned. “any deficiency that an',
3205:'agency incurs where obligations exceed total amounts appropriated, including a deficiency that arises in a situation where it was determined',
3206:'that one of the exceptions set forth in [section 1515b] was applicable, would constitute a violation of 31 u.s.c. §',
3207:'[1341a] . . . .” b167034, sept. 1, 1976. a number of exemptions from the apportionment requirement, formerly found in',
3208:'subsection f of the antideficiency act, are now gathered in 31 u.s.c. § 1516: “an official designated in section 1513',
3209:'of this title to make apportionments may exempt from apportionment— “1 a trust fund or working fund if an expenditure',
3210:'from the fund has no significant effect on the financial operations of the united states government; page 6134 gao06382sp appropriations',
3211:'law—vol. ii chapter 6 availability of appropriations: amount “2 a working capital fund or a revolving fund established for intragovernmental',
3212:'operations; “3 receipts from industrial and power operations available under law; and “4 appropriations made specifically for— “a interest on,',
3213:'or retirement of, the public debt; “b payment of claims, judgments, refunds, and drawbacks; “c items the president decides are',
3214:'of a confidential nature; “d payment under a law requiring payment of the total amount of the appropriation to a',
3215:'designated payee; and “e grants to the states under the social security act 42 u.s.c. 301 et seq..” section 1516',
3216:'is largely selfexplanatory and the various enumerated exceptions appear to be readily understood. note that the statute does not make',
3217:'the exemptions mandatory. it merely authorizes them, within the discretion of the apportioning authority omb. omb’s implementing instructions, omb circular',
3218:'no. a11, preparation, submission, and execution of the budget, part 4, § 120 june 21, 2005, have not adopted all',
3219:'of the exemptions permitted under the statute. for example, the circular’s list of funds exempted from apportionment pursuant to 31',
3220:'u.s.c. § 1516 does not include trust funds or intragovernmental revolving funds. see omb cir. no. a11, at § 120.7.',
3221:'in addition, 10 u.s.c. § 2201a authorizes the president to exempt appropriations for military functions of the defense department from',
3222:'apportionment upon determining “such action to be necessary in the interest of national defense.” page 6135 gao06382sp appropriations law—vol. ii',
3223:'chapter 6 availability of appropriations: amount g. administrative division of apportionments another exemption, this one mandatory, is contained in 31',
3224:'u.s.c. § 1511b3: appropriations for “the senate, the house of representatives, a committee of congress, a member, officer, employee, or',
3225:'office of either house of congress, or the office of the architect of the capitol or an officer or employee',
3226:'of that office” are exempt from the apportionment requirement. the remainder of the legislative branch along with the judicial branch',
3227:'are subject to apportionment. see 31 u.s.c. § 1513a. thus far, we have reviewed the provisions of the antideficiency act',
3228:'directed at the appropriation level and the apportionment level. the law also addresses agency subdivisions. the first provision to note',
3229:'is 31 u.s.c. § 1513d: “an appropriation apportioned under this subchapter may be divided and subdivided administratively within the limits',
3230:'of the apportionment.” thus, administrative subdivisions are expressly authorized. the precise pattern of subdivisions will vary based on the nature',
3231:'and scope of activities funded under the apportionment and, to some extent, agency preference. the levels of subdivision below the',
3232:'apportionment level are, in descending order, allotment, suballotment, and allocation. see omb circular no. a11, preparation, submission, and execution of',
3233:'the budget, § 20.3 june 21, 2005, which notes under its definition of apportionment: “an apportionment may be further subdivided',
3234:'by an agency into allotments, suballotments, and allocations.” as we will see later in our discussion of 31 u.s.c. §',
3235:'1517a, there are definite antideficiency act implications flowing from how an agency structures its fund control system. the next relevant',
3236:'statute is 31 u.s.c. § 1514:128 “a the official having administrative control of an appropriation available to the legislative branch,',
3237:'the judicial branch, the united states international trade commission, or the district of columbia government, and, subject to the approval',
3238:'of the president, the head of each executive 128 prior to the 1982 recodification of title 31, sections 1513d and',
3239:'1514 had been combined as subsection g of the antideficiency act. page 6136 gao06382sp appropriations law—vol. ii chapter 6 availability',
3240:'of appropriations: amount agency except the commission shall prescribe by regulation a system of administrative control not inconsistent with accounting',
3241:'procedures prescribed under law. the system shall be designed to— “1 restrict obligations or expenditures from each appropriation to the',
3242:'amount of apportionments or reapportionments of the appropriation; and “2 enable the official or the head of the executive agency',
3243:'to fix responsibility for an obligation or expenditure exceeding an apportionment or reapportionment. “b to have a simplified system for',
3244:'administratively dividing appropriations, the head of each executive agency except the commission shall work toward the objective of financing each',
3245:'operating unit, at the highest practical level, from not more than one administrative division for each appropriation affecting the unit.”',
3246:'section 1514 is designed to ensure that the agencies in each branch of the government keep their obligations and expenditures',
3247:'within the bounds of each apportionment or reapportionment. the official in each agency who has administrative control of the apportioned',
3248:'funds is required to set up, by regulation, a system of administrative controls to implement this objective. the system must',
3249:'be consistent with any accounting procedures prescribed by or pursuant to law, and must be designed to 1 prevent obligations',
3250:'and expenditures in excess of apportionments or reapportionments, and 2 fix responsibility for any obligation or expenditure in excess of',
3251:'an apportionment or reapportionment.129 agency fund control regulations in the executive branch must be approved by omb. see omb cir.',
3252:'no. a11, pt. 4, § 150.7. 129 see, in this regard, gao, standards for internal control in the federal government,',
3253:'gao/aimd0021.3.1 washington, d.c.: nov. 9, 1999; gao, policy and procedures manual for the guidance of federal agencies, title 7 washington,',
3254:'d.c.: may 18, 1993. page 6137 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount subsection b of 31',
3255:'u.s.c. § 1514 was added in 1956130 and was intended to simplify agency allotment systems. prior to 1956, it was',
3256:'not uncommon for agencies to divide and subdivide their apportionments into numerous “pockets” of obligational authority called “allowances.” obligating or',
3257:'spending more than the amount of each allowance was a violation of the antideficiency act as it then existed. the',
3258:'second hoover commission commission on organization of the executive branch of the government had recommended simplification in 1955. the senate',
3259:'and house committees on government operations agreed. both committees reported as follows: “the making of numerous allotments which are further',
3260:'divided and suballotted to lower levels leads to much confusion and inflexibility in the financial control of appropriations or funds',
3261:'as well as numerous minor violations of [the antideficiency act].” s. rep. no. 842265, at 9 1956; h.r. rep. no.',
3262:'842734, at 7 1956. the result was what is now 31 u.s.c. § 1514b.131 as noted, one of the objectives',
3263:'of 31 u.s.c. § 1514 is to enable the agency head to fix responsibility for obligations or expenditures in excess',
3264:'of apportionments. the statute encourages agencies to fix responsibility at the highest practical level, but does not otherwise prescribe precisely',
3265:'how this is to be done. apart from subsection b, the substance of section 1514 derives from a 1950 amendment',
3266:'to the antideficiency act.132 in testimony on that legislation, the director of the then bureau of the budget stated: “at',
3267:'the present time, theoretically, i presume the agency head is about the only one that you could really hold responsible',
3268:'for exceeding [an] apportionment. the revised section provides for going down the line to the person who creates the obligation',
3269:'against the fund and fixes the 130 pub. l. no. 863, ch. 814, § 3, 70 stat. 782, 783 aug.',
3270:'1, 1956. 131 the historical summary in this paragraph is taken largely from 37 comp. gen. 220 1957. 132 pub.',
3271:'l. no. 759, ch. 896, § 1211, 64 stat. 595, 765 sept. 6, 1950. page 6138 gao06382sp appropriations law—vol. ii',
3272:'chapter 6 availability of appropriations: amount h. expenditures in excess of apportionment responsibility on the bureau head or the division',
3273:'head, if he is the one who creates the obligation.”133 thus, depending on the agency regulations and the level at',
3274:'which administrative responsibility is fixed, the violating individual could be the person in charge of a major agency bureau or',
3275:'operating unit, or it could be a contracting officer or finance officer. identifying the person responsible for a violation will',
3276:'be easy in probably the majority of cases. however, where there are many individuals involved in a complex transaction, and',
3277:'particularly where the actions producing the violation occurred over a long period of time, pinpointing responsibility can be much more',
3278:'difficult. hopkins and nutt, in their study of the antideficiency act, present the following as a sensible approach: “generally, [the',
3279:'individual to be held responsible] will be the highest ranking official in the decisionmaking process who had knowledge, either actual',
3280:'or constructive, of 1 precisely what actions were taken and 2 the impropriety or at least questionableness of such actions.',
3281:'there will be officials who had knowledge of either factor. but the person in the best and perhaps only position',
3282:'to prevent the ultimate error—and thus the one who must be held accountable—is the highest one who is aware of',
3283:'both. 134 thus, hopkins and nutt conclude, where multiple individuals are involved in a violation, the individual to be held',
3284:'responsible “must not be too remote from the cause of the violation and must be in a position to have',
3285:'prevented the violation from occurring.”135 the former subsection h of the antideficiency act, now 31 u.s.c. § 1517a, provides: 133',
3286:'hearings before senate comm. on appropriations on h.r. 7786, 81st cong., 2d sess. 10 1950, quoted in hopkins & nutt,',
3287:'the antideficiency act revised statutes 3679 and funding federal contracts: an analysis, 80 mil. l. rev. 51, 128 1978. 134',
3288:'memorandum for the assistant secretary of the army financial management, 1976, quoted in hopkins & nutt, supra, at 130. 135',
3289:'id. page 6139 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount “a an officer or employee of the',
3290:'united states government or of the district of columbia government may not make or authorize an expenditure or obligation exceeding—',
3291:'“1 an apportionment; or “2 the amount permitted by regulations prescribed under section 1514a of this title.” section 1517a must',
3292:'be read in conjunction with sections 1341, 1512, and 1514, previously discussed. subsection 1517a1 prohibits obligations or expenditures in excess',
3293:'of an apportionment. thus, an agency must observe the limits of its apportionments just as it must observe the limits',
3294:'of its appropriations. it follows that an agency cannot obligate or expend appropriations before they have been apportioned. thus, gao',
3295:'stated in b290600, july 10, 2002: “the antideficiency act prohibits . . . the making or the authorizing of obligations',
3296:'or expenditures in advance of, or in excess of, available appropriations. 31 u.s.c. § 1341. an agency may obligate an',
3297:'appropriation only after omb has apportioned it to the agency.” page 6140 gao06382sp appropriations law—vol. ii chapter 6 availability of',
3298:'appropriations: amount since the antideficiency act requires an apportionment before an agency can obligate the appropriation, 31 u.s.c. § 1512a,',
3299:'an obligation in advance of an apportionment violates the act. see b255529, jan. 10, 1994. in other words, if zero',
3300:'has been apportioned, zero is available for obligation or expenditure.136 when an agency anticipates a need to obligate appropriations upon',
3301:'their enactment, it may request but not receive an apportionment before a regular appropriation or continuing resolution has been enacted.',
3302:'typically, for regular appropriation acts, agencies submit their apportionment requests to omb by august 21 or within 10 calendar days',
3303:'after enactment of the appropriation, whichever is later. see omb circular no. a11, preparation, submission, and execution of the budget,',
3304:'§ 120.30 june 21, 2005. omb permits agencies to submit requests on the day congress completes action on the appropriation',
3305:'bill. id. § 120.34. omb encourages agencies to begin their preparation of apportionment requests as soon as the house and',
3306:'senate have reached agreement on funding levels id. § 120.30 and to discuss the proposed request with omb representatives id.',
3307:'§ 120.34. omb will entertain expedited requests and, for emergency funding needs, may approve the apportionment request by telephone or',
3308:'fax. id. for continuing resolutions, omb typically expedites the process by making “automatic” apportionments under continuing resolutions. see b255529, jan.',
3309:'10, 1994; omb cir. no. a11, § 123.5. 136 but see cessna aircraft co. v. dalton, 126 f.3d 1442 fed.',
3310:'cir. 1997, cert. denied, 525 u.s. 818 1998. in that case, the navy had exercised an option to extend a',
3311:'contract on october 1. the appropriation that navy charged the obligation to was signed into law on october 1; however,',
3312:'omb had not yet apportioned the appropriation. cessna, trying to get out of the contract, argued that the obligation for',
3313:'the contract extension was not valid since it was made in advance of the apportionment. the court held that the',
3314:'provisions of the antideficiency act were only internal government operating requirements and, as such, they did not confer legal rights',
3315:'on outside parties. id. at 1451–52. see generally blackhawk heating & plumbing co. v. united states, 622 f.2d 539, 552',
3316:'n.9 ct. cl. 1980; rough diamond co. v. united states, 351 f.2d 636, 640, 642 ct. cl. 1965, cert. denied,',
3317:'383 u.s. 957 1966. in dicta, the court said that apportionment is not a prerequisite to the obligation of appropriated',
3318:'funds. the court noted that 31 u.s.c. § 1341 explicitly prohibits obligations both in excess of and unless otherwise authorized',
3319:'in advance of appropriations. by contrast, the court pointed out, the apportionment sections of title 31 explicitly prohibit only obligations',
3320:'exceeding an apportionment; they do not literally forbid obligations in advance of an apportionment. cessna, 126 f.3d at 1450–51. the',
3321:'court also rejected cessna’s reliance on provisions of the defense department accounting manual that generally prohibited obligations in advance of',
3322:'an apportionment. the cessna dicta has not been followed in any subsequent case. page 6141 gao06382sp appropriations law—vol. ii chapter',
3323:'6 availability of appropriations: amount under some circumstances, an agency may have a legal duty to seek an additional apportionment',
3324:'from omb. blackhawk heating & plumbing co. v. united states, 622 f.2d 539, 552 n.9 ct. cl. 1980; berends v.',
3325:'butz, 357 f. supp. 143, 155–56 d. minn. 1973. in berends v. butz, the secretary of agriculture had terminated an',
3326:'emergency farm loan program, allegedly due to a shortage of funds. the court found the termination improper and directed reinstatement',
3327:'of the program. since the shortage of funds related to the amount apportioned and not the amount available under the',
3328:'appropriation, the court found that the secretary had a duty to request an additional apportionment in order to continue implementing',
3329:'the program. the case does not address the nature and extent of any duty omb might have in response to',
3330:'such a request. subsection 1517a2 makes it a violation to obligate or expend in excess of an administrative subdivision of',
3331:'an apportionment to the extent provided in the agency’s fund control regulations prescribed under section 1514. the importance of 31',
3332:'u.s.c. § 1514 becomes much clearer when it is read in conjunction with 31 u.s.c. § 1517a2. section 1514 does',
3333:'not prescribe the level of fiscal responsibility for violations below the apportionment level. it merely recommends that the agency set',
3334:'the level at the highest practical point and suggests no more than one subdivision below the apportionment level. the agency',
3335:'thus, under the statute, has a measure of discretion. if it chooses to elevate overobligations or overexpenditures of lowertier subdivisions',
3336:'to the level of antideficiency act violations, it is free to do so in its fund control regulations. at this',
3337:'point, it is important to return to omb circular no. a11. since agency fund control regulations must be approved by',
3338:'omb id. § 150.7, omb has a role in determining what levels of administrative subdivision should constitute antideficiency act violations.',
3339:'under omb circular no. a11, § 145.2, overobligation or overexpenditure of an allotment or suballotment are always violations. overobligation or',
3340:'overexpenditure of other administrative subdivisions are violations only if and to the extent specified in the agency’s fund control regulations.',
3341:'see 31 u.s.c. §§ 1514a, 1517a2. in 37 comp. gen. 220 1957, gao considered proposed fund control regulations of the',
3342:'public housing administration. the regulations provided for allotments as the first subdivision below the apportionment level. they then authorized the',
3343:'further subdivision of allotments into “allowances,” but retained responsibility at the allotment level. the “allowances” were intended as a means',
3344:'of meeting operational needs page 6142 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount rather than an apportionment',
3345:'control device. gao advised that this proposed structure conformed to the purposes of 31 u.s.c. § 1514, particularly in light',
3346:'of the 1956 addition of section 1514b, and that expenditures in excess of an “allowance” would not constitute antideficiency act',
3347:'violations. for further illustration, see 35 comp. gen. 356 1955 overobligation of allotment stemming from misinterpretation of regulations; b95136, aug.',
3348:'8, 1979 overobligation of regional allotments would constitute reportable violation unless sufficient unobligated balance existed at central account level to',
3349:'adjust the allotments; b179849, dec. 31, 1974 overobligation of allotment held a violation of section 1517a where agency regulations specified',
3350:'that allotment process was the “principal means whereby responsibility is fixed for the conduct of program activities within the funds',
3351:'available”; b114841.2o.m., jan. 23, 1986 no violation in exceeding allotment subdivisions termed “work plans”; b242974.6, nov. 26, 1991 nondecision memorandum',
3352:'under defense department regulations, overobligations of administrative subdivisions of funds that are exempt from apportionment do not constitute antideficiency act',
3353:'violations.. 5. penalties and reporting requirements a. administrative and penal sanctions violations of the antideficiency act are subject to sanctions',
3354:'of two types, administrative and penal. the antideficiency act is the only one of the title 31, united states code,',
3355:'fiscal statutes to prescribe penalties of both types, a fact which says something about congressional perception of the act’s importance.',
3356:'an officer or employee who violates 31 u.s.c. § 1341a obligate/expend in excess or advance of appropriation, section 1342 voluntary',
3357:'services prohibition, or section 1517a obligate/expend in excess of an apportionment or administrative subdivision as specified by regulation “shall be',
3358:'subject to appropriate administrative discipline including, when circumstances warrant, suspension from duty without pay or removal from office.” 31 u.s.c.',
3359:'§§ 1349a, 1518. for a case in which an official was reduced in grade and reassigned to other duties, see',
3360:'duggar v. thomas, 550 f. supp. 498 d.d.c. 1982 upholding the agency’s action against a charge of discrimination. page 6143',
3361:'gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount in addition, an officer or employee who “knowingly and willfully”',
3362:'violates any of the three provisions cited above “shall be fined not more than $5,000, imprisoned for not more than',
3363:'2 years, or both.” 31 u.s.c. §§ 1350, 1519. as far as gao is aware, it appears that no officer',
3364:'or employee has ever been prosecuted, much less convicted, for a violation of the antideficiency act as of this writing.',
3365:'the knowing and willful failure to record an overobligation in order to conceal an antideficiency act violation is also a',
3366:'criminal offense. see 71 comp. gen. 502, 509–10 1992 discussing several relevant criminal provisions in title 18, united states code.',
3367:'earlier in this chapter, we pointed out that factors such as the absence of bad faith or the lack of',
3368:'intent to commit a violation are irrelevant for purposes of determining whether a violation has occurred. however, intent is relevant',
3369:'in evaluating the assessment of penalties. note that the criminal penalties are linked to a determination that the law was',
3370:'“knowingly and willfully” violated, but the administrative sanction provisions do not contain similar language. thus, intent or state of mind',
3371:'may and probably should be taken into consideration when evaluating potential administrative sanctions whether to assess them and, if so,',
3372:'what type, but must be taken into consideration in determining applicability of the criminal sanctions. understandably, the provisions for fines',
3373:'and/or jail are intended to be reserved for particularly flagrant violations. finally, the administrative and penal sanctions apply only to',
3374:'violations of the three provisions cited—31 u.s.c. §§ 1341a, 1342, and 1517a. they do not, for example, apply to violations',
3375:'of 31 u.s.c. § 1512 requiring that all appropriations be administratively apportioned so as to ensure obligation and expenditure at',
3376:'a controlled rate which will prevent deficiencies from arising before the end of a fiscal year. 36 comp. gen. 699',
3377:'1957. b. reporting requirements once it is determined that there has been a violation of 31 u.s.c. § 1341a, 1342,',
3378:'or 1517a, the agency head “shall report immediately to the president and congress all relevant facts and a statement of',
3379:'actions taken.” 31 u.s.c. §§ 1351, 1517b. further instructions on preparing the reports may be found in omb circular no.',
3380:'a11, preparation, submission, and execution of the budget, § 145 june 21, 2005. the reports are to be signed by',
3381:'the agency head. id. § 145.7. the report to the president is to be forwarded through the director of omb.',
3382:'id. page 6144 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount in the consolidated appropriations act, 2005, congress',
3383:'amended the antideficiency act to add that the heads of executive branch agencies and the mayor of the district of',
3384:'columbia shall also transmit “[a] copy of each report . . . to the comptroller general on the same date',
3385:'the report is transmitted to the president and congress.”137 the report is to include all pertinent facts and a statement',
3386:'of all actions taken to address and correct the antideficiency act violation any administrative discipline imposed, referral to the justice',
3387:'department where appropriate, new safeguards imposed, etc.. an agency also should include a request for a supplemental or deficiency appropriation',
3388:'when needed. it is also understood that the agency will do everything it can lawfully do to correct or mitigate',
3389:'the financial effects of the violation. for example, when the fish and wildlife service improperly entered into contracts for legal',
3390:'services, we explained that there were a number of ways the department of interior could correct the service’s antideficiency act',
3391:'violations if unable to obtain a deficiency appropriation of the budget authority needed to cover amounts the service paid to',
3392:'these contractors, including ratifying the contracts and covering their costs out of unobligated balances of the applicable fiscal year appropriation,',
3393:'or paying the contractors on a quantum meruit basis138 out of unobligated balances. b290005, july 1, 2002. see also b255831,',
3394:'july 7, 1995; 55 comp. gen. 768, 772 1976; b223857, feb. 27, 1987; b114841.2o.m., jan. 23, 1986. in view of',
3395:'the explicit provisions of 31 u.s.c. § 1351, there is no private right of action for declaratory, mandatory, or injunctive',
3396:'relief under the antideficiency act. thurston v. united states, 696 f. supp. 680 d.d.c. 1988. factors such as mistake, inadvertence,',
3397:'lack of intent, or the minor nature of a violation do not affect the duty to report. for example, the',
3398:'office of management and budget omb and the air transportation stabilization 137 31 u.s.c. §§ 1351, 1517b, as amended by',
3399:'consolidated appropriations act, 2005, pub. l. no. 108447, div. g, title ii, § 1401, 118 stat. 2809, 3192 dec. 8,',
3400:'2004. see, in this regard, the comptroller general’s memorandum to heads of departments, agencies, and others concerned, transmission of antideficiency',
3401:'act reports to the comptroller general of the united states, b304335, mar. 8, 2005. 138 payment under this authority is',
3402:'appropriate where there is no enforceable contractual obligation on the part of the government but where the government has received',
3403:'a benefit not prohibited by law conferred in good faith. see chapter 12, section c.2.b in volume iii of the',
3404:'second edition of principles of federal appropriations law for a general discussion of quantum meruit claims. page 6145 gao06382sp appropriations',
3405:'law—vol. ii chapter 6 availability of appropriations: amount board atsb were required to report an antideficiency act violation when, as',
3406:'discussed in section c.2 above, omb erroneously apportioned, and atsb erroneously obligated, funds to cover the subsidy cost of a',
3407:'loan guarantee prior to the availability of budget authority. b290600, july 10, 2001. of course, if the agency feels there',
3408:'are extenuating circumstances, it is entirely appropriate to include them in the report. 35 comp. gen. 356 1955. what if',
3409:'gao uncovers a violation but the agency thinks gao is wrong? the agency must still make the required reports, and',
3410:'must include an explanation of its disagreement. omb cir. no. a11, § 145. see also gao, antideficiency act: agriculture’s food',
3411:'and nutrition service violates the antideficiency act, gao/afmd8720 washington, d.c.: mar. 17, 1987. 6. funding gaps the term “funding gap”',
3412:'refers to a period of time between the expiration of an appropriation and the enactment of a new one. a',
3413:'funding gap is one of the most difficult fiscal problems a federal agency may have to face. as our discussion',
3414:'here will demonstrate, the case law reflects an attempt to forge a workable solution to a bad situation. funding gaps',
3415:'occur most commonly at the end of a fiscal year when new appropriations, or a continuing resolution, have not yet',
3416:'been enacted. in this context, a gap may affect only a few agencies if, for example, only one appropriation act',
3417:'remains unenacted as of october 1, or the entire federal government. a funding gap may also occur if a particular',
3418:'appropriation becomes exhausted before the end of the fiscal year, in which event it may affect only a single agency',
3419:'or a single program, depending on the scope of the appropriation. in the latter case the lack of funds occurs',
3420:'as a consequence of unforeseen circumstances beyond the agency’s control as opposed to the exhaustion of appropriations as a result',
3421:'of poor management. funding gaps occur for a variety of reasons. for one thing, the complexity of the budget and',
3422:'appropriations process makes it difficult at best for congress and the president to get everything done on time. add to',
3423:'this the enormity of some programs and the need to address budget deficits, and the scope of the problem becomes',
3424:'more apparent. also, funding gaps are perhaps an inevitable reflection of the political process. page 6146 gao06382sp appropriations law—vol. ii',
3425:'chapter 6 availability of appropriations: amount as gao has pointed out, funding gaps, actual or threatened, are both disruptive and',
3426:'costly.139 they also produce difficult legal problems under the antideficiency act. the basic question, easy to state but not quite',
3427:'as easy to answer, is—what is an agency permitted or required to do when faced with a funding gap? can',
3428:'it continue with “business as usual,” must it lock up and go home, or is there some acceptable middle ground?',
3429:'in 1980, a congressional subcommittee asked gao whether agency heads could legally permit employees to come to work when the',
3430:'applicable appropriation for salaries had expired and congress had not yet enacted either a regular appropriation or a continuing resolution',
3431:'for the next fiscal year. the comptroller general replied in b197841, mar. 3, 1980, that 31 u.s.c. §§ 1341a and',
3432:'1342 were both violated if agency employees reported for work under those circumstances. permitting the employees to come to work',
3433:'would result in an obligation to pay salary for the time worked, an obligation in advance of appropriations in violation',
3434:'of section 1341a. with respect to section 1342, no one was suggesting that the employees were offering to work gratuitously,',
3435:'even assuming they could lawfully do so, which for the most part they cannot. the fact that employees were willing',
3436:'to take the risk that the necessary appropriation would eventually be enacted did not avoid the violation. clearly, the employees',
3437:'still expected to be paid eventually. “during a period of expired appropriations,” the comptroller general stated, “the only way the',
3438:'head of an agency can avoid violating the antideficiency act is to suspend the operations of the agency and instruct',
3439:'employees not to report to work until an appropriation is enacted.” b197841, at 3. notwithstanding the literal effect of the',
3440:'antideficiency act, however, the comptroller general went on to observe in b197841, “[w]e do not believe that the congress intends',
3441:'that federal agencies be closed during periods of expired appropriations.” in this regard, the opinion pointed out that at the',
3442:'beginning of fiscal year 1980, gao had prepared an internal memorandum to address its own operations in the event of',
3443:'a funding gap. the memorandum said, in effect, that employees could continue to come to work, but that operations would',
3444:'have to be severely restricted. no new obligations could be incurred for contracts or small purchases of any kind, 139',
3445:'see, e.g., gao, government shutdown: funding lapse furlough information, gao/ggd9652r washington, d.c.: dec. 1, 1995; government shutdown: permanent funding lapse',
3446:'legislation needed, gao/ggd9176 washington, d.c.: june 6, 1991; funding gaps jeopardize federal government operations, pad8131 washington, d.c.: mar. 3, 1981.',
3447:'page 6147 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount and of course the employees could not actually',
3448:'be paid until appropriations were enacted. the opinion further noted that the then chairman of the senate appropriations committee had',
3449:'placed the 1980 gao memorandum in the congressional record, and had described it as providing “common sense guidelines.”140 the opinion',
3450:'also pointed to the fact that when congress enacted appropriations following a funding gap, it generally made the appropriations retroactive',
3451:'to the beginning of the fiscal year and included language ratifying obligations incurred during the funding gap. “it thus appears,”',
3452:'the opinion concluded, “that the congress expects that the various agencies of the government will continue to operate and incur',
3453:'obligations during a period of expired appropriations.” nevertheless, the opinion conceded that this approach would “legally produce widespread violations of',
3454:'the antideficiency act.” b197841, at 4. therefore, the opinion reiterated gao’s support at that time for legislation then pending that',
3455:'would provide permanent statutory authority to continue the pay of federal employees during funding gaps. id.141 less than two months',
3456:'after gao issued b197841, the attorney general issued his opinion to the president. the attorney general essentially agreed with gao’s',
3457:'analysis that permitting employees to work during a funding gap would violate the antideficiency act, but concluded further that the',
3458:'approach outlined in the gao internal memorandum went beyond what the act permitted. 43 op. att’y gen. 224, 4a op.',
3459:'off. legal counsel 16 1980. the opinion stated: “[t]here is nothing in the language of the antideficiency act or in',
3460:'its long history from which any exception to its terms during a period of lapsed appropriations may be inferred. .',
3461:'. . “[f]irst of all . . ., on a lapse in appropriations, federal agencies may incur no obligations that',
3462:'cannot lawfully be funded from prior appropriations unless such obligations are otherwise authorized by law. there are no exceptions to',
3463:'140 125 cong. rec. 26974 oct. 1, 1979 remarks of sen. magnuson. 141 gao commented on this legislation in b197584,',
3464:'feb. 5, 1980, and b197059, feb. 5, 1980. the legislation was not enacted. page 6148 gao06382sp appropriations law—vol. ii chapter',
3465:'6 availability of appropriations: amount this rule under current law, even where obligations incurred earlier would avoid greater costs to',
3466:'the agencies should appropriations later be enacted. “second, the department of justice will take actions to enforce the criminal provisions',
3467:'of the act in appropriate cases in the future when violations of the antideficiency act are alleged. this does not',
3468:'mean that departments and agencies, upon a lapse in appropriations, will be unable logistically to terminate functions in an orderly',
3469:'way. . . . [a]uthority may be inferred from the antideficiency act itself for federal officers to incur those minimal',
3470:'obligations necessary to closing their agencies.” 4a op. off. legal counsel at 19, 20. this opinion stands for the proposition',
3471:'that agencies had little choice but to lock up and go home. a second opinion, 43 op. att’y gen. 293,',
3472:'5 op. off. legal counsel 1 1981, went into much more detail on possible exceptions and should be read in',
3473:'conjunction with the 1980 opinion. as set forth in the 1981 attorney general opinion, the exceptions fall into two broad',
3474:'categories. the first category is obligations “authorized by law.” within this category, there are four types of exceptions: activities funded',
3475:'with appropriations that do not expire at the end of the fiscal year, that is, multiple year and noyear appropriations.142',
3476:'activities authorized by statutes that expressly permit obligations in advance of appropriations, such as contract authority see section c.2.g of',
3477:'this chapter. activities “authorized by necessary implication from the specific terms of duties that have been imposed on, or of',
3478:'authorities that have been invested in, the agency.” to take the example given in the opinion, there will be cases',
3479:'where benefit payments under an entitlement program are funded from other than 1year appropriations e.g., a trust 142 this would',
3480:'also include certain revolving fund operations, but not those whose use requires affirmative authorization in annual appropriation acts. b241730.2, feb.',
3481:'14, 1991 government printing office revolving fund. page 6149 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount fund,',
3482:'but the salaries of personnel who administer the program are funded by 1year money. as long as money for the',
3483:'benefit payments remains available, administration of the program is, by necessary implication, “authorized by law,” unless the entitlement legislation or',
3484:'its legislative history provides otherwise or congress takes affirmative measures to suspend or terminate the program. obligations “necessarily incident to',
3485:'presidential initiatives undertaken within his constitutional powers,” for example, the power to grant pardons and reprieves. this same rationale would',
3486:'apply to legislative branch agencies that incur obligations “necessary to assist the congress in the performance of its constitutional duties.”',
3487:'b241911, oct. 23, 1990 nondecision letter. the second broad category reflected the exceptions authorized under 31 u.s.c. § 1342—emergencies involving',
3488:'the safety of human life or the protection of property see also the discussion of this provision in section c.3.d',
3489:'of this chapter. the attorney general suggested the following rules for interpreting the scope of this exception: “first, there must',
3490:'be some reasonable and articulable connection between the function to be performed and the safety of human life or the',
3491:'protection of property. second, there must be some reasonable likelihood that the safety of human life or the protection of',
3492:'property would be compromised, in some degree, by delay in the performance of the function in question.” 5 op. off.',
3493:'legal counsel at 8. the attorney general then cited the identical exception language in the deficiency apportionment prohibition of 31',
3494:'u.s.c. § 1515, and noted that the office of management and budget followed a similar approach in granting deficiency apportionments',
3495:'over the years.143 given the wide variations in agency activities, it would not be feasible to attempt an advance listing',
3496:'of functions or activities that might qualify under this exception. accordingly, the attorney general made the following recommendation: 143 see',
3497:'section c.4 of this chapter for a more detailed discussion of apportionment authorities. page 6150 gao06382sp appropriations law—vol. ii chapter',
3498:'6 availability of appropriations: amount “to erect the most solid foundation for the executive branch’s practice in this regard, i',
3499:'would recommend that, in preparing contingency plans for periods of lapsed appropriations, each government department or agency provide for the',
3500:'director of the office of management and budget some written description, that could be transmitted to congress, of what the',
3501:'head of the agency, assisted by its general counsel, considers to be the agency’s emergency functions.” 5 op. off. legal',
3502:'counsel at 11. lest this approach be taken too far, congress added the following sentence to 31 u.s.c. § 1342:',
3503:'“as used in this section, the term ‘emergencies involving the safety of human life or the protection of property’ does',
3504:'not include ongoing, regular functions of government the suspension of which would not imminently threaten the safety of human life',
3505:'or the protection of property.” omnibus budget reconciliation act of 1990, pub. l. no. 101508, § 13213b, 104 stat. 1388,',
3506:'1388621 nov. 5, 1990. the conference report on the 1990 legislation explained the intent: “the conference report also makes conforming',
3507:'changes to title 31 of the united states code to make clear that . . . ongoing, regular operations of',
3508:'the government cannot be sustained in the absence of appropriations, except in limited circumstances. these changes guard against what the',
3509:'conferees believe might be an overly broad interpretation of an opinion of the attorney general issued on january 16, 1981,',
3510:'regarding the authority for the continuance of government functions during the temporary lapse of appropriations, and affirm that the constitutional',
3511:'power of the purse resides with congress.” h.r.conf. rep. no. 101964, at 1170 1990. page 6151 gao06382sp appropriations law—vol. ii',
3512:'chapter 6 availability of appropriations: amount the ninth circuit court of appeals added to the list of exceptions, holding the',
3513:'suspension of the civil jury trial system for lack of funds unconstitutional. armster v. united states district court, 792 f.2d',
3514:'1423 9th cir. 1986. faced with the potential exhaustion of appropriations for juror fees, the administrative office of the united',
3515:'states courts, at the direction of the judicial conference of the united states, had sent a memorandum to all district',
3516:'court judges advising that civil jury trials would have to be suspended until more money was available.144 basing its holding',
3517:'on the constitution and expressly declining to rule on the antideficiency act, the court held that a suspension for more',
3518:'than a “most minimal” time violated the seventh amendment. id. at 1430. see also hobson v. brennan, 637 f. supp.',
3519:'173 d.d.c. 1986. the court said that “we do not hold that the antideficiency act requires the result suggested by',
3520:'the administrative office. if it did, its commands would, of course, have to yield to those of the constitution.”145 armster,',
3521:'792 f.2d at 1430 n.13. since the appropriation was not yet actually exhausted, and since there was still ample time',
3522:'for congress to provide additional funds, the court noted that its decision did not amount to ordering congress to appropriate',
3523:'money. the court noted, but did not address, the far more difficult question of what would happen if the appropriation',
3524:'became exhausted and congress refused to appropriate additional funds. armster, 792 f.2d at 1430–31 and 1431 n.14. this, then, is',
3525:'the basic framework. there are a number of exceptions to the antideficiency act which would permit certain activities to continue',
3526:'during a funding gap. for activities not covered by any of the exceptions, however, the agency must proceed with prompt',
3527:'and orderly termination or violate the act and risk invocation of the criminal sanctions. a very brief restatement may be',
3528:'found in 6 op. off. legal counsel 555 1982. within this framework, gao and the justice department addressed a number',
3529:'of specific problems agencies encountered in coming to grips with funding gaps during the 1980s and early 1990s. for example,',
3530:'toward the 144 the administrative office noted a combination of factors contributing to its projected shortfall, including congress’s decision to',
3531:'enact an appropriation in an amount less than the administrative office had requested and the appointment of new judges, which',
3532:'increased the number of jury trials. armster, 792 f.2d at 1425 n.3. 145 although this case addressed an agency’s projected',
3533:'exhaustion of its appropriations rather than a funding gap, the court’s dicta would appear relevant for a funding gap. page',
3534:'6152 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount end of fiscal year 1982, the president vetoed a',
3535:'supplemental appropriations bill. as a result, the defense department did not have sufficient funds to meet the military payroll. the',
3536:'total payroll obligation consisted of 1 the takehome pay of the individuals, and 2 various items the employing agency was',
3537:'required to withhold and transfer to someone else, such as federal income tax and social security contributions. the treasury department',
3538:'published a change to its regulations permitting a temporary deferral of the due date for payment of the withheld items,',
3539:'and the defense department, relying on the “safety of human life or protection of property” exception, used the funds it',
3540:'had available to pay military personnel their full takehome pay. the attorney general upheld the legality of this action. 43',
3541:'op. att’y gen. 369, 6 op. off. legal counsel 27 1982. the comptroller general agreed, but questioned the blanket assumption',
3542:'that all military personnel fit within the exception. b208985, oct. 29, 1982; b208951, oct. 5, 1982. the extent to which',
3543:'this device might be available to civilian agencies would depend on 1 treasury’s willingness to grant a similar deferral, and',
3544:'2 the extent to which the agency could legitimately invoke the emergency exception. additional cases dealing with funding gap problems',
3545:'are: salaries of commissioners of copyright royalty tribunal attach by virtue of their status as officers without regard to availability',
3546:'of funds. salary obligation is therefore viewed as “authorized by law” for purposes of antideficiency act, and commissioners could be',
3547:'retroactively compensated for periods worked without pay during a funding gap. 61 comp. gen. 586 1982. richmond district office of',
3548:'internal revenue service shut down for half a day in october 1986 due to a funding gap. subsequent legislation authorized',
3549:'retroactive compensation of employees affected. gao concluded that the legislation applied to intermittent as well as regular fulltime employees, and',
3550:'held that the intermittent employees could be compensated in the form of administrative leave for time lost during the halfday',
3551:'furlough. b233656, june 19, 1989. witness who had been ordered to appear in federal court was stranded without money to',
3552:'return home when court did not convene due to funding gap. cash disbursement to permit witness to return home or',
3553:'secure overnight lodging was held permissible since hardship circumstances indicated reasonable likelihood that safety of witness would be jeopardized. 5',
3554:'op. off. legal counsel 429 1981. page 6153 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount there are',
3555:'also a few cases addressing actions an agency has taken to forestall the effects of a funding gap. in 62',
3556:'comp. gen. 1 1982, the merit systems protection board, faced with a substantial cut in its appropriation, placed most of',
3557:'its employees on halftime, halfpay status in an attempt to stretch its appropriation through the end of the fiscal year.',
3558:'a subsequent supplemental appropriation provided the necessary operating funds. gao advised that it was within the board’s discretion, assuming the',
3559:'availability of sufficient funds, to grant retroactive administrative leave to the employees who had been affected by the partial shutdown.',
3560:'gao reviewed another furlough plan in 64 comp. gen. 728 1985. the interstate commerce commission had determined that if it',
3561:'continued its normal rate of operations, it would exhaust its appropriation six weeks before the end of the fiscal year.',
3562:'to prevent this from happening, it furloughed its employees for one day per week. gao found that the commission’s actions',
3563:'were in compliance with the antideficiency act. while the icc was thus able to continue essential services, the price was',
3564:'financial hardship for its employees, plus “serious backlogs, missed deadlines and reduced efficiency.” id. at 732. during the 1980s and',
3565:'early 1990s, gao also issued several reports on funding gaps. the first was funding gaps jeopardize federal government operations, pad8131',
3566:'washington, d.c.: mar. 3, 1981. in that report, gao noted the costly and disruptive effects of funding gaps, and recommended',
3567:'the enactment of permanent legislation to permit federal agencies to incur obligations, but not disburse funds, during a funding gap.',
3568:'in the second report, continuing resolutions and an assessment of automatic funding approaches, gao/afmd8616 washington, d.c.: jan. 29, 1986, gao',
3569:'compared several possible options but this time made no specific recommendation. the office of management and budget had pointed out,',
3570:'and gao agreed, that automatic funding legislation could have the undesirable effects of 1 reducing pressure on congress to make',
3571:'timely funding decisions, and 2 permitting major portions of the government to operate for extended periods without action by either',
3572:'house of congress or the president. the ideal solution, both agencies agreed, is the timely enactment of the regular appropriation',
3573:'bills. in managing the cost of government: proposals for reforming federal budgeting practices, gao/afmd901 washington, d.c.: oct. 1, 1989 at',
3574:'28–29, gao reiterated its support for the concept of an automatic continuing resolution in a form that does not reduce',
3575:'the incentive to page 6154 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount complete action on the regular',
3576:'appropriation bills. a 1991 gao report analyzed the impact of a funding gap which occurred over the 1990 columbus day',
3577:'weekend and again renewed the recommendation for permanent legislation to, at a minimum, allow agencies to incur obligations to compensate',
3578:'employees during temporary funding gaps but not pay them until enactment of the appropriation. government shutdown: permanent funding lapse legislation',
3579:'needed, gao/ggd9176 washington, d.c.: june 6, 1991. the report stated: “in our opinion, shutting down the government during temporary funding',
3580:'gaps is an inappropriate way to encourage compromise on the budget. beyond being counterproductive from a financial standpoint, a shutdown',
3581:'disrupts government services. in addition, forcing agency managers to choose who will and will not be furloughed during these temporary',
3582:'funding lapses severely tests agency management’s ability to treat its employees fairly.” id. at 9. the history of funding gaps',
3583:'over recent decades reveals several distinct phases, which were captured in an analysis by a congressional research service report to',
3584:'congress entitled preventing federal government shutdowns: proposals for an automatic continuing resolution, no. rl30339 washington, d.c.: may 19, 2000 hereafter',
3585:'“crs report”. the first phase, covering fiscal years 1977 through 1980, was a period in which agencies reacted to funding',
3586:'gaps along the lines suggested in gao’s opinion in b197841, mar. 3, 1980, described previously, by curtailing operations but not',
3587:'shutting down. during this period, there were 6 funding gaps that lasted from 8 to 17 days. see the crs',
3588:'report at 4, table 1. the second phase, covering fiscal years 1981 through 1995, occurred under the stricter approach to',
3589:'funding gaps reflected in the attorney general opinions described above. as the crs report notes, funding gaps during this period',
3590:'were less frequent and shorter. there were 11 funding gaps in all over this period, many of which took place',
3591:'over weekends. none lasted more than 3 days. id. the string of shorter funding gaps came to an abrupt halt',
3592:'in fiscal year 1996. as crs reported, the unusually difficult and acrimonious budget negotiations for that year led to two',
3593:'funding gaps: the first was 5 days and the second, the longest in history, lasted for 21 days. id. at',
3594:'3, 5. both of these funding gaps resulted in widespread shutdowns of government page 6155 gao06382sp appropriations law—vol. ii chapter',
3595:'6 availability of appropriations: amount operations. during the first funding gap, an estimated 800,000 federal employees were furloughed. during the',
3596:'second, about 284,000 employees were furloughed and another 475,000 continued to work in a nonpay status under the emergency exception',
3597:'to the antideficiency act.146 not surprisingly, the events of 1995–1996 spawned additional legal opinions from the office of legal counsel.',
3598:'these opinions essentially followed the legal framework described previously and did not break much new ground. however, they do illustrate',
3599:'the scope and application of the antideficiency act in different funding gap contexts. see, e.g., memorandum for the attorney general,',
3600:'effect of appropriations for other agencies and branches on the authority to continue department of justice functions during the lapse',
3601:'in the department’s appropriations, olc opinion, dec. 13, 1995 if a suspension of the justice department’s functions during the period',
3602:'of anticipated funding lapse would prevent or significantly damage the execution of those functions, the department’s functions and activities may',
3603:'continue; memorandum for the attorney general, participation in congressional hearings during an appropriations lapse, olc opinion, nov. 16, 1995 justice',
3604:'department officials may testify at congressional hearings during a lapse in funding for the department; memorandum for the counsel to',
3605:'the president, authority to employ the services of white house office employees during an appropriations lapse, olc opinion, sept. 13,',
3606:'1995 outlined the authorities that permitted white house employees to continue to work, but not actually be paid, during a',
3607:'funding gap; memorandum for the director of the office of management and budget, government operations in the event of a',
3608:'lapse in appropriations, olc opinion, aug. 16, 1995 reinforced the justice department’s existing narrow interpretation that the emergency exception 146',
3609:'these figures are based on another crs report, shutdown of the federal government: causes, effects, and process, no. 98844 washington,',
3610:'d.c.: nov. 1, 2003, at 2–3. for a discussion of the nature, background, and dynamics of the fiscal year 1996',
3611:'funding gaps and shutdowns, see anita s. krishnakumar, reconciliation and the fiscal constitution: the anatomy of the 1995–1996 budget “train',
3612:'wreck,” 35 harv. j. on legis. 589 1998. page 6156 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount',
3613:'applied only in the case of an imminent threat or set of circumstances requiring immediate action.147 the 1995–1996 funding gaps',
3614:'also produced at least one lawsuit, although it did not reach a final decision on the merits. in american federation',
3615:'of government employees v. rivlin, civ. a. no. 952115 egs d.d.c. nov. 17, 1995, the plaintiffs sought a temporary restraining',
3616:'order to prevent the executive branch from requiring federal employees who had been designated “emergency” personnel to work during the',
3617:'funding gap. they contended that forcing employees to work without pay violated several personnel statutes and also constituted a misapplication',
3618:'of 31 u.s.c. § 1342 since many of the employees did not meet the emergency criteria under section 1342. the',
3619:'court denied the requested relief, observing: “[t]he court is not convinced at this juncture that plaintiffs will either suffer irreparable',
3620:'harm in the event a temporary restraining order is not issued or that the interests of the public will be',
3621:'best served by the issuance of a temporary restraining order. plaintiffs essentially concede that if the court were to issue',
3622:'a tro, the government would indeed be shut down, because the executive branch could not require its employees to work',
3623:'without compensation. although undoubtedly the public has an interest in having the budget impasse resolved and indeed has an interest',
3624:'in the outcome of this judicial proceeding, one could easily imagine the chaos that would be attendant to a complete',
3625:'governmental shutdown. it is inconceivable, by any stretch of the imagination, that the best interests of the public at large',
3626:'would somehow be served by the creation of that chaos.” american federation of government employees, slip. op. at 4. 147',
3627:'the august 1995 opinion was discussed at length and reaffirmed in a memorandum for the general counsel, united states marshals',
3628:'service, continuation of federal prisoner detention efforts in the face of a usms appropriation deficiency, olc opinion, apr. 5, 2000.',
3629:'current office of management and budget guidance still references the august 1995 opinion as well as the earlier opinions in',
3630:'43 op. att’y gen. 224 1980 and 43 op. att’y gen. 293 1981 as the principal legal authorities governing what',
3631:'agencies can do during a funding gap. see omb circular no. a11, preparation, submission, and execution of the budget, §',
3632:'124.1 a june 21, 2005. page 6157 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount the court further',
3633:'observed that it was “purely speculative” whether any employees would actually go without pay since congress had always appropriated funds',
3634:'to compensate employees for services rendered during a government shutdown. id. the lawsuit was eventually dismissed as moot following resolution',
3635:'of the budget impasse. american federation of government employees v. rivlin, 995 f. supp. 165 d.d.c. 1998. the current phase',
3636:'in the history of funding gaps commenced on the heels of the 1995–1996 government shutdowns and has featured, thus far,',
3637:'the total absence of funding gaps. while there have been delays in the enactment of regular appropriations, there has been',
3638:'no funding gap since 1996. of course, the potential for future funding gaps still exists and proposals for legislation to',
3639:'cushion their impact have been raised again in recent years. however, such proposals have met with little enthusiasm. gao was',
3640:'more cautionary in its most recent comments on this subject. see gao, budget process: considerations for updating the budget enforcement',
3641:'act, gao01991t washington, d.c.: july 19, 2001, at 12: “the periodic experience of government ‘shutdowns’—or partial shutdowns when appropriations bills',
3642:'have not been enacted—has led to proposals for an automatic continuing resolution. the automatic continuing resolution, however, is an idea',
3643:'for which the details are critically important. depending on the detailed structure of such a continuing resolution, the incentive for',
3644:'policymakers—some in the congress and the president—to negotiate seriously and reach agreement may be lessened.” for example, gao pointed out',
3645:'that some negotiators might find the “default position” specified in an automatic continuing resolution to be preferable to proposals on',
3646:'the table. likewise, several efforts to enact an automatic continuing resolution in recent years have been unsuccessful. in 1997, president',
3647:'clinton vetoed a page 6158 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount supplemental appropriations bill that contained',
3648:'such a provision. in 2000, the house of representatives rejected such a proposal in a floor vote.148 d. supplemental and',
3649:'deficiency appropriations a supplemental appropriation may be defined as “[a]n act appropriating funds in addition to those already enacted in',
3650:'an annual appropriation act.” gao, a glossary of terms used in the federal budget process, gao05734sp washington, d.c.: september 2005',
3651:'glossary, at 93. the glossary adds that: “supplemental appropriations provide additional budget authority usually in cases where the need for',
3652:'funds is too urgent to be postponed until enactment of the regular appropriation bill. supplementals may sometimes include items not',
3653:'appropriated in the regular bills for lack of timely authorizations.” id. the glossary, at 43, defines a deficiency appropriation as',
3654:'“[a]n appropriation made to pay obligations for which sufficient funds are not available.” there is an important distinction between supplemental',
3655:'appropriations and deficiency appropriations. a supplemental appropriation “supplements the original appropriation,” 4 comp. dec. 61 1897; that is, it provides',
3656:'additional appropriations to cover additional obligations to meet needs identified by the executive branch and concurred in by congress in',
3657:'advance of the obligational event. a deficiency appropriation is an appropriation made to pay obligations for which sufficient funds were',
3658:'not available at the time the obligations were incurred. 27 comp. gen. 96 1947; 25 comp. gen. 601, 604 1946;',
3659:'4 comp. dec. 61, 62 1897. the need for deficiency appropriations often results from violations of the antideficiency act, and',
3660:'they can be made in the same fiscal year as the overobligated appropriation or in a later year. notwithstanding the',
3661:'148 these legislative actions are described in the congressional research service report, preventing federal government shutdowns: proposals for an automatic',
3662:'continuing resolution, cited previously. other automatic continuing resolution bills have been introduced but died in committee. see h.r. 29, 107th',
3663:'cong. 2000; h.r. 3744, 107th cong. 2001. page 6159 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount distinctions',
3664:'between supplemental and deficiency appropriations, congress often will use supplemental appropriations bills as the legislative vehicle for enacting deficiency appropriations,',
3665:'just as congress may use a supplemental appropriations bill as the legislative vehicle to enact new appropriations in addition to',
3666:'those supplementing appropriations already enacted. because a supplemental appropriation “supplements the original appropriation,” it “partakes of its nature, and is',
3667:'subject to the same limitations as to the expenses for which it can be used as attach by law to',
3668:'the original appropriation” unless otherwise provided. 4 comp. dec. 61. see also 27 comp. gen. 96 1947; 25 comp. gen.',
3669:'601 1946; 20 comp. gen. 769 1941. this means that a supplemental appropriation is subject to the purpose and time',
3670:'limitations, plus any other applicable restrictions, of the appropriation being supplemented. thus, an appropriation made to supplement the regular annual',
3671:'appropriation of a given fiscal year is available beyond the expiration of that fiscal year only to liquidate obligations incurred',
3672:'within the fiscal year. the unobligated balance of a supplemental appropriation will expire at the end of the fiscal year',
3673:'in the same manner as the regular annual appropriation. see 27 comp. gen. 96; 4 comp. dec. 61; 3 comp.',
3674:'dec. 72 1896. of course, congress can enact a supplemental appropriation, just like any other appropriation, to be available until',
3675:'expended noyear. e.g., 36 comp. gen. 526 1957; b72020, jan. 9, 1948. unless otherwise provided, a restriction contained in an',
3676:'annual appropriation act will apply to funds provided in a supplemental appropriation act even though the restriction is not repeated',
3677:'in the supplemental. for example, a restriction in a foreign assistance appropriation act prohibiting the use of funds for assistance',
3678:'to certain countries would apply equally to funds provided in a supplemental appropriation for foreign assistance for the same fiscal',
3679:'year. b158575, feb. 24, 1966. similarly, a provision in an annual appropriation act that “no part of any appropriation for',
3680:'the bureau of reclamation contained in this act shall be used for the salaries and expenses” emphasis added of certain',
3681:'officials who were not qualified engineers would apply as well to bureau funds appropriated in supplemental appropriation acts for the',
3682:'same fiscal year, so long as the supplemental appropriation adds funds to amounts already enacted in the regular appropriation, but',
3683:'not to any new appropriations enacted in the supplemental appropriation act. b86056, may 11, 1949. the rule applies to supplemental',
3684:'authorizations as well as page 6160 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount supplemental appropriations. b106323, nov.',
3685:'27, 1951. if a supplemental appropriation act includes a new appropriation which is separate and distinct from the appropriations being',
3686:'supplemented, restrictions contained in the original appropriation act will not apply to the new appropriation unless specifically provided. id. the',
3687:'fiscal year limitations of the original appropriation, however, would still apply. the rule that supplemental appropriations are subject to restrictions',
3688:'contained in the regular appropriation act being supplemented applies equally to specific dollar limitations. thus, if a regular annual appropriation',
3689:'act specifies a maximum limitation for a particular object, either by using the words “not to exceed” or otherwise, a',
3690:'more general supplemental appropriation for the same fiscal year does not authorize an increase in that limitation. 19 comp. gen.',
3691:'324 1939; 4 comp. gen. 642 1925; b71583, feb. 20, 1948; b66030, may 9, 1947. naturally, this principle will not',
3692:'apply if the supplemental appropriation specifically provides for the object in question. 19 comp. gen. 832 1940. new restrictions appearing',
3693:'in a supplemental appropriation act may or may not reach back and apply to balances remaining in the original annual',
3694:'appropriation, depending on the precise statutory language used. thus, without more, a restriction in a supplemental applicable by its terms',
3695:'to “this appropriation” would apply only to the supplemental funds. b31546, jan. 12, 1943. see also 31 comp. gen. 543',
3696:'1952. at one time, supplemental appropriation acts specified that the funds were for the same objects and subject to the',
3697:'same limitations as the appropriations being supplemented. the then bureau of the budget wanted to delete this language pursuant to',
3698:'its mandate to eliminate unnecessary words in appropriations.149 the comptroller general agreed that the language was unnecessary, pointing out that',
3699:'these conditions would apply even without being explicitly stated in the supplemental appropriation acts themselves. b13900, dec. 17, 1940. in',
3700:'addition to supplementing prior appropriations, a supplemental appropriation act may make entirely new appropriations and enact new 149 prior to',
3701:'the 1982 recodification of title 31, the mandate was found in 31 u.s.c. § 623. the recodifiers thought those words',
3702:'themselves were unnecessary, and the concept is now included in the general mandate in 31 u.s.c. § 1104a to “use',
3703:'uniform terms” in requesting appropriations. page 6161 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount legislative provisions which',
3704:'are separate and distinct from those made by an earlier appropriation act. where a supplemental appropriation act contains new legislation,',
3705:'whether permanent or temporary, the new legislation will take effect on the date the supplemental is enacted absent a clear',
3706:'intent to make it retroactive. 20 comp. gen. 769 1941. in the cited decision, a supplemental appropriation enacted late in',
3707:'fiscal year 1941 for the first time permitted payment of transportation expenses of certain military dependents. the provision was held',
3708:'effective on the date of enactment of the supplemental act and not on the first day of fiscal year 1941.',
3709:'a supplemental appropriation also may add funds to a lumpsum appropriation for a new object. if the original appropriation was',
3710:'not available for that object, then the supplemental amounts to a new appropriation that is, in effect, distinct from the',
3711:'lumpsum appropriation. for example, a fiscal year 1957 supplemental appropriation for the maritime administration provided $18 million for a nuclearpowered',
3712:'merchant ship under the heading “ship construction.” funds for the nuclearpowered ship had been sought under the regular “ship construction”',
3713:'lumpsum appropriation for fiscal year 1957, but had been denied. under the circumstances, the comptroller general found that the supplemental',
3714:'appropriation amounted to a specifically earmarked maximum for the vessel, and that the agency could not exceed the $18 million',
3715:'by using funds from the regular appropriation. 36 comp. gen. 526 1957. e. augmentation of appropriations 1. the augmentation concept',
3716:'as a general proposition, an agency may not augment its appropriations from outside sources without specific statutory authority. when congress',
3717:'makes an appropriation, it also is establishing an authorized program level. in other words, it is telling the agency that',
3718:'it cannot operate beyond the level that it can finance under its appropriation. to permit an agency to operate beyond',
3719:'this level with funds derived from some other source without specific congressional sanction would amount to a usurpation of the',
3720:'congressional prerogative. restated, the objective of the rule against augmentation of appropriations is to prevent a government agency from page',
3721:'6162 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount undercutting the congressional power of the purse by circuitously',
3722:'exceeding the amount congress has appropriated for that activity. as one recent decision put it: “when congress establishes a new',
3723:'program or activity, it also must decide how to finance it. typically it does this by appropriating funds from the',
3724:'u.s. treasury. in addition to providing necessary funds, a congressional appropriation establishes a maximum authorized program level, meaning that an',
3725:'agency cannot, absent statutory authorization, operate beyond the level that can be paid for by its appropriations. an agency may',
3726:'not circumvent these limitations by augmenting its appropriations from sources outside the government. one of the objectives of these limitations',
3727:'is to prevent agencies from avoiding or usurping congress’ ‘power of the purse.” b300248, jan. 15, 2004 citations omitted. there',
3728:'is no statute which, in those precise terms, prohibits the augmentation of appropriated funds. the concept does nevertheless have an',
3729:'adequate statutory basis, although it must be derived from several separate enactments. specifically: 31 u.s.c. § 3302b, the “miscellaneous receipts”',
3730:'statute. 31 u.s.c. § 1301a, restricting the use of appropriated funds to their intended purposes. early comptroller of the treasury',
3731:'decisions often based the augmentation prohibition on the combined effect of 31 u.s.c. §§ 3302b and 1301a. see, e.g., 17',
3732:'comp. dec. 712 1911; 9 comp. dec. 174 1902. 18 u.s.c. § 209, which prohibits the payment of, contribution to,',
3733:'or supplementation of the salary of a government officer or employee as compensation for his or her official duties from',
3734:'any source other than the government of the united states. the augmentation concept manifests itself in a wide variety of',
3735:'contexts. one application is the prohibition against transfers between appropriations without specific statutory authority. an unauthorized transfer is an improper',
3736:'augmentation of the receiving appropriation. e.g., 23 comp. gen. 694 1944; b206668, mar. 15, 1982. in b206668, a department page',
3737:'6163 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount received a general administration appropriation plus separate appropriations for',
3738:'the administration of its component bureaus. the unauthorized transfer of funds from the bureau appropriations to the general administration appropriation',
3739:'was held to be an improper augmentation of the latter appropriation. likewise, the department of labor illegally augmented its departmental',
3740:'management account by “pooling” funds from component appropriations in order to purchase computer equipment where the costs borne by the',
3741:'components far exceeded the value of the equipment they received. 70 comp. gen. 592 1991. the comptroller general rejected the',
3742:'department’s characterization of this transaction as a “reprogramming,” viewing it instead as an unauthorized transfer among appropriations. as with the',
3743:'transfer prohibition itself, however, the augmentation rule has no application at the agency allotment level within the same appropriation account.',
3744:'70 comp. gen. 601 1991. it also should be apparent that the augmentation rule is related to the concept of',
3745:'purpose availability. a very early case pointed out that charging a general appropriation when a specific appropriation is exhausted not',
3746:'only violates 31 u.s.c. § 1301a by using the general appropriation for an unauthorized purpose, but also improperly augments the',
3747:'specific appropriation. [1] bowler, first comp. dec. 257, 258 1894. however, the augmentation rule is most closely related to the',
3748:'subject of this chapter—availability as to amount—because it has the effect of restricting executive spending to the amounts appropriated by',
3749:'congress. in this respect, it is a logical, perhaps indispensable, complement to the antideficiency act. for the most part, although',
3750:'the cases are not entirely consistent, gao has distinguished between receipts of money and receipts of services, dealing with the',
3751:'former under the augmentation rule and the latter under the voluntary services prohibition 31 u.s.c. § 1342.150 for example, in',
3752:'b13378, nov. 20, 1940, a private organization was willing to donate either funds or services. since the agency lacked statutory',
3753:'authority to accept gifts, acceptance of a cash donation would improperly augment its appropriations. acceptance of services was distinguished, however,',
3754:'and addressed in relation to the limits on acceptance of voluntary services set forth in 31 u.s.c. § 1342. gao',
3755:'drew the same distinction in b125406, nov. 4, 1955. see also b287738, may 16, 2002, distinguishing between 150 for a',
3756:'further discussion of the voluntary services prohibition, see section c.3 of this chapter. page 6164 gao06382sp appropriations law—vol. ii chapter',
3757:'6 availability of appropriations: amount agency acceptance of money as compensation for damage to government property, which would constitute an',
3758:'augmentation if retained in agency appropriations, and acceptance of actual repairs to the property, which would be permissible.151 in apparent',
3759:'conflict with these cases, however, is b211079.2, jan. 2, 1987, which stated that, without statutory authority, an agency would improperly',
3760:'augment its appropriations by accepting the uncompensated services of “workfare” participants to do work which would normally be done by',
3761:'the agency with its own personnel and funds. logic would seem to support the formulation in b211079.2. certainly, if i',
3762:'wash your car without charge or if i give you money to have it washed, the result is the same—the',
3763:'car gets washed and your own money is free to be used for something else. be that as it may,',
3764:'the majority of the cases support limiting the augmentation rule to the receipt of money. in the final analysis, the',
3765:'distinction probably makes little practical difference. in view of 31 u.s.c. § 1342, limiting the augmentation rule to the receipt',
3766:'of funds does not mean that the rule can be negated by the unrestricted acceptance of services.152 in a 1991',
3767:'case, 70 comp. gen. 597, gao concluded that the then interstate commerce commission icc would not improperly augment its appropriations',
3768:'by permitting private carriers to install computer equipment at the icc headquarters, to facilitate access to electronically filed rate tariffs.',
3769:'installation was viewed as a reasonable exercise of the icc’s statutory authority to prescribe the form and manner of tariff',
3770:'filing by those over whom the agency has regulatory authority. somewhat similar in 151 in a 1984 decision, gao found',
3771:'that acceptance by the federal communications commission of booth space and utility services at industry trade shows did not augment',
3772:'the commission’s appropriation because “no money changed hands, nor was money paid on the commission’s behalf to anyone else.” 63',
3773:'comp. gen. 459, 461 1984. gao found that there was a “mutually beneficial arrangement” between the commission and trade show',
3774:'promoters that was “neither an augmentation of appropriations nor an illegal retention of a gift.” id. for a discussion of',
3775:'“nocost” contract, see section e.2.b of this chapter. 152 akin to b211079.2, the decision in b286182, jan. 11, 2001, suggested',
3776:'that acceptance of services might be considered an improper augmentation in some circumstances. that decision concerned a settlement agreement in',
3777:'a rate case whereby a company agreed to provide telecommunications equipment and services valued at $1.53 million to the district',
3778:'of columbia courts for the purpose of facilitating access to the legal system. the decision concluded, however, that there was',
3779:'no augmentation issue in this case because the courts had statutory giftacceptance authority, which is discussed in section e.3 of',
3780:'this chapter. page 6165 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount concept to the workfare case, however,',
3781:'the decision suggests that use of the equipment for other purposes, such as word processing by icc staff, would be',
3782:'an improper augmentation, and advised the icc to establish controls to prevent this. see also b277521, july 31, 1997 granting',
3783:'the radio and tv correspondents association a permit to locate equipment in the capitol in order to broadcast events would',
3784:'not constitute an augmentation of congressional appropriations since the equipment is not for official business use of the government. 2.',
3785:'disposition of moneys received: repayments and miscellaneous receipts a. general principles 1 the “miscellaneous receipts” statute a very important statute',
3786:'in the overall scheme of government fiscal operations is 31 u.s.c. § 3302b, known as the “miscellaneous receipts” statute. originally',
3787:'enacted on march 3, 1849 ch. 110, 9 stat. 398, 31 u.s.c. § 3302b states: “except as provided in section',
3788:'3718b of this title, an official or agent of the government receiving money for the government from any source shall',
3789:'deposit the money in the treasury as soon as practicable without deduction for any charge or claim.”153 penalties for violating',
3790:'31 u.s.c. § 3302b are found in 31 u.s.c. § 3302d, and include the possibility of removal from office. in',
3791:'addition, if funds which should have been deposited in the treasury but were not are lost or stolen, the official',
3792:'may be personally liable. e.g., 20 op. att’y gen. 24 1891 liability would attach where funds, which disbursing agent had',
3793:'placed in bank which was not an authorized depositary, were lost due to bank failure. 153 the exception referenced as',
3794:'section 3718b now appears in section 3718d. it permits agencies to contract for assistance in the collection of debts due',
3795:'the united states, and to pay the contractor from the amounts recovered. for a decision addressing the scope and application',
3796:'of this exception, see 72 comp. gen. 85 1993. page 6166 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations:',
3797:'amount “it is difficult to see,” said an early decision, “how a legislative prohibition could be more clearly expressed.” 10',
3798:'comp. gen. 382, 384 1931. simply stated, any money an agency receives for the government from a source outside of',
3799:'the agency must be deposited into the treasury. this means deposited into the general fund “miscellaneous receipts” of the treasury,not',
3800:'into the agency’s own appropriations, even though the agency’s appropriations may be technically still “in the treasury” until the agency',
3801:'actually spends them.154 the comptroller of the treasury explained the distinction in the following terms: “it [31 u.s.c. § 3302b]',
3802:'could hardly be made more comprehensive as to the moneys that are meant and these moneys are required to be',
3803:'paid ‘into the treasury.’ this does not mean that the moneys are to be added to a fund that has',
3804:'been appropriated from the treasury and may be in the treasury or outside. [emphasis in original.] it seems to me',
3805:'that it can only mean that they shall go into the general fund of the treasury which is subject to',
3806:'any disposition which congress might choose to make of it. this has been the holding of the accounting officers for',
3807:'many years . . . [citations omitted]. if congress intended that these moneys should be returned to the appropriation from',
3808:'which a similar amount had once been expended it could have been readily so stated, and it was not.” 22',
3809:'comp. dec. 379, 381 1916. see also 5 comp. gen. 289 1925. the term “miscellaneous receipts” does not refer to',
3810:'any single account in the treasury. rather, it refers to a number of receipt accounts under the heading “general fund.”',
3811:'these are all listed in the treasury department’s federal account symbols and titles book, recently revised according to the treasury',
3812:'financial manual announcement no. a200504, may 2005. the revised version can be accessed at www.fms.treas.gov/fastbook last visited september 15, 2005.',
3813:'154 as a general proposition, an agency’s appropriations do remain “in the treasury” until needed for a valid purpose. unless',
3814:'congress expressly so provides, an agency may not have its appropriations paid over directly to it to be held pending',
3815:'disbursement. 21 comp. gen. 489 1941. page 6167 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount in addition',
3816:'to 31 u.s.c. § 3302b, several other statutes require that moneys received in various specific contexts be deposited as miscellaneous',
3817:'receipts.155 examples are: 7 u.s.c. §§ 384, 2241, 2246, 2247 proceeds from sale of various products by secretary of agriculture;',
3818:'16 u.s.c. § 499 revenue from the national forests, such as timber sales and proceeds from hunting, fishing, and camping',
3819:'permits, subject to the deductions specified in 16 u.s.c. §§ 500 and 501; 19 u.s.c. § 527 customs fines, penalties,',
3820:'and forfeitures; 40 u.s.c. § 571 proceeds from the transfer of excess property or the sale of surplus public property,',
3821:'except as otherwise provided in subchapter iv of chapter 5 of title 40.156 although it is preferable, it is not',
3822:'necessary that the statute use the words “miscellaneous receipts.” a statute requiring the deposit of funds “into the treasury of',
3823:'the united states” will be construed as meaning the general fund of the treasury. 27 comp. dec. 1003 1921. to',
3824:'understand the significance of 31 u.s.c. § 3302b and related statutes, it is necessary to recall the provision in article',
3825:'i, section 9, clause 7 of the u.s. constitution, the socalled “appropriations clause,” directing that “no money shall be drawn',
3826:'from the treasury but in consequence of appropriations made by law.” once money is deposited into a “miscellaneous receipts” account,',
3827:'it takes an appropriation to get it out. e.g., 3 comp. gen. 296 1923; 2 comp. gen. 599, 600 1923;',
3828:'13 comp. dec. 700, 703 1907. thus, the effect of 31 u.s.c. § 3302b is to ensure 155 several specific',
3829:'references to miscellaneous receipts in the pre1982 version of title 31 were deleted in the recodification because they were regarded',
3830:'as covered by the general prescription of the new section 3302. an example is the socalled user charge statute. the',
3831:'prerecodification version, 31 u.s.c. § 483a, required fees to be deposited as miscellaneous receipts. the current version, 31 u.s.c. §',
3832:'9701, omits the requirement because, as the revision note points out, it is covered by § 3302. 156 section 571',
3833:'stems from the federal property and administrative services act of 1949, ch. 288, 63 stat. 377 june 30, 1949. prior',
3834:'to this law, proceeds from the sale of public property were required to be deposited as miscellaneous receipts under the',
3835:'more general authority of what is now 31 u.s.c. § 3302b. see mammoth oil co. v. united states, 275 u.s.',
3836:'13, 34 1927; panamerican petroleum & transport co. v. united states, 273 u.s. 456, 502 1927. these are the notorious',
3837:'“teapot dome” cases. page 6168 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount that the executive branch remains',
3838:'dependent upon the congressional appropriation process. viewed from this perspective, 31 u.s.c. § 3302b emerges as another element in the',
3839:'statutory pattern by which congress retains control of the public purse under the separation of powers doctrine. see b302825, dec.',
3840:'22, 2004; b303413, nov. 8, 2004, at 9; b287738, may 16, 2002; 51 comp. gen. 506, 507 1972; 11 comp.',
3841:'gen. 281, 283 1932. see also 10 comp. gen. 382, 383 1931 the intent is that “all the public moneys',
3842:'shall go into the treasury; appropriations then follow”. as the court observed in scheduled airlines traffic offices v. department of',
3843:'defense, 87 f.3d 1356, 1361 d.c. cir. 1996, the miscellaneous receipts statute “derives from and safeguards a principle fundamental to',
3844:'our constitutional structure, the separationofpowers precept embedded in the appropriations clause” u.s. const. art i, § 9, cl. 7. see',
3845:'also kate stith, congress’ power of the purse, 97 yale l. j. 1343 1988. professor stith notes that the miscellaneous',
3846:'receipts statute “articulates the principle of the public fisc: all monies of the federal government must be claimed as public',
3847:'revenues, subject to public control through constitutional processes.” id. at 1364. this is indeed an important role for a statute',
3848:'that she describes as having such an “unfortunately bland and unrevealing name.” id. at 1365. accordingly, for an agency to',
3849:'retain and credit to its own appropriation moneys which it should have deposited into the general fund of the treasury',
3850:'is an improper augmentation of the agency’s appropriation. this applies even though the appropriation is a noyear appropriation. 46 comp.',
3851:'gen. 31 1966. noyear status relates to duration, not amount. receipts in the form of “monetary credits” are treated for',
3852:'deposit and augmentation purposes the same as cash. 28 comp. gen. 38 1948 use by government of monetary credits received',
3853:'as payment for sale of excess electric power held unauthorized unless agency transfers corresponding amount from its appropriated funds to',
3854:'miscellaneous receipts. this will not apply, however, where it is clear that the appropriation or other legislation involved contemplates a',
3855:'different treatment. b125127, feb. 14, 1956 transfer to miscellaneous receipts not required where settlement of accounts was to be made',
3856:'on “net balance” basis. see also b283731, dec. 21, 1999 defense department has specific statutory authority to accept credits under',
3857:'contracts for travelrelated services; 62 comp. gen. 70, 74–75 1982 credit procedure which would differ from treatment of cash receipts',
3858:'recognized in legislative history. when an agency is entitled to retain a fund in its appropriations see section e.2.a, below,',
3859:'it page 6169 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount may accept the refund in the form',
3860:'of a credit against future payments due to the party owing the refund instead of requiring the party to issue',
3861:'a separate refund check. 72 comp. gen. 63, 64 1992. 2 exceptions exceptions to the miscellaneous receipts requirement fall into',
3862:'two broad categories, statutory and nonstatutory: an agency may retain moneys it receives if it has statutory authority to do',
3863:'so. in other words, 31 u.s.c. § 3302b will not apply if there is specific statutory authority for the agency',
3864:'to retain the funds. e.g., 72 comp. gen. 164, 165–66 1993 and cases cited.157 receipts that qualify as “repayments” to',
3865:'an appropriation may be retained to the credit of that appropriation and are not required to be deposited into the',
3866:'general fund. b302366, july 12, 2004; 6 comp. gen. 337 1926; 5 comp. gen. 734, 736 1926; b138942o.m., aug. 26,',
3867:'1976. repayments falling within the above nonstatutory exception may be further defined in terms of two general classes, reimbursements and',
3868:'refunds, as follows: reimbursements are sums received as a result of commodities sold or services furnished either to the public',
3869:'or to another government account, which are authorized by law to be credited directly to a specific appropriation. refunds are',
3870:'repayments for excess payments and are to be credited to the appropriation or fund accounts from which the excess payments',
3871:'were made. they must be directly related to previously recorded expenditures and are reductions of those expenditures. refunds to 157',
3872:'in addition to instances described elsewhere in the text, the following are examples of statutory exceptions to section 3302b: 42',
3873:'u.s.c. § 8287 measured savings from energy savings performance contracts, discussed in b287488, june 19, 2001; 42 u.s.c. § 8256',
3874:'and note rebates received by federal agencies from utility companies on account of energysaving measures, discussed in b265734, feb. 13,',
3875:'1996; and 38 u.s.c. § 1729a compensatory settlement amounts under the federal medical care recovery act stemming from care provided',
3876:'at department of veterans affairs facilities, discussed in memorandum opinion for the assistant attorney general, civil division, miscellaneous receipts act',
3877:'exception for veterans’ health care recoveries, olc opinion, dec. 3, 1998. page 6170 gao06382sp appropriations law—vol. ii chapter 6 availability',
3878:'of appropriations: amount appropriations represent amounts collected from outside sources for payments made in error, overpayments, or adjustments for previous',
3879:'amounts disbursed. see, e.g., 62 comp. gen. 70, 73 1982; see also, gao, policy and procedures manual for the guidance',
3880:'of federal agencies, title 7, § 5.4 washington, d.c.: may 18, 1993. as used in the above definitions, the term',
3881:'“reimbursement” generally refers to situations in which retention by the agency is authorized by statute. the term “refund” embraces a',
3882:'category of mostly nonstatutory exceptions in which the receipt is directly related to, and is a direct reduction of, a',
3883:'previously recorded expenditure. thus, the recovery of an erroneous payment or overpayment which was erroneous at the time it was',
3884:'made qualifies as a refund to the appropriation originally charged. e.g., b139348, may 12, 1959 utility overcharge refund; b138942o.m., aug.',
3885:'26, 1976 collections resulting from disallowances by gao under the “fly america act”. also, the return of an authorized advance,',
3886:'such as a travel advance, is a refund. at this point, an important distinction must be made. moneys collected to',
3887:'reimburse the government for expenditures previously made are not automatically the same as “adjustments for previous amounts disbursed.” reimbursements must',
3888:'generally, absent statutory authority to the contrary, be deposited as miscellaneous receipts. the mere fact that the reimbursement is related',
3889:'to the prior expenditure—although this is an indispensable element of an authorized refund—is not in itself sufficient to remove the',
3890:'transaction from the scope of 31 u.s.c. § 3302b. see, e.g., 16 comp. gen. 195 1936; 24 comp. dec. 694',
3891:'1918; 22 comp. dec. 253 1915; b45198, oct. 27, 1944. the controlling principles were stated as follows in two early',
3892:'decisions: “the question as to whether moneys collected to reimburse the government for expenditures previously made should be used to',
3893:'reimburse the appropriations from which the expenditures were made or should be covered into the general fund of the treasury',
3894:'has often been before the accounting officers of the treasury and this office, and it has been uniformly held that',
3895:'in the absence of an express provision in the statute to the contrary, such funds should be covered in as',
3896:'miscellaneous receipts.” page 6171 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount 5 comp. gen. 289, 290 1925.',
3897:'“on the other hand, if the collection involves a refund or repayment of moneys paid from an appropriation in excess',
3898:'of what was actually due such refund has been held to be properly for credit to the appropriation originally charged',
3899:'. . . .” 5 comp. gen. 734, 736 1926. the key language in the above passage is “in excess',
3900:'of what was actually due.” apart from the more obvious situations—refunds of overpayments, erroneous payments, unused portions of authorized advances—the',
3901:'type of situation contemplated by the “adjustments for previous amounts disbursed” portion of the definition is illustrated by 23 comp.',
3902:'gen. 652 1944. the agriculture department was authorized to enter into cooperative agreements with states for soil conservation projects. some',
3903:'states were prohibited by state law from making advances and were limited to making reimbursements after the work was performed.',
3904:'in these cases, agriculture initially put up the state’s share and was later reimbursed. the comptroller general held that agriculture',
3905:'could credit the reimbursements to the appropriation charged for the project. the distinction between this type of situation and the',
3906:'simpler “related to a previous expenditure” situation in which the money must go to miscellaneous receipts lies in the nature',
3907:'of the agency’s obligation. here, agriculture was not required to contribute the state’s share; it could simply have foregone the',
3908:'projects in those states which could not advance the funds. this is different from a situation in which the agency',
3909:'is required to make a given expenditure in any event, subject to later reimbursement. in 23 comp. gen. 652, the',
3910:'agency made payments larger than it was required to make, knowing that the “excess” of what it paid over what',
3911:'it had to pay would or at least was required to be returned. see also 64 comp. gen. 431 1985;',
3912:'61 comp. gen. 537 1982; b69813, dec. 8, 1947; b220911.2o.m., apr. 13, 1988. for more recent decisions dealing with an',
3913:'agency’s authority to retain “excess” payments, see b271127.2, jan. 30, 1997; 73 comp. gen. 321 1994. the rationale for crediting',
3914:'refunds to an appropriation account is to enable the account to be made whole for the overpayment that gave rise',
3915:'to the refund. as a recent decision pointed out, the refund exception to the general requirement of section 3302b “simply',
3916:'restores to the appropriation amounts that should not have been paid from the appropriation.” b302366, july 12, 2004. it follows',
3917:'that the exception does page 6172 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount not permit crediting refunds',
3918:'to appropriations in amounts greater than the overpayment. the decision in b302366 illustrates this point. in that case, a department',
3919:'of energy contractor turned over to the department a refund it had received from the state of washington for taxes',
3920:'which the contractor had previously paid and for which it had been reimbursed by the department. along with the tax',
3921:'refund, the contractor also turned over to the department an additional amount it had received from the state as interest',
3922:'on the refunded taxes. gao agreed with the department that the tax refund itself could be credited to the appropriation',
3923:'originally used to reimburse the contractor for the tax payment. however, the decision held that the additional amount representing interest',
3924:'could not be credited to the appropriation but must be returned to the treasury as miscellaneous receipts pursuant to 31',
3925:'u.s.c. § 3302b: “the nonstatutory refund exception . . . does not allow the department to retain the interest paid',
3926:'by the state. because the nonstatutory exception operates simply and solely to restore to an appropriation amounts that should not',
3927:'have been paid from the appropriation, crediting an amount in excess of that paid from the appropriation would improperly augment',
3928:'the appropriation.” in this regard, the decision rejected the department’s suggestion that the interest payment could be regarded as merely',
3929:'restoring the appropriation to an amount adjusted for inflation. the decision noted that congress does not appropriate on a net',
3930:'present value basis. likewise, gao has held that agencies may retain and credit to their appropriations refunds in the form',
3931:'of recoveries under the false claims act 31 u.s.c. § 3729 to the extent that they represent compensatory damages to',
3932:'reimburse erroneous payments, but not “exemplary” damages in the nature of penalties. b281064, feb. 14, 2000; 69 comp. gen. 260',
3933:'1990. for other examples of refunds that may be retained to the credit of an appropriation, see 65 comp. gen.',
3934:'600 1986 rebates from travel management center contractors; 62 comp. gen. 70 1982 partial repayment of contribution to international natural',
3935:'rubber organization occasioned by addition of new members; b139348, may 12, 1959 refund of overcharge by public utility; and b209650o.m.,',
3936:'july 20, 1983 same. it should be noted that crediting refunds to agency appropriations is permissive, not mandatory. thus, the',
3937:'comptroller general advised the general services administration that rebates received from travel page 6173 gao06382sp appropriations law—vol. ii chapter 6',
3938:'availability of appropriations: amount management contractors could be deposited to the general fund of the treasury if the small amounts',
3939:'involved did not justify the cost of processing these payments to the credit of the agency appropriation accounts that “earned”',
3940:'them. 73 comp. gen. 210 1994. the comptroller general also approved crediting de minimis $100 or less rebates to currently',
3941:'available accounts rather than the prior year accounts that earned them. 72 comp. gen. 63 1992. however, the comptroller general',
3942:'refused to extend this de minimis exception to rebates that could aggregate $1,000 or more. 72 comp. gen. 109 1993.',
3943:'a repayment is credited to the appropriation initially charged with the related expenditure, whether current or expired. if the appropriation',
3944:'is still current, then the funds remain available for further obligation within the time and purpose limits of the appropriation.',
3945:'however, if the appropriation has expired for obligational purposes but has not yet been closed, the repayment must be credited',
3946:'to the expired account, not to current funds. see 23 comp. gen. 648 1944; 6 comp. gen. 337 1926; b138942o.m.,',
3947:'aug. 26, 1976. if the repayment relates to an expired appropriation, crediting the repayment to current funds is an improper',
3948:'augmentation of the current appropriation unless authorized by statute. b114088, apr. 29, 1953. these same principles apply to a refund',
3949:'in the form of a credit, such as a credit for utility overcharges. b139348, may 12, 1959; b209650o.m., july 20,',
3950:'1983.158 cf. b260063, june 30, 1995, fn. 3 there is no authority for an agency to hold refunds of erroneous',
3951:'payments in an interest bearing account pending final payment to a contractor since such refunds should be credited to the',
3952:'appropriation account initially charged with the erroneous payment. once an appropriation account has been closed in accordance with 31 u.s.c.',
3953:'§§ 1552a or 1555, repayments must be deposited as miscellaneous receipts regardless of how they would have been treated prior',
3954:'to closing. 31 u.s.c. § 1552b. see also b260993, june 26, 1996; b257905, dec. 26, 1995; 73 comp. gen. 210,',
3955:'211 1994. where funds are authorized to be credited to an appropriation, restrictions on the basic appropriation apply to the',
3956:'credits as well as to the amount originally appropriated. a95083, june 18, 1938. 158 it should not be automatically assumed',
3957:'that every form of credit accruing to the government under a contract will qualify as a refund to the appropriation.',
3958:'see, e.g., b302366, july 12, 2004; a51604, may 31, 1977. page 6174 gao06382sp appropriations law—vol. ii chapter 6 availability of',
3959:'appropriations: amount the fact that some particular reimbursement is authorized or even required by law is not, standing alone, sufficient',
3960:'to overcome 31 u.s.c. § 3302b. e.g., 67 comp. gen. 443 1988; 22 comp. dec. 60 1915; 1 comp. dec.',
3961:'568 1895. the accounting for that reimbursement—whether it may be retained by the agency and, if so, how it is',
3962:'to be credited—will depend on the terms of the statute. some statutes, for example, permit reimbursements to be credited to',
3963:'current appropriations regardless of which appropriation “earned” the reimbursement. see, e.g., 10 u.s.c. § 2208g; 10 u.s.c. § 2210a1; 22',
3964:'u.s.c. § 2392c; 22 u.s.c. § 2509g. as a general proposition, however, this practice, gao has pointed out, diminishes congressional',
3965:'control.159 as might be expected, there have been a great many decisions involving the miscellaneous receipts requirement. it is virtually',
3966:'impossible to draw further generalizations from the decisions other than to restate the basic rule: an agency must deposit into',
3967:'the general fund of the treasury any funds it receives from sources outside of the agency unless the receipt constitutes',
3968:'an authorized repayment or unless the agency has statutory authority to retain the funds for credit to its own appropriations.',
3969:'3 timing of deposits as to the timing of the deposit in the treasury, 31 u.s.c. § 3302b says merely',
3970:'“as soon as practicable.” there is another statute, however, now found at 31 u.s.c. § 3302c, which provides in relevant',
3971:'part: “1 a person having custody or possession of public money, including a disbursing official having public money not for',
3972:'current expenditure, shall deposit the money without delay in the treasury or with a depositary designated by the secretary of',
3973:'the treasury under law. except as provided in paragraph 2, money required to be deposited pursuant to this subsection shall',
3974:'be deposited not later than the third day after the custodian receives the money. . . . 159 for further',
3975:'discussion of these concepts in the context of statutes applicable to the defense department, see gao, reimbursements to appropriations: legislative',
3976:'suggestions for improved congressional control, fgmsd7552 washington, d.c.: nov. 1, 1976. a more recent report made a similar point in',
3977:'relation to agencies crediting user fee proceeds to their appropriations. gao, federal user fees: budgetary treatment, status, and emerging management',
3978:'issues, gao/aimd9811 washington, d.c.: dec. 19, 1997. page 6175 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount “2',
3979:'the secretary of the treasury may by regulation prescribe that a person having custody or possession of money required by',
3980:'this subsection to be deposited shall deposit such money during a period of time that is greater or lesser than',
3981:'the period of time specified by the second sentence of paragraph 1.” this statute, formerly designated as revised statutes §',
3982:'3621, originated on march 3, 1857 ch. 114, 11 stat. 249. it was amended on may 28, 1896 ch. 252,',
3983:'§ 5, 29 stat. 179, to specify a deadline of 30 days. the time limit was reduced to 3 days',
3984:'by section 2652b1 of the deficit reduction act of 1984, pub. l. no. 98369, div. b. title vi, 98 stat.',
3985:'494, 1152 july 18, 1984. a treasury department regulation urges agencies to “achieve same day deposit of money.” when same',
3986:'day deposit is not costeffective or is impracticable, the regulation generally requires nextday deposit. 31 c.f.r. § 206.5 2005.160 as',
3987:'a general proposition, section 3302c and the treasury regulations place an outer limit on what is practicable under section 3302b.',
3988:'11 comp. gen. 281, 283–84 1932; 10 comp. gen. 382, 385 1931. the deadline applies to all receipts, including those',
3989:'to be credited to an appropriation account which, of course, is “in the treasury”, not just those for deposit as',
3990:'miscellaneous receipts. e.g., 10 comp. gen. 382. the deposit timing requirements of 31 u.s.c. § 3302c and the implementing treasury',
3991:'regulations apply as well when public moneys are held by nonfederal custodians. thus, gao found that these requirements were violated',
3992:'where the department of veterans affairs va allowed contractors to hold payments it collected on va loans in an interestbearing',
3993:'account for 30 days or more before transferring the payments to the treasury. see gao, internal controls: va lacked accountability',
3994:'over its direct loan and loan sale activities, gao/aimd9924 washington, d.c.: mar. 24, 1999, at 16–18. 160 further guidance is',
3995:'contained in i treasury financial manual chapter 68000. for example, the manual provides at section 68030.20 that collections totaling less',
3996:'than $5,000 may be accumulated and deposited when the total reaches $5,000. however, deposits must be made at least weekly',
3997:'regardless of amount. page 6176 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount 4 money received or not',
3998:'received “for the government” as originally enacted, 31 u.s.c. § 3302b required deposit into the treasury of moneys received “for',
3999:'the use of the united states.”161 the 1982 codification of title 31 changed this language to moneys received “for the',
4000:'government.”162 the meaning, of course, is the same. there is no distinction between money received for the use of the',
4001:'united states and money received for the use of a particular agency; such a distinction would largely nullify the statute.',
4002:'although the concept of money received “for the use of the united states” or “for the government” does not lend',
4003:'itself to precise definition, both the comptroller general and the courts have applied this concept broadly, consistent with the key',
4004:'role and purpose of section 3302b, in preserving congress’s constitutional power of the purse. for example, as one recent decision',
4005:'observed: “[t]he miscellaneous receipts statute . . . requires that money received for the use of the united states be',
4006:'deposited in the treasury unless otherwise authorized by law. court cases and decisions of this office make clear that an',
4007:'agency cannot avoid the miscellaneous receipts statute simply by changing the form of its transactions to avoid the receipt of',
4008:'money otherwise owed to it.” b303413, nov. 8, 2004. see also b300826, mar. 3, 2005, at 6, noting that an',
4009:'agency cannot avoid section 3302b by authorizing a contractor to charge fees to outside parties and keep the payments in',
4010:'order to offset costs that would otherwise be borne by agency appropriations. neither of the abovecited decisions actually involved transactions',
4011:'that violated section 3302b. however, another recent comptroller general opinion held that a fee arrangement between the small business administration',
4012:'sba and a contractor did violate 31 u.s.c. § 3302b and constituted an improper augmentation of sba’s appropriations. b300248, 161',
4013:'act of march 3, 1849, ch. 110, 9 stat. 398. 162 pub. l. no. 97258, § 1, 96 stat. 877,',
4014:'948 sept. 13, 1982. page 6177 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount jan. 15, 2004.163 this',
4015:'case concerned sba’s “preferred lender program” plp. lenders in this program, socalled “plp lenders,” had authority to make loans without',
4016:'prior sba approval; however, the law specifically required sba to conduct assessments of these lenders at least annually. sba contracted',
4017:'with a firm to assist in conducting the required assessments. under the contract, assessments were conducted by a review team',
4018:'consisting of an sba employee and one or more employees of the contractor. the sba employees, of course, were paid',
4019:'from agency appropriations. however, the contractor was compensated from fees that sba imposed on the plp lenders and that the',
4020:'lenders paid directly to the contractor. sba maintained that the fee proceeds did not constitute “money for the government” within',
4021:'the application of 31 u.s.c. § 3302b since they were paid directly to the contractor as compensation for the contractor’s',
4022:'work. the agency also argued that “nocost” contracts such as this were largely beyond the reach of the augmentation rule',
4023:'or section 3302b. the comptroller general rejected these arguments, holding that sba had “effectively retained and used the fees without',
4024:'specific authorization” and that the agency’s “constructive disposition” of the fees violated section 3302b. in essence, the opinion reasoned that',
4025:'the fee arrangement amounted to shifting to pfp lenders an expense imposed upon sba incident to carrying out its statutory',
4026:'duties that should be borne by the agency’s appropriations: “sba’s position . . . is in conflict with our prior',
4027:'decisions and not supported by the courts. a government official or agent is deemed to receive money for the government',
4028:'under the miscellaneous receipts statute if the money is to be used to bear the expenses of the government or',
4029:'pay the government obligations. . . . sba’s functions clearly include conducting oversight of plp lenders, whether the review is',
4030:'conducted by sba’s own employees or with the assistance of a contractor. these functions are among the purposes for which',
4031:'congress appropriates funds to sba . . . thus the fees paid by plp lenders represent expenses sba would have',
4032:'to pay from its appropriations regardless of whether the expenses were for actions performed by sba employees or 163 the',
4033:'opinion also concluded that the fee arrangement was not authorized under the user charge statute, 31 u.s.c. § 9701, or',
4034:'under provisions of sba’s organic legislation. page 6178 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount by a',
4035:'contractor’s employees. sba has devised an arrangement by which another party incurs these expenses, in effect using the plp review',
4036:'fees to substitute for appropriated funds in paying the cost of the plp reviews.” b300248 at 7. the courts also',
4037:'have given broad application to the section 3302b concept of money received “for the government.” in reeve aleutian airways, inc.',
4038:'v. rice, 789 f. supp. 417 d.d.c. 1992, the air force had awarded a contract to a commercial air carrier',
4039:'markair to provide passenger and cargo service to a remote base in the aleutian islands. the carrier’s revenue would be',
4040:'derived almost entirely from fares either purchased directly or reimbursed by the united states military personnel, their dependents, and government',
4041:'contractor employees. the contract granted the carrier landing rights and ground support at the base, and the contractor agreed to',
4042:'return a specified portion of its receipts as a “concession fee,” to be deposited in the base morale, welfare, and',
4043:'recreation fund. in upholding a disappointed bidder’s challenge to the award, the court stated: “[t]he socalled concession fees to be',
4044:'paid by markair were ‘public monies’ both in the sense that they would be paid by markair exclusively to purchase',
4045:'the use of property of the united states and in the sense that the funds were or were derived directly',
4046:'from public sources—united states taxpayers and the creditors of the united states who have lent it funds to cover expenses',
4047:'which exceed its revenue. obviously, innovation consistent with the law should be encouraged but this transaction so plainly violates the',
4048:'express terms of 31 u.s.c. § 3302b . . . that it should be nipped in the bud.” reeve aleutian',
4049:'airways, 789 f. supp. at 421. since there was no authority to divert the funds from the treasury to the',
4050:'welfare fund, and since the diversion would actually increase the cost to the government, the court found the contract award',
4051:'to be arbitrary and capricious and declared the contract “null, void and of no force and effect.” id. at 423.',
4052:'page 6179 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount in a case it regarded as “virtually identical”',
4053:'to reeve aleutian airways, the united states court of appeals for the district of columbia held that a department of',
4054:'defense contract solicitation requiring payment of the portion of concession fees derived from unofficial travel to a morale fund rather',
4055:'than to the treasury violated 31 u.s.c. § 3302b. scheduled airlines traffic offices, inc. v. department of defense, 87 f.3d',
4056:'1356, 1363 d.c.cir. 1996.164 the court stated: “mindful of both the plain language of the miscellaneous receipts statute and its',
4057:'underlying purpose to preserve congressional control of the appropriations power, we have no doubt that concession fees for unofficial travel',
4058:'constitute ‘money for the government’ within the meaning of the statute. travel agents pay the fees pursuant to contracts awarded',
4059:'by agencies of the united states, doing so in consideration for government resources—the right to occupy agency office space, to',
4060:'utilize government services associated with that space, and to serve as the exclusive onsite travel agent.” id. at 1362. the',
4061:'court was not persuaded by the argument that the required payments to the morale fund did not violate 31 u.s.c.',
4062:'§ 3302b since they were attributable entirely to commissions on unofficial travel purchased with private funds: “this argument is inconsistent',
4063:'with the statute’s unequivocal language. government officials must deposit in the treasury ‘money for the government from any source.’ 31',
4064:'u.s.c. § 3302b emphasis added. the original source of the money—whether from private parties or the government—is thus irrelevant.” id.165',
4065:'164 the court’s disposition in scheduled airlines differed from a comptroller general decision that had denied a protest against this',
4066:'solicitation. 73 comp. gen. 310 1994. 165 subsequently, congress enacted legislation that specifically authorized defense agencies to enter into contracts',
4067:'of the type invalidated in scheduled airlines traffic offices that permit a portion of commissions from unofficial travel to be',
4068:'deposited into nonappropriated morale funds. 10 u.s.c. § 2646. see, in this regard, b283731, dec. 21, 1999. page 6180 gao06382sp',
4069:'appropriations law—vol. ii chapter 6 availability of appropriations: amount in two decisions, gao found that the environmental protection agency epa',
4070:'and the federal election commission did not violate the miscellaneous receipts statute when they engaged contractors to respond to public',
4071:'requests for information and to charge, and retain, fees for the service. in b166506, oct. 20, 1975, the environmental protection',
4072:'agency epa had a number of contracts with private firms for the processing, storage, and retrieval of various kinds of',
4073:'recorded environmental information. much of this information was of value to private parties and available under the freedom of information',
4074:'act foia, 5 u.s.c. § 552. fees collected by an agency under foia must be deposited as miscellaneous receipts. here,',
4075:'however, epa proposed advising requesting parties to deal directly with the contractors, who would charge and retain fees for providing',
4076:'the data, although the requestors would retain the right to deal with epa. gao approved the proposal, concluding that fees',
4077:'charged by the contractors in these circumstances did not constitute money received for the government. the epa decision viewed the',
4078:'contract arrangement as an alternative to the foia process for satisfying information requests and reasoned that the contractors acted as',
4079:'“independent entrepreneurs” rather than as agents of epa in providing such information. the decision cautioned, however, that the fees charged',
4080:'and retained by the contractors could not exceed the fees which epa could charge if it provided the services directly.',
4081:'thus, the fees could include the direct costs of document search and duplication, but not costs associated with developing the',
4082:'information. in 61 comp. gen. 285 1982, gao provided similar advice to the federal election commission in connection with requests',
4083:'from the public for microfilm copies of its reports, citing b166506, oct. 20, 1975. it may be hard to reconcile',
4084:'the epa and federal election commission decisions with more recent decisions, and they should be approached with caution. the contractor',
4085:'fee arrangements in both of these cases clearly had at least the indirect effect of relieving the agencies of expenses',
4086:'incident to the performance of their statutory obligations that otherwise would have been paid from their appropriations. in a recent',
4087:'decision, gao considered whether an agency improperly avoided the miscellaneous receipts statute by structuring a regulatory action so that money',
4088:'would not be owed to the government. b303413, nov. 8, 2004. the federal communications commission proposed to provide spectrum rights',
4089:'to a private company through a “license modification” in which the company would not pay the government for the page',
4090:'6181 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount spectrum but would pay certain costs incurred by it',
4091:'and other spectrum users. if the federal communications act of 1934, as amended, at 47 u.s.c. § 309j, required the',
4092:'commission to license the spectrum through auction instead of a license modification, then the commission’s proposed regulatory action would improperly',
4093:'avoid the government’s receipt of money otherwise owed to it and thus would violate the miscellaneous receipts statute. gao found',
4094:'the commission’s proposed regulatory action to be within the scope of its authority under the federal communications act, at 47',
4095:'u.s.c. § 316a1, and concluded that the license modification did not violate the miscellaneous receipts statute. both the comptroller general',
4096:'and the courts have on occasion held that certain receipts of money did not constitute the receipt of moneys within',
4097:'the scope of 31 u.s.c. § 3302b. in b205901, may 19, 1982, a railroad had furnished 15,000 gallons of fuel',
4098:'to the federal bureau of investigation fbi for use in an undercover investigation of thefts of diesel fuel from the',
4099:'railroad. the railroad and fbi agreed that the fuel or the proceeds from its sale would be returned upon completion',
4100:'of the investigation. in view of 31 u.s.c. § 3302b, the fbi then asked whether money generated from the sale',
4101:'of the fuel had to be deposited in the treasury as miscellaneous receipts. in one sense, it could be argued',
4102:'that the money was received “for the use of the united states,” in that the fbi planned to use it',
4103:'as evidence. however, the comptroller general pointed out, this is not the kind of receipt contemplated by 31 u.s.c. §',
4104:'3302b. the decision concluded that “[f]unds are received for the use of the united states only if they are to',
4105:'be used to bear the expenses of the government or to pay the obligations of the united states.” therefore, there',
4106:'was no legal barrier to returning the funds to the railroad. in another case, gao held that misconduct fines levied',
4107:'on job corps participants by the labor department need not be treated as money received for the government for purposes',
4108:'of 31 u.s.c. § 3302b. the governing legislation specifically authorized “reductions of allowances” as a disciplinary measure. labor felt that,',
4109:'in some cases, immediate collection of a cash fine from the individual’s pocket would be more effective. finding a legislative',
4110:'intent to confer broad discretion in matters of enrollee discipline, gao agreed that the cash fines could be regarded as',
4111:'a form of disciplinary allowance reduction, and accordingly credited to job corps appropriations. b130515, aug. 18, 1970. gao followed the',
4112:'same approach in a similar question several years later in 65 comp. gen. 666, 671 1986. the two job corps',
4113:'decisions relied heavily on the language of the page 6182 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount',
4114:'program statute involved in those cases and appear to have little, if any, application beyond that statute. in 64 comp.',
4115:'gen. 217 1985, a food service concession contract required the contractor to reserve a percentage of income to be used',
4116:'for the replacement of governmentowned equipment. the reserve was found not to constitute money for the government within the meaning',
4117:'of 31 u.s.c. § 3302b. gao distinguished an earlier decision, 35 comp. gen. 113 1955, on the basis that the',
4118:'reserve here constituted “a mere bookkeeping entry” whereas the proposal in the 1955 case would have required the actual transfer',
4119:'of funds to a bank account. 64 comp. gen. at 219. in thomas v. network solutions, inc., 176 f.3d 500',
4120:'d.c. cir. 1999, cert. denied, 528 u.s. 1115 2000, the court concluded that fees charged by a party to a',
4121:'cooperative agreement did not constitute money for the government and thus were not subject to deposit into the treasury under',
4122:'31 u.s.c. § 3302b. in thomas, the national science foundation nsf entered into a cooperative agreement with network solutions to',
4123:'register internet domain names and provide related services to the registrants. in return, network solutions was permitted to charge registrants',
4124:'a fee and to retain the fee as payment for its services. the plaintiff domain registrants challenged the legality of',
4125:'the registration fees. relying in part on the abovecited comptroller general decisions dealing with epa and the federal election commission,',
4126:'the plaintiffs asserted, among other things, that the fees exceeded the amount that nsf itself could have imposed under the',
4127:'user charges statute, 31 u.s.c. § 9701, had the agency provided domain registration services directly. the court rejected this argument',
4128:'and distinguished the comptroller general decisions on the basis that network solutions was not assisting nsf in performing a statutory',
4129:'duty imposed upon it. since congress did not require nsf or any other federal agency to register internet domain names,',
4130:'the registration was not a government service. thus, neither 31 u.s.c. § 9701 nor 31 u.s.c. § 3302b applied. thomas,',
4131:'176 f.3d at 510–12. finally, several of the trust fund cases discussed hereafter in section e.2.h of this chapter also',
4132:'address the money received “for the government” concept. as explained in section e.2.h, the general rule is that funds properly',
4133:'received by an agency in a trust capacity are not subject to section 3302b; however, there are exceptions and limits',
4134:'to this general rule. page 6183 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount b. contract matters 1',
4135:'excess reprocurement costs we use the term “excess reprocurement costs” here to include two factually different but conceptually related situations:',
4136:'original contractor defaults. agency still needs the work done and contracts with someone else to complete the work, almost invariably',
4137:'at a cost higher than the original contract price. original contractor is liable to the government for these “excess reprocurement',
4138:'costs.” defective work by original contractor. agency incurs additional expense to correct defective work. contractor is liable for the amount',
4139:'of this additional expense. disposition of amounts recovered in these situations has generated numerous cases. generally, the answer depends on',
4140:'the timing of the recovery in relation to the agency’s reprocurement or corrective action and the status of the applicable',
4141:'appropriation. the objective is to avoid the depletion of currently available appropriations to get what the government was supposed to',
4142:'get under the original obligation. the rules were summarized, and the case law reviewed, in 65 comp. gen. 838 1986.',
4143:'the rules are as follows: if, at the time of the recovery from the original contractor, the agency has not',
4144:'yet incurred the additional expense, the agency may retain the amount recovered to the extent necessary to fund the reprocurement',
4145:'or corrective measures. the collection is credited to the appropriation obligated for the original contract, without regard to the status',
4146:'of that appropriation. even if that appropriation has expired and is generally no longer available for obligation, it usually can',
4147:'still be used to fund the reprocurement or corrective measures under the “replacement contract” theory until it closes.166 166 see',
4148:'chapter 5, section b.6. the basic rule is that where it becomes necessary to terminate a contract because of the',
4149:'contractor’s default, the funds obligated under the original contract are available, beyond their original period of availability, for purposes of',
4150:'funding a contract to complete the unfinished work. id. as discussed in section b.6, certain conditions must be met in',
4151:'order to invoke the replacement contract rule. excess reprocurement costs recovered from defaulting contractors cannot be retained by an agency',
4152:'in its appropriations and applied to a new contract if the reprocurement does not constitute an appropriate replacement contract. cf.',
4153:'b242274, aug. 27, 1991 applying this principle in the context of recovered liquidated damages. page 6184 gao06382sp appropriations law—vol. ii',
4154:'chapter 6 availability of appropriations: amount if, at the time of recovery from the original contractor, the agency has already',
4155:'incurred the additional reprocurement or corrective expense, the agency may retain the recovery for credit to the applicable appropriation, to',
4156:'the extent necessary to reimburse itself, if that appropriation is still available for obligation. if the appropriation has expired and',
4157:'is no longer available for obligation, the recovery should go to miscellaneous receipts.167 these rules apply equally to default and',
4158:'defective work situations but vary with the type and status of the appropriation involved. if the appropriation used to fund',
4159:'the original contract is a noyear appropriation, the recovery may be credited to that appropriation regardless of whether the agency',
4160:'has or has not yet actually incurred the additional costs. if the appropriation is an annual or multiple year appropriation',
4161:'and the agency has not yet incurred the additional costs as of the time of recovery, the agency may credit',
4162:'the collection to the appropriation regardless of whether it is still current or expired up until the time the account',
4163:'closes. in the case of an annual or multiple year appropriation, where the agency has already incurred the reprocurement or',
4164:'corrective costs as of the time of recovery, the agency may retain the recovery if the appropriation is still available',
4165:'for obligation, but not if it has expired. where the excess costs have already been incurred and the appropriation has',
4166:'expired at the time of recovery, it is too late to avoid a depletion of currently available funds. prior to',
4167:'1983, essentially two separate lines of cases dealt with defective work and default. the defective work cases had always applied',
4168:'the above principles, although not necessarily in those terms. some illustrative cases are summarized below: supplies delivered by a contractor',
4169:'were found upon inspection to be unsatisfactory for use, that is, not in accordance with the terms of the contract.',
4170:'a refund by the contractor could be credited to the 167 in 1990, subsequent to the decision in 65 comp.',
4171:'gen. 838 and many of the other decisions discussed in this section, congress amended the statutory provisions applicable to the',
4172:'closing of appropriation accounts and the disposition of account balances. see generally chapter 5, section d. these statutory changes do',
4173:'not fundamentally affect the substantive rules discussed in this section, although the changes they make in the time periods that',
4174:'appropriation accounts retain their identity after they expire for obligation purposes and before they close may affect the practical application',
4175:'of those rules in particular circumstances. page 6185 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount appropriation originally',
4176:'charged, on the theory that the payment was improperly made from the appropriation in the first instance. the appropriation involved',
4177:'was an annual appropriation, and the corrective costs had not been paid as of the time of the recovery. 8',
4178:'comp. gen. 103 1928. an amount recovered from a contractor’s surety because the work failed to meet specifications, after the',
4179:'contractor had received final payment, was regarded as in the nature of a reduction in contract price representing the value',
4180:'of unfinished work, and therefore amounted to the recovery of an unauthorized overpayment. it could thus be deposited in the',
4181:'appropriation charged with the contract and expended for completion of the work. the appropriation involved was a noyear appropriation. 34',
4182:'comp. gen. 577 1955. recovery for defective work could be credited to an expired annual appropriation. because the corrective work',
4183:'had not yet been undertaken, the funds would remain available for that corrective work under the “replacement contract” theory. 44',
4184:'comp. gen. 623 1965. in default cases, however, the decisions had consistently held for several decades that excess reprocurement costs',
4185:'recovered from defaulting contractors had to be deposited as miscellaneous receipts.168 the two lines of cases met in a 1983',
4186:'decision, 62 comp. gen. 678. that decision recognized that there was no real reason to distinguish between default and defective',
4187:'work for purposes of accounting for recoveries. the rules should be the same in both situations. accordingly, 62 comp. gen.',
4188:'678 modified the prior default cases and held, in effect, that the rules previously applied in the defective work cases',
4189:'should be applied in the future to all excess reprocurement cost cases “without reference to the event that gave rise',
4190:'to the need for the replacement contract—that is, whether occasioned by a default or by defective workmanship.” id. at 681.',
4191:'the decision further held that the bureau of prisons could retain damages 168 e.g., 46 comp. gen. 554 1966; 40',
4192:'comp. gen. 590 1961; 27 comp. gen. 117 1947; 14 comp. gen. 729 1935; 14 comp. gen. 106 1934; 10',
4193:'comp. gen. 510 1931; 8 comp. gen. 284 1928; 26 comp. dec. 877 1920; 23 comp. dec. 352 1916; a26073,',
4194:'mar. 20, 1929, aff’d upon reconsideration, a26073, aug. 8, 1929; a24614, june 20, 1929. the rule was applied regardless of',
4195:'whether the funds were actually collected back from the contractor or merely withheld from future contract payments due. 52 comp.',
4196:'gen. 45 1972. page 6186 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount recovered from a contractor charged',
4197:'with defective work, for credit to the appropriation which had been used to replace the defective work. the 1983 decision',
4198:'added another new element: where the recovery, by virtue of factors such as inflation or underbidding, exceeds the amount paid',
4199:'to the original contractor, any amounts recovered over and above what is actually necessary to fund the reprocurement or corrective',
4200:'work or to reimburse the appropriation charged with that work, if it is still currently available must be deposited in',
4201:'the treasury as miscellaneous receipts. authority to retain funds enables the agency to get what it originally bargained for, not',
4202:'to make a “profit” on the transaction. 62 comp. gen. at 683. logically, the proceeds of a forfeited performance bond',
4203:'should be available to the contracting agency if and to the extent necessary to fund a replacement contract to complete',
4204:'the work of the original contract, and this was the holding in 64 comp. gen. 625 1985. in 65 comp.',
4205:'gen. 838 1986, gao reviewed the evolution of the case law on excess reprocurement costs, restated the rules, and pointed',
4206:'out that in no case had gao approved agency retention of recovered funds where the reprocurement or corrective costs “had',
4207:'already been paid from an appropriation which, at the time of the recovery, was no longer available for obligation.” id.',
4208:'at 841 n.5. before leaving the subject, it may be helpful to again summarize the rules in a slightly different',
4209:'manner. considering the status and the timing of agency action, in the following five categories, an agency may retain amounts',
4210:'recovered to the extent necessary to fund the reprocurement or corrective work, or to reimburse itself for costs already incurred:',
4211:'noyear appropriation where recovery was made before agency incurs additional costs. noyear appropriation where additional costs were incurred prior to',
4212:'recovery. annual or multiple year appropriation where recovery is made before the agency incurs additional costs and the appropriation is',
4213:'still current at time of recovery. page 6187 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount annual or',
4214:'multiple year appropriation where additional costs were incurred prior to recovery and the appropriation is still current at time of',
4215:'recovery. annual or multiple year appropriation where recovery is made before the agency incurs additional costs and the appropriation expired',
4216:'at time of recovery. finally, the recovery goes to the treasury as miscellaneous receipts when an agency has annual or',
4217:'multiple year appropriations where additional costs were incurred prior to recovery and the appropriation had expired at time of recovery.',
4218:'2 other damage claims one form of other damage claims is liquidated damages. liquidated damages constitute a specific amount of',
4219:'money stipulated in advance by the contracting parties as the measure of damages for certain breaches of the contract, such',
4220:'as failure to meet applicable performance deadlines. see b148493, mar. 25, 1963. see also 44 comp. gen. 623 1965. the',
4221:'traditional rule for liquidated damages is that they may be credited to the appropriation originally charged in circumstances similar to',
4222:'those applicable to excess reprocurement costs, as discussed above. 44 comp. gen. 623; 23 comp. gen. 365 1943; 9 comp.',
4223:'gen. 398 1930; 18 comp. dec. 430 1911. see also b237421, sept. 11, 1991. the rationale for retaining liquidated damages',
4224:'in the appropriation account rather than depositing them in the treasury as miscellaneous receipts is that liquidated damages effect an',
4225:'authorized reduction in the price of the individual contract concerned, and also that this would make the damages available for',
4226:'return to the contractor should the liability subsequently be relieved. b242274, aug. 27, 1991. however, where this rationale does not',
4227:'apply—for example, in a case where the contractor did nothing and therefore earned nothing and remission of liquidated damages under',
4228:'41 u.s.c. § 256a169 had been denied—the liquidated damages should be deposited in the treasury as miscellaneous receipts. 46 comp.',
4229:'gen. 554 1966. likewise, as in 169 this section provides that whenever a federal contract includes a provision for liquidated',
4230:'damages for delay, the secretary of the treasury may, upon the recommendation of the head of the procuring agency, remit',
4231:'all or part of the damages if such action would be just and equitable. the comptroller general formerly exercised this',
4232:'remission function, but it was transferred by law to the executive branch in 1996. see the codification note following 41',
4233:'u.s.c. § 256a. page 6188 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount b242274, aug. 27, 1991, liquidated',
4234:'damages cannot be retained and used to fund reprocurements that do not constitute “replacement contracts” for the contract that gave',
4235:'rise to the liquidated damages. in some liquidated damage situations, the agency will not have incurred any additional reprocurement or',
4236:'corrective costs. this might happen in a case where an agency received liquidated damages for delay in performance but the',
4237:'contractor’s performance, though late, was otherwise satisfactory. in other cases, however, the agency will incur additional costs. in the situation',
4238:'described in 46 comp. gen. 554, for example, the agency would presumably need to reprocure, in which event it could',
4239:'retain the liquidated damages in accordance with the rules for excess reprocurement costs just discussed. 64 comp. gen. 625 1985',
4240:'modifying 46 comp. gen. 554 to that extent. consistent with these rules, liquidated damages credited to an expired appropriation may',
4241:'not be used for work which is not part of a legitimate replacement contract. b242274, aug. 27, 1991. 3 refunds',
4242:'and credits as discussed previously, the general rule is that refunds, which include returns of erroneous or excess contract payments',
4243:'as well as adjustments to previous contract payments, represent an exception to the miscellaneous receipts deposit requirement of 31 u.s.c.',
4244:'§ 3302b and are to be credited to the appropriation or fund accounts from which the original payments were made.170',
4245:'thus, refunds received by the government under a price redetermination clause may be credited to the appropriation from which the',
4246:'contract was funded. 33 comp. gen. 176 1953. contra 24 comp. gen. 847, 851 1945.171 refunds received by the government',
4247:'under a warranty clause may be considered as an adjustment in the contract price and therefore credited to the appropriation',
4248:'originally charged under the contract. 34 comp. gen. 145 1954. the same result applies where the warranty refund is in',
4249:'the form of a replacement purchase credit. 27 comp. gen. 384 1948. these cases 170 see section e.2.a of this',
4250:'chapter and 65 comp. gen. 600 1986. 171 the 1953 decision is inconsistent with the 1945 decision on this point',
4251:'and appears to have effectively overruled the latter decision. page 6189 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations:',
4252:'amount are conceptually related to the “defective work” cases discussed earlier, and the result follows logically from the result in',
4253:'those cases. not all contract adjustments qualify as “refunds” for purposes of the section 3302b exception. in b265727, july 19,',
4254:'1996, the securities and exchange commission sec asked whether it could reduce its obligation of appropriated funds for its building',
4255:'lease to reflect the reduced rent sec paid as a result of a sublease. under the arrangement in question, an',
4256:'sec employee group subleased parking in the building from the sec but paid the landlord directly for this sublease. sec',
4257:'deducted these payments under the sublease from its own lease payments. relying on the two cases cited above—34 comp. gen.',
4258:'145 and 27 comp. gen. 384—sec argued that the sublease payment was a “refund” that it could use to reduce',
4259:'the rental payments from its appropriations. gao rejected this argument, holding that sec’s use of amounts paid by the sublessee',
4260:'to reduce the obligation created by sec’s own lease with the landlord constituted an improper augmentation of its appropriations. the',
4261:'decision stated: “in situations where we treated a contract adjustment or price renegotiation as a refund that could be credited',
4262:'to an appropriation like those cited by the sec . . . the ‘refund’ reflected a change in the amount',
4263:'the government owed its contractor based on the contractor’s performance or a change in the government’s requirements.” it went on',
4264:'to point out that neither of these factors was present in the sec case. a different type of credit was',
4265:'discussed in 53 comp. gen. 872 1974. prospective timber sale purchasers were to be required to make certain property surveys,',
4266:'the cost of which would be credited against the sale price. forest service appropriations had previously financed the surveys. gao',
4267:'viewed the proposal as an unauthorized augmentation of those appropriations. similarly, the department of agriculture could not apply savings in',
4268:'the form of credits accrued under a contract for the handling of food stamp sales receipts to offset the cost',
4269:'of a separate data collection contract, even though both contracts were necessary to the same program objective. a51604, may 31,',
4270:'1977. credits in the form of rebates may be credited to agency accounts where they meet the criteria for refunds,',
4271:'that is, they represent adjustments to previous expenditures from those accounts and thus serve to make the page 6190 gao06382sp',
4272:'appropriations law—vol. ii chapter 6 availability of appropriations: amount accounts whole. in 65 comp. gen. 600 1986, gao held that',
4273:'agencies could credit rebates of travel agent commissions to the appropriations charged with the costs of federal employee travel that',
4274:'included those commissions. see also 73 comp. gen. 210 1994; 72 comp. gen. 109 1993; 72 comp. gen. 63 1992.',
4275:'on the other hand, rebates that do not meet these criteria must be deposited into the treasury pursuant to 31',
4276:'u.s.c. § 3302b unless the agency has specific statutory authority to retain them. thus, in a 1996 decision, gao observed',
4277:'that energy efficiency rebates received by the sec from a local utility company did not meet the criteria for refunds.',
4278:'b265734, feb. 13, 1996, at fn. 1. nevertheless, gao held that, because sec had the necessary specific statutory authority,172 it',
4279:'could credit half of an energy efficiency rebate to the accounts that funded its energy and water conservation activities. recoveries',
4280:'of amounts paid under fraudulent contracts constitute “refunds” that may be deposited to the credit of the appropriation charged with',
4281:'the payments until the appropriation account is closed. once the account is closed, the recoveries should be deposited to the',
4282:'general fund of the treasury to the credit of the appropriate receipt account. b257905, dec. 26, 1995. if a contract',
4283:'requires the government to pay a deposit on containers and provides for a refund by the contractor of the deposit',
4284:'upon return of the empty containers by the government, the refund may be credited to the appropriation from which the',
4285:'deposit was paid. b8121, jan. 30, 1940. however, if the contract establishes a time limit for the government to return',
4286:'the empty containers and provides further that thereafter title to the containers shall be deemed to pass to the government,',
4287:'a refund received from the contractor after expiration of the time limit is treated as a sale of surplus property',
4288:'and must be deposited as miscellaneous receipts. 23 comp. gen. 462 1943. 4 “nocost” contracts the federal government sometimes enters',
4289:'into socalled “nocost” contracts to obtain services. typically, the contractor receives no compensation from the government. b300248, jan. 15, 2004.',
4290:'in 63 comp. gen. 459 1984, gao considered whether the federal communications 172 see 42 u.s.c. § 8256c5a, which authorizes',
4291:'such credits for most agencies, subject to appropriation. page 6191 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount',
4292:'commission could accept offers from industry trade show promoters of “rentfree” exhibition space and “other free services” intended to entice',
4293:'the commission to participate in industry trade shows. the commission’s participation in a trade show entailed erecting an exhibition booth',
4294:'and placing staff members and equipment there for the duration of the show in order to educate the public and',
4295:'respond to questions about the commission and its activities. id. at 459–60. the commission felt that it could not afford',
4296:'to rent space from the promoters; the promoters, realizing that the commission’s presence at their show would be a “drawing',
4297:'card,” offered the commission rentfree space, as well as free electricity and other services necessary to support the commission’s display.',
4298:'id. gao found a “mutually beneficial arrangement” between the commission and the promoters, although it did not refer to the',
4299:'mutually beneficial arrangement as a nocost contract: “[i]t is to the advantage of the promoters to solicit the commission’s participation',
4300:'and to waive the usual fees. [at the same time,] acceptance of the free space and services affords [the commission]',
4301:'with an additional opportunity to inform the public . . . at no increased cost to the agency.” id. several',
4302:'recent gao decisions have addressed nocost contracts in relation to the miscellaneous receipts statue, 31 u.s.c. § 3302b. as a',
4303:'study of these decisions will show, an agency considering a nocost contract should approach the proposed contract with a great',
4304:'deal of care lest the agency find that it has incurred a constructive augmentation. in one case, a nocost contract',
4305:'arrangement was specifically authorized by law and thus obviously did not violate section 3302b. see b283731, dec. 21, 1999 nocost',
4306:'contract for travel services authorized by 10 u.s.c. § 2646. in two related decisions, gao also held that the general',
4307:'services administration’s proposed nocost national real estate brokers contract would not violate section 3302b. b302811, july 12, 2004; b291947, aug.',
4308:'15, 2003. under the proposed contract, real estate brokers would provide lease acquisition and related services to federal agencies without',
4309:'cost to the government. rather, consistent with industry practice, their compensation would take the form of commissions paid by the',
4310:'lessors. in affirming the legality of this arrangement, the decision in b302811 observed: page 6192 gao06382sp appropriations law—vol. ii chapter',
4311:'6 availability of appropriations: amount “because the contract was constructed as a no cost contract, gsa will have no financial',
4312:'liability to brokers, and brokers will have no expectation of a payment from gsa. the acceptance of services without payment',
4313:'pursuant to a valid, binding nocost contract does not augment an agency’s appropriation nor does it violate the voluntary services',
4314:'prohibition. although the brokers contract clearly expects that brokers will be remunerated by commissions from landlords, as is a common',
4315:'practice in the real estate industry, gsa does not require landlords to pay commissions. if a landlord were to fail',
4316:'to pay a broker, the broker would have no claim against gsa.” however, the fact that an agency makes no',
4317:'direct payment for contractor services does not necessarily mean that arrangement constitutes a nocost contract with no implications under 31',
4318:'u.s.c. § 3302b. in b300248, jan. 15, 2004, discussed at length in section e.2 of this chapter, the contractor was',
4319:'compensated from fees that the small business administration sba imposed on lenders and that the lenders paid directly to the',
4320:'contractor. the opinion rejected sba’s argument that the “nocost” nature of the contract took it outside the application of the',
4321:'normal augmentation and miscellaneous receipts principles: “sba’s assertion regarding nocost contracts . . . is misplaced. although we have observed',
4322:'that nocost contracts do not per se violate the prohibition against augmentation, we have neither applied nor endorsed the principle',
4323:'that an agency may avoid the prohibition merely by requiring third parties to pay for an agency’s contractual commitment.” gao’s',
4324:'opinion in b302811, july 12, 2004, elaborated on the distinction between the sba contract, which was found to be a',
4325:'“constructive augmentation” in violation of section 3302b, and the gsa contract, which did not constitute an illegal augmentation: “the important',
4326:'difference between the gsa and sba contracts is that under gsa’s contract with brokers, brokers offer their services without any',
4327:'expectation of payment from gsa, whereas under sba’s contract, the contractor offered its services only after sba agreed to impose',
4328:'a fee on page 6193 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount c. damage to government property',
4329:'and other tort liability its preferred lenders to cover the contractor’s costs and to require the lenders to pay that',
4330:'fee to the contractor.” as a general proposition, amounts recovered by the government for loss or damage to government property',
4331:'cannot be credited to the appropriation available to repair or replace the property, but must be deposited in the treasury',
4332:'as miscellaneous receipts. b287738, may 16, 2002 damage to government buildings; 64 comp. gen. 431 1985 damage to government motor',
4333:'vehicle; 26 comp. gen. 618 1947 recovery from insurance company for damage to government vehicle; 3 comp. gen. 808 1924',
4334:'loss of coast guard vessel resulting from collision.173 while the recovery may well be “related” to a prior expenditure for',
4335:'repair of the property, it does not constitute a refund in the form of an “adjustment” of a previous disbursement',
4336:'that would qualify for crediting to agency accounts. 64 comp. gen. 431, 433 1985. there are statutory exceptions to this',
4337:'general proposition. one involves property purchased and maintained by the general services administration from the general supply fund, a revolving',
4338:'fund established by 40 u.s.c. § 321. by virtue of 40 u.s.c. § 321b2, recoveries for loss or damage to',
4339:'general supply fund property are credited to the general supply fund. this includes recoveries from other federal agencies for damage',
4340:'to gsa motor pool vehicles. 59 comp. gen. 515 1980. another is 16 u.s.c. § 579c, which authorizes the forest',
4341:'service to retain the proceeds of bond forfeitures resulting from failure to complete performance under a permit or timber sale',
4342:'contract, and money received from a judgment, compromise, or settlement of a government claim for present or potential damage to',
4343:'lands or improvements under the administration of the forest service. if the receipt exceeds the amount necessary to complete the',
4344:'required work or make the needed repairs, the excess must be transferred to miscellaneous receipts. this provision is discussed in',
4345:'67 comp. gen. 276 1988, holding that the proceeds of a bond forfeiture could be used to reimburse a general',
4346:'forest service appropriation which had been charged with the cost of repairs. 173 additional cases for this proposition are 35',
4347:'comp. gen. 393 1956; 28 comp. gen. 476 1949; 15 comp. gen. 683 1936; 5 comp. gen. 928 1926; 20',
4348:'comp. dec. 349 1913; 14 comp. dec. 87 1907; and 9 comp. dec. 174 1902. page 6194 gao06382sp appropriations law—vol.',
4349:'ii chapter 6 availability of appropriations: amount in addition, where an agency has statutory authority to retain income derived from',
4350:'the use or sale of certain property, and the governing legislation evinces an intent for the particular program or activity',
4351:'to be selfsustaining, the agency may also retain recoveries for loss or damage to that property. 27 comp. gen. 352',
4352:'1947 recovery from party responsible for loss or damage; 24 comp. gen. 847 1945 recovery from insurer; 22 comp. gen.',
4353:'1133 1943 same. there is also a nonstatutory exception to the general proposition. where a private party responsible for loss',
4354:'or damage to government property agrees to replace it in kind or to have it repaired to the satisfaction of',
4355:'the proper government officials and to make payment directly to the party making the repairs, the arrangement is permissible and',
4356:'the agency is not required to transfer an amount equal to the cost of the repair or replacement to miscellaneous',
4357:'receipts.174 this principle was first recognized in 14 comp. dec. 310 1907 and has been followed, either explicitly or implicitly,',
4358:'ever since. e.g., b287738, may 16, 2002; 67 comp. gen. 510 1988; b87636, aug. 4, 1949; b128209o.m., july 12, 1956.',
4359:'the exception applies even though the money would have to go to miscellaneous receipts if the responsible party paid it',
4360:'directly to the government. 67 comp. gen. at 511; b87636, aug. 4, 1949. for an apparent “exception to the exception”',
4361:'based on the specific legislation involved, see 28 comp. gen. 476 1949. logically, the nonstatutory exception in 14 comp. dec.',
4362:'310 appears difficult to support. it is, in fact, an extremely rare instance in which decisions have sanctioned doing indirectly',
4363:'something that cannot be done directly. be that as it may, the exception has been followed since 1907 and appears',
4364:'firmly entrenched. thus, in b128209o.m., july 12, 1956, gao addressed the relationship between 14 comp. dec. 310 and 28 comp.',
4365:'gen. 476, stating that “14 comp. dec. 310 has been followed for almost 50 years and we have never expressed',
4366:'disagreement with the conclusion reached therein.” the exception does not disturb the rule itself; it is “nothing more than an',
4367:'exception that may be advantageous if the timing of repair and payment can be made to coincide.” 64 comp. gen.',
4368:'431, 433 1985. 174 a 1943 case suggested a different result, that is, the agency might have to transfer the',
4369:'value of the repairs to miscellaneous receipts, if the agency had a specific appropriation for repair or replacement of the',
4370:'property in question. 22 comp. gen. 1133, 1137 1943. gao indicated in 67 comp. gen. 510 1988 that this would',
4371:'not be the case, although 67 comp. gen. 510 did not deal with a specific repair appropriation, which would appear',
4372:'to be a rare case in any event. page 6195 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount',
4373:'compensation paid by an insurance company for damage to government property caused by a contractor may not be used to',
4374:'augment the agency’s appropriation used for the contract. therefore, absent specific statutory authority, the moneys, whether paid to the government',
4375:'or to the contractor, are for deposit into the treasury as miscellaneous receipts. b287738, may 16, 2002; 67 comp. gen.',
4376:'129 1987; 48 comp. gen. 209 1968. the retention of insurance proceeds was also at issue in b93322, apr. 19,',
4377:'1950, an apparent exception based on the particular circumstances involved. in that case, the general services administration had entered into',
4378:'a contract for renovation of the executive mansion. the contract required the contractor to carry adequate fire and hazard insurance.',
4379:'the renovation project had been undertaken under a specific appropriation which was enough for the initial cost but would not',
4380:'have been sufficient for repairs in the event of a fire or other hazard. since the renovation was a “particular',
4381:'job of a temporary nature,” and since a contrary result would defeat the purpose of the appropriation, the comptroller general',
4382:'held that insurance proceeds received if a covered risk occurred could be retained and used for the cost of repairs.',
4383:'id. at 4.175 the rule that recoveries for loss or damage to government property must be deposited as miscellaneous receipts',
4384:'applies equally to recoveries from common carriers for government property lost or damaged in transit. 46 comp. gen. 31 1966;',
4385:'28 comp. gen. 666 1949; 22 comp. dec. 703 1916; 22 comp. dec. 379 1916. there is a narrow exception',
4386:'in cases where the freight bill on the shipment of the property lost or damaged equals or exceeds the amounts',
4387:'paid for repairs and both are payable from the same appropriation, in which event the bill is reduced and the',
4388:'amount deducted to cover the cost of repairs is allowed to remain to the credit of the appropriation. 21 comp.',
4389:'dec. 632 1915, as amplified by 8 comp. gen. 615 1929 and 28 comp. gen. 666 1949. the rule and',
4390:'exception are discussed in 46 comp. gen. 31 and in b4494, sept. 19, 1939. also, as with receipts in general,',
4391:'the miscellaneous receipts requirement does not apply if the appropriation or fund involved is made reimbursable by statute. 46 comp.',
4392:'gen. at 33–34. in 50 comp. gen. 545 1971, the comptroller general held that the requirement to deposit as miscellaneous',
4393:'receipts recoveries from carriers for property lost or damaged in transit does not apply to operating funds of 175 as',
4394:'these cases demonstrate, the government occasionally purchases insurance; however, it is a selfinsurer in most areas. see generally chapter 4,',
4395:'section c.10. page 6196 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount the national credit union administration. the',
4396:'decision noted that, under 12 u.s.c. § 1755, the administration’s funds consist entirely of fees and assessments collected from member',
4397:'credit unions and do not include any general revenue appropriations. thus, the recoveries should go to the source that bore',
4398:'the costs of the transactions that gave rise to them. what happens when one federal agency damages the property of',
4399:'another agency? under the socalled “interdepartmental waiver doctrine,” the general rule is that funds available to the agency causing the',
4400:'damage may not be used to pay claims for damages by the agency whose property suffered the damage. 65 comp.',
4401:'gen. 910, 911 1986; 46 comp. gen. 586, 587 1966. the interdepartmental waiver doctrine is based primarily on the concept',
4402:'that property of the various agencies is not the property of separate entities but rather of the government as a',
4403:'single entity, and there can be no reimbursement by the government for damages to or loss of its own property.',
4404:'b302962, june 10, 2005; 46 comp. gen. at 586, 587. however, as gao pointed out in b302962, this general rule',
4405:'also has a wellestablished exception: “the interdepartmental waiver doctrine does not apply . . . where an agency has statutory',
4406:'authority to retain income derived from the use or sale of certain property, and the governing legislation shows an intent',
4407:'for the particular program or activity to be selfsustaining. 24 comp. gen. 847 1945. thus, where an agency operation is',
4408:'financed through reimbursements or a revolving fund, the prohibition does not apply. 65 comp. gen. 910 1986. see also 3',
4409:'comp. gen. 74, 75 1923. in such cases, the agency should recover amounts sufficient to cover loss or damage to',
4410:'property financed by the reimbursements or revolving fund, regardless of whether that damage is caused by another federal agency or',
4411:'a private party, and deposit those funds into the revolving fund. see 65 comp. gen. 910. the rationale for this',
4412:'exception is that the revolving fund, established to operate like a selfsustaining business, should not bear the cost for ‘other',
4413:'than objects for which the fund was created.’ id.” the decision in b302962 held that the exception to the interdepartmental',
4414:'waiver doctrine applied in the case of damage to facilities of the national archives and records administration whose operations were',
4415:'financed by a revolving fund. thus, the administration should collect from other federal page 6197 gao06382sp appropriations law—vol. ii chapter',
4416:'6 availability of appropriations: amount agencies, their contractors, or the administration’s own contractors, as the case may be, amounts sufficient',
4417:'to repair damages they caused to the administration’s facilities and deposit those amounts into the revolving fund. while the preceding',
4418:'cases involved loss or damage to property, the united states may also recover amounts resulting from tortious injury to persons,',
4419:'for example, under the socalled federal medical care recovery act, 42 u.s.c. § 2651. see, e.g., 57 comp. gen. 781',
4420:'1978. such recoveries, absent express congressional authorization, must be deposited in the treasury as miscellaneous receipts. 52 comp. gen. 125',
4421:'1972. because of a statutory exception to the miscellaneous receipts statute, the department of veterans affairs may retain recoveries under',
4422:'the federal medical care recovery act to the extent of medical care or services furnished under chapter 17 of title',
4423:'38, united states code. the recoveries may be deposited into the department of veterans affairs medical care collections fund. memorandum',
4424:'opinion for the assistant attorney general, civil division, miscellaneous receipts act exception for veterans’ health care recoveries, olc opinion, dec.',
4425:'3, 1998 construing 38 u.s.c. § 1729a. a case involving the military personnel and civilian employees claims act of 1964,',
4426:'31 u.s.c. § 3721, provides a good illustration of an adjustment to a prior disbursement, that is, an authorized refund',
4427:'which the agency may retain for credit to the disbursing appropriation. the statute authorizes agencies to pay claims by their',
4428:'employees for personal property lost or damaged incident to service. in cases where there may be thirdparty liability e.g., an',
4429:'insurer or carrier, the agency has a choice. it may pay the entire amount of the employee’s claim and be',
4430:'subrogated to the employee’s claim against the third party, or it may require the employee to pursue the thirdparty claim',
4431:'first. if the agency chooses the former option, it may retain any thirdparty recoveries for credit to the appropriation used',
4432:'to pay the claim. 61 comp. gen. 537 1982. an agency adopting the former policy, the decision stated, “will be',
4433:'making payments in some cases that are, strictly speaking, higher than are required. in such cases, it is entirely legitimate',
4434:'to treat a thirdparty recovery as a reduction in the amount previously disbursed rather than as an augmentation of the',
4435:'agency’s appropriation.” id. at 540. page 6198 gao06382sp appropriations law—vol. ii d. fees and commissions chapter 6 availability of appropriations:',
4436:'amount a comparison of 61 comp. gen. 537 to the federal medical care recovery act case discussed above, 52 comp.',
4437:'gen. 125 1972, illustrates the distinction previously discussed with respect to applying the definition of “refund”—61 comp. gen. 537 is',
4438:'an example of an adjustment to an amount previously disbursed; 52 comp. gen. 125 illustrates a collection which must go',
4439:'to miscellaneous receipts even though it is “related” to a prior expenditure. federal agencies must have statutory authority both 1',
4440:'to charge fees for their programs and activities in the first instance and 2, even if they have feecharging authority,',
4441:'to retain in their appropriations and use the amounts collected. see, e.g., b300826, mar. 3, 2005; b300248, jan. 15, 2004.',
4442:'thus, fees and commissions paid either to the government itself or to a government employee for activities relating to official',
4443:'duties must be deposited in the treasury as miscellaneous receipts, absent statutory authority to the contrary. in the case of',
4444:'fees paid directly to the government, the result is a simple application of 31 u.s.c. § 3302b. thus, the following',
4445:'items must be deposited as miscellaneous receipts: commissions from the use of pay telephones in government buildings. 59 comp. gen.',
4446:'213 1980; 44 comp. gen. 449 1965; 23 comp. gen. 873 1944; 14 comp. gen. 203 1934; 5 comp. gen.',
4447:'354 1925; b4906, oct. 11, 1951. fees and related reimbursable incidental expenses paid to the department of agriculture in connection',
4448:'with the investigation of and issuance of certifications of quality on certain farm products. 2 comp. gen. 677 1923. fees',
4449:'collected under the freedom of information act. 4b op. off. legal counsel 684, 687 1980. fees for copying and shipping',
4450:'documents by the office of federal housing enterprise oversight as part of discovery in administrative proceedings before that agency. b302825,',
4451:'dec. 22, 2004. of course, if and to the extent expressly authorized by statute an agency may retain fees and',
4452:'use them to offset operating costs. see, e.g., 2 u.s.c. § 687b fees and other charges collected for services provided',
4453:'by the senate office of public records; 7 u.s.c. § 7333k3 fees for certain page 6199 gao06382sp appropriations law—vol. ii',
4454:'chapter 6 availability of appropriations: amount services collected by the commodity credit corporation; 28 u.s.c. § 1921e fees collected by',
4455:'the united states marshals service for service of civil process and judicial execution seizures and sales, to the extent provided',
4456:'in advance in appropriation acts; 28 u.s.c. § 1931 specified portions of filing fees paid to the clerk of court.',
4457:'the relevant legislation will determine precisely what may be retained. e.g., 34 comp. gen. 58 1954. training fees illustrate both',
4458:'the general rule and statutory exceptions. under the government employees training act, an agency may extend its training programs to',
4459:'employees of other federal agencies on a reimbursable or nonreimbursable basis. 5 u.s.c. § 4104. the agency, unless it receives',
4460:'appropriations for interagency training, may retain the fees. b241269, feb. 28, 1991 nondecision letter. similarly, an agency may admit state',
4461:'and local government employees to its training programs and may charge a fee or waive it in whole or in',
4462:'part. 42 u.s.c. § 4742a. under 42 u.s.c. § 4742b, the agency that provided the training is authorized to credit',
4463:'its appropriation for reimbursement of fees received. the agency may also admit private persons to its training programs on a',
4464:'spaceavailable and fee basis, but, unless it has statutory authority to the contrary, the agency must deposit the fees as',
4465:'miscellaneous receipts. b271894, july 24, 1997; 65 comp. gen. 666 1986; 42 comp. gen. 673 1963; b241269, feb. 28, 1991;',
4466:'b190244, nov. 28, 1977. parking fees assessed by federal agencies under the authority of 40 u.s.c. § 586 are to',
4467:'be credited to the appropriation or fund originally charged for providing the service. however, any amounts collected in excess of',
4468:'the actual cost of providing the service must be deposited as miscellaneous receipts. 55 comp. gen. 897 1976. statutes other',
4469:'than 40 u.s.c. § 586 may authorize parking fees, in which event the terms of the particular statute must be',
4470:'examined. for example, parking fees at department of veterans affairs medical facilities are addressed in 38 u.s.c. § 8109. originally,',
4471:'the fees had to go to miscellaneous receipts under 31 u.s.c. § 3302b. 45 comp. gen. 27 1965. however, 38',
4472:'u.s.c. § 8109 was amended, and the fees now go into a revolving fund. income derived from the installation and',
4473:'operation of vending machines on governmentowned or controlled property is generally for deposit as miscellaneous receipts. 32 comp. gen. 124',
4474:'1952; a44022, aug. 14, 1944. there are, however, two major exceptions. first, if an employee association with administrative approval makes',
4475:'a contractual arrangement with the vendor, the employee group may retain the income. 32 comp. page 6200 gao06382sp appropriations law—vol.',
4476:'ii chapter 6 availability of appropriations: amount gen. 282 1952; b112840, feb. 2, 1953. second, under the randolph sheppard act,',
4477:'20 u.s.c. § 107d3, vending machine income in certain cases must go to blind licenseeoperators or state agencies for the',
4478:'blind. see b238937, mar. 22, 1991; b199132, sept. 10, 1980 nondecision letters. donations, which are voluntary, and fees and assessments,',
4479:'which are not, require different dispositions of amounts collected.176 statutory authority to accept gifts and donations does not include fees',
4480:'and assessments exacted involuntarily. 25 comp. gen. 637, 639 1946; b195492, mar. 18, 1980; b225834.2o.m., apr. 11, 1988. however, on',
4481:'occasion, gao has held that giftacceptance authorities extended to certain payments that were not wholly gratuitous or purely voluntary. see',
4482:'b286182, jan. 11, 2001 statutory authority of the district of columbia courts to accept gifts permits acceptance of services provided',
4483:'as part of an administrative settlement in a rate case; b232482, june 4, 1990 not improper for commerce department to',
4484:'treat certain registration fees as “contributions” within scope of 22 u.s.c. § 2455f. for a discussion of the difference between',
4485:'the statutory authority to accept donations and the authority to charge fees to cover the costs of services provided, see',
4486:'b272254, mar. 5, 1997. fees paid to individual employees require a twostep analysis. the first step is the principle that',
4487:'the earnings of a government employee in excess of the regular compensation gained in the course of or in connection',
4488:'with his or her services belong to the government. see, e.g., 62 comp. gen. 39, 40 1982 and cases cited',
4489:'military member must remit to the government fee for service on state jury while he was not in leave status.',
4490:'the second step is the application of 31 u.s.c. § 3302b. using this analysis, gao has held that agencies must',
4491:'deposit such fees as miscellaneous receipts in the following instances: an honorarium paid to an army officer for lecturing at',
4492:'a university in his capacity as an officer of the united states. 37 comp. gen. 29 1957. fees collected from',
4493:'private individuals by government employees for their services as notaries public. 16 comp. gen. 306 1936. witness fees and any',
4494:'allowances for travel and subsistence, over and above actual expenses, paid to federal employees for testifying in 176 see section',
4495:'e.3 of this chapter for a discussion of gifts and donations. page 6201 gao06382sp appropriations law—vol. ii e. economy act',
4496:'chapter 6 availability of appropriations: amount certain state court proceedings. 36 comp. gen. 591, 592 1957; 23 comp. gen. 628',
4497:'1944; 15 comp. gen. 196 1935; b160343, nov. 23, 1966. applying the same analysis, a proposal under which a nonprofit',
4498:'corporation funded entirely by private industry would pay monthly “bonuses” to army enlistees to encourage enlistment and satisfactory service, even',
4499:'if otherwise proper, could not be implemented without specific statutory authority, because the payments could not be retained by the',
4500:'enlistees but would have to be deposited in the treasury under 31 u.s.c. § 3302b. b200013, apr. 15, 1981. the',
4501:'economy act, 31 u.s.c. §§ 1535 and 1536, authorizes the interand intradepartmental furnishing of materials or performance of work or',
4502:'services on a reimbursable basis.177 it is a statutory exception to the miscellaneous receipts statute, 31 u.s.c. § 3302b, authorizing',
4503:'a performing agency to credit reimbursements to the appropriation or fund charged in executing its performance.178 crediting economy act reimbursements',
4504:'to agency appropriations is not mandatory. the performing agency may, at its discretion, deposit reimbursements for both direct and indirect',
4505:'costs in the treasury as miscellaneous receipts. 57 comp. gen. 674, 685 1978, modifying 56 comp. gen. 275 1977. there',
4506:'is one area in which the performing agency has no discretion. reimbursements may not be credited to an appropriation against',
4507:'which no charges have been made in executing the order.179 this would constitute an improper augmentation of the credited appropriations.',
4508:'as noted in section e.4 of this chapter, this also applies to appropriations available in different time periods. see b288142,',
4509:'sept. 6, 2001. such reimbursements must therefore be deposited into the general fund as miscellaneous receipts. an example would be',
4510:'crediting reimbursement for depreciation 177 see section b.1 of chapter 15 for a more detailed discussion of the economy act.',
4511:'chapter 15 also discusses a variety of other interagency ordering authorities including working capital funds, special revolving funds, franchise funds,',
4512:'and programspecific funds. 178 temporary credits among appropriations are authorized by 31 u.s.c. § 1534, which generally provides for common',
4513:'service charges to more than one appropriation. see chapter 2, section b.3.a. 179 compare 10 u.s.c. § 2205a, which provides',
4514:'that reimbursements to defense department appropriations under the economy act and similar authorities may be credited to authorized accounts and',
4515:'are available for obligation for the same period as the funds in the account so credited. page 6202 gao06382sp appropriations',
4516:'law—vol. ii chapter 6 availability of appropriations: amount to an appropriation that did not bear any costs of the transaction.',
4517:'if the appropriation that bore the costs is no longer available, the reimbursement for depreciation must be deposited into the',
4518:'treasury as miscellaneous receipts. 57 comp. gen. at 685–86. an agency must deobligate funds at the end of their availability',
4519:'period to the extent that obligations for economy act work exceed costs incurred for that work. 31 u.s.c. § 1535d.',
4520:'see b286929, apr. 25, 2001; 39 comp. gen. 317, 319 1959; 34 comp. gen. 418, 421–22 1955. likewise, where performance',
4521:'of an economy act order extends beyond a fiscal year and is funded by more than one fiscal year appropriation,',
4522:'the reimbursement must be split between the two appropriations based on the work actually performed by each. b301561, june 14,',
4523:'2004 nondecision letter. reimbursement under the economy act is to be made on the basis of “actual cost” as determined',
4524:'by the performing agency. 31 u.s.c. § 1535b. advance payments based on estimated costs are authorized, but the final payment',
4525:'amount must be adjusted to account for actual costs. 31 u.s.c. § 1535b, d; b282601, sept. 27, 1999; b260993, june',
4526:'26, 1996. see also gao, dfoh financial management, gao/aimd96167r washington, d.c.: sept. 30, 1996. while agencies have some flexibility in',
4527:'determining costs, their determinations must be reasonable in order to avoid an augmentation. b257823, jan. 22, 1998; b250377, jan. 28,',
4528:'1993.180 in reviewing cost issues under the economy act, gao’s role is to assess the general accuracy and reasonableness of',
4529:'a performing agency’s charges, not to “recompute” those charges. b257823, jan. 22, 1998. failure to obtain reimbursement for all required',
4530:'costs in a reimbursable economy act transaction improperly augments the appropriations of the ordering agency. 57 comp. gen. 674, 682',
4531:'1978. thus, an ordering agency must reimburse all appropriate costs incurred by the performing agency even if they exceed those',
4532:'agreed upon so long as the ordering agency received the benefit of the added costs. b260993, june 26, 1996. the',
4533:'ordering agency’s obligation to reimburse such additional costs remains 180 the cited decisions note, for example, that agencies can use',
4534:'standard costs for items provided from inventory as well as standard costs for transportation and labor. while the standard cost',
4535:'for inventory items may be based on the latest cost to acquire the item provided, it may not be the',
4536:'cost to acquire a more technologically advanced item. also, reimbursement must include reasonable amounts for both direct and indirect costs.',
4537:'of course, agencies may have more latitude to set rates under other, more specific statutes. see, e.g., 10 u.s.c. §',
4538:'2205b; department of defense financial management regulation 7000.14r, vol. 11a, ch. 3, economy act orders april 2000, available at www.defenselink.mil/comptroller/fmr/11a/index.html',
4539:'last visited september 15, 2005. page 6203 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount even if those',
4540:'costs are not identified until years later and after the appropriation of the ordering agency originally charged for the transaction',
4541:'has closed. in this event, the additional costs are payable from the ordering agency’s current appropriations for the same general',
4542:'purpose. b260993, june 26, 1996. by the same token, the performing agency must return to the ordering agency advance payments',
4543:'that exceeded actual costs. 72 comp. gen. 120 1993. on occasion, the costs may be so out of proportion as',
4544:'to undercut the legitimacy of a purported economy act transaction altogether. in 70 comp. gen. 592 1991, the labor department',
4545:'cited the economy act as authority to combine funds from a number of different departmental appropriation accounts for component agencies',
4546:'in order to purchase computer equipment for a departmentwide network. however, the value of equipment provided to the various components',
4547:'under this arrangement did not match their contributions. for example, one component paid about four times more than the value',
4548:'of the equipment it received. accordingly, the comptroller general held that this arrangement was not a legitimate economy act transaction',
4549:'or reprogramming. rather, it constituted an unauthorized transfer of appropriations that resulted in a subsidy to, and thus an improper',
4550:'augmentation of, the department’s central management account. 70 comp. gen. at 594–96. finally, the general authority of the economy act',
4551:'cannot be used to overcome 31 u.s.c. § 3302b if the transaction in question is governed by a more specific',
4552:'statutory authority. in b241269, feb. 28, 1991, the treasury department’s financial management service asked whether it could invoke the economy',
4553:'act to retain reimbursements for training it provided to employees of other federal and state agencies as well as a',
4554:'few nongovernmental participants. gao responded that the reimbursements were governed not by the economy act but by other statutory authorities',
4555:'dealing specifically with federal training programs. these statutory authorities allowed the agency that provided training to credit its appropriations for',
4556:'reimbursements on behalf of federal and other governmental participants. however, since the statutes did not cover nongovernmental trainees, they could',
4557:'not provide an exception from section 3302 that applied to them. thus, the fees paid by nongovernmental participants must be',
4558:'deposited into the general fund of the treasury as miscellaneous receipts.181 181 this and related decisions are also discussed in',
4559:'section e.2.d of this chapter. page 6204 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount the comptroller general',
4560:'has applied economy act costreimbursement principles by analogy to interagency transactions conducted under other statutory authority requiring reimbursement where that',
4561:'authority does not otherwise specify the basis for reimbursement. see 72 comp. gen. 159 1993. cf. b276509, aug. 28, 1998',
4562:'implicitly following economy act principles. however, rules that are unique to the economy act, such as the deobligation requirement of',
4563:'31 u.s.c. § 1535d, do not apply to interagency transactions carried out under other statutory authorities. b302760, may 17, 2004.',
4564:'f. setoff collections by setoff may be factually distinguishable from direct collections, but the effect on the appropriation is the',
4565:'same. if crediting an agency appropriation with a direct collection in a particular instance would result in an improper augmentation,',
4566:'then retaining an amount collected by setoff would equally constitute an improper augmentation. thus, setoffs must be treated the same',
4567:'as direct collections. if an agency could retain a direct collection in a given situation, it can retain the setoff.',
4568:'however, if a direct collection would have to go to miscellaneous receipts, the setoff also has to go to miscellaneous',
4569:'receipts. in this latter situation, the agency must take the amount of the setoff from its own appropriation and transfer',
4570:'it to the general fund of the treasury. e.g., 2 comp. gen. 599 1923; 20 comp. dec. 349 1913. a',
4571:'hypothetical situation will illustrate. suppose a contractor negligently damages a piece of government equipment and becomes liable to the government',
4572:'in the amount of $500. suppose further that an employee of the contracting agency, in a separate transaction, negligently damages',
4573:'property of the contractor. the contractor files a claim under the federal tort claims act and the agency settles the',
4574:'claim for $600. neither party disputes the validity or amount of either claim. the agency sets the contract debt off',
4575:'against the tort claim and makes a net payment to the contractor of $100. however, if the agency stops here',
4576:'and if it lacks specific statutory authority to retain offsets, it has augmented its appropriation to the tune of $500.',
4577:'if the tort claim had never occurred and the agency collected the $500 from the contractor, the $500 would have',
4578:'to go to miscellaneous receipts see “contract matters,” above. conversely, if the contract claim did not exist, the agency would',
4579:'end up paying $600 on the tort claim. now, combining both claims, if both were paid without setoff, the net',
4580:'result would be that the agency is out $600. the setoff cannot operate to put the agency’s appropriation in a',
4581:'better position than it would have been in had the agency and contractor simply exchanged checks. thus, in addition to',
4582:'paying the contractor $100, the agency must page 6205 gao06382sp appropriations law—vol. ii g. revolving funds chapter 6 availability of',
4583:'appropriations: amount deposit $500 from its own appropriation into the treasury as miscellaneous receipts. a different type of “setoff” occurs',
4584:'under the back pay act, 5 u.s.c. § 5596. when an agency pays an employee back pay under the back',
4585:'pay act, it must deduct amounts the employee earned through other employment during the time period in question. the agency',
4586:'simply pays the net amount. there is no requirement to transfer the amount of the deduction for outside earnings to',
4587:'miscellaneous receipts. 31 comp. gen. 318 1952. the deduction for outside earnings is not really a collection; it is merely',
4588:'part of the statutory formula for determining the amount of the payment. a major exception to the requirements of 31',
4589:'u.s.c. § 3302b is the revolving fund.182 for most revolving funds, receipts are credited directly to the fund and are',
4590:'available, without further appropriation by congress, for expenditures to carry out the purposes of the fund. an agency must have',
4591:'statutory authority to establish a revolving fund. the enabling statute will specify the receipts that may be credited to the',
4592:'fund and the purposes for which they may be expended. an example is the general services administration’s “general supply fund,”',
4593:'noted above under “damage to government property.” receipts that are properly for deposit to a revolving fund are, obviously, exempt',
4594:'from the miscellaneous receipts requirement of section 3302b. e.g., b271894, july 24, 1997 explaining when a revolving fund may retain',
4595:'receipts and when it must deposit receipts into the treasury as miscellaneous receipts. however, the existence of a revolving fund',
4596:'does not automatically signal that 31 u.s.c. § 3302b will never apply. thus, where the statute establishing the fund does',
4597:'not authorize the crediting of receipts of a given type into the fund, those receipts must be deposited in the',
4598:'treasury as miscellaneous receipts. to credit those receipts to the revolving fund would augment the revolving fund. see, e.g., b302825,',
4599:'dec. 22, 2004 the office of federal housing enterprise oversight had authority to collect and deposit into its oversight fund',
4600:'annual assessments from the federal national mortgage association and the federal home loan mortgage corporation; its authority to conduct administrative',
4601:'and enforcement actions did not permit it to retain copying fees charged for document discovery. see also 69 comp. gen.',
4602:'260 1990; 40 comp. gen. 356 1960; 23 comp. gen. 986 1944; 20 comp. gen. 280 1940. 182 see section',
4603:'c of chapter 15 for a much more detailed discussion of revolving funds. page 6206 gao06382sp appropriations law—vol. ii chapter',
4604:'6 availability of appropriations: amount augmentation of a revolving fund may occur in other ways, depending on the nature of',
4605:'the fund and the terms of the governing legislation: while the bureau of land management has authority to retain funds',
4606:'collected as a result of coal trespasses on federal lands, to use those funds to repair damage to the specific',
4607:'lands involved in the trespass, and, within the bureau’s discretion, to refund any excess, the bureau may not retain an',
4608:'excess of collections over repair costs which the bureau determines is inappropriate to refund. to retain such amounts in the',
4609:'revolving fund to be used for other purposes would augment the revolving fund. the bureau must deposit this amount in',
4610:'the treasury as miscellaneous receipts. b204874, july 28, 1982. the corps of engineers provides construction contract supervision and administrative services',
4611:'to other agencies and has a revolving fund the supervision and administration, or s&a, revolving fund that it uses to',
4612:'cover its s&a costs. the corps changes its customer agencies a flat rate for this service so that, over time,',
4613:'its s&a revolving fund will break even. where the air force a customer agency received an amount from an air',
4614:'force contractor for additional expenses incurred by the government as a result of the contractor’s defective workmanship, the corps could',
4615:'cover into its s&a revolving fund only that portion representing s&a costs that the corps had actually charged the air',
4616:'force, regardless of the amount collected from the contractor. 65 comp. gen. 838 1986. to avoid augmenting its s&a revolving',
4617:'fund, the corps had to deposit amounts in excess of that portion into miscellaneous receipts. id. see also b237421, sept.',
4618:'11, 1991. although the corps of engineers may choose to offer training to nongovernmental personnel on a limited spaceavailable basis,',
4619:'such training is not within the scope of the corps’ revolving fund for furnishing facilities and services for other government',
4620:'agencies. therefore, any fees it receives for training nongovernmental personnel must be deposited to the treasury under 31 u.s.c. §',
4621:'3302b rather than being credited to corps’ revolving fund. b271894, july 24, 1997. the tennessee valley authority tva cannot credit',
4622:'to its revolving fund double and treble damages recovered under the false claims act. since these damages are in the',
4623:'nature of penalties rather than compensation for actual losses, tva must deposit them to the treasury as miscellaneous receipts. tva',
4624:'has no authority to augment its revolving fund with proceeds that exceed costs it has incurred and that page 6207',
4625:'gao06382sp appropriations law—vol. ii h. trust funds chapter 6 availability of appropriations: amount are unrelated to its commercial and proprietary',
4626:'activities. b281064, feb. 14, 2000. legislation that merely authorizes, or even requires, that certain expenditures be reimbursed is not sufficient',
4627:'to create a revolving fund. reimbursements must be deposited as miscellaneous receipts unless the statute specifically authorizes retention by the',
4628:'agency. 67 comp. gen. 443 1988; 22 comp. dec. 60 1915; 1 comp. dec. 568 1895. moneys properly received by',
4629:'a federal agency in a trust capacity are not subject to 31 u.s.c. § 3302b and thus do not have',
4630:'to be deposited in the treasury as miscellaneous receipts, unless otherwise required.183 b303413, nov. 8, 2004; 60 comp. gen. 15,',
4631:'26 1980; 27 comp. gen. 641 1948. other authorities supporting this general proposition are emery v. united states, 186 f.2d',
4632:'900, 902 9th cir., cert. denied, 341 u.s. 925 1951 money paid to the united states under court order as',
4633:'refund of overcharges by persons who had violated rent control legislation was held in trust for tenants and could be',
4634:'disbursed to them without need for appropriation; varney v. warehime, 147 f.2d 238, 245 6th cir., cert. denied, 325 u.s.',
4635:'882 1945 assessments levied against milk handlers to defray certain wartime expenses were trust funds and did not have to',
4636:'be covered into the treasury; 62 comp. gen. 245, 251–52 1983 proceeds from sale of certain excess stockpile materials where',
4637:'federal agency was acting on behalf of foreign government; b223146, oct. 7, 1986 moneys received by pension benefit guaranty corporation',
4638:'when acting in its trustee capacity; b23647, feb. 16, 1942 taxes and fines collected in foreign territories occupied by american',
4639:'armed forces. in addition, receipts generated by activities financed with trust funds are generally credited to the trust fund and',
4640:'not deposited as miscellaneous receipts. united states v. sinnott, 26 f. 84 d. ore. 1886 proceeds from sale of lumber',
4641:'made at indian sawmill were to be applied for benefit of indians and were not subject to 31 u.s.c. §',
4642:'3302b; b166059, july 10, 1969 recovery for damage to property purchased with trust funds. see also 50 comp. gen. 545,',
4643:'547 1971. in 51 comp. gen. 506 1972, gao advised the smithsonian institution that receipts generated by various activities at',
4644:'the national zoo need not be deposited as miscellaneous 183 chapter 17, section d discusses trust funds in far greater',
4645:'detail. see also 31 u.s.c. §§ 1321–1323. page 6208 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount receipts.',
4646:'the smithsonian is financed in part by trust funds and in part by appropriated funds. in a 1991 case, an',
4647:'agency had discovered a $10,000 bank account belonging to an employee morale club which had become defunct. no documentation of',
4648:'the club’s creation or dissolution could be located. thus, if the club had ever provided for the disposition of its',
4649:'funds, it could no longer be established. clearly, the money was not received for the use of the government for',
4650:'purposes of 31 u.s.c. § 3302b. it was equally clear that the money could not be credited to the agency’s',
4651:'appropriations. gao advised that the money could be turned over to a successor employee morale organization to be used for',
4652:'its intended purposes. if no successor organization stepped forward, the funds would have to be deposited in a treasury trust',
4653:'account in accordance with 31 u.s.c. § 1322. b241744, may 31, 1991 nondecision letter. there are limits on the extent',
4654:'to which trust funds can legitimately avoid the application of 31 u.s.c. § 3302b. the justice department’s office of legal',
4655:'counsel has cautioned against carrying the trust theory too far in the case of trusts created by executive action rather',
4656:'than statute. for example, the united states and the commonwealth of virginia sued a transportation company for causing an oil',
4657:'spill in the chesapeake bay. a settlement was proposed under which the defendant would donate money to a private waterfowl',
4658:'preservation organization. the justice department’s office of legal counsel found that the proposal would contravene 31 u.s.c. § 3302b. 4b',
4659:'op. off. legal counsel 684 1980. the opinion did not question that section 3302b could be overcome by a statutorily',
4660:'created trust or in other circumstances where money is “given to the government which is not available to the united',
4661:'states for disposition on its own behalf.” id. at 687. however, it listed the following weaknesses in a nonstatutory trust',
4662:'argument: “1 that trusts created by nonstatutory executive action could indeed be used to circumvent legislative prerogatives in the appropriations',
4663:'area; 2 that to some extent all money held in the treasury . . . is received ‘in trust’ for',
4664:'the citizenry and 3 that congress has created or recognized trust funds explicitly in numerous cases and implicitly in others,',
4665:'but it has neglected to do so in this context.” id. at 687–68 footnotes omitted. page 6209 gao06382sp appropriations law—vol.',
4666:'ii chapter 6 availability of appropriations: amount the opinion also noted that the applicability of section 3302b was not affected',
4667:'simply because the government did not physically receive any funds. rather, “constructive receipt” of funds is sufficient to trigger the',
4668:'statute: “in our view, the fact that no cash actually touches the palm of a federal official is irrelevant for',
4669:'purposes of § [3302b], if a federal agency could have accepted possession and retains discretion to direct the use of',
4670:'the money. the doctrine of constructive receipt will ignore the form of a transaction in order to get to its',
4671:'substance. . . . since we believe that money available to the united states and directed to another recipient is',
4672:'constructively ‘received’ for purposes of § [3302b], we conclude that the proposed settlement is barred by that statute.” id. at',
4673:'688. there was a solution in that case, however. since the united states had not suffered any monetary loss, it',
4674:'was not required to seek damages. the proposed contribution by the defendant could be attributed to the coplaintiff, virginia, which',
4675:'of course was not subject to 31 u.s.c. § 3302b. id.184 along the lines of the office of legal counsel',
4676:'opinion discussed above, the court in motor coach industries, inc. v. dole, 725 f.2d 958 4th cir. 1984, rejected a',
4677:'nonstatutory trust arrangement developed by the federal aviation administration faa in order to finance increased surface transportation to dulles international',
4678:'airport. faa agreed to waive landing fees it charged airlines using dulles if they agreed to establish and contribute to',
4679:'an “air carriers trust fund,” which would be used to purchase additional ground transport buses to serve dulles. the court',
4680:'observed: “[t]he trust arrangement both undermined the integrity of the congressional appropriation process and ignored substantive duties under the procurement',
4681:'statutes. viewed realistically, the trust was an attempt by the faa to divert 184 the opinion noted that the proposed',
4682:'settlement would be authorized under subsequent amendments to the governing legislation. page 6210 gao06382sp appropriations law—vol. ii i. fines and',
4683:'penalties chapter 6 availability of appropriations: amount funds from their intended destination—the united states treasury. although the purpose for which',
4684:'the faa sought the funds was laudable, its methods certainly cannot be praised. were the contract between the trust and',
4685:'[the transport company] left intact, the agency’s endrun around the normal appropriation channels would have been successful, enabling it effectively',
4686:'to supplement its budget by $3 million without congressional action.” 725 f.2d at 968 footnote omitted. generally speaking, moneys collected',
4687:'as a fine or penalty must be deposited in the treasury as miscellaneous receipts pursuant to 31 u.s.c. § 3302b.',
4688:'e.g., b281064, feb. 14, 2000 double or treble damages under the false claims act, which constitute “exemplary” or punitive rather',
4689:'than compensatory damages; 70 comp. gen. 17 1990 civil penalties assessed against nuclear regulatory commission licensees; 69 comp. gen. 260',
4690:'1990 penalties—as opposed to the recovery of actual losses—under the false claims act; 47 comp. gen. 674 1968 dishonored checks;',
4691:'b235577.2o.m., nov. 9, 1989 civil penalties under food stamp act. in b210210, sept. 14, 1983, the comptroller general held that',
4692:'the commodity futures trading commission lacked authority to enter into a settlement agreement under which a party charged with violation',
4693:'of the commodity exchange act would donate funds to an educational institution with no relationship to the violation. the decision',
4694:'pointed out that monetary penalties imposed by the commission were subject to deposit into the treasury under 31 u.s.c. §',
4695:'3302b and rejected the commission’s characterization of the donation as a “voluntary contribution” as opposed to a “penalty”: “despite the',
4696:'statement that the donations would not supplant the commission’s regular practice of imposing monetary penalties as part of a settlement,',
4697:'it is difficult to distinguish the proposed donations from money penalties. the money would be donated as a result of',
4698:'an enforcement action and in consideration of not imposing some further sanction or penalty. it is difficult for us to',
4699:'conceive of a situation under the proposed plan where one making the payment would not consider the payment a penalty.”',
4700:'page 6211 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount j. miscellaneous cases: money to treasury another case',
4701:'concluded that, without statutory authority, permitting a party who owes a penalty to contribute to a research project in lieu',
4702:'of paying the penalty amounts to a circumvention of 31 u.s.c. § 3302b and improperly augments the agency’s research appropriations.',
4703:'70 comp. gen. 17 1990. a case saying essentially the same thing in the context of clean air act violations',
4704:'is b247155, july 7, 1992, aff’d on reconsideration, b247155.2, mar. 1, 1993. gao considered similar issues in several cases involving',
4705:'consent orders between the department of energy and oil companies charged with violation of federal oil price and allocation regulations.',
4706:'the department has limited authority to use recovered overcharge funds for restitution purposes, and in fact has a duty to',
4707:'attempt restitution. however, to the extent this cannot reasonably be accomplished or funds remain after restitution efforts have been exhausted,',
4708:'the funds may not be used for energyrelated programs with no restitution nexus but must be deposited in the treasury',
4709:'pursuant to 31 u.s.c. § 3302b. 62 comp. gen. 379 1983; 60 comp. gen. 15 1980. it is equally unauthorized',
4710:'to give the funds to charity or to use them to augment appropriations for administering the overcharge refund program. b200170,',
4711:'apr. 1, 1981. to the same effect is united states v. smithfield foods, inc., 982 f. supp. 373 e.d. va.',
4712:'1997. smithfield was assessed a civil penalty of over $12 million for violating the clean water act. the trial judge',
4713:'initially ordered the government to submit a proposal for “allocation” of the penalty with an emphasis on directing all or',
4714:'part of the penalty toward restoration of the chesapeake bay and its tributaries. the government responded that, since the clean',
4715:'water act did not specify an alternative disposition, the penalty must be paid into the treasury pursuant to 31 u.s.c.',
4716:'§ 3302b. the court “regretfully agree[d]” that the penalty proceeds could not be directed toward local environmental projects. smithfield foods,',
4717:'982 f. supp. at 375. in addition to the categories discussed above, there have been numerous other decisions involving the',
4718:'disposition of receipts in various contexts. some cases in which the comptroller general held that receipts of a particular type',
4719:'must be deposited in the treasury as miscellaneous receipts under 31 u.s.c. § 3302b or related statutes are set forth',
4720:'below. costs awarded to the united states by a court under 28 u.s.c. § 2412. 47 comp. gen. 70 1967.',
4721:'page 6212 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount interest earned on grant advances by grantees other',
4722:'than states. e.g., 69 comp. gen. 660 1990. interest earned by grantees on unauthorized loans of grant funds. 71 comp.',
4723:'gen. 387 1992. interest improperly earned on federal grant funds by various agencies of the district of columbia government. b283834,',
4724:'feb. 24, 2000. reimbursements received for child care services provided by federal agencies for their employees under authority of 40',
4725:'u.s.c. § 590. 67 comp. gen. 443, 448–49 1988. receipts generated by undercover operations by law enforcement agencies. 67 comp.',
4726:'gen. 353 1988; 4b op. off. legal counsel 684, 686 1980. in gao’s opinion, however, shortterm operations a card game',
4727:'or dice game, for example may be treated as single transactions. 67 comp. gen. 353, clarifying b201751, feb. 17, 1981.',
4728:'thus, 31 u.s.c. § 3302b need not be read as requiring an undercover agent participating in a card game to',
4729:'leave the table to make a miscellaneous receipts deposit after every winning hand. if, however, the agent ends up with',
4730:'winnings at the end of the game, the money cannot be used to offset expenses of the operation.185 related cases',
4731:'are 5 comp. gen. 289 1925 and 3 comp. gen. 911 1924 moneys used to purchase evidence for use in',
4732:'criminal prosecutions and recovered when no longer needed for that purpose must be deposited as miscellaneous receipts. proceeds from silver',
4733:'and gold sold as excess property by the interior department as successor to the american revolutionary bicentennial administration. the silver',
4734:'and gold had been obtained by melting down unsold commemorative medals which had been struck by the 185 the federal',
4735:'bureau of investigation and the drug enforcement administration now have statutory authority to retain and use the proceeds from undercover',
4736:'operations, subject to certain conditions. see pub. l. no. 102395, § 102b, 106 stat. 1838 oct. 10, 1992, which was',
4737:'continued in effect by pub. l. no. 104132, § 815d, 110 stat. 1315 apr. 24, 1996, and extended to the',
4738:'bureau of alcohol, tobacco, firearms, and explosives by pub. l. no. 108447, div. b, title i, § 116, 118 stat.',
4739:'2809, 2870 dec. 8, 2004. see 28 u.s.c. § 533 note. other agencies have similar authority. see also 8 u.s.c.',
4740:'§ 1363aa3 immigration and naturalization service; 19 u.s.c. § 2081a2 customs service; 26 u.s.c. § 7608c1b and c internal revenue',
4741:'service. page 6213 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount treasury department for sale by the american',
4742:'revolutionary bicentennial administration. b200962, may 26, 1981. income derived from oil and gas leases on “acquired lands” as distinguished from',
4743:'“public domain lands” of the united states used for military purposes. b203504, july 22, 1981. k. miscellaneous cases: most cases',
4744:'in which an agency may credit receipts to its own appropriation money retained by agency or fund involve the areas',
4745:'previously discussed: authorized repayments, economy act transactions, revolving funds, or the other specific situations noted. there is another group of',
4746:'cases, not susceptible to further generalization, in which an agency simply has specific statutory authority to retain certain receipts. examples',
4747:'are: forest service may retain moneys paid by permittees on national forest lands representing their pro rata share under cooperative',
4748:'agreements for the operation and maintenance of waste disposal systems under the grangerthye act, 16 u.s.c. § 572 1970. 55',
4749:'comp. gen. 1142 1976. customs service may, under 19 u.s.c. § 1524, retain charges collected from airlines for preclearance of',
4750:'passengers and baggage at airports in canada, for credit to the appropriation originally charged with providing the service. 48 comp.',
4751:'gen. 24 1968. overseas private investment corporation may retain interest on loans of excess foreign currencies made under the foreign',
4752:'assistance act of 1961, as amended, 22 u.s.c. § 2196. 52 comp. gen. 54 1972. the african development foundation, by',
4753:'virtue of its statutory giftacceptance authority, may retain funds it receives from certain african governments in order to supplement its',
4754:'grants. b300218, mar. 17, 2003. payroll deductions for governmentfurnished quarters under 5 u.s.c. § 5911 are retained in the appropriations',
4755:'or funds from which the employee’s salary is paid. 59 comp. gen. 235 1980, as modified by 60 comp. gen.',
4756:'659 1981. however, if the employee pays directly rather than by payroll deduction, the direct payments must go to page',
4757:'6214 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount miscellaneous receipts unless the agency has specific statutory authority',
4758:'to retain them. 59 comp. gen. at 236.186 under the mineral lands leasing act of 1920, 30 u.s.c. § 191,',
4759:'receipts from the sale or lease of public lands are distributed in the manner specified in the statute. this was',
4760:'held to include the proceeds of bid deposits forfeited by successful mineral lease bidders who fail to execute the lease.',
4761:'65 comp. gen. 570 1986. by virtue of provisions in the job training partnership act187 and annual appropriation acts, certain',
4762:'receipts generated by job corps centers may be retained for credit to the labor department appropriation from which the centers',
4763:'are funded. 65 comp. gen. 666 1986. legislation establishing the commission on the bicentennial of the united states constitution authorized',
4764:'the commission to retain revenues derived from its licensing activities but did not address sales revenues. sales revenues, therefore, had',
4765:'to be deposited as miscellaneous receipts. b228777, aug. 26, 1988. in the occasional case, the authority may be less than',
4766:'specific. in b114860, mar. 20, 1975, for example, based on the broad authority of the national housing act, gao advised',
4767:'that the department of housing and urban development could require security deposits from tenants in hudowned multifamily projects. consistent with',
4768:'practice in the private sector, the deposit would be considered the property of the tenant and held in an escrow',
4769:'account, to be either returned to the tenant upon completion of the lease or forfeited to the government in cases',
4770:'of breach. a final case we will note is 24 comp. gen. 514 1945, an exception stemming from the particular',
4771:'funding arrangement involved rather than a specific statute. the case dealt with certain government corporations that did not receive annual',
4772:'appropriations but instead received annual authorizations for expenditures from their capital funds for administrative expenses. an appropriation act had imposed',
4773:'a limit on certain 186 for agencies funded under the annual interior department and related agencies appropriation acts, the rentals,',
4774:'whether collected by payroll deduction or otherwise, go into a “special fund” maintained by each agency to be used for',
4775:'maintenance and operation of the quarters. 5 u.s.c. § 5911 note. 187 pub. l. no. 97300, 96 stat. 1324 oct.',
4776:'13, 1982. page 6215 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount l. money erroneously deposited as miscellaneous',
4777:'receipts communication expenditures and provided that savings resulting from the limit “shall not be diverted to other use but shall',
4778:'be covered into the treasury as miscellaneous receipts.” the comptroller general construed this as meaning returned to the source from',
4779:'which made available. in the case of the corporations in question, this meant that the savings could be returned to',
4780:'their capital funds. the various accounts that comprise the heading “miscellaneous receipts” are just that—they are receipt accounts, not expenditure',
4781:'or appropriation accounts. as noted earlier, by virtue of the constitution, once money is deposited into miscellaneous receipts, it takes',
4782:'an appropriation to get it back out. what, therefore, can be done if an agency deposits some money into miscellaneous',
4783:'receipts by mistake? this question really involves two separate situations. in the first situation, an agency receives funds which it',
4784:'is authorized, under the principles discussed above, to credit to its own appropriation or fund, but erroneously deposits them as',
4785:'miscellaneous receipts. the decisions have always recognized that the agency can make an appropriate adjustment to correct the error. in',
4786:'an early case, the interior department sold some property and deposited the proceeds as miscellaneous receipts when in fact it',
4787:'was statutorily authorized to credit the proceeds to its reclamation fund. the interior department then requested a transfer of the',
4788:'funds back to the reclamation fund, and the secretary of the treasury asked the comptroller of the treasury if it',
4789:'was authorized. of course it was, replied the comptroller: “this is not taking money out of the treasury in violation',
4790:'of paragraph 7, section 9, article i of the constitution . . . . “the proceeds of the sale .',
4791:'. . have been appropriated by law. taking it from the treasury and placing it to the credit in the',
4792:'treasury of the appropriation to which it belongs violates neither the constitution nor any other law, but simply corrects an',
4793:'error by which it was placed to the unappropriated surplus instead of to the appropriation to which it belongs.” 12',
4794:'comp. dec. 733, 735 1906. page 6216 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount this concept has',
4795:'consistently been followed. see 45 comp. gen. 724 1966; 3 comp. gen. 762 1924; 2 comp. gen. 599 1923. cf.',
4796:'b275490, dec. 5, 1996.188 the concept also has been applied to permit correction of some errors in accounts that had',
4797:'been closed and their balances canceled pursuant to 31 u.s.c. §§ 1552 or 1555. see 72 comp. gen. 343 1993.',
4798:'this decision held that, while canceled balances cannot be restored for purposes of recording obligations or making disbursements, bookkeeping records',
4799:'of closed accounts can be adjusted to correct obvious accounting errors. the decision was prompted by the defense department’s request',
4800:'that the treasury department reopen some of its accounts in order to record disbursements against those accounts for payments that,',
4801:'according to defense, had been made from those accounts before cancellation but had not been properly charged against the accounts.',
4802:'the decision emphasized that— “treasury’s authority to correct the accounts relates only to obvious clerical errors such as misplaced decimals,',
4803:'transposed digits, or transcribing errors that result in inadvertent cancellations of budget authority, and is not meant to serve as',
4804:'a palliative for deficiencies in dod’s accounting systems.” 72 comp. gen. at 346. a subsequent decision again stressed that while',
4805:'patently erroneous appropriation transactions can and often must be corrected, the authority to make corrections “extends only to clerical and',
4806:'administrative errors, not all misjudgments and miscalculations by government officials.” b286661, jan. 19, 2001, at fn. 5. in the second',
4807:'situation, a private party pays money to a federal agency, the agency deposits it as miscellaneous receipts, and it is',
4808:'subsequently determined that the party is entitled to a refund. here, in contrast to the first situation, an appropriation is',
4809:'necessary to get the money out. e.g., 3 comp. gen. 296 1923. 188 the reverse adjustment is made when funds',
4810:'which should have been deposited as miscellaneous receipts are erroneously credited to an appropriation. the remedy is a transfer from',
4811:'the appropriation to the appropriate miscellaneous receipts account. e.g., b48722, apr. 16, 1945. page 6217 gao06382sp appropriations law—vol. ii chapter',
4812:'6 availability of appropriations: amount there is a permanent indefinite appropriation for refunding collections “erroneously received and covered” that are',
4813:'not properly chargeable to any other appropriation. 31 u.s.c. § 1322b2. the availability of this appropriation depends on exactly where',
4814:'the receipts were deposited. if the amount subject to refund was credited to some specific appropriation account, the refund is',
4815:'chargeable to the same account. if, however, the receipt was deposited in the general fund as miscellaneous receipts, then the',
4816:'appropriation made by 31 u.s.c. § 1322b2 is available for the refund, provided that the amount in question was “erroneously',
4817:'received and covered.” b257131, may 30, 1995; 71 comp. gen. 464 1992; 61 comp. gen. 224 1982; 55 comp. gen.',
4818:'625 1976; 17 comp. gen. 859 1938. also, the 31 u.s.c. § 1322b appropriation is not available as a source',
4819:'for adjusting an erroneous intragovernmental transfer between two appropriation accounts since such an adjustment does not involve a “refund” of',
4820:'funds “erroneously received” by the government. b286661, jan. 19, 2001, at fn. 6. examples of cases in which use of',
4821:'the “moneys erroneously received and covered” appropriation was found authorized are 71 comp. gen. 464 1992 refund to investment company',
4822:'of late filing fee upon issuance of order by securities and exchange commission exempting company from filing deadline for fiscal',
4823:'year in question; 63 comp. gen. 189 1984 department of energy deposited overcharge recoveries from oil companies into general fund',
4824:'instead of first attempting to use them to make restitution refunds; b217595, apr. 2, 1986 interest collections subsequently determined to',
4825:'have been erroneous. one case, 53 comp. gen. 580 1974, combined elements of both situations. the army corps of engineers',
4826:'had been authorized to issue discharge permits under the refuse act permit program. the program was statutorily transferred in 1972',
4827:'to the environmental protection agency. under the user charge statute, 31 u.s.c. § 9701, both the corps and epa had',
4828:'charged applicants a fee. in some cases, the fees had been deposited as miscellaneous receipts before the applications were processed.',
4829:'the legislation that transferred the program to epa also provided that epa could authorize states to issue the permits. however,',
4830:'there was no provision that authorized epa to transfer to the states any fees already paid. thus, some applicants found',
4831:'that they had paid a fee to the corps or epa, received nothing for it, and were now being charged',
4832:'a second fee by the state for the same application. epa felt that the original fees should be refunded. so',
4833:'did the applicants. page 6218 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount gao noted that the user',
4834:'charge statute contemplates that the federal agency will furnish something in exchange for the fee. since this had not been',
4835:'done, the fees could be viewed as having been erroneously deposited in the general fund. however, the fees had not',
4836:'been erroneously received—the corps and epa had been entirely correct in charging the fees in the first place—so the appropriation',
4837:'made by 31 u.s.c. § 1322b2 could not be used. there was a way out, but the refunds would require',
4838:'a twostep process. the corps and epa should have deposited the fees in a trust account189 and kept them there',
4839:'until the applications were processed, at which time depositing as miscellaneous receipts would have been proper. thus, epa could first',
4840:'transfer the funds from the general fund to its suspense account as the correction of an error, and then make',
4841:'the refunds directly from the suspense account. in cases where the “moneys erroneously received and covered” appropriation is otherwise available,',
4842:'it is available without regard to whether the original payment was made under protest. 55 comp. gen. 243 1975. the',
4843:'appropriation made by 31 u.s.c. § 1322b2 for refund of moneys erroneously received and covered is available only to refund',
4844:'amounts actually received and deposited. if a given refund bears interest, for example, a refund claim approved by a contracting',
4845:'officer under the contract disputes act, the interest portion must be charged to the contracting agency’s operating appropriations for the',
4846:'fiscal year in which the award is made. b217595, apr. 2, 1986. if an agency collects money from someone to',
4847:'whom it owes a refund from a prior transaction, it should not simply deposit the net amount. the correct procedure',
4848:'is to deposit the new receipt into the general fund assuming that is the proper receptacle, and then make the',
4849:'refund using the “moneys erroneously received and covered” appropriation. b19882, oct. 28, 1941; a96279, sept. 15, 1938. however, gao has',
4850:'approved offsetting a refund against future amounts due from the same party in cases where there is a continuing relationship,',
4851:'but suggested that the party be given the choice. b217595, apr. 2, 1986, at 4. 189 see also b3596, a51615,',
4852:'nov. 30, 1939. use of a deposit fund suspense account is equally acceptable. b158381, june 21, 1968. page 6219 gao06382sp',
4853:'appropriations law—vol. ii chapter 6 availability of appropriations: amount clearly, if the receipt cannot be regarded as erroneous, 31 u.s.c.',
4854:'§ 1322b2 is not available. e.g., lee v. united states, 33 fed. cl. 374 1995; 53 comp. gen. 580 1974;',
4855:'b146111, july 6, 1961. citing several of the comptroller general decisions discussed previously, the court in lee held that a',
4856:'filing fee appropriately paid by a litigant and deposited into the treasury was not subject to refund under section 1322b2.',
4857:'lee, 33 fed. cl. at 381–84. also, the “moneys erroneously received and covered” appropriation is available only where the amount',
4858:'to be refunded was deposited into the general fund. e.g., 11 comp. dec. 300 1904. if a refund is due',
4859:'of moneys deposited somewhere other than the general fund, some other basis must be sought. republic national bank of miami',
4860:'v. united states, 506 u.s. 80 1992, and the varied opinions of the justices it spawned, illustrate how perplexing the',
4861:'issues can be when it comes to retrieving from the treasury funds that should not have been deposited there. republic',
4862:'national bank was an “in rem” forfeiture action against property a house that the government alleged had been purchased with',
4863:'income from illegal drug trafficking. the bank intervened, claiming to be an innocent owner of the property by virtue of',
4864:'its mortgage interest. with the consent of the bank, the property was sold and the proceeds were held by the',
4865:'u.s. marshal pending the outcome of the litigation. the trial court rejected the bank’s claim and ordered the sale proceeds',
4866:'forfeited to the united states. the bank appealed; however, when it did not seek to stay execution of the judgment',
4867:'the government had the marshal deposit the sales proceeds into the assets forfeiture fund of the treasury. once this occurred,',
4868:'the government sought to dismiss the appeal as moot. the government argued that since the proceeds were now in the',
4869:'treasury, they could not be withdrawn without an appropriation and, thus, the courts could provide no remedy to the bank.',
4870:'when the case reached the supreme court, all of the justices rejected the government’s argument and agreed that the bank',
4871:'could be paid if it prevailed on the merits. however, they were deeply split as to the rationale. justice blackmun,',
4872:'author of most of the court’s opinion in republic national bank, characterized the government’s position as being that, by virtue',
4873:'of the constitution’s appropriations clause, “absent an appropriation, any funds that find their way into a treasury account must remain',
4874:'there, regardless of their ownership.” 506 u.s. at 89. rejecting this position as producing “bizarre” and “absur[d]” results, justice blackmun',
4875:'concluded that an appropriation was not necessary. he reasoned that money involved in a pending in rem forfeiture proceeding could',
4876:'not be page 6220 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount regarded as “public funds” within the',
4877:'scope of the appropriations clause where the very purpose of the proceeding was to sort out their proper ownership. furthermore,',
4878:'he observed: “contrary to the government’s broad submission here, the comptroller general has long assumed that, in certain situations, an',
4879:'erroneous deposit of funds into a treasury account can be corrected without a specific appropriation. see 53 comp. gen. 580',
4880:'1974; 45 comp. gen. 724 1966; 3 comp. gen. 762 1924; 12 comp. dec. 733, 735 1906; principles of federal',
4881:'appropriations law, at 579 to 581. most of these cases have arisen where money intended for one account was accidentally',
4882:'deposited in another. it would be unrealistic, for example, to require congressional authorization before a data processor who misplaces a',
4883:'decimal point can ‘undo’ an inaccurate transfer of treasury funds. the government’s absolutist view of the scope of the appropriations',
4884:'clause is inconsistent with these commonsense understandings.” republic national bank, 506 u.s. at 92. however, chief justice rehnquist, joined by',
4885:'four other justices, wrote the opinion of the court on this point. the chief justice expressed “difficulty accepting the proposition',
4886:'that funds which have been deposited into the treasury are not public money, regardless of whether the government’s ownership of',
4887:'those funds is disputed.” id. at 93. he added, “even if there are circumstances in which funds that have been',
4888:'deposited into the treasury may be returned absent an appropriation, i believe it unnecessary to plow that uncharted ground here.”',
4889:'id. at 95. instead, he concluded that the judgment fund appropriation under 31 u.s.c. § 1304 would be available to',
4890:'provide a source of payment if the bank prevailed in the case. justice blackmun had rejected the chief justice’s judgment',
4891:'fund rationale for two reasons. first, he viewed the judgment fund as being limited to the payment of money judgments.',
4892:'second, he pointed out that the proceeds from the in rem action were not in the judgment fund. rather, they',
4893:'were in page 6221 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount the treasury assets forfeiture fund. see',
4894:'republic national bank, 506 u.s. at 91, fn. 6.190 finally, in their separate opinions, justice white and justice stevens both',
4895:'expressed displeasure over the need to address the appropriations clause issue, indicating surprise that the government would advance “such a',
4896:'transparently fallacious position.” see 506 u.s. at 97–99. 3. gifts and donations to the government a. donations to the government',
4897:'it has long been recognized that the united states as opposed to a particular agency may receive and accept gifts.',
4898:'no particular statutory authority is necessary. as the supreme court has said: “uninterrupted usage from the foundation of the government',
4899:'has sanctioned it.” united states v. burnison, 339 u.s. 87, 90 1950. the gifts may be of real property or',
4900:'personal property, and they may be testamentary made by will or inter vivos made by persons who are not dead',
4901:'yet. monetary gifts to the united states go to the general fund of the treasury and present no augmentation problem',
4902:'since there is no appropriation to augment. however, as the supreme court held in the burnison case, a state may',
4903:'prohibit testamentary gifts by its domiciliaries to the united states. also, a state may impose an inheritance tax on property',
4904:'bequeathed to the united states. united states v. perkins, 163 u.s. 625 1896. the tax is not regarded as a',
4905:'constitutionally impermissible tax on federal property “since the tax is imposed upon the legacy before it reaches the hands of',
4906:'the government. the legacy becomes the property of the united states only after it has suffered a diminution to the',
4907:'amount of the tax . . . .” id. at 630. while gifts to the united states do not require',
4908:'statutory authority, gifts to an individual federal agency stand on a different footing. the rule is that a government agency',
4909:'may not accept for its own use i.e., for retention by the agency or credit to its own appropriations gifts',
4910:'of money or other 190 in b259065, dec. 21, 1995, the comptroller general sided with justice blackmun on this point,',
4911:'holding that awards against the united states for the return of forfeited cash or cash proceeds of forfeited property that',
4912:'had been deposited in the justice department’s assets forfeiture fund should be satisfied from that fund. page 6222 gao06382sp appropriations',
4913:'law—vol. ii chapter 6 availability of appropriations: amount property in the absence of specific statutory authority. 16 comp. gen. 911',
4914:'1937. as the comptroller general said in that decision, “[w]hen the congress has considered desirable the receipt of donations .',
4915:'. . it has generally made specific provision therefor . . . .” id. at 912. see also b286182, jan.',
4916:'11, 2001; b289903, mar. 4, 2002 nondecision letter. thus, acceptance of a gift of money or other property by an',
4917:'agency lacking statutory authority to do so is an improper augmentation. e.g., b286182, jan. 11, 2001 district of columbia courts',
4918:'statutory giftacceptance authority permitted receipt of a private company’s contribution of telecommunications services and equipment. if an agency does not',
4919:'have statutory authority to accept donations of money, it must turn the money in to the treasury as miscellaneous receipts.',
4920:'e.g., b139992, aug. 31, 1959 proceeds of life insurance policy designating federal agency as beneficiary. under the federal property and',
4921:'administrative services act of 1949, as amended, agencies without gift retention authority must report gifts of property to the general',
4922:'services administration gsa and the property is treated in accordance with its regulations. see 40 u.s.c. § 121; 41 c.f.r.',
4923:'§§ 10236.410 and 10236.415 2005. gifts from foreign governments or entities must also be reported to gsa and treated in',
4924:'accordance with 41 c.f.r. § 10236.420 and part 10149. for purposes of this discussion, the term “gifts” may be defined',
4925:'as “gratuitous conveyances or transfers of ownership in property without any consideration.” b286182, jan. 11, 2001; 25 comp. gen. 637,',
4926:'639 1946; b217909, sept. 22, 1986. a receipt that does not meet this definition does not become a gift merely',
4927:'because the agency characterizes it as one. for example, a fee paid for the privilege of filming a motion picture',
4928:'in a national park is not a gift and must be deposited as miscellaneous receipts rather than in the agency’s',
4929:'trust fund. 25 comp. gen. 637. see also b89294, aug. 6, 1963. similarly, a reduction of accrued liability in fulfillment',
4930:'of a contractual obligation is not a donation for purposes of a statute authorizing appropriations to match “donations.” b183442, oct.',
4931:'21, 1975 statute indicated that only gifts may be matched and payment in satisfaction of a contractual debt is not',
4932:'a gift. on the other hand, some payments that are not wholly voluntary or gratuitous may occasionally qualify for acceptance',
4933:'as gifts or contributions. see b286182, jan. 11, 2001 district of columbia court system may accept and use a contribution',
4934:'of telecommunication services and equipment from a telecommunication company as part of a settlement agreement in a rate case; b232482,',
4935:'june 4, 1990 payments of fees by nongovernment participants for services provided as part of department of commercesponsored international page',
4936:'6223 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount trade shows are considered “contributions” under specific language in',
4937:'commerce’s appropriation act. a number of departments and agencies have statutory authority to accept gifts. a partial listing is contained',
4938:'in b149711, aug. 20, 1963 although dated, b149711 is still useful since there is no more recent comprehensive compilation of',
4939:'these authorities. the statutory authorizations contain varying degrees of specificity as to precisely what may be accepted money, property, services,',
4940:'etc.. for example, the state department’s general gift statute, 22 u.s.c. § 2697, authorizes the state department to accept gifts',
4941:'of money or property, real or personal, and, in the secretary’s discretion, conditional gifts. a case discussing this statute is',
4942:'67 comp. gen. 90 1987 united states information agency may accept donations of radio programs prepared by private syndicators for',
4943:'broadcast over voice of america facilities. another is 70 comp. gen. 413 1991 united states information agency may accept donations',
4944:'of foreign debt. authority to accept voluntary services does not include donations of cash. a86115, july 15, 1937; a51627, mar.',
4945:'15, 1937. for a further discussion of voluntary services, see section c.3 of this chapter. the authority of the defense',
4946:'department to accept gifts is found in several statutes. first, the defense department may accept contributions of money or real',
4947:'or personal property “for use by the department of defense” from any person, foreign government, or international organization. the money',
4948:'and proceeds from the sale of property are credited to the defense cooperation account in the treasury. the money is',
4949:'not automatically available to defense, but is available for obligation or expenditure only in the manner and to the extent',
4950:'provided in appropriation acts. 10 u.s.c. § 2608. second, the department may accept services, supplies, real property, or the use',
4951:'of real property under a mutual defense or similar agreement or as reciprocal courtesies, from a foreign government for the',
4952:'support of any element of united states armed forces in that country. 10 u.s.c. § 2350g. these authorities formed the',
4953:'basis for the united states to accept contributions from foreign governments and others to defray the costs of the 1991',
4954:'military operations in the persian gulf. see gao, operations desert shield/storm: foreign government and individual contributions to the department of',
4955:'defense, gao/nsiad92144 washington, d.c.: may 11, 1992. other limitedpurpose authorities available to the military are found in 10 u.s.c. §§',
4956:'2601–2607. we also should note a statute tailormade for the philanthropist desiring to make a donation for the express purpose',
4957:'of reducing the national debt. page 6224 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount some people mistakenly',
4958:'think they already do this in april of each year. the secretary of the treasury may accept gifts of money,',
4959:'obligations of the united states, or other intangible personal property made for the express purpose of reducing the public debt.',
4960:'gifts of other real or personal property for the same purpose may be made to the administrator of the general',
4961:'services administration. 31 u.s.c. § 3113. assuming the existence of the requisite statutory authority, it is quite easy to make',
4962:'a gift to the government. the essential elements of a gift are donative intent, delivery, and acceptance. there are no',
4963:'particular forms required. a simple letter to the appropriate agency head transmitting the funds for the stated purpose will suffice.',
4964:'see b274855, jan. 23, 1997; b157469, july 24, 1974 nondecision letter. a 1980 gao study found that, during fiscal year',
4965:'1979, 41 government agencies received a total of $21.6 million classified as gift revenue. see gao, review of federal agencies’',
4966:'gift funds, fgmsd8077 washington, d.c.: sept. 24, 1980. the report pointed out that the use of gift funds dilutes congressional',
4967:'oversight because the funds do not go through the appropriation process. the report recommended that agencies be required to more',
4968:'fully disclose gift fund operations in their budget submissions. the issue raised in most gift cases is the purpose for',
4969:'which gift funds may be used. this ultimately depends on the scope of the agency’s statutory authority and the terms',
4970:'of the gift. gift funds are accounted for as trust funds. they generally must be deposited in the treasury as',
4971:'trust funds under 31 u.s.c. § 1321b, to be disbursed in accordance with the terms of the trust. in 16',
4972:'comp. gen. 650, 655 1937, the comptroller general stated: “where the congress authorizes federal officers to accept private gifts or',
4973:'bequests for a specific purpose, often subject to certain prescribed conditions as to administration, authority must of necessity be reposed',
4974:'in the custodians of the trust fund to make expenditures for administration in such a manner as to carry out',
4975:'the purposes of the trust and to comply with the prescribed conditions thereof without reference to general regulatory and prohibitory',
4976:'statutes applicable to public funds.” while this passage correctly states the trust fund concept, agencies have sometimes misconstrued it to',
4977:'mean that they have free and unrestricted use of donated funds. this is not the case. on the one hand,',
4978:'donated funds page 6225 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount may not be subject to all',
4979:'of the restrictions applicable to direct appropriations. yet on the other hand, gift funds constitute appropriated funds unless congress provides',
4980:'otherwise191 and they are still “public funds” in a very real sense. as gao stated in b274855, jan. 23, 1997:',
4981:'“[f]unds available to agencies are considered appropriated, regardless of their source, if they are made available for collection and expenditure',
4982:'pursuant to specific statutory authority. see b215042, april 12, 1985. this means that although donated funds may not be subject',
4983:'to all the restrictions applicable to direct appropriations, they are still public funds. see b197565, may 13, 1980.” id. at',
4984:'3. see also b275669.2, july 30, 1997. consequently, gift funds can be used only in furtherance of authorized agency purposes',
4985:'and incident to the terms of the trust. see b300218, mar. 17, 2003; b195492, mar. 18, 1980. an interesting illustration',
4986:'of this point occurred in b16406, may 17, 1941. a citizen had bequeathed money in her will to a hospital.',
4987:'when the will was made, the hospital belonged to the state of louisiana. by the time the will was probated,',
4988:'however, it had been acquired by the united states. louisiana was concerned that the bequest might, if deposited in the',
4989:'united states treasury, be diverted from the decedent’s intent. there was no need for concern, the comptroller general advised. the',
4990:'money would have to be deposited as trust funds and would be available for expenditure only for the purposes specified',
4991:'in the trust, that is, for the hospital. in evaluating the propriety of a proposed use of gift funds, it',
4992:'is first necessary to examine the precise terms of the statute authorizing the agency to accept the gift. limitations imposed',
4993:'by that statute must be followed. thus, under a statute which authorized the forest service to accept donations “for the',
4994:'purpose of establishing or operating any forest research facility,” the forest service could not turn over unconditional gift funds to',
4995:'a private foundation under a cooperative agreement, with the foundation to invest the funds and use the proceeds for purposes',
4996:'other than establishing or operating forest research facilities. 55 comp. gen. 1059 1976. see also b198730, dec. 10, 1986 funds',
4997:'donated to 191 see, e.g., 36 u.s.c. § 2307 specifically provides that funds donated to the united states holocaust memorial',
4998:'museum are not to be regarded as appropriated funds and are not subject to requirements or restrictions applicable to appropriated',
4999:'funds. page 6226 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount library of congress to further purposes of',
5000:'library’s center for the book could not be used for unrelated library programs; 40 op. att’y gen. 66 1941 library',
5001:'of congress could not, without statutory authority, share income from donated property with smithsonian institution. under a statute authorizing the',
5002:'federal board for vocational education to accept donations to be used “in connection with the appropriations hereby made or hereafter',
5003:'to be made, to defray the expenses of providing and maintaining courses of vocational rehabilitation,” the funds could be used',
5004:'only to supplement the board’s regular appropriations and could not be used for any expense not legally payable from the',
5005:'regular appropriation. the statute here conferred no discretion. 27 comp. dec. 1068 1921. if an agency is authorized to accept',
5006:'gifts, the funds may be used to augment a “not to exceed” earmark applicable to that purpose. b52501, nov. 9,',
5007:'1945. although the statute involved in b52501, the predecessor of 10 u.s.c. § 2608 noted above, no longer exists, the',
5008:'point of the decision is still valid. once it is determined that the proposed use will not contravene the terms',
5009:'of the agency’s authorizing statute, the agency will have some discretion under the trust fund concept. for example, donated funds',
5010:'may be used for entertainment only if the entertainment will further a valid function of the agency for which the',
5011:'donated funds were provided, if the government could not accomplish the function as effectively without the expenditure, and if the',
5012:'expenditure does not violate any restrictions imposed by the donor on the use of the funds. 46 comp. gen. 379',
5013:'1966; b195492, mar. 18, 1980; b170938, oct. 30, 1972; b142538, feb. 8, 1961. see also b152331, nov. 19, 1975 involving',
5014:'a trust fund which included both gift and nongift funds. it follows that donated funds may not be used for',
5015:'entertainment which does not bear a legitimate relationship to official agency purposes. 61 comp. gen. 260 1982, aff’d upon reconsideration,',
5016:'b206173, aug. 3, 1982 donated funds improperly used for breakfast for cabinet wives and secretary’s holiday party. the trust fund',
5017:'concept was also applied in 36 comp. gen. 771 1957. the alexander hamilton bicentennial commission had been given statutory authority',
5018:'to accept gifts and wanted to use the donations to award alexander hamilton commemorative scholarships. the commission was to have',
5019:'a brief existence and would not have sufficient time to administer the scholarship awards. the comptroller general held that the',
5020:'commission could, prior to the date of its expiration, transfer the funds to a page 6227 gao06382sp appropriations law—vol. ii',
5021:'chapter 6 availability of appropriations: amount responsible private organization for the purpose of enabling proper administration of the scholarship awards.',
5022:'the distinction between this case and 55 comp. gen. 1059, mentioned above, is that in 36 comp. gen. 771, the',
5023:'objective of transferring the funds to a private organization was to better carry out an authorized purpose. in 55 comp.',
5024:'gen. 1059, the objective was to enable the funds to be used for unauthorized purposes. another case illustrating permissible administrative',
5025:'discretion under the trust fund concept is b131278, sept. 9, 1957. a number of persons had made donations to st.',
5026:'elizabeth’s hospital to enable it to buy an organ for its chapel. the donors organ donors? had made the gifts',
5027:'on the condition that the hospital purchase a highquality expensive organ. when the hospital issued its invitation for bids on',
5028:'the organ, the specifications were sufficiently restrictive so as to preclude offers on lower quality organs. the decision found this',
5029:'to be entirely within the hospital’s discretion in using the gift funds in accordance with their terms. as noted above,',
5030:'however, the agency’s discretion in administering its gift funds is not unlimited. thus, for example, an agency may not use',
5031:'gift funds for purely personal items such as greeting cards that do not further agency purposes for which the gift',
5032:'funds were donated. 47 comp. gen. 314 1967. see also b195492, mar. 18, 1980 when an agency uses trust funds',
5033:'for what appear to be personal purposes, it has the burden of showing that this use furthers the trust purposes.',
5034:'the particular statutory scheme will determine the extent to which donated funds are subject to other laws governing the expenditure',
5035:'of public funds. in two cases, for example, where a designated activity was to be carried out solely or primarily',
5036:'with donated funds, gao found that the recipient agency could invest the gift funds in nontreasury interestbearing accounts and was',
5037:'not required to comply with the federal property and administrative services act of 1949 fpasa, 41 u.s.c. § 251–266, or',
5038:'the federal acquisition regulation far, 48 c.f.r. §§ 1.104 and 12.101. 68 comp. gen. 237 1989 christopher columbus quincentenary jubilee',
5039:'commission; b211149, dec. 12, 1985 holocaust memorial council. however, these cases were distinguished in b275669.2, july 30, 1997, in which',
5040:'gao determined that the american battle monuments commission charged with establishing the world war ii memorial must use donated funds',
5041:'for contracts in accordance with the fpasa and far since neither the authorizing legislation nor the legislative history indicated an',
5042:'intention to exempt the commission from such requirements. page 6228 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount',
5043:'gifts that would require the government to incur significant expenses in future years present special issues. although there are no',
5044:'recent cases, indications are that the agency needs specific statutory authority—not merely general authority to accept gifts—since the agency’s appropriations',
5045:'would not otherwise be available to make the future expenditures. for example, an individual made a testamentary gift to a',
5046:'united states naval hospital. the will provided that the money was to be invested in the form of a memorial',
5047:'fund, with the income to be used for specified purposes. the comptroller general objected to this, finding that the gift',
5048:'appeared to be conditional and that “the united states would become, in effect, a trustee for charitable uses, would never',
5049:'gain a legal title to the money, but would have the burden and obligation of administering in perpetuity a trust',
5050:'fund . . . .” 11 comp. gen. 355, 366 1932. also, absent specific authorization by congress, appropriations would not',
5051:'be available for the expenses of administering the trust. therefore, absent congressional authorization to accept the donation “as made,” it',
5052:'could not be accepted either by the naval hospital, id., or by the treasury department, a40707, dec. 15, 1936. see',
5053:'story v. snyder, 184 f.2d 454, 456 d.c. cir., cert. denied, 340 u.s. 866 1950 “gifts to the united states',
5054:'which involve any duty, burden, or condition, or are made dependent upon some future performance by the united states, are',
5055:'not accepted by the government unless by the express authority of congress”. see also 10 comp. gen. 395 1931; 22',
5056:'comp. dec. 465 1916;192 30 op. att’y gen. 527 1916. a few of the cases e.g., 10 comp. gen. 395',
5057:'and 30 op. att’y gen. 527 have tied the result to the antideficiency act prohibition against incurring obligations in advance',
5058:'of appropriations, reasoning that acceptance would, in effect, create an unauthorized and unfunded contractual commitment to incur future expenses. see',
5059:'10 comp. gen. at 398. a question that received little attention in the past is whether an agency with statutory',
5060:'authority to accept gifts may use either appropriated funds or donated funds to solicit the gifts. gao found that the',
5061:'holocaust memorial council may use either appropriated or donated funds to hire a fundraiser, but the cases have little precedential',
5062:'value since the legislation involved included specific authority to solicit as well as accept donations. see b211149, dec. 12, 1985;',
5063:'b211149, june 22, 1983. 192 some wag once said, jokingly we think, that if you looked hard enough you could',
5064:'probably find a case dealing with the use of appropriated funds to buy dog food. 22 comp. dec. 465 is',
5065:'it. page 6229 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount an interesting, and hopefully unique, situation presented',
5066:'itself in b230727, aug. 1, 1988. congress had enacted legislation to establish a commission on improving the effectiveness of the',
5067:'united nations, to be funded solely from private contributions. pub. l. no. 100204, title vii, pt. b, § 727, 101',
5068:'stat. 1331, 1394 dec. 22, 1987. the effective date of the legislation was march 1, 1989. unfortunately, the legislation failed',
5069:'to provide a mechanism for anyone treasury department or general services administration, for example to accept and account for donations',
5070:'prior to the effective date, and the commission itself could not do so since it had no legal existence. thus,',
5071:'unless the statute were amended to authorize some other agency to act on the commission’s behalf, potential donors could not',
5072:'make contributions prior to the effective date since there was no one authorized to accept them. in 1995, gao was',
5073:'asked whether, under the public health service’s gift acceptance statute, 42 u.s.c. § 238a, the national institutes of health nih,',
5074:'a component of the public health service, may use its appropriated funds to apply for grants from nongovernmental sources, a',
5075:'kind of solicitation of funds. gao determined that, since nih had the authority to accept grants as conditional gifts under',
5076:'the statute, it could use its appropriated funds to cover the costs incurred in applying for such grants. b255474, apr.',
5077:'3, 1995. finally, if an agency is authorized to accept gifts, it may also accept a loan of equipment by',
5078:'a private party without charge to be used in connection with particular government work. the agency’s appropriations for the work',
5079:'will be available for repairs to the equipment, but only to the extent necessary for the continued use of the',
5080:'equipment on the government work, and not after the government’s use has terminated. 20 comp. gen. 617 1941. in one',
5081:'case, gao approved the loan of private property to a federal agency by one of its employees, without charge and',
5082:'apparently without statutory authority, where the agency administratively determined that the equipment was necessary to the discharge of agency functions',
5083:'and the loan was in the interest of the united states. 22 comp. gen. 153 1942. the decision stressed, however,',
5084:'that the practice of borrowing property should not be encouraged since it might give rise to claims against the government',
5085:'or questions about favors received or expected by the persons loaning the property. the decision seems to have been based',
5086:'in part on wartime needs and its precedent value would therefore seem minimal. see, e.g., b168717, feb. 18, 1970. page',
5087:'6230 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount b. donations to individual 1 contributions to salary or',
5088:'expenses employees as a general proposition, unless authorized by statute, private contributions to the salary or expenses of a federal',
5089:'employee are improper. first, they may in some circumstances violate 18 u.s.c. § 209, which prohibits the supplementation of a',
5090:'government employee’s salary from private sources. “the evils of such, were it permitted, are obvious.” exchange national bank v. abramson,',
5091:'295 f. supp. 87, 90 d. minn. 1969. for purposes of 18 u.s.c. § 209, the proverb that it is',
5092:'better to give than to receive does not work. both the giving and the receiving are criminal offenses under the',
5093:'statute. the employee would presumably violate the law by receiving more than he or she is entitled to receive under',
5094:'applicable statutes and regulations. 33 op. att’y gen. 273, 275 1922 object of the predecessor to 18 u.s.c. § 209',
5095:'was that “no government official or employee should serve two masters to the prejudice of his unbiased devotion to the',
5096:'interests of the united states”. for further discussion of section 209, see the memorandum opinion for the general counsel, federal',
5097:'bureau of investigation, applicability of 18 u.s.c. § 209 to acceptance by fbi employees of benefits under the “make a',
5098:'dream come true” program, olc opinion, oct. 28, 1997. see also the office of government ethics, standards of ethical conduct',
5099:'for employees of the executive branch, 5 c.f.r. part 2635 2005 implementing 18 u.s.c. § 201, which prohibit an employee',
5100:'from accepting gifts from persons whose interests may be substantially affected by the employee. second, they are improper as unauthorized',
5101:'augmentations. to the extent the private contribution replaces the employee’s government salary, it is a direct augmentation of the employing',
5102:'agency’s appropriations. to the extent the contribution supplements the government salary, it is an augmentation in an indirect sense, the',
5103:'theory being that when congress appropriates money for an activity, all expenses of that activity must be borne by that',
5104:'appropriation unless congress specifically provides otherwise. an early case in point is 2 comp. gen. 775 1923. the american jewelers’',
5105:'protective association offered to pay the salary and expenses of a customs agent for one year on the condition that',
5106:'the agent be assigned exclusively for that year to investigate jewelry smuggling. the comptroller general found the arrangement improper, for',
5107:'the two reasons noted above. whether the payments were to be made directly to the employee or to the agency',
5108:'by way of reimbursement was immaterial. page 6231 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount most questions',
5109:'in this area involve schemes for private entities to pay official travel expenses. from the sheer number of cases gao',
5110:'has considered, one cannot help feeling that the bureaucrat must indeed be a beloved creature. a long series of decisions',
5111:'established the proposition that donations from private sources for official travel to conduct government business constituted an unlawful augmentation unless',
5112:'the employing agency had statutory authority to accept gifts. if the agency had such authority, the donation could be made',
5113:'to the agency, not the individual employee, and the agency would then reimburse the employee in accordance with applicable travel',
5114:'laws and regulations, with the allowances reduced as appropriate in the case of contributions in kind.193 one problem with this',
5115:'system was the lack of uniformity in treatment, varying with the agency’s statutory authority. congress addressed the situation in the',
5116:'ethics reform act of 1989, pub. l. no. 101194, § 302, 103 stat. 1716, 1745 nov. 30, 1989, codified at',
5117:'31 u.s.c. § 1353. subsection a provides as follows: “notwithstanding any other provision of law, the administrator of general services,',
5118:'in consultation with the director of the office of government ethics, shall prescribe by regulation the conditions under which an',
5119:'agency in the executive branch including an independent agency may accept payment, or authorize an employee of such agency to',
5120:'accept payment on the agency’s behalf, from nonfederal sources for travel, subsistence, and related expenses with respect to attendance of',
5121:'the employee or the spouse of such employee at any meeting or similar function relating to the official duties of',
5122:'the employee. any cash payment so accepted shall be credited to the appropriation applicable to such expenses. in the case',
5123:'of a payment in kind so accepted, a pro rata reduction shall be made in any entitlement of the employee',
5124:'to payment from the government for such expenses.” gsa’s implementing regulations are found at 41 c.f.r. chapter 304 2005. thus,',
5125:'as long as acceptance complies with the statute and regulations, 193 some cases from this series are 59 comp. gen.',
5126:'415 1980; 55 comp. gen. 1293 1976; 49 comp. gen. 572 1970; 46 comp. gen. 689 1967; 36 comp. gen.',
5127:'268 1956; 26 comp. dec. 43 1919. page 6232 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount there',
5128:'is no longer an augmentation problem. the existence or lack of separate statutory authority to accept gifts is immaterial. another',
5129:'relevant statute, which seemingly overlaps 31 u.s.c. § 1353 to some extent but was left untouched by it, is 5',
5130:'u.s.c. § 4111, enacted as part of the government employees training act, pub. l. no. 85507, 72 stat. 327 july',
5131:'7, 1958. under this provision, an employee may accept 1 contributions and awards incident to training in nongovernment facilities, and',
5132:'2 payment of travel, subsistence, and other expenses incident to attendance at meetings, but only if the donor is a',
5133:'taxexempt nonprofit organization. if an employee receives a contribution in cash or in kind under this section, travel and subsistence',
5134:'allowances are subject to an “appropriate reduction.” section 4111 authorizes the employee to accept the donation. it does not authorize',
5135:'the agency to accept the donation, credit it to its appropriations, and then reimburse the employee. 55 comp. gen. 1293',
5136:'1976. an employee who receives an authorized donation after the government has already paid the travel expenses cannot keep everything.',
5137:'the employee must refund to the government the amount by which his or her allowances would have been reduced had',
5138:'the donation been received before the allowances were paid. the agency may then credit this refund to its travel appropriation',
5139:'as an authorized repayment. id. at 1294–95. see also 41 c.f.r. § 3049.5. the statute requires an “appropriate reduction” in',
5140:'travel payments in order to preclude the agency from paying for something that has already been reimbursed by an authorized',
5141:'private organization. an employee being reimbursed on an “actual expense” basis should not be claiming items which would duplicate private',
5142:'reimbursements. thus, the agency is not required to reduce the actual expense entitlement by the value of provided meals. 64',
5143:'comp. gen. 185 1985. however, the value of subsistence items furnished in kind must be deducted where the employee is',
5144:'being reimbursed on a per diem basis. id. at 188; 49 comp. gen. 572, 576 1970. the authority conferred by',
5145:'5 u.s.c. § 4111 is expressly limited to organizations exempt from taxation under section 501c3 of the internal revenue code,',
5146:'26 u.s.c. § 501c3 religious, charitable, scientific, educational, etc.. it does not extend to organizations which may be taxexempt under',
5147:'other portions of section 501. b225986, mar. 2, 1987. also, it does not apply to an organization whose application for',
5148:'exemption under section 501c3 has not yet been approved; subsequent approval is not page 6233 gao06382sp appropriations law—vol. ii chapter',
5149:'6 availability of appropriations: amount retroactive for purposes of 5 u.s.c. § 4111. b225264, nov. 24, 1987 nondecision letter. donations',
5150:'made under the express condition that they be used for some unauthorized purpose should be returned to the donor. 47',
5151:'comp. gen. 319 1967. 2 travelrelated promotional items over the years, commercial airlines and others have devised a variety of',
5152:'programs to reward frequent customers. promotional materials awarded to customers may take various forms—bonus trips, reducedfare coupons, cash, merchandise, credits',
5153:'toward future goods or services, etc. government employees traveling on government business are eligible for these promotional items the same',
5154:'as anyone else. historically, statutes, regulations, and case law had maintained that the government employee, with certain exceptions, could not',
5155:'keep such promotional items. the fundamental principle underlying the prior decisions and regulations in this area was that any benefit,',
5156:'cash payment or otherwise, received by a government employee from private sources incident to or resulting from the performance of',
5157:'official duty was regarded as having been received on behalf of the government and was the property of the government.194',
5158:'on december 28, 2001, the president signed into law a provision that federal employees may retain travelrelated promotional items for',
5159:'personal use. pub. l. no. 107107, div. a, title xi, subtitle b, § 1116, 115 stat. 1012, 1241 dec. 28,',
5160:'2001, 5 u.s.c. § 5702 note. the law specifically provides that a federal traveler who receives a promotional item such',
5161:'as frequent flyer miles, upgrades, or access to carrier clubs or facilities as a result of using travel or transportation',
5162:'services obtained at federal government 194 gao’s decisions involving promotional items obtained as a result of governmentsponsored travel were decided',
5163:'under its claims settlement authority and predate the transfer of this authority to the executive branch in 1995. for details',
5164:'of this transfer see b275605, mar. 17, 1997. gao has not issued decisions on such promotional items subsequent to that',
5165:'transfer. in testimony before the house of representative’s subcommittee on technology and procurement policy of the committee on government reform,',
5166:'the comptroller general spoke in favor of proposals that would allow employees who travel on government business to keep their',
5167:'frequent flyer miles, describing it as a “small benefit but one that private sector employers commonly provide their people as',
5168:'part of a mosaic of competitive employee benefits.” gao, human capital: building the information technology workforce to achieve results, gao011007t',
5169:'washington, d.c.: july 31, 2001, at 23. page 6234 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount expense',
5170:'may retain those items for personal use if the item is obtained under the same terms as those offered to',
5171:'the general public and at no additional cost to the government. the federal travel regulation addresses promotional items in 41',
5172:'c.f.r. part 30153 2005. 4. other augmentation principles and cases as pointed out earlier in our introductory comments, the augmentation',
5173:'theory is relevant in a wide variety of contexts. the most common applications are the areas previously discussed—the spectrum of',
5174:'situations involving the miscellaneous receipts statute and the acceptance of gifts. this portion of the discussion will present a sampling',
5175:'of cases to illustrate other applications of the theory. another way of stating the augmentation rule is that when congress',
5176:'appropriates funds for an activity, the appropriation represents a limitation congress has fixed for that activity, and all expenditures for',
5177:'that activity must come from that appropriation absent express authority to the contrary. thus, a federal institution is normally not',
5178:'eligible to receive grant funds from another federal institution. it is not necessary for the grant statute to expressly exclude',
5179:'federal institutions as eligible grantees; the rule will apply based on the augmentation theory unless the grant statute expressly includes',
5180:'federal institutions. 57 comp. gen. 662, 664 1978; 23 comp. gen. 694 1944; b114868, apr. 11, 1975.195 the improper treatment',
5181:'of reimbursable transactions may result in an augmentation. an example of this type of transaction is an order under the',
5182:'economy act, 31 u.s.c. § 1535.196 thus, if a given reimbursement must be credited to the appropriation that “earned” it',
5183:'i.e., that financed the transaction, and that appropriation has expired, crediting the reimbursement to current funds is an improper augmentation.',
5184:'e.g., 72 comp. gen. 109, 110 1993; b242274, aug. 27, 1991. however, a de minimis exception to this rule was',
5185:'recognized in 72 comp. gen. 63 1992. this decision held that a refund of $100 or less that related to',
5186:'an expired account could be treated as a credit against a future invoice to the party owing the refund, and',
5187:'thus applied to a current account since the cost of 195 gao has no decisions addressing whether a federal agency',
5188:'with gift acceptance authority may receive a gift of money transferred to it from another federal agency. 196 economy act',
5189:'transactions are described in more detail in section e.2.e of this chapter, above, and in section b.1 of chapter 15.',
5190:'page 6235 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount processing a separate refund check would exceed the',
5191:'amount of the refund. the decision reasoned that this approach would save the government money and have an insignificant impact',
5192:'on the agency’s account integrity. id. at 64. the decision in 72 comp. gen. 109 1993, which was issued shortly',
5193:'thereafter, underscored that this exception applied to de minimis amounts of $100 or less and did not apply to refunds',
5194:'that regularly exceeded $1,000. 72 comp. gen. at 110. some statutes give an agency the option of crediting reimbursements either',
5195:'to current funds or to the appropriation that financed the transaction. e.g., 10 u.s.c. §§ 2205 and 2210; 22 u.s.c.',
5196:'§ 2392c and d.197 even here, however, crediting a reimbursement to an appropriation that bears no relationship to the transaction',
5197:'would be an unauthorized augmentation. b132900o.m., nov. 1, 1977. likewise, treating a transaction which should be reimbursed as nonreimbursable may',
5198:'result in an improper augmentation. for example, an agency receives appropriations to do its own work, not that of another',
5199:'agency. accordingly, as a general proposition, interdepartmental loans of personnel on a nonreimbursable basis improperly augment the appropriations of the',
5200:'receiving agency. 65 comp. gen. 635 1986; 64 comp. gen. 370 1985. such nonreimbursable loans also constitute a misuse of',
5201:'the detailing agency’s appropriation under 31 u.s.c. § 1301. b247348, june 22, 1992. reimbursement by one agency to another in',
5202:'situations which are not the proper subject of an economy act agreement or where reimbursement is not otherwise statutorily authorized',
5203:'is improper for several reasons: it is an unauthorized transfer of appropriations; it violates 31 u.s.c. § 1301a by using',
5204:'the reimbursing agency’s appropriations for other than their intended purpose; and it is an improper augmentation of the appropriations of',
5205:'the agency receiving the reimbursement. the cases do not always cite all of these theories; they again illustrate the close',
5206:'interrelationship of the various concepts discussed throughout this publication. the situation arises, for example, when agencies attempt to use the',
5207:'economy act for a “service” that is a normal part of the providing agency’s mission and for which it receives',
5208:'appropriations. 197 for a discussion of some of these statutes as well as related and predecessor provisions, see b179708o.m., dec.',
5209:'1, 1975, and b179708o.m., july 21, 1975. page 6236 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount to',
5210:'illustrate, an agency acquiring land cannot reimburse the justice department for the legal expenses incurred incident to the acquisition because',
5211:'these are regular administrative expenses of the justice department for which it receives appropriations. 16 comp. gen. 333 1936. similarly,',
5212:'an agency cannot reimburse the treasury department for the administrative expenses incurred in making disbursements on its account. 17 comp.',
5213:'gen. 728 1938. federal agencies may not reimburse the patent office for services performed in administering the patent and trademark',
5214:'laws since the patent office is required by law to furnish these services and receives appropriations for them. 33 comp.',
5215:'gen. 27 1953. nor may they reimburse the library of congress for recording assignments of copyrights to the united states.',
5216:'31 comp. gen. 14 1951. see also 40 comp. gen. 369 1960 interior department may not charge other agencies for',
5217:'the cost of conducting hearings incident to the validation of unpatented mining claims, although it may charge for other services',
5218:'in connection with the validation which it is not required to furnish; b211953, dec. 7, 1984 general services administration may',
5219:'not seek reimbursement for costs of storing records which it is required by law to store and for which it',
5220:'receives appropriations. the merit systems protection board may not accept reimbursement from other federal agencies for travel expenses of hearing',
5221:'officers to hearing sites away from the board’s regular field offices. holding the hearings is not a service to the',
5222:'other agency, but is a board function for which it receives appropriations. the inadequacy of the board’s appropriations to permit',
5223:'sufficient travel is legally irrelevant. 59 comp. gen. 415 1980, aff’d upon reconsideration, 61 comp. gen. 419 1982. where an',
5224:'agency provides personnel to act as hearing officers for another agency, it may be reimbursed if it is not required',
5225:'to provide the officers b192875, jan. 15, 1980 but may not be reimbursed if it is required to provide them',
5226:'32 comp. gen. 534 1953. likewise, the exportimport bank cannot charge its customers for travel expenses incurred by bank employees',
5227:'in transacting their business. b277254, mar. 5, 1997. a client agency must bear from its own appropriations costs it incurs',
5228:'in assisting the justice department to defend it in litigation. such support costs, which may include substantial temporary services provided',
5229:'by the agency’s staff lawyers and paralegals, cannot be billed to justice. 73 comp. gen. 90 1994, citing 39 comp.',
5230:'gen. 643 1960. page 6237 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount the decision in 70 comp.',
5231:'gen. 601 1991 provides a variant on this principle. that decision approved the army civilian appellate review agency’s practice of',
5232:'obtaining reimbursement from other army components for costs it incurred in investigating grievances filed by employees of the other components.',
5233:'for one thing, both the review agency and the other components were funded from the same appropriation in most instances;',
5234:'thus, there could be no augmentation. however, even when different appropriations were involved, the other component’s appropriation could be charged',
5235:'pursuant to 31 u.s.c. § 1534. indeed, the decision pointed out that such charges were “precisely the kind of situation',
5236:'contemplated by section 1534” since the review agency assisted the other components in satisfying their obligation to provide a grievance',
5237:'resolution process for their employees. 70 comp. gen. at 604. augmentation issues also can arise when an agency is trying',
5238:'to decide which of its appropriations to use for a given object. in 68 comp. gen. 337 1989, for example,',
5239:'the railroad retirement board wanted to make performance awards to personnel in its office of inspector general ig, and was',
5240:'unsure whether to charge its appropriation for the ig’s office or its general appropriation. a reasonable argument could be made',
5241:'to support either choice. thus, the board could make an election as long as it remained consistent thereafter. since there',
5242:'was no indication that the ig appropriation was intended to be the exclusive funding source for the performance awards, using',
5243:'the general appropriation would not result in an improper augmentation of the ig appropriation.198 a somewhat analogous situation could arise',
5244:'if an agency agrees to reduce or forgo receipts to which it is entitled, and the party owing those receipts',
5245:'agrees in return to make some expenditure which would otherwise have to be borne by a separate appropriation of the',
5246:'same agency. gao examined such a situation in b77467, nov. 8, 1950, involving the leasing of lands under the bankheadjones',
5247:'farm tenant act at reduced rentals on condition that the lessees in return perform certain improvements to the land. there',
5248:'was no augmentation in that case, however, since the statute expressly authorized the leasing with or without consideration and on',
5249:'such 198 no augmentation requiring an election between potential funding sources exists, however, where the law clearly authorizes an agency',
5250:'to use both sources interchangeably in order to supplement each other. see b272191, nov. 4, 1997, distinguishing 68 comp. gen.',
5251:'337. page 6238 gao06382sp appropriations law—vol. ii chapter 6 availability of appropriations: amount terms as the secretary of agriculture determined',
5252:'would best accomplish the purposes of the act. the following cases illustrate other situations which gao found would result in',
5253:'unauthorized augmentations: the customs service may not charge the partyininterest for travel expenses of customs employees incurred incident to official',
5254:'duties performed at night or on a sunday or holiday. 43 comp. gen. 101 1963; 3 comp. gen. 960 1924.',
5255:'see also 22 comp. dec. 253 1915.department of energy may not use overcharge refunds collected from oil companies to pay',
5256:'the administrative expenses of its office of hearings and appeals. b200170, apr. 1, 1981. proposal for airlines to reimburse treasury',
5257:'to permit customs service to hire additional staff to reduce clearance delays at miami airport was unauthorized in that it',
5258:'would augment appropriations made by congress for that service. 59 comp. gen. 294 1980. page 6239 gao06382sp appropriations law—vol. ii',
5259:'chapter 6 availability of appropriations: amount page 6240 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations a. introduction: nature',
5260:'of an obligation . . . . . . . . . . . . . . .72 b. criteria',
5261:'for recording obligations 31 u.s.c. § 1501 . . . . . . . . . . . . .',
5262:'. . . . . . . . . . . . . . . . . . .76 1.',
5263:'section 1501a1: contracts . . . . . . . . . . . . . . . . .',
5264:'. . . . . . . . . . . . 710 a. binding agreement . . . .',
5265:'. . . . . . . . . . . . . . . . . . . .',
5266:'. . . . . . . . . . . . 710 b. contract “in writing” . . .',
5267:'. . . . . . . . . . . . . . . . . . . .',
5268:'. . . . . . . . . . . 714 c. requirement of specificity . . . .',
5269:'. . . . . . . . . . . . . . . . . . . .',
5270:'. . . . . 717 d. invalid award/unauthorized commitment . . . . . . . . . .',
5271:'. . . . . . 718 e. variations in quantity to be furnished . . . . . .',
5272:'. . . . . . . . . . . . . 719 f. amount to be recorded .',
5273:'. . . . . . . . . . . . . . . . . . . .',
5274:'. . . . . . . . . . 723 g. administrative approval of payment . . . .',
5275:'. . . . . . . . . . . . . . . . . 726 h. miscellaneous',
5276:'contractual obligations . . . . . . . . . . . . . . . . . .',
5277:'. 727 i. interagency transactions . . . . . . . . . . . . . . .',
5278:'. . . . . . . . . . . . . . . 728 1 economy act agreements',
5279:'. . . . . . . . . . . . . . . . . . . .',
5280:'. . . . . . 729 2 noneconomy act agreements . . . . . . . . .',
5281:'. . . . . . . . . . . . 730 3 “binding agreement” requirement . . .',
5282:'. . . . . . . . . . . . . . . . 731 4 orders from',
5283:'stock . . . . . . . . . . . . . . . . . . .',
5284:'. . . . . . . . . . . . . 733 5 project orders . . .',
5285:'. . . . . . . . . . . . . . . . . . . .',
5286:'. . . . . . . . . . . . . 733 2. section 1501a2: loans . .',
5287:'. . . . . . . . . . . . . . . . . . . .',
5288:'. . . . . . . . . . 735 3. section 1501a3: interagency orders required by law .',
5289:'. . . . 737 4. section 1501a4: orders without advertising . . . . . . . . .',
5290:'. . . . . 739 5. section 1501a5: grants and subsidies . . . . . . . .',
5291:'. . . . . . . . . . . 739 a. grants . . . . . .',
5292:'. . . . . . . . . . . . . . . . . . . .',
5293:'. . . . . . . . . . . . . . . . . . . .',
5294:'. 740 b. subsidies . . . . . . . . . . . . . . . .',
5295:'. . . . . . . . . . . . . . . . . . . .',
5296:'. . . . . . . . 742 6. section 1501a6: pending litigation . . . . . .',
5297:'. . . . . . . . . . . . . . . 744 7. section 1501a7: employment',
5298:'and travel . . . . . . . . . . . . . . . . . 745',
5299:'a. wages, salaries, annual leave . . . . . . . . . . . . . . .',
5300:'. . . . . . . . . . . 746 b. compensation plans in foreign countries . .',
5301:'. . . . . . . . . . . . . . 748 c. training . . .',
5302:'. . . . . . . . . . . . . . . . . . . .',
5303:'. . . . . . . . . . . . . . . . . . . .',
5304:'. . 749 d. uniform allowance . . . . . . . . . . . . . .',
5305:'. . . . . . . . . . . . . . . . . . . .',
5306:'. 749 e. travel expenses . . . . . . . . . . . . . . .',
5307:'. . . . . . . . . . . . . . . . . . . .',
5308:'. . 749 f. state department: travel outside continental united states 751 g. employee transfer/relocation costs . . . .',
5309:'. . . . . . . . . . . . . . . . 752 8. section 1501a8:',
5310:'public utilities . . . . . . . . . . . . . . . . . .',
5311:'. . . . . . 754 9. section 1501a9: other legal liabilities . . . . . . .',
5312:'. . . . . . . . . . . 755 c. contingent liabilities. . . . . .',
5313:'. . . . . . . . . . . . . . . . . . . .',
5314:'. .755 d. reporting requirements . . . . . . . . . . . . . . .',
5315:'. . . . . . . . . .758 e. deobligation . . . . . . . .',
5316:'. . . . . . . . . . . . . . . . . . . .',
5317:'. . . . . . .759 page 71 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations a. introduction:',
5318:'nature of an obligation you, as an individual, use a variety of procedures to spend your money. consider the following',
5319:'transactions: you walk into a store, make a purchase, and pay at the counter with cash, check, or debit card.',
5320:'you move to another counter and make another purchase with a credit card. no money changes hands at the time,',
5321:'but you sign a credit form which states that you promise to pay upon being billed. you call the local',
5322:'tree surgeon to remove some ailing limbs from your favorite sycamore. he quotes an estimate and you arrange to have',
5323:'the work done. the tree doctor arrives while you are not at home, does the work, and slips his bill',
5324:'under your front door. you visit your family dentist to relieve a toothache. the work is done and you go',
5325:'home. no mention is made of money. of course, you know that the work wasn’t free and that the dentist',
5326:'will bill you. you now visit your family lawyer to sue the dentist and the tree surgeon. the lawyer takes',
5327:'your case and you sign a contingent fee contract in which you agree that the lawyer’s fee will be onethird',
5328:'of any amounts recovered. numerous other variations could be added to the list but these are sufficient to make the',
5329:'point. the first example is a simple cash transaction. the legal liability to pay and the actual disbursement of money',
5330:'occur simultaneously. the rest of the examples all have one essential thing in common: you first take some action which',
5331:'creates the legal liability to pay—that is, you “obligate” yourself to pay—and the actual disbursement of money follows at some',
5332:'later time. the obligation occurs in a variety of ways, such as placing an order or signing a contract. the',
5333:'government spends money in much the same fashion except that it is subject to a variety of statutory restrictions. the',
5334:'simple “cash transaction” or “direct outlay” involves a simultaneous obligation and disbursement and represents a minor portion of government expenditures.',
5335:'the major portion of appropriated funds are first obligated and then expended. the subsequent disbursement “liquidates” the obligation. thus, an',
5336:'agency “uses” appropriations in two basic ways—direct expenditures disbursements and obligations. there is no legal requirement for you as page',
5337:'72 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations an individual to keep track of your “obligations.” for the',
5338:'government, there is. the concept of “obligation” is central to appropriations law. as will be demonstrated in the discussion below,',
5339:'this is because of the principle, one of the most fundamental, that an obligation must be charged against the relevant',
5340:'appropriation in accordance with the rules relating to purpose, time, and amount. the term “available for obligation” is used throughout',
5341:'this publication to refer to availability as to purpose, time, and amount. this chapter will explore exactly what an obligation',
5342:'is. it would be nice to start with an allinclusive and universally applicable definition of “obligation.” however, because of the',
5343:'immense variety of transactions in which the government is involved, gao has defined “obligation” only in the most general terms',
5344:'and has instead analyzed on a casebycase basis the nature of the particular transaction at issue to determine whether an',
5345:'obligation has been incurred. b192282, apr. 18, 1979; b116795, june 18, 1954. the most one finds in the decisions are',
5346:'general statements referring to an obligation in such terms as “a definite commitment which creates a legal liability of the',
5347:'government for the payment of appropriated funds for goods and services ordered or received.” b116795, june 18, 1954. see also',
5348:'b300480.2, june 6, 2003; b272191, nov. 4, 1997; b265901, oct. 14, 1997; 21 comp. gen. 1162, 1163 1941 circular letter;',
5349:'b222048, feb. 10, 1987; b82368, july 20, 1954; b24827, apr. 3, 1942. from the earliest days, the comptroller general has',
5350:'cautioned that the obligating of appropriations must be “definite and certain.” a5894, dec. 3, 1924. another definition of an “obligation”',
5351:'that one finds in the decisions takes a slightly broader perspective: “a legal duty on the part of the united',
5352:'states which constitutes a legal liability or which could mature into a legal liability by virtue of actions on the',
5353:'part of the other party beyond the control of the united states . . .” 42 comp. gen. 733, 734',
5354:'1963. thus, in very general and simplified terms, an “obligation” is some action that creates a legal liability or definite',
5355:'commitment on the part of the government, or creates a legal duty that could mature into a legal liability page',
5356:'73 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations by virtue of an action that is beyond the control',
5357:'of the government. payment may be made immediately or in the future. gao, a glossary of terms used in the',
5358:'federal budget process, gao05734sp washington, d.c.: september 2005, at 70. see also mcdonnell douglas corp. v. united states, 37 fed.',
5359:'cl. 295, 301, order modified, 39 fed. cl. 665 1997; omb circular no. a11, preparation, submission, and execution of the',
5360:'budget, §§ 20.3, 20.5 june 21, 2005. an advance of funds to a working fund1 does not in itself serve',
5361:'to obligate the funds. see b180578o.m., sept. 26, 1978. the same result holds for funds transferred to a special “holding',
5362:'account” established for administrative convenience. b118638, nov. 4, 1974 appropriations for district of columbia public defender service under control of',
5363:'the administrative office of the u.s. courts are not obligated by transfer to a “judiciary trust fund” established by the',
5364:'administrative office. the typical question on obligations is framed in terms of when the obligation may or must be “recorded,”',
5365:'that is, officially charged against the spending agency’s appropriations. restated, what action is necessary or sufficient to create an obligation?',
5366:'this is essential in determining what fiscal year to charge, with all the consequences that flow from that determination. it',
5367:'is also essential to the broader concern of congressional control over the public purse. before proceeding with the specifics, two',
5368:'general points should be noted. first, an obligation arises when the definite commitment is made, even though the actual payment',
5369:'may not take place until a future fiscal year. b300480.2, june 6, 2003; 56 comp. gen. 351 1977; 23 comp.',
5370:'gen. 862 1944. second, for appropriations law purposes, the term “obligation” includes both matured and unmatured commitments. a matured commitment',
5371:'is a legal liability that is currently payable. an unmatured commitment is a liability which is not yet payable but',
5372:'for which a definite commitment nevertheless exists. for example, a contractual liability to pay for goods which have been delivered',
5373:'and accepted has “matured.” the liability for monthly rental payments under a lease is largely unmatured although the legal liability',
5374:'covers the entire rental period. both types of liability are “obligations.” the fact that an unmatured liability may be 1',
5375:'a working fund account is established to receive advance payment from other agencies or accounts. 14 comp. gen. 25 1934.',
5376:'for an example, see 10 u.s.c. § 2208, which authorizes working capital funds in the department of defense. page 74',
5377:'gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations subject to a right of cancellation does not negate the obligation.',
5378:'a97205, feb. 3, 1944, at 9–10.2 a recent decision illustrates this point. in b300480, apr. 9, 2003, gao determined that',
5379:'the corporation for national and community service corporation, the parent body of the americorps national service program, incurred a legal',
5380:'liability for the award of americorps national service educational benefits at the time it entered into a grant agreement to',
5381:'provide educational benefits to americorps participants. participants in the americorps program who successfully completed a required term of service earned',
5382:'a national service educational award that could be used to pay for postsecondary education. the corporation awarded grants to state',
5383:'service commissions, which awarded subgrants to the nonprofit groups—the entities that actually enrolled the americorps participants. when the corporation awarded',
5384:'a grant to a state service commission, it entered into a binding agreement authorizing the state service commissions to provide',
5385:'grant awards to a specified number of new participants in the americorps program. the corporation argued that it did not',
5386:'incur an obligation for an education award until the time of enrollment because the corporation could modify the terms and',
5387:'conditions of a grant, including suspension of enrollment, prior to the enrollment of all positions initially approved in a grant.',
5388:'gao disagreed and explained that: “the fact that the government may have the power to amend unilaterally a contract or',
5389:'agreement does not change the nature or scope of the obligation incurred at time of award. were it otherwise, every',
5390:'government contract that permits the government to terminate the contract for the convenience of the government 48 c.f.r. § 49.502,',
5391:'or to modify the terms of the contract at will 48 c.f.r. §§ 52.2431, 2432, 2433, would not be an',
5392:'obligation of the government at time of award. longstanding practice and logic both of the congress 31 u.s.c. § 1501,',
5393:'41 u.s.c. § 5 and the accounting officers of the government b234957, july 10, 1989, b112131, feb. 1, 1956 have',
5394:'rejected such a view.” 2 an “unmatured liability” as described in this paragraph is different from a “contingent liability” as',
5395:'discussed in section c of this chapter. page 75 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations b300480, apr.',
5396:'9, 2003. gao concluded that because the corporation had taken an action that could mature into a legal liability for',
5397:'the education benefits by virtue of actions taken by the grantee and participants, not the corporation, the corporation incurred an',
5398:'obligation at the time of grant award. id. subsequently, gao issued a second decision, b300480.2, june 6, 2003, which elaborated',
5399:'upon and affirmed the april decision. b. criteria for recording obligations 31 u.s.c. § 1501 the overrecording and the underrecording',
5400:'of obligations are equally improper. both practices make it impossible to determine the precise status of the appropriation and can',
5401:'lead to other adverse consequences. overrecording recording as obligations items that are not is usually done to inflate obligated balances',
5402:'and reduce unobligated balances of appropriations expiring at the end of a fiscal year. underrecording failing to record legitimate obligations',
5403:'may result in violating the antideficiency act. 31 u.s.c. § 1341.3 a 1953 decision put it this way: “in order',
5404:'to determine the status of appropriations, both from the viewpoint of management and the congress, it is essential that obligations',
5405:'be recorded in the accounting records on a factual and consistent basis throughout the government. only by the following of',
5406:'sound practices in this regard can data on existing obligations serve to indicate program accomplishments and be related to the',
5407:'amount of additional appropriations required.” 32 comp. gen. 436, 437 1953. see also gao, policy and procedures manual for guidance',
5408:'of federal agencies, title 7, § 3.5.a. washington, d.c.: may 18, 1993 hereafter gaoppm. the standards for the proper recording',
5409:'of obligations are found in 31 u.s.c. § 1501a, originally enacted as section 1311 of the supplemental appropriation act, 1955,',
5410:'pub. l. no. 83663, 68 stat. 800, 830 aug. 26, 1954. a senate committee has described the origin of the',
5411:'statute as follows: “section 1311 of the supplemental appropriation act of 1955 resulted from the difficulty encountered by the house',
5412:'3 for further discussion of the antideficiency act, see chapter 6, section c. page 76 gao06382sp appropriations law—vol. ii chapter',
5413:'7 obligation of appropriations appropriations committee in obtaining reliable figures on obligations from the executive agencies in connection with the',
5414:'budget review. it was not uncommon for the committees to receive two or three different sets of figures as of',
5415:'the same date. this situation, together with rather vague explanations of certain types of obligations particularly in the military department[s],',
5416:'caused the house committee on appropriations to institute studies of agency obligating practices. “the result of these examinations laid the',
5417:'foundation for the committee’s conclusion that loose practices had grown up in various agencies, particularly in the recording of obligations',
5418:'in situations where no real obligation existed, and that by reason of these practices the congress did not have reliable',
5419:'information in the form of accurate obligations on which to determine an agency’s future requirements. to correct this situation, the',
5420:'committee, with the cooperation of the general accounting office and the bureau of the budget, developed what has become the',
5421:'statutory criterion by which the validity of an obligation is determined. . . .”4 thus, the primary purpose of 31',
5422:'u.s.c. § 1501 is to ensure that agencies record only those transactions which meet specified standards for legitimate obligations. 71',
5423:'comp. gen. 109 1991; 54 comp. gen. 962, 964 1975; 51 comp. gen. 631, 633 1972; b192036, sept. 11, 1978.5',
5424:'subsection a of 31 u.s.c. § 1501 prescribes specific criteria for recording obligations. the subsection begins by stating that “[a]n',
5425:'amount shall be 4 senate committee on government operations, financial management in the federal government, s. doc. no. 8711, at',
5426:'85 1961. 5 although 31 u.s.c. § 1501 does not expressly apply to the government of the district of columbia,',
5427:'gao has expressed the view that the same criteria should be followed. b180578, sept. 26, 1978. this is because the',
5428:'proper recording of obligations is the only way to assure compliance with 31 u.s.c. § 1341, a portion of the',
5429:'antideficiency act, which does expressly apply to the government of the district of columbia. district of columbia selfgovernment and governmental',
5430:'reorganization act socalled “home rule” act, pub. l. no. 93198, § 603e, 87 stat. 774, 815 dec. 24, 1973. page',
5431:'77 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations recorded as an obligation of the united states government only',
5432:'when supported by documentary evidence” and then goes on to specify nine criteria for recording obligations. note that the statute',
5433:'requires “documentary evidence” to support the recording in each instance. in one sense, these nine criteria taken together may be',
5434:'said to comprise the “definition” of an obligation.6 if a given transaction does not meet any of the criteria, then',
5435:'it is not a proper obligation and may not be recorded as one. once one of the criteria is met,',
5436:'however, the agency not only may but must at that point record the transaction as an obligation. while 31 u.s.c.',
5437:'§ 1501 does not explicitly state that obligations must be recorded as they arise or are incurred, it follows logically',
5438:'from an agency’s responsibility to comply with the antideficiency act. gao has made the point in decisions and reports in',
5439:'various contexts. e.g., b302358, dec. 27, 2004; 72 comp. gen. 59 1992; 65 comp. gen. 4, 6 1985; b242974.6, nov.',
5440:'26, 1991; b226801, mar. 2, 1988; b192036, sept. 11, 1978; a97205, feb. 3, 1944, at 10; gao, fgmsd7520 washington, d.c.:',
5441:'feb. 13, 1975 untitled letter report; gao, substantial understatement of obligations for separation allowances for foreign national employees, b179343, washington,',
5442:'d.c.: oct. 21, 1974, at 6. it is important to emphasize the relationship between the existence of an obligation and',
5443:'the act of recording. recording evidences the obligation but does not create it. if a given transaction is not sufficient',
5444:'to constitute a valid obligation, recording it will not make it one. e.g., b197274, feb. 16, 1982 “reservation and notification”',
5445:'letter held not to constitute an obligation, act of recording notwithstanding, where letter did not impose legal liability on government',
5446:'and subsequent formation of contract was within agency’s control. conversely, failing to record a valid obligation in no way diminishes',
5447:'its validity or affects the fiscal year to which it is properly chargeable. e.g., b226782, oct. 20, 1987 letter of',
5448:'intent, executed in fiscal year 1985 and found to constitute a contract, obligated fiscal year 1985 funds, notwithstanding agency’s failure',
5449:'to treat it as an obligation. see also 63 comp. gen. 525 1984; 38 comp. gen. 81, 82–83 1958. the',
5450:'precise amount of the government’s liability should be recorded as the obligation where that amount is known. however, where the',
5451:'precise amount is not known at the time the obligation is incurred, an obligation 6 s. doc. no. 8711, at',
5452:'86. page 78 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations amount must still be recorded on a preliminary',
5453:'basis. how to determine this amount is discussed in section b.1.f of this chapter. see also omb circular no. a11,',
5454:'preparation, submission, and execution of the budget, § 20.5 june 21, 2005 for guidance on how to record obligation amounts',
5455:'in certain situations. as more precise data on the liability becomes available, the obligation must be periodically adjusted, that is,',
5456:'the agency must deobligate funds or increase the obligational level as the case may be. 7 gaoppm § 3.5.d; b300480,',
5457:'apr. 9, 2003. adjustments to recorded obligations, like the initial recordings themselves, must be supported by documentary evidence. the use',
5458:'of statistical methods to make adjustments “lacks legal foundation if the underlying transactions cannot be identified and do not support',
5459:'the calculated totals.” b236940, oct. 17, 1989; gao, financial management: defense accounting adjustments for stock fund obligations are illegal, gao/afmd871',
5460:'washington, d.c.: mar. 11, 1987, at 6. a related concept is the allocation of obligations for administrative expenses utility costs,',
5461:'computer services, etc. between or among programs funded under separate appropriations. there is no rule or formula for this allocation',
5462:'apart from the general prescription that the agency must use a supportable methodology. merely relying on the approved budget is',
5463:'not sufficient. see gao, financial management: improvements needed in osmre’s method of allocating obligations, gao/afmd8989 washington, d.c.: july 28, 1989.',
5464:'an agency may initially charge commonuse items to a single appropriation as long as it makes the appropriate adjustments from',
5465:'other benefiting appropriations before or as of the end of the fiscal year. 31 u.s.c. § 1534; 70 comp. gen.',
5466:'601 1991. the allocation must be in proportion to the benefit. 70 comp. gen. 592 1991. further procedural guidance may',
5467:'be found in omb circular no. a11, at § 20.5; the treasury financial manual; and title 7 of gao’s policy',
5468:'and procedures manual for guidance of federal agencies. for the most part, the statutory criteria in 31 u.s.c. § 1501a',
5469:'reflect standards that had been developed in prior decisions of the comptroller general over the years. see, e.g., 18 comp.',
5470:'gen. 363 1938; 16 comp. gen. 37 1936. the remainder of this section will explore the nine specific recording criteria.',
5471:'page 79 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations 1. section 1501a1: contracts a. binding agreement subsection a1',
5472:'of 31 u.s.c. § 1501 establishes minimum requirements for recording obligations for contracts. specifically, there must be documentary evidence of—',
5473:'“1 a binding agreement between an agency and another person including an agency that is— “a in writing, in a',
5474:'way and form, and for a purpose authorized by law; and “b executed before the end of the period of',
5475:'availability for obligation of the appropriation or fund used for specific goods to be delivered, real property to be bought',
5476:'or leased, or work or service to be provided.” as seen in chapter 5, the general rule for obligating fiscal',
5477:'year appropriations by contract is that the contract imposing the obligation must be made within the fiscal year sought to',
5478:'be charged and must meet a bona fide need of that fiscal year. e.g., b272191, nov. 4, 1997; b235086, apr.',
5479:'24, 1991; 37 comp. gen. 155 1957. this discussion will center on the timing of the obligation from the perspective',
5480:'of 31 u.s.c. § 1501a1. subsection a1 actually imposes several different requirements— a binding agreement; in writing; for a purpose',
5481:'authorized by law; executed before the expiration of the period of obligational availability; and a contract calling for specific goods,',
5482:'real property, work, or services. an agreement must be legally binding offer, acceptance, consideration, made by authorized official. as stated',
5483:'in a 1991 decision: “the primary purpose of section 1501a1 is to ‘require that there be an offer and acceptance',
5484:'imposing liability on page 710 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations both parties.’ 39 comp. gen. 829,',
5485:'831 1960. hence the government may record an obligation under section 1501 only upon evidence that both parties to the',
5486:'contract willfully express the intent to be bound.” 71 comp. gen. 109, 110 1991 emphasis in original. to be binding,',
5487:'however, an agreement does not have to be the final “definitized” contract. the legislative history of subsection a1 makes this',
5488:'clear. the following excerpt is taken from the conference report: “section 1311a1 precludes the recording of an obligation unless it',
5489:'is supported by documentary evidence of a binding agreement between the parties as specified therein. it is not necessary, however,',
5490:'that the binding agreement be the final formal contract on any specified form. the primary purpose is to require that',
5491:'there be an offer and an acceptance imposing liability on both parties. for example, an authorized order by one agency',
5492:'on another agency of the government, if accepted by the latter and meeting the requirement of specificity, etc., is sufficient.',
5493:'likewise, a letter of intent accepted by a contractor, if sufficiently specific and definitive to show the purposes and scope',
5494:'of the contract finally to be executed, would constitute the binding agreement required.”7 the following passage from 42 comp. gen.',
5495:'733, 734 1963 remains a useful general prescription: “the question whether government funds are obligated at any specific time is',
5496:'answerable only in terms of an analysis of written arrangements and conditions agreed to by the united states and the',
5497:'party with whom it is dealing. if such analysis discloses a legal duty on the part of the united states',
5498:'which constitutes a legal liability or which could mature into a legal liability by virtue of actions on the part',
5499:'of the other party beyond the control of the united states, an obligation of funds may generally be stated to',
5500:'exist.” 7 h.r. rep. no. 832663, at 18 1954, quoted in b118654, aug. 10, 1965. page 711 gao06382sp appropriations law—vol.',
5501:'ii chapter 7 obligation of appropriations in 35 comp. gen. 319 1955, and 59 comp. gen. 431 1980, the comptroller',
5502:'general set forth the factors that must be present in order for a binding agreement to exist for purposes of',
5503:'31 u.s.c. § 1501a1 with respect to contracts awarded under competitive procedures: each bid must have been in writing. the',
5504:'acceptance of each bid must have been communicated to the bidder in the same manner as the bid was made.',
5505:'if the bid was mailed, the contract must have been placed in the mails before the close of the fiscal',
5506:'year. if the bid was delivered other than by mail, the contract must have been delivered in like manner before',
5507:'the end of the fiscal year. each contract must have incorporated the terms and conditions of the respective bid without',
5508:'qualification. otherwise, it must be viewed as a counteroffer and there would be no binding agreement until accepted by the',
5509:'contractor. to illustrate, where the agency notified the successful bidder of the award by telephone near the end of fiscal',
5510:'year 1979 but did not mail the contract document until fiscal year 1980, there was no valid obligation of fiscal',
5511:'year 1979 funds. 59 comp. gen. 431 1980. see also goldberger foods v. united states, 23 cl. ct. 295, 302–303,',
5512:'aff’d, 960 f.2d 155 fed. cir. 1992; b159999o.m., mar. 16. 1967; b235086, apr. 24, 1991; 35 comp. gen. 319 1955.',
5513:'a document is considered “mailed” when it is placed in the custody of the postal service given to postman or',
5514:'dropped in mailbox or letter chute in office building; merely delivering the document to an agency messenger with instructions to',
5515:'mail it is insufficient. 59 comp. gen. 431, 433 1980; b235086, apr. 24, 1991. similarly, there was no recordable obligation',
5516:'of fiscal year 1960 funds where the agency erroneously mailed the notice of award to the wrong bidder and did',
5517:'not notify the successful bidder until the first day of fiscal year 1961. 40 comp. gen. 147 1960. it is',
5518:'important to note that, in the above cases, the obligation was invalid only with respect to the fiscal year the',
5519:'agency wanted to charge. the agency could still proceed to finalize the obligation but would have to charge funds current',
5520:'in the subsequent fiscal year. a mere request for additional supplies under a purchase order with no indication of acceptance',
5521:'of the request does not create a recordable obligation. 39 comp. gen. 829 1960. similarly, a work order or purchase',
5522:'page 712 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations order may be recorded as an obligation only where',
5523:'it constitutes a binding agreement for specific work or services. 34 comp. gen. 459 1955. a “letter of intent” is',
5524:'a preliminary document that may or may not constitute an obligation. at one extreme, it may be nothing more than',
5525:'an “agreement to agree” with neither party bound until execution of the formal contract. e.g., b201035, feb. 15, 1984, at',
5526:'5. at the other extreme, it may contain all the elements of a contract, in which event it will create',
5527:'binding obligations. the crucial question is whether the parties intended to be bound, determinable primarily from the language actually used.',
5528:'saul bass & associates v. united states, 505 f.2d 1386 ct. cl. 1974. for a good example of a letter',
5529:'of intent creating contractual obligations, see b226782, oct. 20, 1987. a letter of intent which amounts to a contract is',
5530:'also called a “letter contract.” in the context of government procurement, it is used most commonly when there is insufficient',
5531:'time to prepare and execute the full contract before the end of the fiscal year. as indicated in the legislative',
5532:'history quoted earlier, a “letter of intent” accepted by the contractor may form the basis of an obligation if it',
5533:'is sufficiently specific and definitive to show the purpose and scope of the contract. 21 comp. gen. 574 1941; b127518,',
5534:'may 10, 1956. letters of intent should be used “only under conditions of the utmost urgency.” 33 comp. gen. 291,',
5535:'293 1954. under the federal acquisition regulation far, letter contracts may be used— “when 1 the government’s interests demand that',
5536:'the contractor be given a binding commitment so that work can start immediately and 2 negotiating a definitive contract is',
5537:'not possible in sufficient time to meet the requirement. however, a letter contract should be as complete and definite as',
5538:'feasible under the circumstances.” 48 c.f.r. § 16.6032a 2005. the amount to be obligated under a letter contract is the',
5539:'government’s maximum liability under the letter contract itself, without regard to additional obligations anticipated to be included in the definitive',
5540:'contract or, restated, the amount necessary to cover expenses to be incurred by the contractor prior to execution of the',
5541:'definitive contract. the obligation is recorded against funds available for obligation at the time the letter contract is issued. 34',
5542:'comp. gen. 418, 421 1955; b197274, sept. 23, 1983; page 713 gao06382sp appropriations law—vol. ii b. contract “in writing” chapter',
5543:'7 obligation of appropriations b197274, feb. 16, 1982; b127518, may 10, 1956. see also far, 48 c.f.r. §§ 16.6032d, 16.6033a.',
5544:'once the definitive contract is executed, the government’s liability under the letter contract is merged into it. if definitization does',
5545:'not occur until the following fiscal year, the definitive contract will obligate funds of the latter year, usually in the',
5546:'amount of the total contract price less an appropriate deduction relating to the letter contract. b197274, sept. 23, 1983. the',
5547:'cited decision, at page 5, specifies how to calculate the deduction as follows: “the definitized contract then supports obligating against',
5548:'the appropriation current at the time it is entered into since it is, in fact, a bona fide need of',
5549:'that year. the amount of the definitized contract would ordinarily be the total contract cost less either the actual costs',
5550:'incurred under the letter contract when known or the amount of the maximum legal liability permitted by the letter contract',
5551:'when the actual costs cannot be determined.” letter contracts should be definitized within 180 days, or before completion of 40',
5552:'percent of the work to be performed, whichever occurs first. far, 48 c.f.r. § 16.6032c. also, letter contracts should not',
5553:'be used to record excess obligations as this distorts the agency’s funding picture. see gao, contract pricing: obligations exceed definitized',
5554:'prices on unpriced contracts, gao/nsiad86128 washington, d.c.: may 2, 1986. although the binding agreement under 31 u.s.c. § 1501a1 must',
5555:'be “in writing,” the “writing” is not necessarily limited to words on a piece of paper. the traditional mode of',
5556:'contract execution is to affix original handwritten signatures to a document paper setting forth the contract terms. change is in',
5557:'the winds, however, and traditional interpretations are being reassessed in light of advancing computer technologies. in 1983, gao’s legal staff,',
5558:'in an internal memorandum to one of gao’s audit divisions, took note of modern legal trends and advised that the',
5559:'“in writing” requirement could be satisfied by computerrelated media which produce tangible recordings of information, such as punch cards, magnetic',
5560:'cards, tapes, or disks. b2088632o.m., may 23, 1983. eight years later, the comptroller general issued his first formal decision on',
5561:'the topic, 71 comp. gen. 109 1991. the national institute of standards and technology nist asked whether federal agencies could',
5562:'use certain page 714 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations electronic data interchange edi technologies to create',
5563:'valid contractual obligations for purposes of 31 u.s.c. § 1501a. yes, replied the comptroller, as long as there are adequate',
5564:'safeguards and controls to provide no less certainty and protection of the government’s interests as under a “paper and ink”',
5565:'method. the decision states: “we conclude that edi systems using message authentication codes which follow nist’s computer data authentication standard',
5566:'. . . or digital signatures following nist’s digital signature standard, as currently proposed, can produce a form of evidence',
5567:'that is acceptable under section 1501.” 71 comp. gen. at 111. in 2000, congress enacted the electronic signatures in global',
5568:'and national commerce act,8 which confirmed the legality of digital signatures in any transaction in or affecting interstate or foreign',
5569:'commerce. section 101a of the act provides: “in general.—notwithstanding any statute, regulation, or other rule of law . . .',
5570:'with respect to any transaction in or affecting interstate or foreign commerce— 1a signature, contract, or other record relating to',
5571:'such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form; and 2',
5572:'a contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature',
5573:'or electronic record was used in its formation.” while there may be some room for interpretation as to what constitutes',
5574:'a “writing” for purposes of 31 u.s.c. § 1501a1, the writing, in some acceptable form, must exist. under the plain',
5575:'terms of the statute, an oral agreement may not be recorded as an obligation. in united states v. american renaissance',
5576:'lines, inc., 494 f.2d 1059, 1062 d.c. cir., cert. denied, 419 u.s. 1020 1974, the court found that 31 u.s.c.',
5577:'8 pub. l. no. 106229, § 101a, 114 stat. 464 june 30, 2000. page 715 gao06382sp appropriations law—vol. ii chapter',
5578:'7 obligation of appropriations § 1501a1 “establishes virtually a statute of frauds” for the government9 and held that neither party',
5579:'can judicially enforce an oral contract in violation of the statute. however, the court of claims and its successors, the',
5580:'claims court and united states court of federal claims, have taken the position that 31 u.s.c. § 1501a1 does not',
5581:'bar recovery “outside of the contract” where sufficient additional facts exist for the court to infer the necessary “meeting of',
5582:'minds” contract impliedinfact. narva harris construction corp. v. united states, 574 f.2d 508 ct. cl. 1978; johnsmanville corp. v. united',
5583:'states, 12 cl. ct. 1, 19–20 1987. cf. kinzley v. united states, 661 f.2d 187 ct. cl. 1981 documentary evidence',
5584:'of employment of persons sufficient to support oral employment contract for purposes of 31 u.s.c. § 1501a7. in pacord, inc.',
5585:'v. united states, 139 f.3d 1320 9th cir. 1998, the court relied on narva harris construction corp. in holding that,',
5586:'even though the federal acquisition regulation far generally requires contracts to be in writing,10 an oral contract may be enforced',
5587:'if the plaintiff “can establish sufficient facts, beyond a mere oral agreement, for the court to infer the existence of',
5588:'an impliedinfact contract.” pacord, 139 f.3d at 1323. these would be examples of subsequently imposed liability where the agency did',
5589:'not record—and lawfully could not have recorded—an obligation when the events giving rise to the liability took place. if a',
5590:'contractor received a judgment in this type of situation, the obligational impact on the contracting agency would depend on whether',
5591:'the case was subject to the contract disputes act. if the act applies, the judgment would be payable initially from',
5592:'the permanent judgment appropriation 31 u.s.c. § 1304, to be reimbursed by the agency from currently available appropriations. see 41',
5593:'u.s.c. §§ 612a–c; b252754, oct. 6, 1994. if the act does not apply, the judgment would be paid from the',
5594:'judgment 9 a “statute of frauds” is a law requiring contracts to be in writing in order to be enforceable.',
5595:'most, if not all, states have some version of such a statute. strictly speaking, as the comptroller general has noted,',
5596:'there is no federal statute of frauds. 39 comp. gen. 829, 831 1960. see also 55 comp. gen. 833 1976.',
5597:'10 the far defines “contracts” as including “all types of commitments that obligate the government to an expenditure of appropriated',
5598:'funds and that, except as otherwise authorized, are in writing.” this provision also provides that “[i]n writing, writing, or written',
5599:'means any worded or numbered expression that can be read, reproduced, and later communicated, and includes electronically transmitted and stored',
5600:'information.” 48 c.f.r. § 2.101 2005. page 716 gao06382sp appropriations law—vol. ii c. requirement of specificity chapter 7 obligation of',
5601:'appropriations appropriation without reimbursement, and there would thus be no obligational impact on the agency. in b118654, aug. 10, 1965,',
5602:'gao concluded that a notice of award signed by the contracting officer and issued before the close of the fiscal',
5603:'year did not satisfy the requirements of 31 u.s.c. § 1501a1 where it incorporated modifications of the offer as to',
5604:'price and other terms which had been agreed to orally during negotiations. the reason is that there was no evidence',
5605:'in writing that the contractor had agreed to the modifications. gao conceded, however, that the agency’s argument that there was',
5606:'documentary evidence of a binding agreement for purposes of section 1501a1 was not without merit. in view of this and',
5607:'since the agency was in the process of changing its contracting procedures to assure adequate documentary evidence of both the',
5608:'offer and the acceptance, we did not insist on any appropriation adjustments. in a 1977 decision, however, gao concluded that',
5609:'a signed contract that included ambiguous terms relating to pricing might not be defeated where the ambiguity was resolved by',
5610:'telephone conversations that were incorporated by reference into an award letter, even though there was no written record of the',
5611:'conversations showing agreement by both parties. the comptroller general concluded that the potential defect in any event would not afford',
5612:'a basis for a third party in this case a protesting unsuccessful offeror to object to the contract’s legality. 56',
5613:'comp. gen. 768, 775 1977. the statute requires documentary evidence of a binding agreement for specific goods or services. an',
5614:'agreement that fails this test is not a valid obligation. for example, a state department contract under the migration and',
5615:'refugee assistance program establishing a contingency fund “to provide funds for refugee assistance by any means, organization or other voluntary',
5616:'agency as determined by the supervising officer” did not meet the requirement of specificity and therefore was not a valid',
5617:'obligation. b147196, apr. 5, 1965. similarly, a purchase order which lacks a description of the products to be provided is',
5618:'not sufficient to create a recordable obligation. b196109, oct. 23, 1979. in the cited decision, a purchase order for “regulatory,',
5619:'warning, and guide signs based on information supplied” on requisitions to be issued did not validly obligate fiscal year 1978',
5620:'funds where the requisitions were not sent to the supplier until after the close of fiscal year page 717 gao06382sp',
5621:'appropriations law—vol. ii chapter 7 obligation of appropriations d. invalid award/unauthorized commitment 1978. see also 70 comp. gen. 481 1991',
5622:'advances to establish an imprest fund to finance unspecified future cash payments do not meet the statutory requirements for recording',
5623:'obligations. where a contract award is determined to be invalid, the effect is that no binding agreement ever existed as',
5624:'required by 31 u.s.c. § 1501a1 and therefore there was no valid obligation of funds. 38 comp. gen. 190 1958;',
5625:'b157360, aug. 11, 1965. as discussed in chapter 5, section b.6, under more recent authorities the original obligation is not',
5626:'extinguished for all purposes, and those amounts originally obligated remain available postexpiration to fund a valid “replacement contract.” 70 comp.',
5627:'gen. 230 1991; 68 comp. gen. 158 1988. where the invalidity is determined under a bid protest, which will presumably',
5628:'cover most such instances, the extended availability described in the gao decisions is statutorily defined as 100 days after the',
5629:'final ruling on the protest. 31 u.s.c. § 1558a. thus, cases like 38 comp. gen. 190 must be regarded as',
5630:'modified to this extent. of course, amounts originally obligated do not survive postexpiration for anything other than a valid replacement',
5631:'contract. b270723, apr. 15, 1996. where the comptroller general awards bid preparation costs to a successful protester under authority of',
5632:'31 u.s.c. § 3554c, payment should be charged to the agency’s procurement appropriations current at the time gao issued its',
5633:'decision. if the agency must verify the amount of bid preparation costs to which the protester is entitled prior to',
5634:'payment, the agency should record an estimated obligation, using gao’s decision as the obligating document. upon verification, the obligation is',
5635:'adjusted up or down as necessary, on the basis of the documents submitted by the protester to substantiate the amount.',
5636:'b199368.4, jan. 19, 1983 nondecision letter. claims against the government resulting from unauthorized commitments raise obligation questions in two general',
5637:'situations. if the circumstances surrounding the unauthorized commitment are sufficient to give rise to a contract impliedinfact, it may be',
5638:'possible for the agency to ratify the unauthorized act. if the ratification occurs in a subsequent fiscal year, the obligation',
5639:'is chargeable to the prior year, that is, the year in which the need presumably arose and the claimant performed.',
5640:'b208730, jan. 6, 1983. however, before an agency chooses to ratify the obligation, it first must assure that sufficient prior',
5641:'year unobligated funds remain available to cover the ratification. id. ; b290005, july 1, 2002. if ratification is not available',
5642:'for whatever reason, the only remaining possibility for payment is a quantum meruit recovery under a theory of contract impliedinlaw.',
5643:'the page 718 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations e. variations in quantity to be furnished quantum',
5644:'meruit theory permits payment in limited circumstances even in cases where there was no valid obligation, for example, where the',
5645:'contractor has made partial delivery operating under what he believed to be a valid contract. b303906, dec. 7, 2004; b251668,',
5646:'may 13, 1993; b118428, sept. 21, 1954. see also 67 comp. gen. 507 1988. the obligational impact is the same',
5647:'as for ratification—payment is chargeable to the fiscal year in which the claimant performed. b210808, may 24, 1984; b207557, july',
5648:'11, 1983. in some types of contracts, the quantity of goods to be furnished or services to be performed may',
5649:'vary. the quantity may be indefinite or it may be stated in terms of a definite minimum with permissible variation.',
5650:'variations may be at the option of the government or the contractor. the obligational treatment of this type of contract',
5651:'depends on the exact nature of the contractual liability imposed on the government. before proceeding, it is important to define',
5652:'some terms. a requirements contract is one in which the government agrees to purchase all of its needs for the',
5653:'particular item or service during the contract period from the contractor, and the contractor agrees to fill all such needs.',
5654:'federal acquisition regulation far, 48 c.f.r. § 16.503a 2005; modern systems technology corp. v. united states, 979 f.2d 200, 206',
5655:'fed. cir. 1992; torncello v. united states, 681 f.2d 756, 761 ct. cl. 1982. an indefinitequantity contract is one in',
5656:'which the contractor agrees to supply whatever quantity the government may order, within limits, with the government under no obligation',
5657:'to use that contractor for all of its requirements. far, 48 c.f.r. § 16.504a; hemet valley flying service co. v.',
5658:'united states, 7 cl. ct. 512, 515–16 1985; mason v. united states, 615 f.2d 1343, 1346 n.5 ct. cl., cert.',
5659:'denied, 449 u.s. 830 1980; b302358, dec. 27, 2004. under either type of contract, the government orders specific quantities from',
5660:'time to time by issuing a document variously termed a work order, task order, delivery order, etc. in a requirements',
5661:'contract, the government must state a realistic estimated total quantity. an agency may obtain its estimate from records of previous',
5662:'requirements and consumption, or by other means, and should base the estimate on the most current information available. far, 48',
5663:'c.f.r. § 16.503a1; b190855, mar. 31, 1978; b188426, sept. 20, 1977. it is not legally necessary that requirements contracts place',
5664:'a minimum or a maximum limit upon the estimated requirements. b256312, june 6, 1994; b226992.2, july 13, 1987. see also',
5665:'unlimited enterprises, exportimport, inc., asbca no. 34825, 883 bca ¶ 20,908 1988. however, the far page 719 gao06382sp appropriations law—vol.',
5666:'ii chapter 7 obligation of appropriations provides that “[t]he contract shall state, if feasible, the maximum limit of the contractor’s',
5667:'obligation to deliver and the government’s obligation to order.” 48 c.f.r. § 16.503a2. needs must relate to the contract period.',
5668:'21 comp. gen. 961, 964 1942. if, in the exercise of good faith, the anticipated requirements simply do not materialize,',
5669:'the government is not obligated to purchase the stated estimate or indeed, if no requirements arise, to place any orders',
5670:'with the contractor beyond any required minimum. 47 comp. gen. 365, 370 1968. see also appeal of shepard printing, gpobca',
5671:'no. 3792 1994; ags genesys corp., asbca no. 35302, 892 bca ¶ 21,702 1989; world contractors, inc., asbca no. 20354,',
5672:'752 bca ¶ 11,536 1975. the contractor assumes the risk that nonguaranteed requirements may fall short of expectations, and has',
5673:'no claim for a price adjustment if they do. medart, inc. v. austin, 967 f.2d 579 fed. cir. 1992; 37',
5674:'comp. gen. 688 1958. if, however, the government attempts to meet its requirements elsewhere, including the development of inhouse capability,',
5675:'or if failure to place orders with the contractor for valid needs is otherwise found to evidence lack of good',
5676:'faith, liability will result. e.g., rumsfeld v. applied companies, inc., 325 f.3d 1328 fed. cir, cert. denied, 540 u.s. 981',
5677:'2003; torncello, 681 f.2d at 768–69; cleek aviation v. united states, 19 cl. ct. 552 1990; appeal of mdp construction,',
5678:'inc., asbca no. 49527, 962 bca ¶ 28,525 1996; viktoria transport gmbh & co., asbca no. 30371, 883 bca ¶',
5679:'20,921 1988; california bus lines, asbca no. 19732, 752 bca ¶ 11,601 1975; henry angelo & sons, inc., asbca no.',
5680:'15082, 721 bca ¶ 9356 1972; b182266, apr. 1, 1975. an indefinitequantity contract, under current regulations, must include a minimum',
5681:'purchase requirement which must be more than nominal. far, 48 c.f.r. § 16.504a2; b302358, dec. 27, 2004. an indefinitequantity contract',
5682:'without a minimum purchase requirement is regarded as illusory and unenforceable. it is no contract at all. torncello, 681 f.2d',
5683:'at 761; mason, 615 f.2d at 1346 n.5; howell v. united states, 51 fed. cl. 516 2002; rice lake contracting,',
5684:'inc. v. united states, 33 fed. cl. 144, 152–53 1995; modern systems technology corp. v. united states, 24 cl. ct.',
5685:'360 1991. apart from the specified minimum, the government is free to obtain its requirements from other contractors. government contract',
5686:'services, inc., gsbca no. 8447, 881 bca ¶ 20,255 1987; alta construction co., psbca no. 1395, 872 bca ¶ 19,720',
5687:'1987. an indefinitedelivery, indefinitequantity idiq contract is a form of an indefinitequantity contract. as with other indefinite quantity contracts, an',
5688:'page 720 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations idiq contract must require the government to order, and',
5689:'the contractor to furnish, at least a stated minimum quantity of supplies or services. far, 48 c.f.r. § 16.504a. while',
5690:'the agency may place orders at any time during a fixed period, actual delivery dates during that period are undefined.',
5691:'after award of an idiq contract, the government places task or delivery orders with the contractor or contractors as the',
5692:'government’s needs become definite. b302358, dec. 27, 2004. idiqs have historically provided a way to expeditiously fill certain government needs.',
5693:'see gao, contract management: few competing proposals for large dod information technology orders, nsiad0056 washington, d.c.: mar. 20, 2000, at',
5694:'5. what does all this signify from the perspective of obligating appropriations? as we noted at the outset, the obligational',
5695:'impact of a variable quantity contract depends on exactly what the government has bound itself to do. a fairly simple',
5696:'generalization can be deduced from the decisions: in a variable quantity contract requirements or indefinitequantity, any required minimum purchase must',
5697:'be obligated when the contract is executed; subsequent obligations occur as work orders or delivery orders are placed, and are',
5698:'chargeable to the fiscal year in which the order is placed. b302358, dec. 27, 2004. thus, in a variable quantity',
5699:'contract with no guaranteed minimum—or any analogous situation in which there is no liability unless and until an order is',
5700:'placed—there would be no recordable obligation at the time of award. b302358, dec. 27, 2004; b259274, may 22, 1996; 63',
5701:'comp. gen. 129 1983; 60 comp. gen. 219 1981; 34 comp. gen. 459, 462 1955; b124901, oct. 26, 1955 “call',
5702:'contract”.11 obligations are recorded as orders are placed. the same approach applies to a contract for a fixed quantity in',
5703:'which the government reserves an option to purchase an additional quantity. the contract price for the fixed quantity is an',
5704:'obligation at the time the contract is entered into; the reservation of the option ripens into an obligation only if',
5705:'and when the government exercises the option. 19 comp. gen. 980 1940. see also b287619, july 5, 2001 for medical',
5706:'services provided through civilian contracted care, dod’s legal liability for atrisk payment is determined by the fixed price established by',
5707:'the contract and should be recorded at the time dod executes the contract, and again when it executes any subsequent',
5708:'options. 11 as cases such as 63 comp. gen. 129 illustrate, there can be many variations on the basic indefinitequantity',
5709:'theme. page 721 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations an application of these concepts also can be',
5710:'found at b192036, sept. 11, 1978. the national park service entered into a construction contract for the development of a',
5711:'national historic site. part of the contract price was a “contingent sum” of $25,000 for “force account work,” described in',
5712:'the contract as miscellaneous items of a minor nature not included in the bid schedule. no “force account work” was',
5713:'to be done except under written orders issued by the contracting officer. since a written order was required for the',
5714:'performance of work, no part of the $25,000 could be recorded as an obligation unless and until such orders were',
5715:'issued and accepted by the contractor. that portion of the master contract itself which provided for the force account work',
5716:'was not sufficiently specific to create an obligation. in a 1955 case, the army entered into a contract for the',
5717:'procurement of lumber. the contract contained a clause permitting a 10 percent overshipment or undershipment of the quantity ordered. this',
5718:'type of clause was standard in lumber procurement contracts. the comptroller general held that the army could obligate the amount',
5719:'necessary to pay for the maximum quantities deliverable under the contract. 34 comp. gen. 596 1955. here, the quantity was',
5720:'definite and the government was required to accept the permissible variation. in another 1955 case, the general services administration had',
5721:'published in the federal register an offer to purchase chrome ore up to a stated maximum quantity. formal agreements would',
5722:'not be executed until producers made actual tenders of the ore. the program published in the federal register was a',
5723:'mere offer to purchase and gsa could not obligate funds to cover the total quantity authorized. reason: there was no',
5724:'mutual assent and therefore no binding agreement in writing until a producer responded to the offer and a formal contract',
5725:'was executed. b125644, nov. 21, 1955. socalled “level of effort” contracts are conceptually related to the “variation in quantity” cases.',
5726:'in one case, the environmental protection agency entered into a costplusfixedfee contract for various services at an epa facility. the',
5727:'contractor’s contractual obligation was expressed as a “level of effort” in terms of staffhours. the contractor was to provide up',
5728:'to a stated maximum number of direct staffhours, to be applied on the basis of work orders issued during the',
5729:'course of the contract. since the government was obligated under the contract to order specific tasks, the contract was sufficiently',
5730:'definitive to justify recording the full estimated contract amount at the time of award. b183184, may 30, 1975. see also',
5731:'page 722 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations 58 comp. gen. 471, 474 1979; b199422, june 22,',
5732:'1981 nondecision letter. f. amount to be recorded as noted previously, where the precise amount of the government’s liability is',
5733:'defined at the time the government enters into the contract that is the amount to be recorded. for example, in',
5734:'the simple firm fixedprice contract, the contract price is the recordable obligation. the possibility that the contractor may not perform',
5735:'up to the level specified in the contract does not provide a basis for recording less than the full contract',
5736:'price as the obligation. however, for many types of obligations, the precise amount of the government’s liability cannot be known',
5737:'at the time the liability is incurred. as summarized in our preliminary discussion of 31 u.s.c. § 1501a, some initial',
5738:'amount must still be recorded. the agency should then adjust this initial obligation amount up or down periodically as more',
5739:'precise information becomes available.12 gao decisions, as well as gao’s policy and procedures manual for guidance of federal agencies, 13',
5740:'indicate that, in general, the agency should use its best estimate to record the initial amount where the amount of',
5741:'the government’s final liability is undefined. e.g., 56 comp. gen. 414, 418 1977; 50 comp. gen. 589 1971. section 3.5.d',
5742:'of the manual further provides that, where an estimate is used, the basis for the estimate and the computation must',
5743:'be documented. for example, in 50 comp. gen. 589, gao considered the accounting procedures used by the administrative office of',
5744:'the united states courts administrative office with respect to paying courtappointed attorneys in federal criminal cases. gao held that at',
5745:'the time of appointment of such attorneys a contractual obligation was created on the part of the government to pay',
5746:'the reasonable costs of the representation, although the exact amount of such obligation remained to be determined. such obligations must,',
5747:'therefore, be charged against the appropriations current 12 this discussion addresses the amount to be recorded when the amount of',
5748:'the liability is undefined, and is not to be confused with a discussion of contingent liabilities. for example, for an',
5749:'indefinitedelivery, indefinitequantity contract, any liability in excess of the government’s minimum commitment, as defined in the contract, is a contingent',
5750:'liability— that is, contingent on the government placing future orders with the contractor. for that reason, at the time the',
5751:'government enters into the contract, the government has no liability above the minimum specified in the contract, and thus incurs',
5752:'no obligation for future orders. we discuss contingent liabilities in section c of this chapter. 13 title 7, § 3.5.d',
5753:'washington, d.c.: may 18, 1993. page 723 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations at the time of',
5754:'appointment. id. at 590–91. the proper procedure for charging these obligations was described as follows: “[u]pon the appointment of an',
5755:'attorney by the court, a copy of the order of appointment is sent to [the administrative office] for the purpose',
5756:'of estimating the obligation to be charged against the current appropriation. this estimate made by [the administrative office] is based',
5757:'on past average costs per case and the fact that the [criminal justice act] sets dollar limits on the amount',
5758:'of compensation a courtappointed attorney may receive.” id. at 589. the appropriation account current at the time of appointment was',
5759:'thus charged until the voucher reflecting the actual costs was approved which could occur in a subsequent fiscal year, at',
5760:'which point the estimated amounts were adjusted accordingly.14 decisions dealing with certain kinds of contract obligations provide more specific rules.',
5761:'under a fixedprice contract with escalation, price redetermination, or incentive provisions, the amount to be obligated initially is the fixed',
5762:'price stated in the contract or the target price in the case, for example, of a contract with an incentive',
5763:'clause. b255831, july 7, 1995; 34 comp. gen. 418 1955; b133170, jan. 29, 1975; b206283o.m., feb. 17, 1983. thus, in',
5764:'an incentive contract with a target price of $85 million and a ceiling price of $100 million, the proper amount',
5765:'to record initially as an obligation is the target price of $85 million. 55 comp. gen. 812, 824 1976. see',
5766:'also mcdonnell douglas corp. v. united states, 39 fed. cl. 665 1997. the agency must increase or decrease the amount',
5767:'recorded i.e., the target price to reflect price revisions at the time such revisions are made or determined pursuant to',
5768:'the provisions of the contract. 34 comp. gen. at 420–21. when obligations are recorded based on a target price, the',
5769:'agency should establish appropriate safeguards to guard against violations of the antideficiency act. this usually means the administrative reservation of',
5770:'sufficient funds to cover potential liability. 14 the decision in 50 comp. gen. 589 is offered here as an example',
5771:'of a methodology for estimating obligations. beginning with fiscal year 1977 the judiciary has received noyear appropriations to pay court',
5772:'appointed attorneys. see departments of state, justice, and commerce, the judiciary, and related agencies appropriation act, 1977, pub. l. no.',
5773:'94362, title iv, 90 stat. 937, 953 july 14, 1976; consolidated appropriations act, 2005, pub. l. no. 108447, div. b,',
5774:'title iii, 118 stat. 2809, 2892 dec. 8, 2004. page 724 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations',
5775:'b255831, july 7, 1995; 34 comp. gen. at 420–21; b206283o.m., feb. 17, 1983. the two recent decisions involving the corporation',
5776:'for national and community service, discussed previously in section a of this chapter, held that the corporation must record the',
5777:'government’s full liability under the grant at the time of grant award. b300480, apr. 9, 2003, aff’d, b300480.2, june 6,',
5778:'2003. under the grant agreements involved, the corporation agreed to fund a specified number of americorps program participants. this number',
5779:'could be converted into a precise dollar amount. thus, the corporation incurred an obligation to pay the maximum dollar amount',
5780:'if the grantee fully performed under the grant agreement and enrolled the specified number of participants. while the grantee might',
5781:'ultimately fail to enroll the number of participants called for in the grant agreement, the extent of the grantee’s performance',
5782:'under the grant was entirely within the grantee’s control. the decisions rejected contentions by the corporation and the office of',
5783:'management and budget that the initial grant obligation should be recorded on the basis of estimates that reflected past experience.',
5784:'as the april 9, 2003 decision observed: “for purposes of identifying the amount of the corporation’s obligation at grant award',
5785:'. . . the grantee and subgrantee, by their actions in enrolling participants, ultimately control the amount of the corporation’s',
5786:'liability. if the amount of liability of the government is under the control of the grantee, not the corporation, the',
5787:'government should obligate funds to cover the maximum amount of the liability. see, e.g., b238581, oct. 31, 1990; b197274, sept.',
5788:'23, 1983.”15 in this regard, the result in the two 2003 decisions is really no different from the obligation rule',
5789:'that applies to a simple fixedprice contract. there, the government incurs a firm obligation to pay a specified amount provided,',
5790:'of course, that the contractor fully performs under the contract. the possibility that the contractor may not perform up to',
5791:'the level 15 subsequently, congress passed legislation clarifying the method by which the corporation should record obligations, authorizing the corporation',
5792:'to record as an obligation an estimate based on a formula that takes into consideration historical rates of enrollment in',
5793:'the program. pub. l. no. 10845, § 2b, 117 stat. 844 july 3, 2003. see also 149 cong. rec. s8163–64',
5794:'2003 statement of sen. bond. page 725 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations g. administrative approval of',
5795:'payment specified in the contract does not provide a basis for recording less than the full contract price as the',
5796:'obligation. in some instances, a liability does not arise until the agency formally reviews and approves a payment. in these',
5797:'instances, of course, the agency should not record an obligation for payment until it approves the payment. the review and',
5798:'approval here refers to a process in addition to the normal review and approval of the voucher by a certifying',
5799:'and disbursing officer that is always required. for example, under internal revenue service irs regulations, irs has no financial liability',
5800:'to its informants until it has evaluated the worth of the information and assessed and collected any underpaid taxes and',
5801:'penalties stemming from that information. it is at this point that an appropriate irs official determines that a reward should',
5802:'be paid and its amount, and it is at this point that irs incurs a recordable obligation. b137762.32, july 11,',
5803:'1977. in 46 comp. gen. 895 1967, gao approved the then veterans administration’s va practice of recording obligations for feebasis',
5804:'outpatient treatment of eligible veterans at the time the agency administratively approved the vouchers. va had established a review and',
5805:'approval process to determine whether the government should accept liability; therefore, no obligation arose until that time. see also b133944,',
5806:'jan. 31, 1958; b92679, july 24, 1950. gao followed 46 comp. gen. 895 in a decision concerning the defense department’s',
5807:'tricare health care program, b287619, july 5, 2001. the decision concluded that the defense department did not incur a liability',
5808:'for the costs of medical services provided under the socalled “pass through” arrangement of the tricare program until the department',
5809:'processed and approved a claim—that is, until the department determined that the beneficiary was eligible to receive treatment, the services',
5810:'provided were allowable, and the amount billed was proper. thus, claimsapproval was the appropriate time at which to record an',
5811:'obligation. by way of contrast, the obligation for the expenses of a courtappointed attorney under the criminal justice act of',
5812:'1964 cja arises at the time of appointment, not later when the expenses are approved, because of the terms of',
5813:'the act. 50 comp. gen. 589 1971. under section 2 of the cja, as amended, 18 u.s.c § 3006a, the',
5814:'court’s order of appointment establishes contractual liability, even though the exact amount of the obligation is not determinable until the',
5815:'attorney’s payment voucher is approved. the court’s review of the voucher is intended only to ensure the reasonableness of the',
5816:'page 726 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations h. miscellaneous contractual obligations expenses incurred. thus, gao held',
5817:'that payment must be charged to the funds available for the fiscal year in which the appointment was made. beginning',
5818:'with fiscal year 1977 the judiciary has received noyear appropriations to pay court appointed attorneys. see departments of state, justice,',
5819:'and commerce, the judiciary, and related agencies appropriation act, 1977, pub. l. no. 94362, title iv, 90 stat. 937, 953',
5820:'july 14, 1976; consolidated appropriations act, 2005, pub. l. no. 108447, div. b, title iii, 118 stat. 2809, 2892 dec.',
5821:'8, 2004. the core issue in many of the previously discussed cases has been when a given transaction ripens into',
5822:'a recordable obligation, that is, precisely when the “definite commitment” occurs. many of the cases do not fit neatly into',
5823:'categories. rather, the answer must be derived by analyzing the nature of the contractual or statutory commitments in the particular',
5824:'case. a 1979 case dealt with a lease arrangement entered into by the peace corps in korea. under a particular',
5825:'type of lease recognized by korean law, the lessee does not make installment rental payments. instead, the lessee makes an',
5826:'initial payment of approximately 50 percent of the assessed valuation of the property. at the end of the lease, the',
5827:'lessor is required to return the entire initial payment. the lessor makes his profit by investing the initial payment at',
5828:'the local interest rate. since the lease is a binding contractual commitment and since the entire amount of the initial',
5829:'payment may not be recoverable for a number of reasons, gao found it improper to treat the initial payment as',
5830:'a mere advance or an account receivable as in the case of travel advances and thus not reflected as an',
5831:'obligation. rather, the amount of the initial payment must be recorded as an obligation chargeable to the fiscal year in',
5832:'which the lease is entered into, with subsequent returns to be deposited in the treasury as miscellaneous receipts. b192282, apr.',
5833:'18, 1979. page 727 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations several cases deal with courtrelated obligations. for',
5834:'example, the obligation for fees of jurors, including retroactive increases authorized by 28 u.s.c. § 1871, occurs at the time',
5835:'the jury service is performed. 54 comp. gen. 472 1974. see also the discussion of attorney fee payments in section',
5836:'b.1.g of this chapter. the recording of obligations for land commissioners appointed to determine just compensation in land condemnation cases',
5837:'was discussed in b184782, feb. 26, 1976, and 56 comp. gen. 414 1977.16 the rules derived from these decisions are',
5838:'as follows: the obligation occurs at the time of appointment and is chargeable to the fiscal year of appointment if',
5839:'a specific case is referred to the commission in that fiscal year. pendency of an action will satisfy the bona',
5840:'fide needs rule and will be sufficient to support the obligation even though services are not actually performed until the',
5841:'following fiscal year. appointment of a “continuous” land commission creates no obligation until a particular action is referred to it.',
5842:'an amended court order increasing the compensation of a particular commissioner amounts to a new obligation and the full compensation',
5843:'is chargeable to the appropriation current at the time of the amended order. a valid obligation occurs under the above',
5844:'principles even though the order of appointment does not expressly charge the costs to the united states because, under the',
5845:'constitution, the costs cannot be assessed against the condemnee. i. interagency transactions it is not uncommon for federal agencies to',
5846:'provide goods or services to other federal agencies. section 1501 addresses these interagency transactions in two places. subsection a3 addresses',
5847:'interagency orders 16 beginning with fiscal year 1978, the appropriation to compensate land commissioners was switched from the justice department',
5848:'to the judiciary and since then has been a noyear appropriation. see the appropriation entitled “fees of jurors and commissioners”',
5849:'in the judiciary appropriation act, 1978, pub. l. no. 9586, title iv, 91 stat. 419, 434–35 aug. 2, 1977, and',
5850:'in the consolidated appropriations act, 2005, pub. l. no. 108447, div. b, title iii, 118 stat. 2809, 2892–93 dec. 8,',
5851:'2004. we retain the above summary here to illustrate the analysis and because it may have use by analogy in',
5852:'similar situations. page 728 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations required by law. we discuss these transactions',
5853:'in section b.3 of this chapter. subsection a1 addresses the obligational requirements of all other interagency transactions: “a binding agreement',
5854:'between an agency and another person including an agency” emphasis added. to distinguish these other transactions from those required by',
5855:'law, these transactions are often referred to as “voluntary orders.” this section discusses voluntary orders. because voluntary orders are covered',
5856:'by section 1501a1, obligations for many voluntary orders are recorded in the same manner as for contracts. however, the authority',
5857:'that governs the interagency transaction, not contract practices, determines the obligational treatment of a voluntary order. 1 economy act agreements',
5858:'a major source of authority for voluntary interagency agreements is the economy act, 31 u.s.c. §§ 1535, 1536. an economy',
5859:'act agreement is recorded as an obligation of the ordering agency at the time the ordering agency enters into the',
5860:'agreement.17 however, economy act agreements are subject to one additional requirement. under 31 u.s.c. § 1535d, if the ordering agency',
5861:'obligated a fixedyear appropriation, the ordering agency must deobligate the obligation at the end of the fiscal year to the',
5862:'extent that the performing agency has not incurred an obligation, that is, 1 has not provided the requested item to',
5863:'the ordering agency, 2 has not performed the requested service, or 3 has not entered into a valid contract with',
5864:'another person to provide the requested item or service to the ordering agency. 39 comp. gen. 317 1959; 34 comp.',
5865:'gen. 418, 421–22 1955. it was, for example, improper for the library of congress to use annual funds transferred to',
5866:'it under economy act agreements and not obligated by it prior to the end of the fiscal year to provide',
5867:'services in the following fiscal year. gao, financial audit: first audit of the library of congress discloses significant problems, gao/afmd9113',
5868:'washington, d.c.: aug. 22, 1991. the reason for this requirement is to prevent the economy act from being used to',
5869:'extend the obligational life of an appropriation 17 the determination of whether an interagency agreement is “binding” for purposes of',
5870:'recording under 31 u.s.c. § 1501a1 is made in the same manner as if the contract were with a private',
5871:'party—examining precisely what the parties have “committed” themselves to do under the terms of the agreement. however, an agreement between',
5872:'two government agencies cannot be legally “enforced” against a defaulting agency in the sense of compelling performance or obtaining damages.',
5873:'enforcement against another agency is largely a matter of comity and good faith. thus, the term “binding” in the context',
5874:'of interagency agreements reflects the undertakings expressed in the agreement without regard to the legal consequences or lack thereof of',
5875:'nonperformance. page 729 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations beyond that provided by law. 31 comp. gen.',
5876:'83, 85 1951. the deobligation requirement of 31 u.s.c. § 1535d does not apply to obligations against noyear appropriations. 39',
5877:'comp. gen. 317, 319 1959. for more background information on obligation and deobligation under the economy act, see chapter 15,',
5878:'section b.1; b302760, may 17, 2004; b288142, sept. 6, 2001; and b301561, june 14, 2004 nondecision letter. 2 noneconomy act',
5879:'agreements where the agreement is based on some statutory authority other than the economy act, the recording of the obligation',
5880:'is still governed by 31 u.s.c. § 1501a1. however, the deobligation requirement of 31 u.s.c. § 1535d does not apply.',
5881:'in this situation, the obligation will remain payable in full from the appropriation initially charged, regardless of when performance occurs,',
5882:'in the same manner as contractual obligations generally, subject, of course, to the bona fide needs rule and to any',
5883:'restrictions in the legislation authorizing the agreement. e.g., b302760, may 17, 2004 interagency agreement pursuant to 2 u.s.c. § 141c',
5884:'for renovation of loading dock; b289380, july 31, 2002 interagency agreement pursuant to the section 27g of the consumer product',
5885:'safety act, 15 u.s.c. § 2076g; b286929, apr. 25, 2001 interagency agreement pursuant to what is now 40 u.s.c. §',
5886:'322 for implementation of a declassification information management system; 51 comp. gen. 766 1972 interagency agreement pursuant to section 303a',
5887:'of the former manpower development and training act of 1962, 42 u.s.c. § 2613a 1964 for training of air traffic',
5888:'controllers. thus, it is necessary to determine the specific statutory authority supporting the interagency agreement in order to properly obligate',
5889:'a requesting agency’s appropriation. the following examples illustrate these principles. the national park service nps of the department of interior',
5890:'entered into a series of agreements during fiscal year 1998 with the national resource conservation service of the department of',
5891:'agriculture to obtain soil surveys at various nps locations. each agreement delineated specific tasks organized in two or three phases',
5892:'across several fiscal years, culminating in the publication of a final soil survey report for each location. gao concluded that',
5893:'the agreements were entered into primarily under the authority of 16 u.s.c. § 460l1g and thus were not subject to',
5894:'the deobligation requirement of 31 u.s.c. § 1535d. however, since nps provided insufficient information for gao to determine whether the',
5895:'page 730 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations agreements were for severable or nonseverable services for purpose',
5896:'of complying with the bona fide needs rule,18 gao returned the case to nps in order to make the requisite',
5897:'determinations and adjust its accounts accordingly. b282601, sept. 27, 1999. the administrative office of united states courts and the general',
5898:'services administration entered into an agreement during fiscal year 1976 for design and implementation of an automated payroll system that',
5899:'was authorized by 40 u.s.c. § 759 1976 a provision of law that has since been repealed, rather than the',
5900:'economy act. the work was to be performed during fiscal years 1976 and 1977. since the agreement met the requirements',
5901:'of 31 u.s.c. § 1501a1, it was properly recordable as a valid obligation against fiscal year 1976 funds and was',
5902:'not subject to 31 u.s.c. § 1535d. 55 comp. gen. 1497 1976. the army corps of engineers entered into agreement',
5903:'with department of housing and urban development hud to perform flood insurance studies pursuant to orders placed by hud. since',
5904:'the agreement presumably required the corps to perform as hud placed the orders, a recordable obligation would arise when hud',
5905:'placed an order under the agreement. since the agreement was authorized by the national flood insurance act,19 rather than the',
5906:'economy act, funds obligated by an order would remain obligated even though the corps did not complete performance or contract',
5907:'out for it until following the fiscal year. b167790, sept. 22, 1977. 3 “binding agreement” requirement regardless of whether the',
5908:'economy act or other interagency transaction authority governs the transaction, a voluntary interagency order is recordable under 31 u.s.c. §',
5909:'1501a1 only if it constitutes a binding agreement that meets the other criteria of that subsection. if it does, the',
5910:'applicability or nonapplicability of 31 u.s.c. § 1535d then becomes relevant. if it does not, an obligation arises only when',
5911:'the performing agency has completed the work or has awarded contracts to have the work done. see 59 comp. gen.',
5912:'602 1980; 39 comp. gen. 829 1960; 34 comp. gen. 705, 708 1955; 23 comp. gen. 88 1943; b193005, oct.',
5913:'2, 1978; 18 see chapter 5, section b for a discussion of the bona fide needs rule. 19 42 u.s.c.',
5914:'§ 4101a 1970 and supp. v 1975. page 731 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations b180578o.m., sept.',
5915:'26, 1978. for example, military interdepartmental procurement requests mipr are viewed as authorized by the economy act. an mipr is',
5916:'considered a binding agreement for obligation purposes under 31 u.s.c. § 1501a1. it is subject to the deobligation requirement of',
5917:'31 u.s.c. § 1535d and is thus ultimately chargeable to appropriations current when the performing component incurs valid obligations. 59',
5918:'comp. gen. 563 1980; 34 comp. gen. 418, 422 1955. in b193005, oct. 2, 1978, gao considered the procurement of',
5919:'crude oil for the strategic petroleum reserve. the federal property and administrative services act of 194920 authorized the general services',
5920:'administration gsa to procure materials for other federal agencies as well as to delegate such authority. gsa delegated the authority',
5921:'to procure fuel commodities to the secretary of defense, who redelegated the authority to the defense fuel supply center dfsc.',
5922:'thus, the department of energy doe could procure oil through the dfsc in a noneconomy act transaction. an order placed',
5923:'by doe with dfsc prior to the expiration of the period of availability of the appropriation to be charged could',
5924:'be recorded as an obligation against such appropriation under 31 u.s.c. § 1501a1 if it constituted a “binding agreement.” further,',
5925:'the appropriation that was obligated would remain available to liquidate contracts awarded by dfsc. this result would have been precluded',
5926:'by 31 u.s.c. § 1535d had the transaction been governed by the economy act. in 59 comp. gen. 602 1980,',
5927:'gao considered the procedure by which the then bureau of alcohol, tobacco, and firearms atf ordered “strip stamps” from the',
5928:'bureau of engraving and printing. these are the excise tax stamps one sees pasted across the caps of liquor bottles.',
5929:'gao reviewed pertinent legislation and concluded that atf was not “required by law” to procure its strip stamps from the',
5930:'bureau of engraving and printing. since individual orders were not binding agreements, it was immaterial in one important respect whether',
5931:'the order was governed by the economy act or some other law; in neither event could atf’s funds remain obligated',
5932:'beyond the last day of a fiscal year to the extent an order remained unfilled. funds could be considered obligated',
5933:'at the end of a fiscal year only to the extent that stamps were printed or in process or that',
5934:'the bureau of engraving and printing had entered into a contract with a third party to provide them. 20 ch.',
5935:'288, 63 stat. 377 june 30, 1949. page 732 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations 4 orders',
5936:'from stock the obligational treatment of orders for items to be delivered from stock of the requisitioned agency derives from',
5937:'32 comp. gen. 436 1953. an order for items to be delivered from stock is a recordable obligation if 1',
5938:'it is intended to meet a bona fide need of the fiscal year in which the order is placed or',
5939:'to replace stock used in that fiscal year21 and 2 the order is firm and complete. to be firm and',
5940:'complete, the order must request prompt delivery of specific available stock items for a stated consideration and must be accepted',
5941:'by the supplying agency in writing. “available” means on hand or routinely on order. however, acceptance is not required for',
5942:'commonuse stock items which are on hand or on order and will be delivered promptly. materials which are specially manufactured',
5943:'or otherwise created for a particular purpose in order to satisfy an order are not “stock.” 44 comp. gen. 695',
5944:'1965. likewise, an order for an item not stocked by the requisitioned agency or, if out of stock, not routinely',
5945:'on order is not a recordable obligation until the requisitioned agency purchases the item or executes a contract for it.',
5946:'the reason is that such an order does not mature into a binding agreement until the requisitioned agency executes the',
5947:'order or purchases the items needed to fill it; before then, it is merely an offer subject to acceptance by',
5948:'the requisitioned agency’s performance. b193005, oct. 2, 1978. the basic rules in this area were established by 34 comp. gen.',
5949:'705 1955. although the foregoing rules were developed prior to the enactment of 31 u.s.c. § 1501a1, they continue to',
5950:'govern the recording of obligations under that statute. 34 comp. gen. 705; 34 comp. gen. 418, 422 1955. 5 project',
5951:'orders historically, “project orders” refer to orders authorized by 41 u.s.c. § 23,22 which provides: 21 the fact that the',
5952:'replacement stock will not be used until the following year will not defeat an otherwise valid obligation. see 73 comp.',
5953:'gen. 259 1994; 44 comp. gen. 695 1965. 22 the coast guard has virtually identical authority in 14 u.s.c. §',
5954:'151. page 733 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations “all orders or contracts for work or material',
5955:'or for the manufacture of material pertaining to approved projects heretofore or hereafter placed with governmentowned establishments shall be considered',
5956:'as obligations in the same manner as provided for similar orders or contracts placed with commercial manufacturers or private contractors,',
5957:'and the appropriations shall remain available for the payment of the obligations so created as in the case of contracts',
5958:'or orders with commercial manufacturers or private contractors.”23 gao has interpreted this statute, which was derived from earlier appropriation act',
5959:'provisions for the military departments appearing shortly after world war i, 24 as applying only to transactions between the military',
5960:'departments and establishments owned by the defense department for work related to military projects. 72 comp. gen. 172, 173 1993;',
5961:'b95760, june 27, 1950. thus, the decision in 72 comp. gen. 172 held that the economy act, rather than 41',
5962:'u.s.c. § 23, applies to defense department transactions with other federal agencies, in this case a department of defense request',
5963:'for research assistance from the library of congress. a project order is a valid and recordable obligation when the order',
5964:'is issued and accepted, regardless of the fact that performance may not be accomplished until after the expiration of the',
5965:'fiscal year. 1 comp. gen. 175 1921; b135037o.m., june 19, 1958. the statute does not, however, authorize the use of',
5966:'the appropriations so obligated for the purpose of replenishing stock used in connection with the order. a25603, may 15, 1929.',
5967:'the requirement of specificity applies to project orders the same as any other recordable obligations under 31 u.s.c. § 1501a1.',
5968:'b126405, may 21, 1957. since a project order is not an economy act transaction, the deobligation requirement of 31 u.s.c.',
5969:'§ 1535d does not apply. 34 comp. gen. 418, 422 1955. see also 16 comp. gen. 752 1937. also, unlike',
5970:'the economy act, 23 the term “approved projects,” as used in 41 u.s.c. § 23, has no special meaning. it',
5971:'refers simply to “projects that have been approved by officials having legal authority to do so.” b171049o.m., feb. 17, 1972.',
5972:'24 thus 41 u.s.c. § 23 predates enactment of § 1311 of the supplemental appropriations act of 1955, now codified',
5973:'at 31 u.s.c. § 1501, and, like the economy act, provides an early statutory authority to obligate an appropriation on',
5974:'the basis of an interagency transaction. page 734 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations 41 u.s.c. §',
5975:'23 does not authorize advance payment. thus, advance payment for project orders is not authorized unless permitted by some other',
5976:'statute. b95760, june 27, 1950. 2. section 1501a2: loans under 31 u.s.c. § 1501a2, a recordable obligation exists when there',
5977:'is documentary evidence of “a loan agreement showing the amount and terms of repayment.” a loan agreement is essentially contractual',
5978:'in nature. thus, to have a valid obligation, there must be a proposal by one party and an acceptance by',
5979:'another. approval of the loan application must be communicated to the applicant within the fiscal year sought to be charged,',
5980:'and there must be documentary evidence of that communication. b159999o.m., mar. 16, 1967. where a loan application is made in',
5981:'one fiscal year and approval is not communicated to the applicant until the following fiscal year, the obligation is chargeable',
5982:'to the later year. id. ; b159999o.m., dec. 14, 1966. telegraphic notification of approval of a loan application where the',
5983:'amount of the loan and terms of repayment are thereby agreed upon is legally acceptable. b159999o.m., dec. 14, 1966. to',
5984:'support a recordable obligation under section 1501a2, the agreement must be sufficiently definite and specific, just as in the case',
5985:'of section 1501a1 obligations. to illustrate, the united states and the government of brazil entered into a loan agreement in',
5986:'1964. as a condition precedent to any disbursement under the agreement, brazil was to furnish a statement covering utilization of',
5987:'the funds. the funds were to be used for various economic and social development projects “as may, from time to',
5988:'time, be agreed upon in writing” by the governments of the united states and brazil. while the loan agreement constituted',
5989:'a valid binding contract, it was not sufficiently definite or specific to validly obligate fiscal year 1964 funds. the basic',
5990:'agreement was little more than an “agreement to agree,” and an obligation of funds could arise only when a particular',
5991:'“utilization statement” was submitted and approved. b155708o.m., apr. 26, 1965. prior to fiscal year 1992, the amount to be recorded',
5992:'in the case of a loan was quite simple—the face amount of the loan. from the budgetary perspective, however, this',
5993:'was undesirable because the obligation was indistinguishable from any other cash outlay. by disregarding at the obligational stage the fact',
5994:'that loans are supposed to be repaid, this treatment did not reflect the true cost to the government of direct',
5995:'loan page 735 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations programs. congress addressed the situation in the federal',
5996:'credit reform act of 1990 fcra, pub. l. no. 101508, § 13201, 104 stat. 1388, 1388609 nov. 5, 1990, codified',
5997:'at 2 u.s.c. §§ 661–661f. the general approach of the fcra is to require the advance provision of budget authority',
5998:'to cover the subsidy portion of direct loans in recognition of the fact that not all loans are repaid, with',
5999:'the nonsubsidy portion the portion expected to be repaid financed through borrowings from the treasury. the office of management and',
6000:'budget has issued detailed instructions for implementing the fcra’s requirements that appear in omb circular no. a11, preparation, submission, and',
6001:'execution of the budget, part 5 june 21, 2005. 25 the fcra defines “direct loan” as “a disbursement of funds',
6002:'by the government to a nonfederal borrower under a contract that requires the repayment of such funds with or without',
6003:'interest.” 2 u.s.c. § 661a1. a “direct loan obligation” is “a binding agreement by a federal agency to make a',
6004:'direct loan when specified conditions are fulfilled by the borrower.” id. § 661a2. the “cost” of a direct loan is',
6005:'the estimated longterm cost to the government, taking into consideration disbursements and repayments, calculated on a net present value basis',
6006:'at the time of disbursement. id. § 661a5. unless otherwise provided by statute, new direct loan obligations may be incurred',
6007:'only to the extent that budget authority to cover the subsidy costs is provided in advance. 2 u.s.c. § 661cb.',
6008:'under this provision, the typical appropriation will include both an appropriation of budget authority for the subsidy costs and a',
6009:'program ceiling total face amount of loans supportable by the cost appropriation. the appropriation is made to a “program account.”',
6010:'when a direct loan obligation is incurred, its cost is obligated against the program account. see generally omb cir. no.',
6011:'a11, at § 185.10. the actual funding is done through a revolving, nonbudget “financing account.” loan repayments are credited to',
6012:'the financing account. see generally omb cir. no. a11, at § 185.11. the overobligation or overexpenditure of either the loan',
6013:'subsidy or the credit level supportable by the enacted subsidy violates the antideficiency act. see omb cir. no. a11, at',
6014:'§ 145.3. 25 the fcra applies to new direct loan obligations incurred on or after october 1, 1991. the budgetary',
6015:'and obligational treatment of guaranteed and insured loans is discussed in chapter 11, section b. page 736 gao06382sp appropriations law—vol.',
6016:'ii chapter 7 obligation of appropriations 3. section 1501a3: interagency orders required by law the third standard for recording obligations,',
6017:'31 u.s.c. § 1501a3, is “an order required by law to be placed with [a federal] agency.” subsection a3 means',
6018:'exactly what it says. an order placed with another government agency is recordable under this subsection only if it is',
6019:'required by statute or statutory regulation to be placed with the other agency. the subsection does not apply to orders',
6020:'that are merely authorized rather than required. 34 comp. gen. 705 1955. an order required by law to be placed',
6021:'with another agency is not an economy act transaction. therefore, the deobligation requirement of 31 u.s.c. § 1535d does not',
6022:'apply. 35 comp. gen. 3, 5 1955. the fact that the work will be performed in the next fiscal year',
6023:'does not defeat the obligation as long as the bona fide need test is met. b302760, may 17, 2004; 59',
6024:'comp. gen. 386 1980; 35 comp. gen. 3. also, the fact that the work is to be accomplished and reimbursement',
6025:'made through use of a revolving fund is immaterial. 35 comp. gen. 3; 34 comp. gen. 705. a common example',
6026:'of “orders required by law” is printing and binding to be done by the government printing office gpo. 44 u.s.c.',
6027:'§ 501.26 the rule is that a requisition for printing services may be recorded as an obligation when placed if',
6028:'1 there is a present need for the printing and 2the requisition is accompanied by copy or specifications sufficient for',
6029:'gpo to proceed with the job. thus, a requisition by the commission on fine arts for the printing of “sixteenth',
6030:'street architecture, volume i” placed with gpo in fiscal year 1977 and accompanied by manuscript and specifications obligated fiscal year',
6031:'1977 funds and was chargeable in its entirety to fiscal year 1977, notwithstanding that the printing would be done in',
6032:'the following fiscal year. 59 comp. gen. 386 1980. however, a requisition for u.s. travel service sales promotional literature placed',
6033:'with gpo near the end of fiscal year 1964 did not obligate fiscal year 1964 funds where no copy or',
6034:'manuscript was furnished to gpo until fiscal year 1965. 44 comp. gen. 695 1965. for other printing cases illustrating these',
6035:'rules, see 29 comp. gen. 489 1950; 23 comp. gen. 82 1943; b154277, june 5, 1964; b123964, 26 see b300192,',
6036:'nov. 13, 2002, regarding the constitutionality of this and related statutory provisions. page 737 gao06382sp appropriations law—vol. ii chapter 7',
6037:'obligation of appropriations aug. 23, 1955; b114619, apr. 17, 1953; b50663, june 30, 1945; b35807, aug. 10, 1943; b34888, june',
6038:'21, 1943. after an agency certifies that it requires the services of gpo, the public printer is required to furnish',
6039:'an estimate of the cost of the services to the ordering agency, which then may make a requisition for performance',
6040:'from gpo. the estimate is the amount that the ordering agency should obligate against its appropriation and establishes a ceiling',
6041:'that gpo may not exceed without first providing the ordering agency a new estimate and obtaining a requisition from an',
6042:'authorized official of the ordering agency. 44 u.s.c. §§ 1102c, 1103. thus gpo was not authorized to exceed its estimate',
6043:'of $14,000 and incur expenses amounting to $304,334 without first notifying and obtaining the approval of an authorized official of',
6044:'the requisitioning agency, in this case the environmental protection agency. b259208, mar. 6, 1996. further, the printing estimate alone, even',
6045:'if written, is not sufficient to create a valid and recordable obligation unless it is accompanied by the placement of',
6046:'an order. b182081, jan. 26, 1977, aff’d, b182081, feb. 14, 1979. in the cited decision, there was no valid obligation',
6047:'before the ordering commission went out of existence and its appropriations ceased to be available for further obligation. therefore, there',
6048:'was no appropriation available to reimburse gpo for work done under the invalid purported obligation. gpo is required by law',
6049:'to print certain congressional materials such as the congressional record, and receives a “printing and binding” appropriation for this purpose.',
6050:'for items such as these where no further request or authorization is required, a copy of the basic law authorizing',
6051:'the printing and a copy of the appropriation constitute the obligating documents. b123964, aug. 23, 1955. another common “order required',
6052:'by law” situation is building alteration, management, and related services to be performed by the general services administration. for example,',
6053:'a job order by the social security administration for building repairs validly obligated funds of the fiscal year in which',
6054:'the order was placed, by virtue of subsection a3, notwithstanding that gsa was unable to perform the work until the',
6055:'following fiscal year. 35 comp. gen. 3 1955. see also b158374, feb. 21, 1966. however, this result assumes compliance with',
6056:'the bona fide need concept. thus, an agreement for work incident to the relocation of federal power commission employees placed',
6057:'in fiscal year 1971 did not validly obligate fiscal year 1971 funds where it was clear that the relocation was',
6058:'not required to, and would not, take place, nor would the space in question page 738 gao06382sp appropriations law—vol. ii',
6059:'chapter 7 obligation of appropriations be made tenantable, until the following fiscal year. b95136o.m., aug. 11, 1972. orders placed with',
6060:'gsa are further discussed in 34 comp. gen. 705 1955. as noted earlier, gao has expressed the view that the',
6061:'recording criteria of 31 u.s.c. § 1501a should be followed in evaluating obligations of the government of the district of',
6062:'columbia. thus, orders by a department of the district of columbia government for repairs and improvements which are required by',
6063:'statute or statutory regulation to be placed with the district of columbia department of general services and performed through use',
6064:'of the repairs and improvements working fund create valid obligations when the orders are placed. b180578o.m., sept. 26, 1978. 4.',
6065:'section 1501a4: the fourth recording standard in 31 u.s.c. § 1501a4 is— orders without “an order issued under a law',
6066:'authorizing purchases without advertising advertising awhen necessary because of a public exigency; bfor perishable subsistence supplies; or cwithin specific monetary',
6067:'limits.” subsection a4 is limited to statutorily authorized purchases without advertising in the three situations specified. the subsection must be',
6068:'selfexplanatory as there appear to be no comptroller general decisions under it. 5. section 1501a5: grants and subsidies the fifth',
6069:'recording standard in 31 u.s.c. § 1501a5 requires that the obligation be supported by documentary evidence of a grant or',
6070:'subsidy payable: “a from appropriations made for payment of, or contributions to, amounts required to be paid in specific amounts',
6071:'fixed by law or under formulas prescribed by law; “b under an agreement authorized by law; or page 739 gao06382sp',
6072:'appropriations law—vol. ii chapter 7 obligation of appropriations “c under plans approved consistent with and authorized by law.” the recording',
6073:'statute refers to grants and subsidies although federal assistance may be characterized in many ways. see chapters 10 and 11,',
6074:'respectively, for a more comprehensive discussion of the concepts of federal assistance in the form of grants and cooperative agreements',
6075:'and federal assistance in the form of guaranteed and insured loans. a. grants in order to properly obligate an appropriation',
6076:'for an assistance program, some action creating a definite liability against the appropriation must occur during the period of the',
6077:'obligational availability of the appropriation. in some situations, the obligating action under section 1501a5 involves a discretionary action by an',
6078:'agency of awarding a grant that is evidenced by a grant agreement. the particular document will vary and may be',
6079:'in the form of an agency’s approval of a grant application or a letter of commitment. see b289801, dec. 30,',
6080:'2002; 39 comp. gen. 317 1959; 37 comp. gen. 861, 863 1958; 31 comp. gen. 608 1952; b128190, june 2,',
6081:'1958; b114868.01o.m., mar. 17, 1976. generally, in order to properly obligate federal assistance funds, there must be some action to',
6082:'establish a firm commitment on the part of the united states. this commitment must be unconditional. 50 comp. gen. 857,',
6083:'862 1971. there must be documentary evidence of the grant award and this requirement is not satisfied by the mere',
6084:'reservation or earmarking of amounts in accounting records for the purpose of having them available should an application for a',
6085:'grant be submitted and approved. champaign county, illinois v. united states law enforcement assistance administration, 611 f.2d 1200 7th cir.',
6086:'1979; b126372, sept. 18, 1956. finally, the award terms must be communicated to the official grantee, and where the grantee',
6087:'is required to comply with certain prerequisites, such as putting up matching funds, the prerequisite must also be accepted by',
6088:'the grantee during the period of availability of the grant funds. an illustration of this latter requirement is b220527, dec.',
6089:'16, 1985. the economic development administration made an “offer of grant” to a connecticut municipality that would have required a',
6090:'substantial outlay of funds by the municipality. the offer was accepted by a town official who had no authority to',
6091:'accept the grant. by its own municipal ordinance, only the town council could accept a grant offer. by the time',
6092:'the town marshaled the resources to fulfill its obligations under the grant and the unauthorized acceptance was ratified by the',
6093:'town council, the federal page 740 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations funds had expired for obligational',
6094:'purposes. gao held that no valid grant obligation on the part of the government had ever been made. see also',
6095:'b164990, jan. 10, 1969, finding an attempted obligation invalid where the program legislation required approval of a proposed grant by',
6096:'the state governor and he had not yet agreed, even though the award instruments had already been executed. applying the',
6097:'above principles, the comptroller general found that a document entitled “approval and award of grant” used by the economic development',
6098:'administration was sufficient for recording grant obligations under the local public works program because it “reflects the administration’s acceptance of',
6099:'a grant application; specifies the project approved and the amount of funding; and imposes a deadline for affirmation by the',
6100:'grantee.” b126652, aug. 30, 1977. once the appropriation has been properly obligated, performance by the grantee and the actual disbursement',
6101:'of funds may extend beyond the period of obligational availability. b300480, apr. 9, 2003, aff’d, b300480.2, june 6, 2003; b289801,',
6102:'dec. 30, 2002; 31 comp. gen. 608, 610 1952; 20 comp. gen. 370 1941; b37609, nov. 15, 1943; b24827, apr.',
6103:'3, 1942; b124374o. m., jan. 26, 1956. if the above requirements are not met, then the appropriation is not obligated.',
6104:'thus, the comptroller general determined that the attempted obligation was invalid in b164990, sept. 6, 1968, where the grantee corporation',
6105:'was not in existence when the obligation was recorded. also, the relevant program legislation must be examined to see if',
6106:'there are any additional requirements. in other situations, the obligating action for purposes of 31 u.s.c. § 1501a5a may take',
6107:'place by operation of law under a statutory formula grant or by virtue of actions authorized by law to be',
6108:'taken by others that are beyond the control of the agency even when the precise amount of the obligation is',
6109:'not determined until a later time. when this occurs, the documentary evidence used to support the accounting charge against the',
6110:'appropriation is a reflection of, not the creation of, the obligation under the particular law and usually is generated subsequent',
6111:'to the time that the actual obligation arose. 63 comp. gen. 525 1984; b1640313.150, sept. 5, 1979. thus where an',
6112:'agency is required to allocate funds to states on the basis of a statutory formula, the formula establishes the obligation',
6113:'to each recipient rather than the agency’s allocation since, if the allocation is erroneous, the agency must adjust the page',
6114:'741 gao06382sp appropriations law—vol. ii b. subsidies chapter 7 obligation of appropriations amounts paid each recipient. 41 comp. gen. 16',
6115:'1961; b1640313.150, sept. 5, 1979. the rules for deobligation and reobligation of assistance funds are the same as for other',
6116:'obligations generally. program legislation in a given case may, of course, provide for different treatment. for example, b211323, jan. 3,',
6117:'1984, considered a provision of the public works and economic development act of 196527 under which funds apportioned to states',
6118:'remained available to the state until expended. under that particular provision, funds deobligated as the result of a cost underrun',
6119:'could be reobligated by the state, without fiscal year limitation, for purposes within the scope of the program statute. for',
6120:'a discussion of obligation and deobligation of funds under the now defunct comprehensive employment and training act the predecessor of',
6121:'the job training partnership act in the context of the impoundment control act, see b200685, apr. 27, 1981. there have',
6122:'been relatively few cases dealing with the obligational treatment of subsidies, although the principles should parallel those for grants since',
6123:'they both derive from 31 u.s.c. § 1501a5. this may be explained by the fact that some courts when confronted',
6124:'with the necessity to determine the meaning of “subsidy” when used in a statute that does not define the word',
6125:'have done so in a manner that is remarkably similar to the commonly used definitions of a grant. see the',
6126:'discussion of grants in chapter 10, section b. thus a subsidy has been defined as “a grant of public funds',
6127:'or property by a government to a private person to assist in establishment or support of an enterprise deemed advantageous',
6128:'to public…” in re hooper’s estate, 359 f.2d 569, 575–76 3rd cir., cert. denied sub. nom, 385 u.s. 903 1966.',
6129:'see also satellite broadcasting & communications ass’n of america v. fcc, 146 f. supp. 2d 803, 829–30 e.d.va., aff’d, 275',
6130:'f.3d 337 4th cir. 2001, cert. denied, 536 u.s. 922 2002; kennecott copper corp. v. state tax commission, 60 f.',
6131:'supp. 181 d.utah 1944 rev’d, 150 f.2d 905 10th cir. 1945, aff’d, 327 u.s. 573 1946; los angeles county v.',
6132:'state department of public health, 322 p.2d 968, 973 cal. app. 2nd dist. 1958. the few gao decisions in this',
6133:'area treat subsidies in a manner similar to grants for obligational purposes. in 50 comp. gen. 857 1971 gao considered',
6134:'legislation authorizing the former federal home loan bank board to make “interest adjustment” payments to member banks. the 27 42',
6135:'u.s.c. § 3153 1976 and supp. iv 1980. page 742 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations payments',
6136:'were designed to adjust the effective rates of interest charged by member banks on short and longterm borrowing, the objective',
6137:'being to stimulate residential construction for low and middleincome families. funds were appropriated to the board for this purpose on',
6138:'a fiscal year basis. gao concluded that an obligation arose for purposes of 31 u.s.c. § 1501a5 when a federal',
6139:'home loan bank made a firm and unconditional commitment in writing to a member institution, provided that the commitment letter',
6140:'included a reasonable expiration date. the funds would have to be deobligated to the extent that a member institution failed',
6141:'to execute loans prior to the specified expiration date. in 65 comp. gen. 4 1985, gao advised the department of',
6142:'education that mandatory interest subsidies under the guaranteed student loan program should be recorded as obligations on a “best estimate”',
6143:'basis as they arise, even if the recordings would exceed available budgetary resources. since the subsidies are not discretionary obligations',
6144:'but are imposed by law, there would be no antideficiency act violation. the decision overruled an earlier case b126372, sept.',
6145:'18, 1956 which had held that the recording of obligations for mail rate subsidies to air carriers could be deferred',
6146:'until the time of payment. 65 comp. gen. at 8 n.3. in 64 comp. gen. 410 1985, gao considered obligations',
6147:'by the department of housing and urban development for operating subsidies to state public housing authorities for lowincome housing projects.',
6148:'under the governing statute and regulations, the amount of the subsidy was determined upon hud’s approval of the state’s annual',
6149:'operating budget, although the basic commitment stemmed from an annual contribution contract. hud’s practice, primarily for states whose fiscal year',
6150:'coincides with that of the federal government, was to record the obligation on the basis of an estimate, issued in',
6151:'a letter of intent. gao found this to be legally permissible, but cautioned that hud was required to adjust the',
6152:'obligation up or down once it approved the operating budget. a 1983 decision, b212145, sept. 27, 1983, discusses the use',
6153:'of estimates subject to subsequent adjustment for the recording of obligations for payments in lieu of taxes under 31 u.s.c.',
6154:'§§ 6901–6906. from the perspective of the recording of obligations, these two decisions— 64 comp. gen. 410 and b212145—are simply',
6155:'applications of the general principle, previously noted, that best estimates should be recorded when more precise information is not available,',
6156:'subject to later adjustment. page 743 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations for additional discussion see chapter',
6157:'5, section b.10, relating to the application of the bona fide needs rule to grants and cooperative agreements and chapter',
6158:'10 relating to the obligation of appropriations for grants. 6. section 1501a6: pending litigation the sixth standard for recording obligations',
6159:'is “a liability that may result from pending litigation.” 31 u.s.c. § 1501a6. despite its seemingly broad language, subsection a6',
6160:'has very limited application. most judgments against the united states are paid from a permanent indefinite appropriation, 31 u.s.c. §',
6161:'1304. accordingly, since the expenditure of agency funds is not involved, judgments payable under 31 u.s.c. § 1304 have no',
6162:'obligational impact on the respondent agency. not all judgments against the united states are paid from the permanent judgment appropriation.',
6163:'several types are payable from agency funds. however, the mere fact that a judgment is payable from agency funds does',
6164:'not make it subject to subsection a6. thus far, the comptroller general has applied subsection a6 in only two situations—land',
6165:'condemnation 35 comp. gen. 185 1955 and certain impoundment litigation 54 comp. gen. 962 1975. in land condemnation proceedings, the',
6166:'appropriation is obligated when the request is made to the attorney general to institute the proceedings. 34 comp. gen. 418,',
6167:'423 1955; 34 comp. gen. 67 1954; 17 comp. gen. 664 1938; 4 comp. gen. 206 1924. in impoundment litigation,',
6168:'the comptroller general has held that when the impounded balance is obligated under subsection a6 as a liability which might',
6169:'result from the pending litigation, the balance so obligated may be used without further appropriation action. 54 comp. gen. 962.',
6170:'however, with limited exceptions, pending litigation itself does not create an obligation against the united states for purposes of section',
6171:'1501a6. rochester pure waters district v. epa, 960 f.2d 180, 186 d.c. cir. 1992 citing 35 comp. gen. 185 and',
6172:'54 comp. gen. 962. the plaintiff in rochester sought an injunction to restore appropriated funds that congress had rescinded pending',
6173:'adjudication of a claim the plaintiff was pursuing against the environmental protection agency that would have been payable from the',
6174:'rescinded funds. the court held that it lacked statutory or constitutional authority to grant the requested relief. as stated in',
6175:'35 comp. gen. at 187, subsection a6 requires recording an obligation in cases where the government is definitely liable for',
6176:'the page 744 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations payment of money out of available appropriations and',
6177:'the pending litigation is for the purpose of determining the amount of the government’s liability. thus, for judgments payable from',
6178:'agency appropriations in other than land condemnation and impoundment cases, the standard of 35 comp. gen. 185 should be applied',
6179:'to determine whether an obligation must be recorded. in cases where a judgment will be payable from agency funds but',
6180:'recording is not required, 35 comp. gen. 185 suggested that the agency should nevertheless administratively reserve sufficient funds to cover',
6181:'the contingent liability to avoid a possible violation of the antideficiency act. id. at 187. while the administrative reservation may',
6182:'still be a good idea for other reasons, the majority of more recent cases cited and summarized in chapter 6,',
6183:'section c.2.f under the heading “intent/factors beyond agency control” have taken the position that overobligations resulting from courtordered payments do',
6184:'not violate the antideficiency act.28 it should be apparent that the preceding discussion applies to money judgments— judgments directing the',
6185:'payment of money. 62 comp. gen. 527 1983; 61 comp. gen. 509 1982. in some types of litigation, a court',
6186:'may order an agency to take some specific action. while compliance will result in the expenditure of agency funds, this',
6187:'type of judgment is not within the scope of 35 comp. gen. 185. while we have found no cases, it',
6188:'seems clear from the application of 31 u.s.c. § 1501a in other contexts that no recordable obligation would arise while',
6189:'this type of litigation is still “pending.” 7. section 1501a7: under 31 u.s.c. § 1501a7, obligations are recordable when supported',
6190:'by documentary evidence of “employment or services of persons or employment and travel expenses of travel under law,” which covers',
6191:'a variety of loosely related obligations. 28 apart from the considerations discussed here, pending litigation as well as potential litigation',
6192:'and other legal claims, may require disclosure as a contingent liability in an agency’s financial statements. see generally federal accounting',
6193:'standards advisory board, accounting for liabilities of the federal government, sffas no. 5, ¶¶ 33, 35–42 dec. 20, 1995, as',
6194:'amended by sffas no. 12 december 1998, available at www.fasab.gov/codifica.html last visited september 15, 2005. page 745 gao06382sp appropriations law—vol.',
6195:'ii chapter 7 obligation of appropriations a. wages, salaries, annual leave salaries of government employees, as well as related items',
6196:'that flow from those salary entitlements such as retirement fund contributions, are obligations at the time the salaries are earned,',
6197:'that is, when the services are rendered. b303961, dec. 6, 2004; b302911, sept. 7, 2004; b287619, july 5, 2001; 24',
6198:'comp. gen. 676, 678 1945. for example, in 38 comp. gen. 316 1958, the commerce department wanted to treat the',
6199:'salaries of employees performing administrative and engineering services on highway construction projects as part of the construction contract costs. under',
6200:'this procedure, the anticipated expenses of the employees, salaries included, would be recorded as an obligation at the time a',
6201:'contract was awarded. however, the comptroller general held that this would not constitute a valid obligation under 31 u.s.c. §',
6202:'1501. the employee expenses were not part of the contract costs and could not be obligated before the services were',
6203:'performed. section 1501a7 is not limited to permanent federal employees. it applies as well to persons employed in other capacities,',
6204:'such as temporary or intermittent employees or persons employed under a personal services contract. in kinzley v. united states, 661',
6205:'f.2d 187 ct. cl. 1981, for example, the court found various agency correspondence sufficient compliance with subsection a7 to permit',
6206:'a claim for compensation for services rendered as a project coordinator. unlike subsection a1, the court pointed out, subsection a7',
6207:'does not require a binding agreement in writing between the parties, but only documentary evidence of “employment or services of',
6208:'persons.” id. at 191. for persons compensated on an actual expense basis, it may be necessary to record the obligation',
6209:'as an estimate, to be adjusted when the services are actually performed. documentation requirements to support the obligation or subsequent',
6210:'claims are up to the agency. e.g., b217475, dec. 24, 1986. when a pay increase is granted to wage board',
6211:'employees, the effective date of the increase is governed by 5 u.s.c. § 5344. this effective date determines the government’s',
6212:'liability to pay the additional compensation. therefore, the increase is chargeable to appropriations currently available for payment of the wages',
6213:'for the period to which the increases apply. b287619, july 5, 2001; 39 comp. gen. 422 1959. this is true',
6214:'regardless of the fact that appropriations may be insufficient to discharge the obligation and the agency may not yet have',
6215:'had time to obtain a supplemental appropriation. the obligation in this situation is considered “authorized by page 746 gao06382sp appropriations',
6216:'law—vol. ii chapter 7 obligation of appropriations law” and therefore does not violate the antideficiency act. 39 comp. gen. at',
6217:'426. annual leave status “is synonymous with a work or duty status.” 25 comp. gen. 687 1946. as such, annual',
6218:'leave obligates appropriations current at the time the leave is taken. id. ; 50 comp. gen. 863, 865 1971; 17',
6219:'comp. gen. 641 1938. except for employees paid from revolving funds 25 comp. gen. 687, or where there is some',
6220:'statutory indication to the contrary b70247, jan. 9, 1948, the obligation for terminal leave is recorded against appropriations for the',
6221:'fiscal year covering the employee’s last day of active service. 25 comp. gen. at 688; 24 comp. gen. 578, 583',
6222:'1945. bonuses such as performance awards or incentive awards obligate appropriations current at the time the awards are made. thus,',
6223:'for example, where performance awards to senior executive service officials under 5 u.s.c. § 5384 were made in fiscal year',
6224:'1982 but actual payment had to be split between fiscal year 1982 and fiscal year 1983 to stay within statutory',
6225:'compensation ceilings, the entire amount of the awards remained chargeable to fiscal year 1982 funds. 64 comp. gen. 114, 115',
6226:'n. 2 1984. the same principle would apply to other types of discretionary payments; the administrative determination creates the obligation.',
6227:'e.g., b80060, sept. 30, 1948. employees terminated by a reduction in force rif are entitled by statute to severance pay.',
6228:'5 u.s.c. § 5595. severance pay is obligated on a pay period by pay period basis. thus, where a rif',
6229:'occurs near the end of a fiscal year and severance payments will extend into the following fiscal year, it is',
6230:'improper to charge the entire amount of severance pay to the fiscal year in which the rif occurs. b200170, july',
6231:'28, 1981. gao reached a different result in b200170, sept. 24, 1982. the united states metric board was scheduled to',
6232:'terminate its existence on september 30, 1982. legislative history indicated that the board’s fiscal year 1982 appropriation was intended to',
6233:'include severance pay, and no appropriations had been requested for fiscal year 1983. under these circumstances, severance payments to be',
6234:'made in fiscal year 1983 were held chargeable to the fiscal year 1982 appropriation. a contrary result would have meant',
6235:'that the fiscal year 1982 funds would expire, and congress would have had to appropriate the same funds again for',
6236:'fiscal year 1983. page 747 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations b. compensation plans in foreign countries',
6237:'by statute, the state department is required to establish compensation plans for foreign national employees of the foreign service in',
6238:'foreign countries. the plans are to be “based upon prevailing wage rates and compensation practices . . . for corresponding',
6239:'types of positions in the locality of employment,” to the extent consistent with the public interest. 22 u.s.c. § 3968a1.',
6240:'under subsection b of 22 u.s.c. § 3968, other government agencies are authorized to administer foreign national employee compensation programs',
6241:'in accordance with the applicable provisions of the foreign service act. this provision, for example, authorized the defense department to',
6242:'establish a pension and life insurance program for foreign national employees in bermuda, provided that it corresponded to prevailing local',
6243:'practice. 40 comp. gen. 650 1961. section 3968c of title 22, united states code, authorizes the secretary of state to',
6244:'prescribe regulations for local compensation plans applicable to all federal agencies. to the extent this authority is not exercised, however,',
6245:'the statute does not otherwise require that a plan established by another agency conform to the state department’s plan. an',
6246:'agency establishing a local plan should, to the extent not regulated by state, coordinate with other agencies operating in the',
6247:'locality. 40 comp. gen. at 652. as a practical matter, two agencies operating in the same locality should not develop',
6248:'substantially different plans, assuming both legitimately reflect prevailing local practice. to the extent the authority of 22 u.s.c. § 3968',
6249:'is exercised in a given country, the obligational treatment of various elements of compensation may vary from what would otherwise',
6250:'be required. for example, colombian law provides for the advance payment of accrued severance pay to help the employee purchase',
6251:'or make improvements on a home. thus, under a compensation plan for foreign national employees in colombia, severance pay would',
6252:'be recorded as an obligation against the fiscal year appropriation current at the time of accrual. b192511, feb. 5, 1979.',
6253:'while 22 u.s.c. § 3968 authorizes compensation plans based on local practice, it does not permit automatic disregard of all',
6254:'other laws of the united states. thus, under the colombian severance pay program noted above, if the employee subsequently is',
6255:'terminated for cause or otherwise loses eligibility, the agency must proceed with collection action under the federal claims collection act,',
6256:'local practice to the contrary notwithstanding. b192511, june 8, 1979. similarly, accrued severance pay page 748 gao06382sp appropriations law—vol. ii',
6257:'chapter 7 obligation of appropriations c. training d. uniform allowance e. travel expenses29 retains its status as united states funds',
6258:'up to actual disbursement and is therefore subject to applicable fiscal and fund control requirements. b199722, sept. 15, 1981 severance',
6259:'pay plan in jordan. in several foreign countries, foreign nationals employed by the united states are entitled to be paid',
6260:'a “separation allowance” when they resign, retire, or are otherwise separated through no fault of their own. the allowance is',
6261:'based on length of service, rate of pay at time of separation, and type of separation. unlike severance pay for',
6262:'federal employees, these separation allowances represent binding commitments which accrue during the period of employment. as such, they should be',
6263:'recorded as obligations when they are earned rather than when they are paid. gao, fgmsd7625 washington, d.c.: oct. 17, 1975;',
6264:'fgmsd7520 washington, d.c.: feb. 13, 1975; substantial understatements of obligations for separation allowances for foreign national employees, b179343, washington, d.c.:',
6265:'oct. 21, 1974. these three items are gao reports, the first two being untitled letter reports. see also b226729, may',
6266:'18, 1987; b192511, feb. 5, 1979. the obligation for training frequently stems from a contract for services and to that',
6267:'extent is recordable under subsection a1 rather than subsection a7 of 31 u.s.c. § 1501. the rules for training obligations',
6268:'are summarized in chapter 5, section b.5. the federal employees uniform act, 5 u.s.c. § 5901, authorizes a uniform allowance',
6269:'for each employee required by statute or regulation to wear a uniform. the agency may furnish the uniform or pay',
6270:'a cash allowance. where an agency elects to pay an allowance, the obligation arises when the employee incurs the expense',
6271:'and becomes entitled to reimbursement. thus, the appropriation chargeable is the one currently available at the time the employee makes',
6272:'the expenditure or incurs the debt. 38 comp. gen. 81 1958. the obligation of appropriations for expenses relating to travel',
6273:'was an extremely fertile area and generated a large number of decisions before 31 u.s.c. § 1501 was enacted. the',
6274:'cases seem to involve every conceivable permutation of facts involving trips or transactions covering more than one 29 this section',
6275:'does not apply to travel incident to employee transfers. the rules for employee transfers are set forth separately in section',
6276:'b.7.g of this chapter. page 749 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations fiscal year. the enactment of',
6277:'31 u.s.c. § 1501 logically prompted the question of how the new statute affected the prior decisions. it did not,',
6278:'replied the comptroller general. thus, the starting point is that subsection a7 incorporates prior gao decisions on obligations for travel.',
6279:'35 comp. gen. 183 1955; 34 comp. gen. 459 1955. the leading case in this area appears to have been',
6280:'35 comp. gen. 183, which states the pertinent rules. the rules for travel may be summarized as follows: the issuance',
6281:'of a travel order in itself does not constitute a contractual obligation. the travel order is merely an authorization for',
6282:'the person specified to incur the obligation. the obligation is not incurred until the travel is actually performed or until',
6283:'a ticket is purchased, provided in the latter case the travel is to be performed in the same fiscal year',
6284:'the ticket is purchased. 35 comp. gen. at 185. a 1991 decision, 70 comp. gen. 469, reaffirmed the principle that',
6285:'the expenses of temporary duty travel are chargeable to the fiscal year or years in which they are actually incurred.',
6286:'some of the earlier cases in this evolutionary process are as follows: where tickets are purchased in one fiscal year',
6287:'and the travel is performed in the following fiscal year, the obligation is chargeable to the year in which the',
6288:'travel is performed, even though early purchase of the tickets may have been necessary to assure reservations. 27 comp. gen.',
6289:'764 1948; 26 comp. gen. 131 1946. a “continuous journey” involving more than one segment obligates funds of the fiscal',
6290:'year in which the ticket was purchased, as long as the trip starts in that same fiscal year. however, procurement',
6291:'of transportation en route is a new obligation. similarly, a roundtrip ticket obligates funds at the time of purchase as',
6292:'long as the trip starts in the same fiscal year. however, if the return portion of the ticket cannot be',
6293:'used and a separate return ticket must be purchased, a new obligation is created. 26 comp. gen. 961 1947; a36450,',
6294:'may 27, 1931. per diem incident to official travel accrues from day to day. per diem allowances are chargeable to',
6295:'appropriations current when the allowances accrue i.e., when the expenditures are made. thus, where travel begins in one fiscal year',
6296:'and extends into the next fiscal year, the per diem obligation must be split along fiscal year lines, even though',
6297:'the cost of the travel itself may have been chargeable in its entirety to the prior fiscal year. 23 comp.',
6298:'gen. 197 1943. page 750 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations f. state department: travel outside continental',
6299:'united states reimbursement on a mileage basis is chargeable to the fiscal year in which the major portion of the',
6300:'travel occurred. if travel is begun sufficiently prior to the end of a fiscal year to enable the employee to',
6301:'complete a continuous journey before the close of the fiscal year, the obligation is chargeable entirely to that year. however,',
6302:'if the travel is begun so late in the fiscal year that the major portion of it is performed in',
6303:'the succeeding fiscal year, it is chargeable to appropriations for the succeeding year. 9 comp. gen. 458, 460 1930; 2',
6304:'comp. dec. 14 1895. where 1 an employee is authorized to travel by privately owned vehicle at not to exceed',
6305:'the constructive cost of similar travel by rail, 2the trip starts in one fiscal year and extends into the following',
6306:'fiscal year, and 3 the journey would have been completed in the prior year had rail travel been used, the',
6307:'travel expense is chargeable to the fiscal year in which the travel began. 30 comp. gen. 147 1950. other cases',
6308:'involving obligations for travel expenses are: 16 comp. gen. 926 1937; 16 comp. gen. 858 1937; 5 comp. gen. 1',
6309:'1925; 26 comp. dec. 86 1919; b134099, dec. 13, 1957; a30477, apr. 20, 1939; a75086, july 29, 1936; a69370, apr.',
6310:'10, 1936. by virtue of 22 u.s.c. § 2677, appropriations available to the state department for travel and transportation outside',
6311:'the continental united states “shall be available for such expenses when any part of such travel or transportation begins in',
6312:'one fiscal year pursuant to travel orders issued in that year, notwithstanding the fact that such travel or transportation may',
6313:'not be completed during that same fiscal year.” this provision appeared in appropriation acts starting in 1948 and was subsequently',
6314:'made permanent and codified. it has the effect of excluding state department travel or transportation outside the continental united states',
6315:'from some of the earlier decisions. the authority is permissive rather than mandatory. 42 comp. gen. 699 1963. section 2677',
6316:'of title 22 applies to temporary duty travel as well as travel incident to change of duty station. 71 comp.',
6317:'gen. 494 1992. in either case, expenses are chargeable to the year in which the travel is ordered as long',
6318:'as some travelrelated expense is also incurred in that year, even though the physical travel may not begin until the',
6319:'following year. id. travelrelated expenses in this context include miscellaneous incidental expenses such as inoculations and passports as long as',
6320:'they are not incurred at a time so far removed from the actual travel as to question their legitimacy as',
6321:'incident to the travel. 30 comp. gen. 25 1950. the statute page 751 gao06382sp appropriations law—vol. ii chapter 7 obligation',
6322:'of appropriations g. employee transfer/relocation costs also permits charging the prior year for expenses incurred under amended travel orders issued',
6323:'in the subsequent fiscal year as long as some part of the travel or transportation began in the prior fiscal',
6324:'year. 29 comp. gen. 142 1949. the statute does not permit retroactive charging of an expired appropriation. thus, the comptroller',
6325:'general found it improper to issue a travel authorization in one fiscal year designating the succeeding fiscal year as the',
6326:'appropriation to be charged, and then, at the start of the succeeding fiscal year, cancel the authorization and replace it',
6327:'with a new authorization retroactively designating the prior year. 42 comp. gen. 699 1963. a government employee transferred to a',
6328:'new duty station is entitled to various allowances, primarily travel expenses of the employee and his or her immediate family,',
6329:'and transportation and temporary storage of household goods. 5 u.s.c. § 5724. in addition, legislation enacted in 1967, now found',
6330:'at 5 u.s.c. § 5724a, authorized several types of relocation expenses for transferred employees. specifically, they are: 1 per diem',
6331:'allowance for employee’s immediate family en route between old and new duty station; 2 expenses of one househunting trip to',
6332:'new duty station; 3temporary quarters allowance incident to relocation; 4 certain expenses of real estate transactions incurred as a result',
6333:'of the transfer; and 5 a miscellaneous expense allowance. the leading case on the obligation of employee transfer expenses is',
6334:'64 comp. gen. 45 1984. the rule is that “for all [reimbursable] travel and transportation expenses of a transferred employee,',
6335:'the agency should record the obligation against the appropriation current when the employee is issued travel orders.” id. at 48.',
6336:'this treatment applies to expenses stemming from employee transfers; it does not apply to expenses stemming from temporary duty. 70',
6337:'comp. gen. 469 1991. the rule of 64 comp. gen. 45 applies to obligations for extensions of temporary quarters subsistence',
6338:'expenses—the obligation is chargeable to the year in which the transfer order was issued. 64 comp. gen. 901 1985. it',
6339:'also applies to dislocation allowances payable to members of the armed services incident to a permanent change of station move.',
6340:'67 comp. gen. 474 1988. agencies have discretionary authority under 5 u.s.c. § 5724c to contract with private firms for',
6341:'arranging the purchase of a transferred employee’s old residence. since this service is wholly discretionary and in no way an',
6342:'page 752 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations “entitlement,” the agency’s obligation to a relocation firm stems',
6343:'from its contract with the firm, not from the employee’s transfer. thus, the obligation under one of these arrangements occurs',
6344:'when a purchase order under the contract is awarded. 66 comp. gen. 554 1987. since the obligation is evidenced by',
6345:'a written contract, it would be recorded under 31 u.s.c. § 1501a1. the decision at 64 comp. gen. 45 overruled',
6346:'prior inconsistent decisions such as 28 comp. gen. 337 1948 storage and b122358, aug. 4, 1976 relocation expenses under 5',
6347:'u.s.c. § 5724a. in assessing the impact of 64 comp. gen. 45, however, care must be taken to determine precisely',
6348:'what has been overruled and what has not. for example, since 64 comp. gen. 45 dealt with reimbursable expenses, prior',
6349:'decisions addressing the transportation of household goods shipped directly by the government presumably remain valid.30 also, 35 comp. gen. 183',
6350:'1955 should not be regarded as overruled, notwithstanding language to the contrary in 64 comp. gen. 45. there are two',
6351:'reasons for this. first, 35 comp. gen. 183 was not limited to employee transfers, but dealt with travel in other',
6352:'contexts as well, situations not involved in the 1984 decision. second, 35 comp. gen. 183 states, at page 185: “it',
6353:'may be stated, however, that we have no objection to recording tentatively as obligations the estimated cost of transportation to',
6354:'be purchased and reimbursements therefor to be earned, including reimbursements for transportation of household effects, within the current fiscal year',
6355:'at the time the travel orders are actually issued where it is administratively determined desirable in order to avoid certain',
6356:'additional accounting requirements; but all estimated amounts for travel and related expenses so recorded should be adjusted to actual obligations',
6357:'periodically . . . ” this is not very different from the holding of 64 comp. gen. 45. 30 if',
6358:'the government ships the goods, the obligation occurs when a carrier picks up the goods pursuant to a government bill',
6359:'of lading. if separate bills of lading are issued covering different segments of the shipment, each bill of lading is',
6360:'a separate and distinct obligation. e.g., 31 comp. gen. 471 1952. page 753 gao06382sp appropriations law—vol. ii chapter 7 obligation',
6361:'of appropriations 8. section 1501a8: public utilities under 31 u.s.c. § 1501a8, a recordable obligation arises when there is documentary',
6362:'evidence of “services provided by public utilities.”31 government agencies are not required to enter into contracts with public utilities when',
6363:'charges are based on rates that are fixed by regulatory bodies. however, contracts may be used if desired by the',
6364:'utility or the agency. gao, policy and procedures manual for guidance of federal agencies, title 7, § 6.2.c.5 washington, d.c.:',
6365:'may 18, 1993. if there is a contract, monthly estimates of the cost of services to be performed, based on',
6366:'past experience, may be recorded as obligations. if there is no contract, obligations should be recorded only on the basis',
6367:'of services actually performed. 34 comp. gen. 459, 462 1955. see also b287619, july 5, 2001; b259274, may 22, 1996.',
6368:'a statute relating to obligations for public utility services is 31 u.s.c. § 1308. under this law, in making payments',
6369:'for telephone services and for services like gas or electricity where the quantity is based on metered readings, the entire',
6370:'payment for a billing period which begins in one fiscal year and ends in another is chargeable to appropriations current',
6371:'at the end of the billing period. if the charge covers several fiscal years, 31 u.s.c. § 1308 does not',
6372:'apply. a charge covering several fiscal years must be prorated so that the charge to any one fiscal year appropriation',
6373:'will not exceed the cost of service for a 1year period ending in that fiscal year. 19 comp. gen. 365',
6374:'1939. gao has construed this statute as applicable to teletypewriter services as well. 34 comp. gen. 414 1955. the general',
6375:'services administration is authorized to enter into contracts for public utility services for periods not exceeding 10 years. 40 u.s.c.',
6376:'§ 501b1b.32 a contract for the procurement of telephone equipment and related services has been held subject to this provision',
6377:'even where the provider was not a “traditional” form of public utility. 62 comp. gen. 569 1983. noting that the',
6378:'concept of what constitutes “public utility service” 31 prior to the 1982 recodification of title 31, united states code, section',
6379:'1501a7 included public utilities as well as employment and travel expenses. the recodification logically separated public utilities into a new',
6380:'subsection since it is unrelated to the other items. thus, pre1982 materials refer to eight subsections whereas there are now',
6381:'nine. 32 the military departments have authority to enter into utility service contracts for up to 50 years in connection',
6382:'with the conveyance of a utility system from the department to the service provider. see 10 u.s.c. § 2688c3. page',
6383:'754 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations is flexible, the decision emphasized that the nature of the',
6384:'product or service provided rather than the nature of the provider should govern for purposes of 40 u.s.c. § 501b1b.',
6385:'62 comp. gen. at 575. the decision also concluded that gsa is not required to obligate the total estimated cost',
6386:'of a multiyear contract under 40 u.s.c. § 501b1b, but is required to obligate only its annual costs. 62 comp.',
6387:'gen. at 572, 576. 9. section 1501a9: other legal liabilities the final standard for recording obligations, 31 u.s.c. § 1501a9,',
6388:'is documentary evidence of any “other legal liability of the government against an available appropriation or fund.” this is sort',
6389:'of a catchall category designed to pick up valid obligations which are not covered by 31 u.s.c. §§ 1501a1–a8. 34',
6390:'comp. gen. 418, 424 1955. thus far, the decisions provide very little guidance on the types of situations that might',
6391:'be covered by subsection a9. the few decisions that mention subsection a9 generally cite it in conjunction with one of',
6392:'the other subsections and stop short of a definitive statement as to its independent applicability. see, e.g., 54 comp. gen.',
6393:'962 1975 impoundment litigation; b192511, feb. 5, 1979 severance pay plan under 22 u.s.c. § 3968. another case, although not',
6394:'specifically citing subsection a9, pointed out a situation that would seemingly qualify under that subsection: estimates of municipal tax liabilities',
6395:'on united states property located in foreign countries, based on tax bills received in prior years. 35 comp. gen. 319',
6396:'1955. thus, subsection a9 must be applied on a casebycase basis. if a given item is a legal liability of',
6397:'the united states, if appropriations are legally available for the item in terms of purpose and time, and if the',
6398:'item does not fit under any of the other eight subsections, then subsection a9 should be considered. up to this',
6399:'point in chapter 7, we have discussed obligations: what they are c. contingent and how and when to record them.',
6400:'as pointed out in the previous sections liabilities of this chapter, the core attribute of an obligation recordable under 31',
6401:'u.s.c. § 1501 is that it creates a definite legal liability on the part of the federal government. while the',
6402:'precise amount of the liability may be undefined initially, an “obligational event,” reflecting a definite liability, page 755 gao06382sp appropriations',
6403:'law—vol. ii chapter 7 obligation of appropriations may occur even though the amount of the liability at that time is',
6404:'undefined. a “contingent liability” is fundamentally different. in contrast to a definite liability, a contingent liability does not create an',
6405:'obligation unless and until the contingency materializes. contingent liabilities take different forms depending on the circumstances. however, whatever form it',
6406:'takes, a contingent liability by definition lacks the definiteness that is essential to the concept of an obligation. thus, gao',
6407:'defines a “contingent liability” generically as “[a]n existing condition, situation, or set of circumstances that poses the possibility of a',
6408:'loss to an agency that will ultimately be resolved when one or more events occur or fail to occur.”33 contingent',
6409:'liabilities are not recordable as obligations under section 1501 of title 31.34 rather, a contingent liability ripens into a recordable',
6410:'obligation for purposes of section 1501 only if and when the contingency materializes. e.g., 62 comp. gen. 143, 145–46 1983;',
6411:'37 comp. gen. 691– 92 1958; gao, policy and procedures manual for guidance of federal agencies, title 7, § 3.5.c',
6412:'washington, d.c.: may 18, 1993 hereafter gaoppm. the contingent liability poses somewhat of a fiscal dilemma. on the one hand,',
6413:'it is by definition and absent special statutory treatment not sufficiently definite to support the recording of an obligation. yet',
6414:'on the other hand, sound financial management may dictate that it somehow be recognized. indeed, if completely disregarded, a contingent',
6415:'liability could mature into an actual liability and result in an antideficiency act violation. agencies have a legal obligation to',
6416:'take reasonable steps to avoid situations in which contingent liabilities become actual liabilities that result in antideficiency act violations. this',
6417:'may include the 33 gao, a glossary of terms used in the federal budget process, gao05734sp washington, d.c.: september 2005,',
6418:'at 35 emphasis added. 34 outside the framework of 31 u.s.c. § 1501, however, congress has provided special treatment for',
6419:'certain contingent liabilities in order to better capture their budgetary impact. most notably, the federal credit reform act of 1990,',
6420:'2 u.s.c. §§ 661–661, changed the normal budgetary treatment of loans and loan guarantees by establishing that for most programs,',
6421:'loan guarantee commitments cannot be made unless the congress has appropriated budget authority in advance to cover their estimated losses',
6422:'known as “credit subsidy costs”. see chapter 11, section b, for a detailed discussion of the budgetary and obligational treatment',
6423:'of loan and loan guarantee programs under the federal credit reform act. page 756 gao06382sp appropriations law—vol. ii chapter 7',
6424:'obligation of appropriations “administrative reservation” or “commitment” of funds, as well as taking other actions to prevent contingencies from materializing.35',
6425:'for example, in b238201, apr. 15, 1991, the general services administration gsa was faced with a contingent liability that could',
6426:'become an actual liability. gsa was engaged in litigation concerning an illinois statute authorizing the taxation of government property purchased',
6427:'under an installment contract. gsa had entered into arrangements to purchase buildings in illinois on an installment basis, so there',
6428:'was a potential for tax liability, including back taxes, which would be assessed if the illinois statute was upheld. since',
6429:'the litigation was extending over fiscal years and the outcome was in doubt, gsa accrued amounts from the fiscal years',
6430:'involved as loss contingencies for the potential tax liability. gao agreed with gsa’s approach and stated: “because the underlying legal',
6431:'liability of the government has yet to be established, the potential tax liability of the [property] is not sufficiently definite',
6432:'to be recorded as an obligation. however, gsa has not actually obligated funds for this purpose, . . . instead,',
6433:'in terms of fiscal operations, it is possible for gsa officials to have recorded the potential liability as a commitment',
6434:'through the budgetary account ‘commitments available for obligation’ in the standard general ledger. this accounting procedure reflects allotments or other',
6435:'available funds which were earmarked in anticipation of a potential obligation and is used for purposes of effective financial planning.”',
6436:'id. see also 35 comp. gen. 185, 187 1955 gao recommended reserving funds as a means to avoid potential antideficiency',
6437:'act violations from contingent liabilities involving pending litigation in cases where it was believed that claims against the government were',
6438:'meritorious. in addition to the obligational accounting treatment of contingent liabilities, agencies need to be aware of the financial accounting',
6439:'treatment of contingent liabilities. contingent liabilities may be sufficiently important to warrant recognition in a footnote to pertinent financial statements.',
6440:'62 comp. gen. 143, 146 1983; 37 comp. gen. at 692. see also federal 35 see 7 gaoppm § 3.5.f;',
6441:'b238201, apr. 15, 1991 nondecision letter. page 757 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations accounting standards advisory',
6442:'board, accounting for liabilities of the federal government, ssfas no. 5, ¶¶ 35–42 dec. 20, 1995, as amended by ssfas',
6443:'no. 12 december 1998 provides guidance on the appropriate accounting treatment of contingent liabilities in financial statements. d. reporting requirements',
6444:'when 31 u.s.c. § 1501 was originally enacted in 1954,36 it required each agency to prepare a report each year',
6445:'on the unliquidated obligations and unobligated balance for each appropriation or fund under the agency’s control. the reports were to',
6446:'be submitted to the senate and house appropriations committees, the then bureau of the budget, and gao. gao was often',
6447:'asked by the appropriations committees to review these reports. after several years of reviewing reports, the appropriations committees determined that',
6448:'the requirement had served its purpose, and congress amended the law in 1959 to revise and relax the reporting procedures.',
6449:'the current reporting requirements are found at 31 u.s.c. §§ 1108c and 1501b. under 31 u.s.c. § 1108c, each agency,',
6450:'when submitting requests for appropriations to the office of management and budget, must report that “the statement of obligations submitted',
6451:'with the request contains obligations consistent with section 1501 of this title.” see 39 comp. gen. 422, 425 1959. the',
6452:'reports must be certified by officials designated by the agency head. omb circular no. a11, preparation, submission, and execution of',
6453:'the budget, § 51.1 june 21, 2005. the certification must be supported by adequate records, and the agency must retain',
6454:'the records and certifications in such form as to facilitate audit and reconciliation. officials designated to make the certifications may',
6455:'not redelegate the responsibility.37 the conference report on the original enactment of 31 u.s.c. § 1501 specified that the officials',
6456:'designated to make the certifications should be persons with overall responsibility for the recording of obligations, and “in 36 see',
6457:'pub. l. no. 83663, § 1311b, 68 stat. 800, 830 aug. 26, 1954. 37 see gao, policy and procedures manual',
6458:'for guidance of federal agencies, title 7, § 3.8.a washington, d.c.: may 18, 1993 hereafter gaoppm. page 758 gao06382sp appropriations',
6459:'law—vol. ii chapter 7 obligation of appropriations no event should the designation be below the level of the chief accounting',
6460:'officer of a major bureau, service, or constituent organizational unit.”38 the person who makes certifications under 31 u.s.c. § 1108c',
6461:'is not a “certifying officer” for purposes of personal accountability for the funds in question. although he or she may',
6462:'be coincidentally an “authorized certifying officer,” the two functions are legally separate and distinct. b197559o.m., may 13, 1980. the statute',
6463:'does not require 100 percent verification of unliquidated obligations prior to certification. agencies may use statistical sampling. b199967o.m., dec. 3,',
6464:'1980. in the case of transfer appropriation accounts under interagency agreements, the certification official of the spending agency must make',
6465:'the certifications to the head of the advancing agency and not to the head of the spending agency. 7 gaoppm',
6466:'§ 3.8.a. finally, 31 u.s.c. § 1501b provides that any statement of obligations furnished by any agency to the congress',
6467:'or to any congressional committee “shall include only those amounts that are obligations consistent with subsection a of this section.”',
6468:'the definition of the term “deobligation” is an agency’s cancellation or e. deobligation downward adjustment of previously incurred obligations. deobligated',
6469:'funds may be reobligated within the period of availability of the appropriation. for example, annual appropriations may be reobligated in',
6470:'the fiscal year for which the funds were appropriated, while multiyear or noyear appropriated funds may be reobligated in the',
6471:'same or subsequent fiscal years.39 deobligations occur for a variety of reasons. examples are: liquidation in amount less than amount',
6472:'of original obligation. e.g., b207433, sept. 16, 1983 cost underrun; b183184, may 30, 1975 38 h.r. rep. no. 832663, 18',
6473:'1954, quoted in financial management in the federal government, s. doc. no. 8711, 88 1961, and in 50 comp. gen.',
6474:'857, 862 1971. 39 see gao, a glossary of terms used in the federal budget process, gao05734sp washington, d.c.: september',
6475:'2005, at 44 and 85. page 759 gao06382sp appropriations law—vol. ii chapter 7 obligation of appropriations agency called for less',
6476:'work than maximum provided under levelof effort contract. see also b286929, apr. 25, 2001. cancellation of project or contract. initial',
6477:'obligation determined to be invalid. reduction of previously recorded estimate. correction of bookkeeping errors or duplicate obligations. in addition, deobligation',
6478:'may be statutorily required in some instances. an example is 31 u.s.c. § 1535d, requiring deobligation of appropriations obligated under',
6479:'an economy act agreement to the extent the performing agency has not incurred valid obligations under the agreement by the',
6480:'end of the fiscal year. see section b.1.i of this chapter for a further discussion of recording obligations in economy',
6481:'act transactions. for the most part, there are no special rules relating to deobligation. rather, the treatment of deobligations follows',
6482:'logically from the principles previously discussed in this and preceding chapters. thus funds deobligated within the original period of obligational',
6483:'availability are once again available for new obligations just as if they had never been obligated in the first place.',
6484:'naturally, any new obligations are subject to the purpose, time, and amount restrictions governing the source appropriation. funds deobligated after',
6485:'the expiration of the original period of obligational availability are not available for new obligations. b286929, apr. 25, 2001; 64',
6486:'comp. gen. 410 1985; 52 comp. gen. 179 1972. they may be retained as unobligated balances in the expired account',
6487:'until the account is closed, however, and are available for adjustments in accordance with 31 u.s.c. § 1553a. a proper',
6488:'and unliquidated obligation should not be deobligated unless there is some valid reason for doing so. absent a valid reason,',
6489:'it is improper to deobligate funds solely to “free them up” for new obligations. to do so risks violating the',
6490:'antideficiency act. for example, where a government check issued in payment of some valid obligation cannot be promptly negotiated if,',
6491:'for example, it is returned as undeliverable, it is improper to deobligate the funds and use them for new obligations.',
6492:'15 comp. gen. 489 1935; a44024, sept. 21, 1942. the two cited decisions deal with provisions of law which have',
6493:'since changed, but the thrust of the decisions remains the same. the antideficiency act violation would occur page 760 gao06382sp',
6494:'appropriations law—vol. ii chapter 7 obligation of appropriations if the payee of the original check subsequently shows up and demands',
6495:'payment but the funds are no longer available because they have been reobligated and the account contains insufficient funds. this',
6496:'does not preclude an agency from exercising flexibility in the use of its appropriations so long as the agency does',
6497:'not risk an antideficiency act violation. b272191, nov. 4, 1997. under some programs, an agency provides funds to an intermediary',
6498:'which in turn distributes the funds to members of a class of beneficiaries. the agency records the obligation when it',
6499:'provides, or legally commits itself to provide, the funds to the intermediary. it is undesirable for many reasons to permit',
6500:'the intermediary to hold the funds indefinitely prior to reallocation. unless the program legislation provides otherwise, the agency may establish',
6501:'a reasonable cutoff date at which time unused funds in the hands of the intermediary are “recaptured” by the agency',
6502:'and deobligated. gao recommended such a course of action in 50 comp. gen. 857 1971. if recapture occurs during the',
6503:'period of availability, the funds may be reobligated for program purposes; if it occurs after the period of availability has',
6504:'ended, the funds expire absent some contrary direction in the governing legislation. id. ; dabney v. reagan, no. 82 civ.',
6505:'2231csh s.d.n.y. mar. 21, 1985. congress may occasionally by statute authorize an agency to reobligate deobligated funds after expiration of',
6506:'the original period of availability. this is called “deobligationreobligation” or “deobreob” authority. such authority exists only when expressly granted by',
6507:'statute. deobligationreobligation authority generally contemplates that funds will be deobligated only when the original obligation ceases to exist and not',
6508:'as a device to effectively augment the appropriation. see b173240o.m., jan. 23, 1973. also, absent statutory authority to the contrary,',
6509:'“deobreob” authority applies only to obligations and not to expenditures. thus, repayments to an appropriation after expiration of the original',
6510:'period of obligational availability are not available for reobligation. b121836, apr. 22, 1955. page 761 gao06382sp appropriations law—vol. ii chapter',
6511:'7 obligation of appropriations page 762 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions a. introduction . . . .',
6512:'. . . . . . . . . . . . . . . . . . . .',
6513:'. . . . . . . . . . . .82 1. definition and general description . . .',
6514:'. . . . . . . . . . . . . . . . . . . .',
6515:'. . 82 2. use of appropriation warrants . . . . . . . . . . . .',
6516:'. . . . . . . . . . . . . . . . . 89 b. rate',
6517:'for operations . . . . . . . . . . . . . . . . . .',
6518:'. . . . . . . . . . .810 1. current rate . . . . . .',
6519:'. . . . . . . . . . . . . . . . . . . .',
6520:'. . . . . . . . . . . . . . . . . 810 2. rate',
6521:'not exceeding current rate . . . . . . . . . . . . . . . .',
6522:'. . . . . . . . . 812 3. spending pattern under continuing resolution . . . .',
6523:'. . . . . . . . . . 815 a. pattern of obligations . . . . .',
6524:'. . . . . . . . . . . . . . . . . . . .',
6525:'. . . . . . . . 815 b. apportionment . . . . . . . . .',
6526:'. . . . . . . . . . . . . . . . . . . .',
6527:'. . . . . . . . . . 818 4. liquidation of contract authority . . . .',
6528:'. . . . . . . . . . . . . . . . . . . .',
6529:'. 819 5. rate for operations exceeds final appropriation . . . . . . . . . . .',
6530:'. 819 c. projects or activities. . . . . . . . . . . . . . .',
6531:'. . . . . . . . . . . . .821 d. relationship to other legislation . .',
6532:'. . . . . . . . . . . . . .827 1. not otherwise provided for .',
6533:'. . . . . . . . . . . . . . . . . . . .',
6534:'. . . . . . . . . 827 2. status of bill or budget estimate used as reference',
6535:'. . . . . . . . . 827 3. more restrictive authority . . . . . .',
6536:'. . . . . . . . . . . . . . . . . . . .',
6537:'. . . . . 829 4. lack of authorizing legislation . . . . . . . . .',
6538:'. . . . . . . . . . . . . . . . . . 831 e.',
6539:'duration . . . . . . . . . . . . . . . . . . .',
6540:'. . . . . . . . . . . . . . . . . . .835 1.',
6541:'duration of continuing resolution . . . . . . . . . . . . . . . .',
6542:'. . . . . . . . 835 2. duration of appropriations . . . . . . .',
6543:'. . . . . . . . . . . . . . . . . . . .',
6544:'. . . . 836 3. impoundment . . . . . . . . . . . . .',
6545:'. . . . . . . . . . . . . . . . . . . .',
6546:'. . . . . . . . . 838 page 81 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions',
6547:'a. introduction 1. definition and general description the term “continuing resolution” may be defined as follows: “an appropriation act that',
6548:'provides budget authority for federal agencies, specific activities, or both to continue in operation when congress and the president have',
6549:'not completed action on the regular appropriation acts by the beginning of the fiscal year.”1 for the most part, continuing',
6550:'resolutions are temporary appropriation acts. with a few exceptions to be noted later, they are intended by congress to be',
6551:'stopgap measures enacted to keep existing federal programs functioning after the expiration of previous budget authority and until regular appropriation',
6552:'acts can be enacted. b300673, july 3, 2003. congress resorts to the continuing resolution when there is no regular appropriation',
6553:'for a program or agency, perhaps because the two houses of congress have not yet agreed on common language, because',
6554:'authorizing legislation has not yet been enacted, or because the president has vetoed an appropriation act passed by congress. 58',
6555:'comp. gen. 530, 532 1979. also, given the size and complexity of today’s government, the consequent complexity of the budget',
6556:'and appropriations process, and the occasionally differing policy objectives of the executive and legislative branches, it sometimes becomes difficult for',
6557:'congress to enact all of the regular appropriation acts before the fiscal year ends. continuing resolutions are nothing new. gao',
6558:'has found administrative decisions discussing them as far back as the 1880s.2 at one time, they were called “temporary resolutions.”',
6559:'the term “continuing resolution” came into widespread use in the early 1960s.3 1 gao, a glossary of terms used in',
6560:'the federal budget process, gao05734sp washington, d.c.: september 2005, at 35–36. 2 4 lawrence, first comp. dec. 116 1883; 3',
6561:'lawrence, first comp. dec. 213 1882. 3 for a brief historical sketch, see library of congress, congressional research service, budget',
6562:'concepts and terminology: the appropriations phase, no. ggr 74210, ch. v 1974, at 31–32, which identifies what may have been',
6563:'the first continuing resolution, an 1876 resolution ch. 157, 19 stat. 65 june 30, 1876 requested by president grant. page',
6564:'82 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions in the 20 years from fiscal years 1962 to 1981, 85',
6565:'percent of the appropriation bills for federal agencies were enacted after the start of the fiscal year and thus necessitated',
6566:'continuing resolutions. gao has discussed the problems inherent in this situation in several reports. see, e.g., gao, updated information regarding',
6567:'funding gaps and continuing resolutions, gao/pad8313 washington, d.c.: dec. 17, 1982; funding gaps jeopardize federal government operations, pad8131 washington, d.c.:',
6568:'mar. 3, 1981. in 24 of the fiscal years between fiscal years 1977 and 2004, congress and the president did',
6569:'not complete action on a majority of the 13 regular appropriations by the start of the fiscal year. in eight',
6570:'of those years, they did not finish any of the bills by the start of the new fiscal year.4 twentyone',
6571:'continuing resolutions were enacted for fiscal year 2001. the periodic experience of government “shutdowns,” or partial shutdowns, when appropriations bills',
6572:'have not been enacted has led to proposals for an automatic continuing resolution. the automatic continuing resolution, however, is an',
6573:'idea for which the details are critically important. depending on the detailed structure of such a continuing resolution, the incentive',
6574:'for policymakers—some in the congress and the president—to negotiate seriously and reach agreement may be lessened. if the goal of',
6575:'the automatic continuing resolution is to provide a little more time for resolving issues, it could be designed to permit',
6576:'the incurrence of obligations to avoid a funding gap, but not the outlay of funds to liquidate the new obligations.',
6577:'this would allow agencies to continue operations for a period while the congress completes appropriations actions. gao, budget process: considerations',
6578:'for updating the budget enforcement act, gao01991t july 19, 2001. funding gaps and the legal problems they present are discussed',
6579:'in greater detail in chapter 6, section c.6. continuing resolutions are enacted as joint resolutions making continuing appropriations for a',
6580:'certain fiscal year or portion of the fiscal year. although enacted in this form rather than as an “act,” once',
6581:'passed by both houses of congress and approved by the president, a continuing resolution becomes a public law and has',
6582:'the same force and effect as any other statute. oklahoma v. weinberger, 360 f. supp. 724, 726 w.d. okla. 1973;',
6583:'4 library of congress, congressional research service crs, the congressional appropriations process: an introduction, no. 976845 dec. 6, 2004, at',
6584:'15. see also crs, duration of continuing resolutions in recent years, no. rl32614 apr. 22, 2005; crs, continuing appropriations acts:',
6585:'brief overview of recent practices, no. rl30343 jan. 10, 2005. page 83 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions',
6586:'b152554, dec. 15, 1970. since a continuing resolution is a form of appropriation act, it often will include the same',
6587:'types of restrictions and conditions that are commonly found in regular appropriation acts. see, e.g., b210603, feb. 25, 1983 ship',
6588:'construction appropriation in continuing resolution making funds available “only under a firm, fixed price type contract”. indeed, continuing resolutions typically',
6589:'incorporate by reference restrictions and conditions from regular appropriations acts. see, e.g., pub. l. no. 108309, § 102, 118 stat.',
6590:'1137, 1138 sept. 30, 2004. having said this, however, it is necessary to note that continuing resolutions, at least those',
6591:'in what gao considers the “traditional form,” differ considerably from regular appropriation acts. continuing resolutions may take different forms. the',
6592:'“traditional” form, used consistently except for a few years in the 1980s, employs essentially standard language and is clearly a',
6593:'temporary measure. an example of this form is public law 108309, the first continuing resolution for fiscal year 2005, which',
6594:'provided funding authority from october 1 through november 20, 2004. section 101 appropriates: “such amounts as may be necessary under',
6595:'the authority and conditions provided in the applicable appropriations act for fiscal year 2004 for continuing projects or activities including',
6596:'the costs of direct loans and loan guarantees not otherwise specifically provided for in this joint resolution which were conducted',
6597:'in fiscal year 2004, at a rate for operations not exceeding the current rate, and for which appropriations, funds, or',
6598:'other authority was made available in the following appropriations acts . . .” section 101 then references most of the',
6599:'regular appropriation acts for fiscal year 2004. public law 108309 also contains a number of additional typical provisions, including the',
6600:'following: “sec. 102. appropriations made by section 101 shall be available to the extent and in the manner which would',
6601:'be provided by the pertinent appropriations act.” “sec. 104. no appropriation or funds made available or authority granted pursuant to',
6602:'section 101 shall be used to initiate or resume any project or activity for which page 84 gao06382sp appropriations law—vol.',
6603:'ii chapter 8 continuing resolutions appropriations, funds, or other authority were not available during fiscal year 2004.” “sec. 107. unless',
6604:'otherwise provided for in this joint resolution or in the applicable appropriations act, appropriations and funds made available and authority',
6605:'granted pursuant to this joint resolution shall be available until a enactment into law of an appropriation for any project',
6606:'or activity provided for in this joint resolution, or bthe enactment into law of the applicable appropriations act by both',
6607:'houses without any provision for such project or activity, or c november 20, 2004, whichever first occurs.” when enacting continuing',
6608:'resolutions in this form, there is clear indication that congress intends and expects that the normal authorization and appropriation process',
6609:'will eventually produce appropriation acts which will replace or terminate the budget authority contained in the resolution. thus, a continuing',
6610:'resolution of this type generally provides that funds appropriated for an activity by the resolution will no longer be available',
6611:'for obligation if the activity is later funded by a regular appropriation act, or congress indicates its intent to end',
6612:'the activity by enacting an applicable appropriation act without providing for the activity. 58 comp. gen. at 532. see also',
6613:'section 107 of public law 108309, quoted above. obligations already incurred under the resolution, however, may be liquidated. gao’s decision',
6614:'in b300673, july 3, 2003, illustrates the interplay between funding under a continuing resolution and a laterenacted regular appropriation. the',
6615:'fiscal year 2003 appropriation act for the legislative branch authorized the house of representatives chief administrative officer to use that',
6616:'office’s salaries and expenses appropriation to pay certain expenses of the house child care center for “fiscal year 2003 and',
6617:'each succeeding fiscal year.” pub. l. no. 1087, § 108, 117 stat. 11, 355 feb. 20, 2003. previously, a revolving',
6618:'fund paid those expenses. however, since public law 1087 was not enacted until february 20, 2003, fiscal year 2003 expenses',
6619:'for the child care center were initially charged to the revolving fund under continuing resolutions. with enactment of public law',
6620:'1087, gao held that the chief administrative officer’s salaries and expenses appropriation should fund the child care center expenses retroactive',
6621:'to the beginning of fiscal year 2003 and that this appropriation should reimburse the revolving fund for the fiscal year',
6622:'2003 expenses initially charged to it under the continuing resolutions. the decision stated page 85 gao06382sp appropriations law—vol. ii chapter',
6623:'8 continuing resolutions that the fact that payments were initially made during a period covered by a continuing resolution was',
6624:'not significant since the regular appropriation, once enacted, supersedes the continuing resolution and governs the amount and period of availability.',
6625:'unlike regular appropriation acts, continuing resolutions in their traditional form do not usually appropriate specified sums of money. rather, they',
6626:'usually appropriate “such amounts as may be necessary” for continuing projects or activities at a certain “rate for operations.” the',
6627:'rate for operations may be the amount provided for the activity in an appropriation act that has passed both houses',
6628:'of congress but has not become law; the lower of the amounts provided when each house has passed a different',
6629:'act; the lower of the amounts provided either in an act which has passed only one house or in the',
6630:'administration’s budget estimate; the amount specified in a particular conference report; the lower of either the amount provided in the',
6631:'budget estimate or the “current rate”; or simply the current rate. therefore, in order to determine the sum of money',
6632:'appropriated for any given activity by this type of continuing resolution, it is necessary to examine documents other than the',
6633:'resolution itself. some continuing resolutions have used a combination of “formula appropriations” of the types described in this paragraph and',
6634:'appropriations of specific dollar amounts. an example is the fiscal year 1996 continuing resolution, pub. l. no. 10469, 109 stat.',
6635:'767 dec. 22, 1995. there are times when congress acknowledges at the outset that it is not likely to enact',
6636:'one or more regular appropriation acts during the current fiscal year.5 see, for example, the 1980 continuing resolution, pub. l.',
6637:'no. 9686, 93 stat. 656 oct. 12, 1979, which provided budget authority for the legislative branch for the entire fiscal',
6638:'year. for a few years in the 1980s, congress used a very different form of continuing resolution, simply stringing together',
6639:'the complete texts of appropriation bills not yet enacted and enacting them together in a single “omnibus” package. this approach',
6640:'reached its extreme in the 1988 continuing resolution, pub. l. no. 100202, 101 stat. 1329 dec. 22, 1987, which included',
6641:'the complete texts of all 13 of the regular appropriation 5 in november 1995, perhaps anticipating numerous continuing resolutions for',
6642:'fiscal year 1996, for example, congress suspended for the remainder of that session the requirement in 1 u.s.c. § 107',
6643:'that the resolutions be printed on parchment for presentation to the president. pub. l. no. 10456, title ii, § 201,',
6644:'109 stat. 548, 553 nov. 20, 1995. page 86 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions bills. this form',
6645:'of continuing resolution differs from the traditional form in two key respects: unlike the traditional continuing resolution, the “full text”',
6646:'version amounts to an acknowledgement that no further action on the unenacted bills will be forthcoming, and consequently provides funding',
6647:'for the remainder of the fiscal year. when the entire text of an appropriation bill is incorporated into a continuing',
6648:'resolution, the appropriations are in the form of specified dollar amounts, the same as if the individual bill had been',
6649:'enacted. the “full text” format generally does not raise the same issues of statutory interpretation that arise under the traditional',
6650:'format. however, it produces new ones. for example, in a continuing resolution which consolidates the full texts of what would',
6651:'otherwise have been several separate appropriation acts, gao has construed the term “this act” as referring only to the individual',
6652:'“appropriation act” in which it appears rather than to the entire continuing resolution. b230110, apr. 11, 1988. while the omnibus',
6653:'approach of the 1988 resolution may appear convenient, it generated considerable controversy because, among other reasons, it is virtually “vetoproof”—the',
6654:'president has little choice but to sign the bill or bring the entire government to an abrupt halt. see presidential',
6655:'remarks on the signing of the continuing appropriations for fiscal year 1988 and the omnibus budget reconciliation act of 1987',
6656:'into law, 23 weekly comp. pres. doc. 1546, 1547 dec. 22, 1987. there was no continuing resolution for fiscal year',
6657:'1989. all 13 of the appropriation bills were enacted on time, for what was reported to be the first time',
6658:'in 12 years.6 for fiscal year 1990, congress reverted to the traditional type of continuing resolution. see pub. l. no.',
6659:'101100, 103 stat. 638 sept. 29, 1989. nor were there any continuing resolutions for fiscal years 1995 and 1997. the',
6660:'start of the 1997 fiscal year was met with an omnibus appropriations act which added five regular appropriations bills to',
6661:'a sixth regular appropriations bill. pub. l. no. 104208, 110 stat. 3009 sept. 30, 1996. the remaining seven bills were',
6662:'enacted separately. 6 irvin molotsky, all spending bills completed on time, n.y. times, oct. 2, 1988, at 27. page 87',
6663:'gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions questions arising under continuing resolutions can be grouped loosely into two broad',
6664:'categories. first are questions in which the fact that a continuing resolution is involved is purely incidental, in other words,',
6665:'questions which could have arisen just as easily under a regular appropriation act. for example, one of the issues considered',
6666:'in b230110, apr. 11, 1988, was whether certain provisions in the 1988 resolution constituted permanent legislation. cases in this category',
6667:'are included with their respective topics throughout this publication and are not repeated in this chapter. second are issues that',
6668:'are unique to continuing resolutions, and these are the focus of the remainder of this chapter. for the most part,',
6669:'the material deals with the traditional form of continuing resolution as it is this form that uses concepts and language',
6670:'found only in continuing resolutions. one point that should emerge from the gao decisions and opinions is the central role',
6671:'of legislative intent. to be sure, legislative intent cannot change the plain meaning of a statute; congress must enact what',
6672:'it intends in order to make it law. however, there are many cases in which the statutory language alone does',
6673:'not provide a clear answer, and indications of congressional intent expressed in wellestablished methods, viewed in light of the purpose',
6674:'of the continuing resolution, will tip the balance. in one case, for example, a continuing resolution provided a lumpsum appropriation',
6675:'for the national oceanic and atmospheric administration’s research and facilities account, and provided further for the transfer of $1.8 million',
6676:'from the fisheries loan fund. the first continuing resolution for 1987 included the transfer provision and was signed into law',
6677:'on october 1, 1986. the fisheries loan fund was scheduled to expire at “the close of september 30, 1986.” under',
6678:'a strictly technical reading, the $1.8 million ceased to be available once the clock struck midnight on september 30. however,',
6679:'the comptroller general found the transfer provision effective, noting that a contrary result would “frustrate the obvious intent of congress.”',
6680:'b227658, aug. 7, 1987. similarly, appropriations for the united states commission on civil rights contained in a fiscal year 1992',
6681:'continuing resolution were found to have extended the existence of the commission beyond its termination on september 30, 1991. “when',
6682:'viewed in their entirety, legislative actions on the commission’s reauthorization and appropriation bills, together with their legislative history, clearly manifest',
6683:'an intent by congress for the page 88 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions commission to continue to',
6684:'operate after september 30, 1991.” 71 comp. gen. 378, 381 1992. while many of the continuing resolution provisions to be',
6685:'discussed will appear highly technical because they are highly technical, there is an essential logic to them, evolved over many',
6686:'years, which is more readily seen from the perspective not of a specific case or problem, but of the overall',
6687:'goals and objectives of continuing resolutions and their relationship to the rest of the budget and appropriations process. 2. use',
6688:'of appropriation warrants funds, including funds appropriated under a continuing resolution, are drawn from the treasury by means of an',
6689:'appropriation warrant fms form 6200.7 a warrant is the official document issued pursuant to law by the secretary of the',
6690:'treasury upon enactment of an appropriation that establishes the amount of money authorized to be withdrawn from the treasury.8 under',
6691:'31 u.s.c. § 3323a, warrants authorized by law are to be signed by the secretary of the treasury and countersigned',
6692:'by the comptroller general. however, under the authority of section 3326a of title 31, united states code, the secretary of',
6693:'the treasury and the comptroller general have issued several joint regulations phasing out the countersignature requirement. 9 first, department of',
6694:'the treasurygeneral accounting office joint regulation no. 5 oct. 18, 1974 waived the requirement for all appropriations except continuing resolutions.',
6695:'next, treasurygao joint regulation no. 6 oct. 1, 1983 further simplified the process by requiring issuance of a warrant and',
6696:'countersignature under a continuing resolution only once, for the total amount appropriated, unless a subsequent resolution changed the annual amount.',
6697:'finally, treasury gao joint regulation no. 7, effective january 1, 1991, eliminated the countersignature requirement completely. 7 1 tfm 22025',
6698:'dec. 15, 2004. 8 gao, a glossary of terms used in the federal budget process, gao05734sp washington, d.c.: september 2005,',
6699:'at 101. 9 treasurygao joint regulations are included in appendix ii to title 7 of the gao policy and procedures',
6700:'manual for guidance of federal agencies washington, d.c.: may 18, 1993. because of their nature, they are not published in',
6701:'the federal register. some of the earlier ones, but not those noted in the text, were published in the annual',
6702:'“comp. gen.” volumes. title 7 of the policy and procedures manual is the only gao reference in which the regulations',
6703:'and amendments can be found together in a single location, available at www.gao.gov/special.pubs/ppm.html last visited september 15, 2005. page 89',
6704:'gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions b. rate for operations 1. current rate the current rate, as that',
6705:'term is used in continuing resolutions, is equivalent to the total amount of money which was available for obligation for',
6706:'an activity during the fiscal year immediately prior to the one for which the continuing resolution is enacted. the term',
6707:'“current rate” is used in continuing resolutions to indicate the level of spending which congress desires for a program. for',
6708:'example, a resolution may appropriate sufficient funds to enable a program to operate at a rate for operations “not in',
6709:'excess of the current rate,” or at a rate “not in excess of the lower of the current rate” or',
6710:'the rate provided in a certain bill. it is possible to read the term “current rate” as referring to either',
6711:'the amount of money available for the program in the preceding year, or an amount of money sufficient to enable',
6712:'continuation of the program at the level of the preceding year. the two can be very different. as a general',
6713:'proposition, gao regards the term “current rate” as referring to a sum of money rather than a program level. see,',
6714:'e.g., 58 comp. gen. 530, 533 1979; b194362, may 1, 1979. thus, when a continuing resolution appropriates in terms of',
6715:'the current rate, the amount of money available under the resolution will be limited by that rate, even though an',
6716:'increase in the minimum wage may force a reduction in the number of people participating in an employment program b194063,',
6717:'may 4, 1979, or an increase in the mandatory level of assistance will reduce the number of meals provided under',
6718:'a meals for the elderly program b194362, may 1, 1979. the term “current rate” refers to the rate of operations',
6719:'carried on within the appropriation for the prior fiscal year. b152554, dec. 6, 1963. the current rate is equivalent to',
6720:'the total appropriation, or the total funds which were available for obligation, for an activity during the previous fiscal year.',
6721:'edwards v. bowen, 785 f.2d 1440 9th cir. 1986; b300167, nov. 15, 2002; b255529, jan. 10, 1994; 64 comp. gen.',
6722:'21 1984; 58 comp. gen. 530, 533 1979; b194063, may 4, 1979; b194362, may 1, 1979. funds administratively transferred from',
6723:'the account during the fiscal year, under authority contained in substantive legislation, should not be deducted in determining the current',
6724:'rate. b197881, apr. 8, 1980; b152554, nov. 4, 1974. page 810 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions it',
6725:'follows that funds transferred into the account during the fiscal year pursuant to statutory authority should be excluded. b197881, apr.',
6726:'8, 1980. in those instances in which the program in question has been funded by 1year appropriations in prior years,',
6727:'the current rate is equal to the total funds appropriated for the program for the previous fiscal year. see, e.g.,',
6728:'b271304, mar. 19, 1996; 64 comp. gen. at 22; 58 comp. gen. 530; b194362, may 1, 1979. in those instances',
6729:'in which the program has been funded by multiple year or noyear appropriations in prior years, the current rate is',
6730:'equal to the total funds appropriated for the previous fiscal year plus the total of unobligated budget authority carried over',
6731:'into that year from prior years. 58 comp. gen. 530; b152554, oct. 9, 1970. one apparent deviation from this calculation',
6732:'of current rate occurred in 58 comp. gen. 530, a case involving the now obsolete comprehensive employment and training act',
6733:'program. in that decision, the comptroller general, in calculating the current rate under the 1979 continuing resolution, included funds appropriated',
6734:'in a 1977 appropriation act and obligated during 1977. ordinarily, only funds appropriated by the fiscal year 1978 appropriation act,',
6735:'and carryover funds unobligated at the beginning of fiscal year 1979, would have been included in the current rate. however,',
6736:'congress did not appropriate funds for this activity in the fiscal year 1978 appropriation act. in this instance the funds',
6737:'appropriated in 1977 were included because it was clear from the legislative history of the appropriation act that congress intended',
6738:'these funds to be an advance of appropriations for fiscal year 1978. thus, in order to ascertain the actual amount',
6739:'available for the activity for fiscal year 1978, it was necessary to include the advance funding provided by the 1977',
6740:'appropriation act. the rationale used in this decision would apply only when it is clear that congress was providing advance',
6741:'funding for the reference fiscal year in an earlier year’s appropriation act. where funding for the preceding fiscal year covered',
6742:'only a part of that year, it may be appropriate to “annualize” the previous year’s appropriation in order to determine',
6743:'the current rate. this was the result in 61 comp. gen. 473 1982, in which the fiscal year 1981 appropriation',
6744:'for a particular program had been contained in a supplemental appropriation act and was intended to cover only the last',
6745:'quarter of the fiscal year. the current rate for purposes of the fiscal year 1982 continuing resolution was four times',
6746:'the fiscal year 1981 figure. page 811 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions prior year supplemental appropriations also',
6747:'count in calculating the current rate. in this regard, section 103 of public law 108309, 118 stat. 1137, 1138 sept.',
6748:'30, 2004, discussed above, provides: “the appropriations acts listed in section 101 shall be deemed to include miscellaneous and supplemental',
6749:'appropriation laws enacted during fiscal year 2004.” there are exceptions to the rule that current rate means a sum of',
6750:'money rather than a program level. for example, gao construed the fiscal year 1980 continuing resolution as appropriating sufficient funds',
6751:'to support an increased number of indochinese refugees in view of explicit statements by both the appropriations and the budget',
6752:'committees that the resolution was intended to fund the higher program level. b197636, feb. 25, 1980. also, the legislative history',
6753:'of the fiscal year 1981 continuing resolution pub. l. no. 96369, 94 stat. 1351 oct. 1, 1980 indicated that in',
6754:'some instances current rate must be interpreted so as to avoid reducing existing program levels. it is always preferable for',
6755:'the exception to be specified in the resolution itself. starting with the first continuing resolution for fiscal year 1983 pub.',
6756:'l. no. 97276, 96 stat. 1186 oct. 2, 1982, congress began appropriating for the continuation of certain programs “at a',
6757:'rate to maintain current operating levels.” gao has construed this language as meaning sufficient funds to maintain the program in',
6758:'question at the same operating level as at the end of the immediately preceding fiscal year. b209676, apr. 14, 1983;',
6759:'b200923, nov. 16, 1982 nondecision letter. recent continuing resolutions have included similar language for entitlement and other mandatory payments: “activities',
6760:'shall be continued at the rate to maintain program levels under current law.”10 2. rate not exceeding current rate when',
6761:'a resolution appropriates funds to continue an activity at a rate for operations “not in excess of the current rate,”',
6762:'the amount of funds appropriated by the resolution is equal to the current rate less any unobligated balance carried over',
6763:'into the present year. as discussed in the preceding section, the current rate is equivalent to the total amount of',
6764:'funds that was available for obligation for a project or 10 pub. l. no. 108309, § 126 first continuing resolution',
6765:'for fiscal year 2005. see also pub. l. no. 10884, § 112, 117 stat. 1042, 1044 sept. 30, 2003 first',
6766:'continuing resolution for fiscal year 2004. page 812 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions activity in the preceding',
6767:'fiscal year. when the continuing resolution appropriates funds to continue an activity at a rate for operations “not in excess',
6768:'of the current rate,” it is the intent of congress that the activity have available for obligation in the present',
6769:'fiscal year no more funds than it had available for obligation in the preceding fiscal year. therefore, if there is',
6770:'a balance of unobligated funds which can be carried over into the present fiscal year because the funds are multiple',
6771:'year or noyear funds, this balance must be deducted from the current rate in determining the amount of funds appropriated',
6772:'by the continuing resolution. if this were not done, the program would be funded at a higher level in the',
6773:'present year than it was in the preceding year, which is not permitted by the language of the resolution. see',
6774:'58 comp. gen. 530, 535 1979. for example, suppose a continuing resolution for fiscal year 2006 were to appropriate sufficient',
6775:'funds to continue an activity at a rate not exceeding the current rate, and the current rate, or the total',
6776:'amount which was available for obligation in fiscal year 2005, is $1,000,000. of this amount, suppose $100,000 of multiple year',
6777:'funds remains unobligated at the end of fiscal year 2005, and is available for obligation in fiscal year 2006. if',
6778:'the activity is to operate at a rate not to exceed the current rate, $1,000,000, then the resolution appropriates no',
6779:'more than the difference between the current rate and the carryover from 2005 to 2006, or $900,000. if the resolution',
6780:'were interpreted as appropriating the full current rate, then a total of $1,100,000 would be available for fiscal year 2006,',
6781:'and the activity would be able to operate at a rate in excess of the current rate, a result prohibited',
6782:'by the language of the resolution. an unobligated balance which does not carry over into the present fiscal year the',
6783:'more common situation does not have to be deducted. b152554, nov. 4, 1974. a commonly encountered form of continuing resolution',
6784:'formula appropriation is an amount not in excess of the current rate or the rate provided in some reference item,',
6785:'whichever is lower. the reference item may be an unenacted bill, a conference report, the president’s budget estimate, etc. when',
6786:'the current rate produces the lower figure—the situation encountered in 58 comp. gen. 530—the above rule applies and an unobligated',
6787:'carryover balance must be deducted to determine the amount appropriated by the continuing resolution. however, when the current rate is',
6788:'not the lower of the two referenced items, the rule does not necessarily apply. page 813 gao06382sp appropriations law—vol. ii',
6789:'chapter 8 continuing resolutions to illustrate, a continuing resolution appropriated funds for the office of refugee resettlement at a rate',
6790:'for operations not in excess of the lower of the current rate or the rate authorized by a bill as',
6791:'passed by the house of representatives. the rate under the housepassed bill was $50 million. the current rate was $77.5',
6792:'million, of which $39 million remained unobligated at the end of the preceding fiscal year and was authorized to be',
6793:'carried over into the current fiscal year. if the continuing resolution had simply specified a rate not in excess of',
6794:'the current rate, or if the rate in the housepassed bill had been greater than the current rate, it would',
6795:'have been necessary to deduct the $39 million carryover balance from the $77.5 million current rate to determine the maximum',
6796:'funding level for the current year. here, however, the rate in the housepassed bill was the lower of the two.',
6797:'reasoning that the current rate already includes an unobligated carryover balance, if any, whereas the rate in the housepassed bill',
6798:'did not include a prior year’s balance, and supported by the legislative history of the continuing resolution, the comptroller general',
6799:'concluded that the amount available for the current year was the amount appropriated by the resolution, $50 million, plus the',
6800:'unobligated carryover balance of $39 million, for a total of $89 million. 64 comp. gen. 649 1985. the decision distinguished',
6801:'58 comp. gen. 530, stating that “the rule with respect to deduction of unobligated balances in 58 comp. gen. 530',
6802:'is not applicable where the lower of two referenced rates is not the current rate.” id. at 652–53. the case',
6803:'went to court, and the ninth circuit court of appeals reached the same result. edwards v. bowen, 785 f.2d 1440',
6804:'9th cir. 1986. in sum, if a continuing resolution appropriates the lower of the current rate or the rate in',
6805:'some reference item, you compare the two numbers to determine which is lower before taking any unobligated carryover balance into',
6806:'account. if the current rate is lower, you then deduct the carryover balance to determine the funding level under the',
6807:'continuing resolution. if the rate in the reference item is lower, the funding level is the reference rate plus the',
6808:'carryover balance unless it is clear that this is not what was intended. page 814 gao06382sp appropriations law—vol. ii 3.',
6809:'spending pattern under continuing resolution a. pattern of obligations chapter 8 continuing resolutions an agency may determine the pattern of',
6810:'its obligations under a continuing resolution so long as it operates under a plan which will keep it within the',
6811:'rate for operations limit set by the resolution. if an agency usually obligates most of its annual budget in the',
6812:'first month or first quarter of the fiscal year, it may continue that pattern under the resolution. if an agency',
6813:'usually obligates funds uniformly over the entire year, it will be limited to that pattern under the resolution, unless it',
6814:'presents convincing reasons why its pattern must be changed in the current fiscal year. continuing resolutions are often enacted to',
6815:'cover a limited period of time, such as a month or a calendar quarter. the time limit stated in the',
6816:'resolution is the maximum period of time during which funds appropriated by the resolution are available for obligation. however, this',
6817:'limited period of availability does not affect the amount of money appropriated by the resolution. the rate for operations specified',
6818:'in the resolution, whether in terms of an appropriation act which has not yet become law, a budget estimate, or',
6819:'the current rate, is an annual amount. the continuing resolution, in general, regardless of its period of duration, appropriates this',
6820:'full annual amount. see b271304, mar. 19, 1996; b152554, nov. 4, 1974. because the appropriation under a continuing resolution is',
6821:'the full annual amount, an agency may generally follow any pattern of obligating funds, so long as it is operating',
6822:'under a plan which will enable continuation of activities throughout the fiscal year within the limits of the annual amount',
6823:'appropriated. thus, under a resolution with a duration of one month, and which appropriates funds at a rate for operations',
6824:'not in excess of the current rate, the agency is not necessarily limited to incurring obligations at the same rate',
6825:'it incurred them in the corresponding month of the preceding year if the agency can establish that it is operating',
6826:'under a flexible plan that would enable continuation of activities throughout the fiscal year. b152554, dec. 6, 1963. the same',
6827:'principle applies when the resolution appropriates funds at a rate to maintain current operating levels. b209676, apr. 14, 1983. however,',
6828:'the pattern of obligations in prior years does provide a framework for determining the proper pattern of obligations under the',
6829:'page 815 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions continuing resolution. for example, if the activity is a formula',
6830:'grant program in which nearly all appropriated funds are normally obligated at the beginning of the fiscal year, then the',
6831:'full annual amount should be made available to the agency under the resolution, even though the resolution may be in',
6832:'effect for only 1 month. however, if the activity is salaries and expenses, in which funds are normally obligated uniformly',
6833:'throughout the year, then the amount made available to the agency should be only onetwelfth of the annual amount under',
6834:'a 1month resolution or onefourth of the annual amount under a calendar quarter resolution. b152554, feb. 17, 1972. for example,',
6835:'gao determined that omb properly apportioned, and the state department properly obligated, 75 percent of funds appropriated by a fiscal',
6836:'year 1994 continuing resolution pub. l. no. 10388, 107 stat. 977 sept. 30, 1993 for payments to the united nations.',
6837:'it was state department policy to defer payment of the united states’ general assessment of united nations contributions to the',
6838:'fourth quarter of the calendar year, which is the first quarter of the fiscal year. as a matter of normal',
6839:'practice, the state department also made peacekeeping payments when bills were received to the extent funds were available. we found',
6840:'that the advance apportionment and obligation for the united nations assessment and peacekeeping payments with funds appropriated by the fiscal',
6841:'year 1994 continuing resolution did not violate either the continuing resolution or the provisions of title 31, united states code,',
6842:'controlling apportionment of funds. b255529, jan. 10, 1994. congress can, of course, alter the pattern of obligations by the language',
6843:'of the resolution. for example, if the resolution limits obligations in any calendar quarter to onefourth of the annual rate,',
6844:'the agency is limited to that onefourth rate regardless of its normal pattern of obligations. b152554, oct. 16, 1973. further,',
6845:'even if the resolution itself does not have such limitations, but the legislative history clearly shows the intent of congress',
6846:'that only onefourth of the annual rate be obligated each calendar quarter, only this amount should be made available unless',
6847:'the agency can demonstrate a real need to exceed that rate. b152554, nov. 4, 1974. beginning with fiscal year 1996,',
6848:'congress to date has included the following two provisions in continuing resolutions: “. . . for those programs that had',
6849:'high initial rates of operation or complete distribution of funding at the beginning of the fiscal year in fiscal year',
6850:'[1995] because of page 816 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions distributions of funding to states, foreign countries,',
6851:'grantees, or others, similar distributions of funds for fiscal year [1996] shall not be made and no grants shall be',
6852:'awarded for such programs funded by this resolution that would impinge on final funding prerogatives.” “this joint resolution shall be',
6853:'implemented so that only the most limited funding action of that permitted in the resolution shall be taken in order',
6854:'to provide for continuation of projects and activities.” pub. l. no. 10431, §§ 113, 114, 109 stat. 278, 281 sept.',
6855:'30, 1995.11 gao considered these provisions in b300167, nov. 15, 2002. that decision involved the federal highway administration’s fhwa distribution',
6856:'of federal aid to highways funds to the states under a continuing resolution for fiscal year 2003, pub. l. no.',
6857:'107229, 116 stat. 1465 sept. 30, 2002. fhwa had determined its distributions to the states at 4/365ths of the current',
6858:'rate of $31.8 billion since that was the previous fiscal year’s obligation limitation under the 2002 department of transportation appropriations',
6859:'act referenced by the continuing resolution. fhwa’s consistent historical practice was to allocate funds to the states on a prorata',
6860:'basis by multiplying the percentage of the year covered by the continuing resolution by the rate for the continuing resolution',
6861:'at the time the anticipated length of the continuing resolution was 4 days, hence fhwa’s 4/365ths distribution. omb, however, apportioned',
6862:'a total amount of $27.7 billion to fhwa during the term of the continuing resolution to refrain from “impinging on',
6863:'final funding prerogatives” per the first provision quoted above, thereby reducing the amount fhwa had available for allocation to the',
6864:'states from 4/365ths of $31.8 billion to 4/365ths of $27.7 billion. omb reasoned that because the program traditionally makes available',
6865:'all of the budgetary resources subject to limitation for allocation to the states at the beginning of the fiscal year,',
6866:'had omb apportioned the full amount of the fiscal year 11 see also pub. l. no. 108309, §§ 110, 111,',
6867:'118 stat. 1137, 1138–39 sept. 30, 2004. our review did not reveal any relevant legislative history concerning the intent of',
6868:'congress in adopting these provisions. page 817 gao06382sp appropriations law—vol. ii b. apportionment chapter 8 continuing resolutions 2002 level, then',
6869:'any subsequent effort by congress to enact an obligation limitation of less than $31.8 billion could have been compromised. gao',
6870:'found that omb had no basis to further reduce the level of highway spending below the current rate established in',
6871:'fiscal year 2002. based on the plain language of the first provision above, it only applies to programs that 1',
6872:'had “high initial rates of operation or a complete distribution” of funds at the beginning of the prior fiscal year',
6873:'assuming the normal appropriations process, and where 2 a “similar distribution of funds” under the continuing resolution would impinge on',
6874:'congress’s final funding prerogatives. in other words, the provision can only be applied to reduce or limit the distribution of',
6875:'the current rate for a program as defined in the continuing resolution if both prongs of the twopart test are',
6876:'met. since fhwa’s longstanding practice of distributing highway funds under a continuing resolution on a prorata basis fully protects congressional',
6877:'funding prerogatives, and does so in a manner that is consistent with the second provision and is far more restrictive',
6878:'than would be true under the first provision, gao concluded that omb was not justified under the two provisions to',
6879:'set the level of highway spending at $27.7 billion. congress subsequently resolved the dispute between omb and fhwa by including',
6880:'a specific provision in its second amendment to the continuing resolution establishing an annual rate of operations of $31.8 billion',
6881:'for fhwa provided that total obligations for the program not exceed $27.7 billion while operating under the resolution, pub. l.',
6882:'no. 107240, § 137, 116 stat. 1492, 1495 oct. 11, 2002. the requirement that appropriations be apportioned by the office',
6883:'of management and budget, imposed by the antideficiency act, applies to funds appropriated by continuing resolution as well as regular',
6884:'appropriations.12 see generally omb circular no. a11, preparation, submission, and execution of the budget, pt. 4, § 120.1 june 21,',
6885:'2005. typically, omb has permitted some continuing resolution funds to be apportioned automatically. omb cir. no. a11, § 123.5. for',
6886:'example, if a given continuing resolution covers 10 percent of a fiscal year, omb may permit 10 percent of the',
6887:'appropriation to be apportioned automatically, meaning that the agency can obligate this amount without seeking a specific apportionment. under such',
6888:'an arrangement, if program 12 for a more general discussion of apportionment, see chapter 6, section c.4. page 818 gao06382sp',
6889:'appropriations law—vol. ii chapter 8 continuing resolutions requirements produced a need for additional funds, the agency would have to seek',
6890:'an apportionment from omb for the larger amount. apportionment requirements may vary from year to year because of differences in',
6891:'duration and other aspects of applicable continuing resolutions. a device omb has commonly used to announce its apportionment requirements for',
6892:'a given fiscal year is an omb bulletin reflecting the particular continuing resolution for that year.13 4. liquidation of contract',
6893:'authority when in the preceding fiscal year congress has provided an agency with contract authority, the continuing resolution must be',
6894:'interpreted as appropriating sufficient funds to liquidate that authority to the extent it becomes due during the period covered by',
6895:'the continuing resolution. when an activity operates on the basis that in one year congress provides contract authority to the',
6896:'agency and in the next year appropriates funds to liquidate that authority, then a continuing resolution in the second year',
6897:'must be interpreted as appropriating sufficient funds to liquidate the outstanding contract authority. the term “contract authority” means express statutory',
6898:'authority to incur contractual obligations in advance of appropriations.14 thus, there is no “rate for operations” limitation in connection with',
6899:'the liquidation of due debts based on validly executed contracts entered into under statutory contract authority. in this context, rate',
6900:'for operations limitations apply only to new contract authority for the current fiscal year. b114833, nov. 12, 1974. 5. rate',
6901:'for operations if an agency operating under a continuing resolution incurs obligations within the rate for operations limit, but congress',
6902:'subsequently exceeds final appropriates a total annual amount less than the amount of these appropriation obligations, the obligations remain valid.',
6903:'b152554, feb. 17, 1972. 13 see, e.g., omb bulletin no. 0405, apportionment of the continuing resolutions for fiscal year 2005',
6904:'sept. 30, 2004. for a detailed review of apportionment of funds appropriated or authority granted by the fiscal year 2003',
6905:'continuing resolution, see b300373, dec. 20, 2002. 14 gao, a glossary of terms used in the federal budget process, gao05734sp',
6906:'washington, d.c.: september 2005, at 21. page 819 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions for example, a continuing',
6907:'resolution for a period of 1 month may have a rate for operations limitation of the current rate. the activity',
6908:'being funded is a grant program and the agency obligates the full annual amount during the period of the resolution.',
6909:'congress then enacts a regular appropriation act which appropriates for the activity an amount less than the obligations already incurred',
6910:'by the agency. under these circumstances, the obligations incurred by the agency remain valid obligations of the united states. having',
6911:'established that the “excess” obligations remain valid, the next question is how they are to be paid. at one time,',
6912:'gao took the position that an agency finding itself in this situation must not incur any further obligations and must',
6913:'attempt to negotiate its obligations downward to come within the amount of the final appropriation. b152554, feb. 17, 1972. if',
6914:'this is not possible, the agency would have to seek a supplemental or deficiency appropriation. this position was based on',
6915:'a provision commonly appearing in continuing resolutions along the following lines: “expenditures made pursuant to this joint resolution shall be',
6916:'charged to the applicable appropriation, fund, or authorization whenever a bill in which such applicable appropriation, fund, or authorization is',
6917:'contained is enacted into law.”15 however, the 1972 opinion failed to take into consideration another provision commonly included in continuing',
6918:'resolutions: “appropriations made and authority granted pursuant to this joint resolution shall cover all obligations or expenditures incurred for any',
6919:'program, project, or activity during the period for which funds or authority for such project or activity are available under',
6920:'this joint resolution.”16 when these two provisions are considered together, it becomes apparent that the purpose of the first provision',
6921:'is merely to emphasize that the funds 15 e.g., pub. l. no. 108309, § 108, 118 stat. 1137, 1138 sept.',
6922:'30, 2004. comparable provisions have been included in continuing resolutions for over a century. see, for example, the fiscal year',
6923:'1883 continuing resolution pub. l. no. 38, 22 stat. 384 june 30, 1882 discussed in 3 lawrence, first comp. dec.',
6924:'213 1882. 16 e.g., pub. l. no. 108309, § 105. page 820 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions',
6925:'appropriated by the continuing resolution are not in addition to the funds later provided when the applicable regular appropriation act',
6926:'is enacted. accordingly, gao modified the 1972 opinion and held that funds made available by a continuing resolution remain available',
6927:'to pay validly incurred obligations which exceed the amount of the final appropriation. 62 comp. gen. 9 1982. see also',
6928:'67 comp. gen. 474 1988; b207281, oct. 19, 1982. thus, obligations under a continuing resolution are treated as follows: “when',
6929:'an annual appropriation act provides sufficient funding for an appropriation account to cover obligations previously incurred under the authority of',
6930:'a continuing resolution, any unpaid obligations are to be charged to and paid from the applicable account established under the',
6931:'annual appropriation act. similarly, to the extent the annual act provides sufficient funding, those obligations which were incurred and paid',
6932:'during the period of the continuing resolution must be charged to the account created by the annual appropriation act. on',
6933:'the other hand, to the extent the annual appropriation act does not provide sufficient funding for the appropriation account to',
6934:'cover obligations validly incurred under a continuing resolution, the obligations in excess of the amount provided by the annual act',
6935:'should be charged to and paid from the appropriation account established under authority of the continuing resolution. [footnote omitted.] thus',
6936:'the funds made available by the resolution must remain available to pay these obligations.” 62 comp. gen. 9, 11–12 1982.',
6937:'thus, as gao had advised in 1972, agencies are still required to make their best efforts to remain within the',
6938:'amount of the final appropriation. the change recognized in 62 comp. gen. 9 is that, to the extent an agency',
6939:'is unable to do so, the appropriation made by the continuing resolution remains available to liquidate the “excess” obligations. “projects',
6940:'or activities” as used in continuing resolutions may have two c. projects or meanings. when determining which government programs are',
6941:'covered by activities the resolution, and the rate for operations limit, the term “project or page 821 gao06382sp appropriations law—vol.',
6942:'ii chapter 8 continuing resolutions activity” refers to the total appropriation rather than to specific activities. when determining whether an',
6943:'activity was authorized or carried out in the preceding year, the term “project or activity” may refer to the specific',
6944:'activity. the following paragraphs will elaborate. the term “projects or activities” is sometimes used in continuing resolutions to indicate which',
6945:'government programs are to be funded and at what rate. thus a resolution might appropriate sufficient funds to continue “projects',
6946:'or activities provided for” in a certain appropriation bill “to the extent and in the manner” provided in the bill',
6947:'or as provided for in prior year appropriation acts. see, e.g., pub. l. no. 108309, §§ 101, 102, 118 stat.',
6948:'1137–38 sept. 30, 2004. occasionally congress will use only the term “activities” by appropriating sufficient funds “for continuing the following',
6949:'activities, but at a rate for operations not in excess of the current rate.” see, e.g., pub. l. no. 9751,',
6950:'§ 101d, 95 stat. 958, 961 oct. 1, 1981. when used in this context, “projects or activities” or simply “activities”',
6951:'does not refer to specific items contained as activities in the administration’s budget submission or in a committee report. rather,',
6952:'the term refers to the appropriation for the preceding fiscal year. b204449, nov. 18, 1981.17 thus, if a resolution appropriates',
6953:'funds to continue projects or activities under a certain appropriation at a rate for operations not exceeding the current rate,',
6954:'the agency is operating within the limits of the resolution so long as the total of obligations under the appropriation',
6955:'does not exceed the current rate. within the appropriation, an agency may fund a particular activity at a higher rate',
6956:'than that activity was funded in the previous year and still not violate the current rate limitation, assuming of course',
6957:'that the resolution itself does not provide to the contrary. an exception to the interpretation that projects or activities refers',
6958:'to the appropriation in existence in the preceding fiscal year occurred in 58 comp. gen. 530 1979. in prior years,',
6959:'comprehensive employment and 17 this position also follows from decisions such as b162447, mar. 8, 1971, read in conjunction with',
6960:'decisions on the availability of lumpsum appropriations. of course, if the appropriation for the preceding fiscal year was a lineitem',
6961:'appropriation, then the scope of “project or activity” will be defined accordingly. see 66 comp. gen. 484 1987 special defense',
6962:'acquisition fund, a revolving fund made available by annual “limitation on obligations” provisions, held a “project or activity” for purposes',
6963:'of appropriating language in a continuing resolution. page 822 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions training act ceta18',
6964:'programs had been funded in two separate appropriations, employment and training assistance and temporary employment assistance. the individual programs under',
6965:'the two appropriations differed only in that the number of jobs provided under temporary employment assistance depended on the condition',
6966:'of the national economy. concurrently with the enactment of the 1979 continuing resolution, congress amended the ceta authorizing legislation so',
6967:'that certain programs previously operating under the temporary employment assistance appropriation were to operate in fiscal year 1980 under the',
6968:'employment and training assistance appropriation. under these circumstances, if the phrase “activities under the comprehensive employment and training act” in',
6969:'the continuing resolution had been interpreted as referring to the two separate appropriations made in the preceding year, and the',
6970:'current rates calculated accordingly, there would have been insufficient funds available for the now increased programs under the employment and',
6971:'training assistance appropriation, and a surplus of funds available for the decreased programs under the temporary employment assistance appropriation. to',
6972:'avoid this result, the comptroller general interpreted the 1979 continuing resolution as appropriating a single lumpsum amount for all ceta',
6973:'programs, based on the combined current rates of the two appropriation accounts for the previous year. see 58 comp. gen.',
6974:'at 535–36. of course, as we noted earlier, continuing resolutions are really just short term appropriations that bridge the gaps',
6975:'that occasionally arise between the end of appropriations for one fiscal year and the start of appropriations for the next.19',
6976:'for this reason, continuing resolutions usually refer only to those projects and activities for which annual funding has expired—on account',
6977:'of which funding is being provided. it should be remembered that most, but not all, of the government is funded',
6978:'under annual appropriations. those projects and activities which are funded by multiple year and noyear appropriations are not usually directly',
6979:'affected by continuing resolutions. thus, it would be a mistake to read the failure of a continuing resolution to address',
6980:'funding for the rest of the government as an implicit 18 pub. l. no. 93203, 87 stat. 839 dec. 28,',
6981:'1973. 19 see gao, a glossary of terms used in the federal budget process, gao05734sp washington, d.c.: september 2005 at',
6982:'35–36 definition of “continuing appropriation/continuing resolution”. page 823 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions prohibition on undertaking other',
6983:'projects or activities that are, in fact, funded from other appropriations not covered by the continuing resolution.20 the term “projects',
6984:'or activities” has also been used in continuing resolutions to prohibit the use of funds to start new programs. thus,',
6985:'many resolutions have contained a section stating that no funds made available under the resolution shall be available to initiate',
6986:'or resume any project or activity which was not conducted during the preceding fiscal year. when used in this context,',
6987:'the term “projects or activities” refers to the individual program rather than the total appropriation. see 52 comp. gen. 270',
6988:'1972; 35 comp. gen. 156 1955. one exception to this interpretation occurred in b178131, mar. 8, 1973. in that instance,',
6989:'in the previous fiscal year funds were available generally for construction of buildings, including plans and specifications. however, a specific',
6990:'construction project was not actually under way during the previous year. nonetheless it was decided that, because funds were available',
6991:'generally for construction in the previous year, this specific project was not a new project or activity and thus could',
6992:'be funded under the continuing resolution.21 in more recent years, congress has resolved the differing interpretations of “project or activity”',
6993:'by altering the language of the new program limitation. rather than limiting funds to programs which were actually conducted in',
6994:'the preceding year, the more recent resolutions prohibit use of funds appropriated by the resolution for “any project or activity',
6995:'for which appropriations, funds, or other authority were not available” during the 20 see 19 op. off. legal counsel 278',
6996:'1995 requester was proceeding from the mistaken belief that a continuing resolution implicitly prohibits all obligations or expenditures except those',
6997:'expressly provided for in the resolution itself; activity at issue was funded by a noyear appropriation. 21 for this exception',
6998:'to work, however, the previous appropriation must have afforded adequate authority to undertake the construction. see 4 lawrence, first comp.',
6999:'dec. 116 1883, which concluded that howard university violated the antideficiency act while operating under a continuing resolution. the university',
7000:'undertook building repairs that were not authorized by the outgoing appropriation or the continuing resolution, and could not defend its',
7001:'violation by pointing to new authority pending and eventually enacted during the continuing resolution that would have authorized the repairs.',
7002:'page 824 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions preceding fiscal year.22 thus, if an agency had authority and',
7003:'sufficient funds to carry out a particular program in the preceding year, that program is not a new project or',
7004:'activity regardless of whether it was actually operating in the preceding year. a variation occurred in 60 comp. gen. 263',
7005:'1981. a provision of the higher education act23 authorized loans to institutions of higher education from a revolving fund, not',
7006:'to exceed limitations specified in appropriation acts. congress had not released money from the loan fund since 1978. the fiscal',
7007:'year 1981 continuing resolution provided funds to the department of education based on its regular fiscal year 1981 appropriation bill',
7008:'as passed by the house of representatives. the housepassed version included $25 million for the higher education loans. since the',
7009:'continuing resolution did not include a general prohibition against using funds for projects not funded during the preceding fiscal year,',
7010:'the $25 million from the loan fund was available under the continuing resolution, notwithstanding that the program had not been',
7011:'funded in the preceding year. another variation can be seen in in re uncle bud’s, inc., 206 b.r. 889 bankr.',
7012:'m.d. tenn., 1997. in a fiscal year 1997 continuing resolution, pub. l. no. 10499, title ii, § 211, 110 stat.',
7013:'26, 37–38 jan. 26, 1996, congress amended the bankruptcy code to require the u.s. trustee to impose and collect a',
7014:'new quarterly fee as part of the bankruptcy process. uncle bud’s, 206 b.r. at 897. some debtors argued that the',
7015:'new fee was barred because it constituted a “new activity.” the bankruptcy court disagreed, noting that, while the fee itself',
7016:'was new, the u.s. trustee had long been required to collect other fees imposed by law. the court reasoned that',
7017:'the continuing resolution language was intended to limit spending to previous year levels. the new fee did not require the',
7018:'expenditure of additional funds—rather, it brought in more revenues. accordingly, the bankruptcy court concluded that collection of the new fee',
7019:'represented, not a new project or activity, but the continuation of activities undertaken in the previous year. id. on appeal,',
7020:'while other parts of the bankruptcy court’s ruling were reversed, this part was upheld and even expanded when the district',
7021:'court gave retroactive effect to the provision 22 see, e.g., pub. l. no. 108309, § 104 first continuing resolution for',
7022:'fiscal year 2005, discussed above. 23 pub. l. no. 96374, § 731, 94 stat. 1367, 1475 oct. 3, 1980. page',
7023:'825 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions imposing the new fees. see vergos v. uncle bud’s, inc., no.',
7024:'3970296 m.d. tenn., aug. 17, 1998. under the right set of circumstances, the projects or activities limitation can also have',
7025:'the effect of blocking existing programs. for example, in environmental defense center v. babbitt, 73 f.3d 867 9th cir. 1995,',
7026:'the secretary of the interior was sued for failing to determine whether to list the california redlegged frog under the',
7027:'endangered species act, 16 u.s.c. § 1533b6a. the secretary acknowledged that the only actions that remained to be taken before',
7028:'the frog’s status could be settled were the agency’s inhouse review and its final decisionmaking. babbitt, 73 f.3d at 871–72.',
7029:'however, the secretary argued he could not take those steps because, in 1995, congress had enacted an appropriations rider which',
7030:'rescinded some of that fiscal year’s funds and barred the remaining funds for that year from being used to make',
7031:'any determination that a species was threatened or endangered. 24 see emergency supplemental appropriations and rescissions for the department of',
7032:'defense to preserve and enhance military readiness act of 1995, pub. l. no. 1046, 109 stat. 73, 86 apr. 10,',
7033:'1995. although the supplemental rider applied only to fiscal year 1995 funds, the ban was effectively continued into fiscal year',
7034:'1996 by the projects or activities limitation in the continuing resolution under which the government was being funded when the',
7035:'lawsuit was brought. babbitt, 73 f.3d at 870. continuing resolutions can carry over restrictions on projects and activities that applied',
7036:'under prior year appropriations riders. the court held that neither the appropriations rider nor the projects or activities limitation repealed',
7037:'the secretary’s duty to determine whether the california redlegged frog is endangered, but they did bar the secretary from complying',
7038:'with that duty by denying him funding for that purpose. id. at 871–72. as the court explained: “[e]ven though completion',
7039:'of the process may require only a slight expenditure of funds, . . . taking final action on the california',
7040:'redlegged frog listing proposal would necessarily require the use of appropriated funds. the use of any 24 for a further',
7041:'discussion of the effect of appropriations riders, see chapter 1, section b, and the update of that section in gao,',
7042:'principles of federal appropriations law: annual update of the third edition, gao05354sp washington, d.c.: march 2005, available at www.gao.gov/legal.htmlast visited',
7043:'september 15, 2005. page 826 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions government resources—whether salaries, employees, paper, or buildings—to',
7044:'accomplish a final listing would entail government expenditure. the government cannot make expenditures, and therefore cannot act, other than by',
7045:'appropriation.” id. d. relationship to other legislation 1. not otherwise provided for continuing resolutions often appropriate funds to continue projects',
7046:'“not otherwise provided for.” this language limits funding to those programs which are not funded by any other appropriation act.',
7047:'programs which received funds under another appropriation act are not covered by the resolution even though the authorizing legislation which',
7048:'created the program is mentioned specifically in the continuing resolution. see b183433, mar. 28, 1979. for example, if a resolution',
7049:'appropriates funds to continue activities under the social security act, and a specific program under the social security act has',
7050:'already been funded in a regular appropriation act, the resolution does not appropriate any additional funds for that program. 2.',
7051:'status of bill or budget estimate used as reference when a continuing resolution appropriates funds at a rate for operations',
7052:'specified in a certain bill or in the administration’s budget estimate, the status of the bill or estimate on the',
7053:'date the resolution passes is controlling, unless the resolution specifies some other reference date. a continuing resolution will often provide',
7054:'funds to continue activities at a rate provided in a certain bill that has passed one or both houses of',
7055:'congress, or at the rate provided in the administration’s budget estimate. in such instances, the resolution is referring to the',
7056:'status of the bill or budget estimate on the date the resolution became law. b1640312.17, dec. 5, 1975; b152098, jan.',
7057:'30, 1970. for example, the resolution may provide that activities are to be continued at the current rate or at',
7058:'the rate provided in the budget estimate, whichever page 827 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions is lower.',
7059:'the budget estimate referred to is the one in existence at the time the resolution is enacted, and the rate',
7060:'for operations cannot be increased by a subsequent upward revision of the budget estimate. b1640312.17, dec. 5, 1975. similarly, if',
7061:'a resolution provides that activities are to continue at the rate provided in a certain appropriation bill, the resolution is',
7062:'referring to the status of the bill on the date the resolution is enacted. a later veto of the bill',
7063:'by the president would not affect the continuation of programs under the resolution. b152098, jan. 15, 1973. where a continuing',
7064:'resolution provides funds based on a reference bill, this includes restrictions or limitations contained in the reference bill, as well',
7065:'as the amounts appropriated, unless the continuing resolution provides otherwise. 33 comp. gen. 20 b116069, july 10, 1953;25 b199966, sept.',
7066:'10, 1980. in national treasury employees union v. devine, 733 f.2d 114 d.c.cir. 1984, the court construed a provision in',
7067:'a reference bill prohibiting the implementation of certain regulations, accepting without question the restriction as having been “enacted into law”',
7068:'by a continuing resolution which provided funds “to the extent and in the manner provided for” in the reference bill.',
7069:'see also environmental defense center v. babbitt, 73 f.3d 867 9th cir. 1995; connecticut v. schweiker, 684 f.2d 979 d.c.cir.',
7070:'1982, cert. denied, 459 u.s. 1207 1983. obviously, the same result applies under a “full text” continuing resolution, that is,',
7071:'a continuing resolution that enacts the full text of a reference bill “to be effective as if” the reference bill',
7072:'“had been enacted into law as the regular appropriation act.” b221694, apr. 8, 1986. a provision in a continuing resolution',
7073:'using a reference bill may incorporate legislative history, in which event the specified item of legislative history will determine the',
7074:'controlling version of the reference bill. for example, an issue in american federation of government employees v. devine, 525 f.',
7075:'supp. 250 d.d.c. 1981, was whether the 1982 continuing resolution prohibited the office of personnel management from funding coverage of',
7076:'therapeutic abortions in government health plans. the resolution funded employee health benefits “under the authority and conditions set forth in',
7077:'h.r. 4121 as reported to the senate on september 22, 1981.” an earlier version of h.r. 4121 had included a',
7078:'provision barring the funding of therapeutic abortions. however, the bill as reported to the full 25 two decisions begin on',
7079:'the same page, hence the variation in citation format. page 828 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions senate',
7080:'by the appropriations committee on september 22, 1981, dropped the provision. accordingly, the court held that the continuing resolution could',
7081:'not form the basis for refusing to fund therapeutic abortions in the plaintiff’s 1982 health plan. devine, 525 f. supp.',
7082:'at 254. in previous years, it was also not uncommon for a continuing resolution to appropriate funds as provided in',
7083:'a particular reference bill at a rate for operations provided for in the conference report on the reference bill. see,',
7084:'e.g., pub. l. no. 99103, § 101c, 99 stat. 471, 472 sept. 30, 1985. at a minimum, this will include',
7085:'items on which the house and senate conferees agreed, as reflected in the conference report. if the resolution also incorporates',
7086:'the “joint explanatory statement” portion of the conference report, then it will enact those amendments reported in “technical disagreement” as',
7087:'well. see b221694, apr. 8, 1986; b205523, nov. 18, 1981; b204449, nov. 18, 1981. 3. more restrictive authority the “more',
7088:'restrictive authority,” as that term is used in continuing resolutions, is the version of a bill which gives an agency',
7089:'less discretion in obligating and disbursing funds under a certain program. continuing resolutions will often appropriate funds to continue projects',
7090:'or activities at the rate provided in either the version of an appropriation act that has passed the house or',
7091:'the version that has passed the senate, whichever is lower, “or under the more restrictive authority.” under this language, the',
7092:'version of the bill which appropriates the lesser amount of money for an activity will be controlling. if both versions',
7093:'of the bill appropriate the same amount, the version which gives the agency less discretion in obligating and disbursing funds',
7094:'under a program is the more restrictive authority and will be the reference for continuing the program under the resolution.',
7095:'b210922, mar. 30, 1984; b152098, mar. 26, 1973; b152554, dec. 15, 1970. however, this provision may not be used to',
7096:'amend or nullify a mandatory provision of prior permanent law. to illustrate, the federal housing administration was required by a',
7097:'provision of permanent law to appoint an assistant commissioner to perform certain functions. the position subsequently became controversial. for the',
7098:'first month of fiscal year 1954, the agency operated under a continuing resolution which included the “more restrictive authority” provision.',
7099:'language abolishing the position had been contained in one version of the reference bill, but not both. the bill, when',
7100:'subsequently enacted, abolished the position. page 829 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions under a strict application of',
7101:'the “more restrictive authority” provision, it could be argued that there was no authority to continue the employment of the',
7102:'assistant commissioner during the month covered by the continuing resolution. noting that “laws are to be given a sensible construction',
7103:'where a literal application thereof would lead to unjust or absurd consequences, which should be avoided if a reasonable application',
7104:'is consistent with the legislative purpose,” the comptroller general held that the assistant commissioner could be paid his salary for',
7105:'the month in question. b116566, sept. 14, 1953. the decision concluded: “[m]anifestly the [more restrictive authority] language . . .',
7106:'was not designed to amend or nullify prior permanent law which theretofore required, or might thereafter require, the continuance of',
7107:'a specific project or activity during july 1953. . . . “. . . accordingly, it is concluded that the',
7108:'words ‘the lesser amount or the more restrictive authority’ as used in [the continuing resolution] had reference to such funds',
7109:'and authority as theretofore were provided in appropriations for [the preceding fiscal year], and which might be changed, enlarged or',
7110:'restricted from year to year.” in addition, continuing resolutions frequently provide that a provision “which by its terms is applicable',
7111:'to more than one appropriation” and which was not included in the applicable appropriation act for the preceding fiscal year,',
7112:'will not be applicable to funds or authority under the resolution unless it was included in identical form in the',
7113:'relevant appropriation bill as passed by both the house and the senate. thus, in 52 comp. gen. 71 1972, a',
7114:'provision in the house version of the 1973 labor department appropriation act prohibited the use of “funds appropriated by this',
7115:'act” for occupational safety and health act osha26 inspections of firms employing 25 persons or less. the senate version contained',
7116:'the identical version except that “15” was substituted for “25.” the continuing resolution for that year contained both the “more',
7117:'restrictive authority” and the “applicable to more than one appropriation” provisions. the 26 pub. l. no. 91596, 84 stat. 1590',
7118:'dec. 29, 1970. page 830 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions comptroller general concluded that, even though the',
7119:'house provision was more restrictive, the osha provision did not apply to funds under the continuing resolution since it had',
7120:'not been contained in the 1972 appropriation act and by its terms it was applicable to more than one appropriation',
7121:'i.e., it applied to the entire appropriation act. see also b210922, mar. 30, 1984; b142011, aug. 6, 1969. for purposes',
7122:'of the “applicable to more than one appropriation” provision, gao has construed the “applicable appropriation act for the preceding fiscal',
7123:'year” as meaning the regular appropriation act for the preceding year and not a supplemental. b210922, mar. 30, 1984. the',
7124:'cited decision also illustrates some of the complexities encountered when the appropriation act for the preceding year was itself a',
7125:'continuing resolution. 4. lack of authorizing legislation in order for a government agency to carry out a program, the program',
7126:'must first be authorized by law and then funded, usually by means of regular appropriations. this section deals with the',
7127:'relationship of continuing resolutions to programs whose authorization has expired or is about to expire. the common issue is the',
7128:'extent to which a continuing resolution provides authority to continue the program after expiration of the underlying authorization. as the',
7129:'following discussion will reveal, there are no easy answers. the cases frequently involve a complex interrelationship of various legislative actions',
7130:'or inactions and are not susceptible to any meaningful formulation of simple rules. for the most part, the answer is',
7131:'primarily a question of intent, circumscribed of course by statutory language and aided by various rules of statutory construction. we',
7132:'start with a fairly straightforward case. toward the end of fiscal year 1984, congress was considering legislation s. 2456 to',
7133:'establish a commission to study the ukrainian famine of 1932–33. the bill passed the senate but was not enacted into',
7134:'law before the end of the fiscal year. the fiscal year 1985 continuing resolution provided that “[t]here are hereby appropriated',
7135:'$400,000 to carry out the provisions of s. 2456, as passed by the senate on september 21, 1984.”27 if this',
7136:'provision were not construed as authorizing the establishment and operation of the commission as well 27 pub. l. no. 98473,',
7137:'§ 136, 98 stat. 1837, 1973 oct. 12, 1984. page 831 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions as',
7138:'the appropriation of funds, it would have been absolutely meaningless. accordingly, gao concluded that the appropriation incorporated the substantive authority',
7139:'of s. 2456. b219727, july 30, 1985. the result was supported by clear and explicit legislative history. in a 1975',
7140:'case, gao held that the specific inclusion of a program in a continuing resolution will provide both authorization and funding',
7141:'to continue the program despite the expiration of the appropriation authorization legislation. thus, for example, if the continuing resolution specifically',
7142:'states that the school breakfast program is to be continued under the resolution, the program may be continued although funding',
7143:'authorization legislation for the program expires prior to or during the period the resolution is in effect. 55 comp. gen.',
7144:'289 1975. the same result would follow if the intent to continue the program was made particularly clear in legislative',
7145:'history. 65 comp. gen. 318, 320–21 1986. the result in 55 comp. gen. 289 flows from two concepts. first, the',
7146:'continuing resolution, as the later enactment, is the more recent expression of congressional intent. second, if congress can appropriate funds',
7147:'in excess of a specific ceiling in authorizing legislation, which it can, then it should be able to appropriate funds',
7148:'to continue a program whose funding authorization is about to expire, at least where the authorization of appropriations is not',
7149:'a legal prerequisite to the appropriation itself. however, the “rule” of 55 comp. gen. 289 is not an absolute and',
7150:'the result in any given case will depend on several variables. although not spelled out as such in any of',
7151:'the decisions, the variables may include: the degree of specificity in the continuing resolution; the apparent intent of congress with',
7152:'respect to the expired program; whether what has expired is an authorization of appropriations or the underlying program authority itself;',
7153:'page 832 gao06382sp appropriations law—vol. ii chapter 8 continuing resolutions and the duration of the continuing resolution shortterm versus full',
7154:'fiscal year.28 in one case, for example, “all authority” under the manpower development and training act mdta29 terminated on june',
7155:'30, 1973. the program was not specifically provided for in the 1974 continuing resolution, and the authority in fact was',
7156:'not reestablished until enactment of the comprehensive employment and training act ceta30 six months later. under these circumstances, the claims',
7157:'court held that, in the absence of express language in the continuing resolution or elsewhere, contracts entered into during the',
7158:'gap between expiration of the mdta and enactment of ceta were without legal authority and did not bind the government.',
7159:'consortium venture corp. v. united states, 5 cl. ct. 47 1984, aff’d mem., 765 f.2d 163 fed. cir. 1985. in',
7160:'another case, recent defense department authorization acts, including the one for fiscal year 1985, had authorized a test program involving',
7161:'payment of a price differential to “labor surplus area” contractors. the test program amounted to an exemption from permanent legislation',
7162:'prohibiting the payment of such differentials. the 1985 provision expired, of course, at the end of fiscal year 1985. the',
7163:'1986 continuing resolution made no specific provision for the test program nor was there any evidence of congressional intent to',
7164:'continue the test program under the resolution. this lack of intent was confirmed when the 1986 authorization act was subsequently',
7165:'enacted without the test program provision. gao found that the defense logistics agency’s failure to apply the price differential in',
7166:'evaluating bids on a contract awarded under the continuing resolution 28 see also 71 comp. gen. 378, 380–81 1992: “while',
7167:'the outcome in these cases varies, they are all grounded in the same principle. the congress may revive or extend',
7168:'an act by any form of words which makes clear its intention to do so. kersten v. united states, 161',
7169:'f.2d 337 10th cir. 1947, cert. denied, 331 u.s. 851. furthermore, when the congress desires to extend, amend, suspend or',
7170:'repeal a statute, it can accomplish its purpose by including the requisite language in an appropriations or other act of',
7171:'congress. the whole matter depends on the intention of congress as expressed in statute. united states v. will, 449 u.s.',
7172:'200, 221–222 1980 and united states v. burton, 888 f.2d 682, 685 l0th cir. 1989.” 29 pub. l. no. 87415,',
7173:'76 stat. 23 mar. 15, 1962. 30 pub. l. no. 93203, 87 stat. 839 dec. 28, 1973. page 833 gao06382sp',
7174:'appropriations law—vol. ii chapter 8 continuing resolutions even though the differential had been included in the solicitation issued prior to',
7175:'the close of fiscal year 1985 was not legally objectionable. 65 comp. gen. 318 1986. a more difficult case was',
7176:'presented in b207186, feb. 10, 1989. congress enacted two pieces of legislation on december 22, 1987. one was a temporary',
7177:'extension of the solar bank, which had been scheduled to go out of existence on september 30, 1987. congress had',
7178:'enacted several temporary extensions while it was considering reauthorization, the one in question extending the bank’s life to march 15,',
7179:'1988. the second piece of legislation was the final continuing resolution for 1988 which funded the government for the remainder',
7180:'of the fiscal year. the resolution included a specific appropriation of $1.5 million for the solar bank, with a 2year',
7181:'period of availability. if the concept of 55 comp. gen. 289 were applied, the result would have been that the',
7182:'specific appropriation in the continuing resolution, in effect, reauthorized the solar bank as well. however, the “later enactment of congress”',
7183:'concept has little relevance when both laws are enacted on the same day. in addition, in contrast to 55 comp.',
7184:'gen. 289, there was no indication of congressional intent to continue the solar bank beyond the march 1988 expiration date.',
7185:'therefore, gao distinguished prior cases,31 found that the two pieces of legislation could be reconciled, and concluded that the resolution',
7186:'merely appropriated funds for the bank to use during the remainder of its existence. another case involving a sunset provision',
7187:'is 71 comp. gen. 378 1992. the legislation establishing the united states commission on civil rights provided for the commission',
7188:'to terminate on september 30, 1991. during fiscal year 1991, congress was working on the commission’s reauthorization and its regular',
7189:'fiscal year 1992 appropriation. although both bills passed both houses of congress, neither was enacted into law by september 30.',
7190:'the first continuing resolution for fiscal year 1992, with a cutoff date of october 29, 1991, expressly provided funds for',
7191:'activities included in the commission’s yetunenacted 1992 appropriations bill. it was clear from all of this that congress intended the',
7192:'commission to 31 gao had also applied the concept of 55 comp. gen. 289 in 65 comp. gen. 524 1986,',
7193:'holding that a specific provision in a regular appropriation act permitted the continuation of an activity whose organic authority had',
7194:'expired at the end of the preceding fiscal year. see also b1640313, jan. 3, 1973. page 834 gao06382sp appropriations law—vol.',
7195:'ii chapter 8 continuing resolutions continue operating beyond september 30. thus, the continuing resolution effectively suspended the sunset date and',
7196:'authorized the commission to operate until october 28, 1991, when the regular 1992 appropriation act was enacted, at which time',
7197:'the regular appropriation provided similar authority until november 26, when the reauthorization was enacted. appropriation bills sometimes contain provisions making',
7198:'the availability of the appropriations contingent upon the enactment of additional authorizing legislation. if a continuing resolution used a bill',
7199:'with such a provision as a reference, and if the authorizing legislation was not enacted, the amount contained in the',
7200:'appropriation bill, and therefore the amount appropriated by the continuing resolution, would be zero. to avoid this possibility, a continuing',
7201:'resolution may contain a provision suspending the effectiveness of such “contingency” provisions for the life of the resolution.32 such a',
7202:'suspension provision will be applicable only until the referenced appropriation bill is enacted into law. 55 comp. gen. at 294.',
7203:'e. duration 1. duration of continuing resolution continuing resolutions generally provide that the budget authority provided for an activity by',
7204:'the resolution shall remain available until a enactment into law of a regular appropriation for the activity, b enactment of',
7205:'the applicable appropriation by both houses of congress without provision for the activity, or c a fixed cutoff date, whichever',
7206:'occurs first.33 once either of the first two conditions occurs, or the cutoff date passes, funds appropriated by the resolution',
7207:'are no longer available for obligation and new obligations may be incurred only if a regular appropriation is made or',
7208:'if the termination date of the resolution is extended. the period of availability of funds under a continuing resolution can',
7209:'be extended by congress by amending the fixed cutoff date stated in the resolution. b1657311, nov. 10, 1971; b152098, jan.',
7210:'30, 1970. the 32 e.g., pub. l. no. 102109, § 109, 105 stat. 551, 553 sept. 30, 1991 1992 continuing',
7211:'resolution. 33 e.g., pub. l. no. 108309, § 107, 118 stat. 1137, 1138 sept. 30, 2004. page 835 gao06382sp appropriations',
7212:'law—vol. ii chapter 8 continuing resolutions extension may run beyond the session of congress in which it is enacted. b152554,',
7213:'dec. 15, 1970. thus, some fiscal years have seen a series of continuing resolutions, informally designated “first,” “second,” etc., up',
7214:'to “final.” this happens as congress extends the fixed cutoff date for short time periods until either all the regular',
7215:'appropriation acts are enacted or congress determines that some or all of the remaining bills will not be enacted individually,',
7216:'in which event relevant portions of the resolution will continue in effect for the remainder of the fiscal year. the',
7217:'second condition of the standard duration provision—enactment of the appropriation by both houses of congress without provision for the activity—will',
7218:'be considered to have occurred only when it is clear that congress intended to terminate the activity. thus, in b1640311,',
7219:'mar. 14, 1974, although regular and supplemental appropriation acts had been enacted without provision for a program, the comptroller general',
7220:'decided that funds for the program were still available under the continuing resolution. in this case, the legislative history indicated',
7221:'that in enacting the regular appropriation act, congress was providing funding for only some of the programs normally funded by',
7222:'this act and was deferring consideration of other programs, including the one in question. therefore, the second condition was not',
7223:'applicable. moreover, because supplemental appropriations are intended to provide funding only for new or additional needs, omission of the program',
7224:'from the supplemental did not trigger the second cutoff provision. as discussed previously, once the applicable appropriation is enacted into',
7225:'law, expenditures made under the continuing resolution are charged to that appropriation, except that valid obligations incurred under the continuing',
7226:'resolution in excess of the amount finally appropriated are charged to the account established under the continuing resolution. 2. duration',
7227:'of appropriations for the most part, the duration period of obligational availability of an appropriation under a shortterm continuing resolution',
7228:'does not present problems. if you have, say, only 1 month to incur obligations under a continuing resolution, it matters',
7229:'little that the corresponding appropriation in a regular appropriation act might be a multiple year or noyear appropriation. also, once',
7230:'the regular appropriation is enacted, it supersedes the continuing resolution and governs the period of availability. page 836 gao06382sp appropriations',
7231:'law—vol. ii chapter 8 continuing resolutions b300673, july 3, 2003. questions may arise, however, under continuing resolutions whose duration is',
7232:'the balance of the fiscal year. for example, the continuing resolution for fiscal year 1979 included the standard duration provision',
7233:'described above, with a cutoff date of september 30, 1979, the last day of the fiscal year. however, a provision',
7234:'in the comprehensive employment and training act ceta, 29 u.s.c. § 802b 1976, stated that “notwithstanding any other provision of',
7235:'law, unless enacted in specific limitation of the provisions of this subsection,” appropriations to carry out the ceta program shall',
7236:'remain available for 2 years. applying the principle that a specific provision governs over a more general one, it was',
7237:'held that funds appropriated for ceta under the continuing resolution were available for obligation for 2 years in accordance with',
7238:'the ceta provision. b194063, may 4, 1979; b115398.33, mar. 20, 1979. a few years earlier, the united states district court',
7239:'for the district of columbia had reached the same result in a case involving grants to states under the elementary',
7240:'and secondary education act. pennsylvania v. weinberger, 367 f. supp. 1378, 1384–85 d.d.c. 1973. the court stated, “[i]t is a',
7241:'basic premise of statutory construction that in such circumstances the more specific measure . . . is to be held',
7242:'controlling over the general measure where inconsistencies arise in their application.” id. at 1385. application of the same principle produced',
7243:'a similar result in b199966, sept. 10, 1980. the 1980 continuing resolution appropriated funds for foreign economic assistance loans by',
7244:'referencing the regular 1980 appropriation bill which had passed the house but not the senate. for that type of situation,',
7245:'the resolution provided for continuation of projects or activities “under the appropriation, fund, or authority granted by the one house',
7246:'[which had passed the bill].” the housepassed bill gave the economic assistance loan funds a 2year period of availability. the',
7247:'continuing resolution also included the standard duration provision with a cutoff date of september 30, 1980. since the duration provision',
7248:'applied to the entire resolution whereas the provision applicable to the loan funds had a narrower scope, the latter provision',
7249:'was the more specific one and the loan funds were therefore held to be available for 2 years. see also',
7250:'60 comp. gen. 263 1981 for further discussion of similar continuing resolution language. in some instances, an extended period of',
7251:'availability is produced by a specific exemption from the standard duration provision. for example, the page 837 gao06382sp appropriations law—vol.',
7252:'ii chapter 8 continuing resolutions 1983 continuing resolution provided foreign assistance funds “under the terms and conditions” set forth in',
7253:'the foreign assistance appropriation act of 1982, and further exempted that appropriation from the duration provision. since under the 1982',
7254:'act, appropriations for the african development fund were to remain available until expended, appropriations to the fund under the continuing',
7255:'resolution were also noyear funds. b212876, sept. 21, 1983. in view of the express exemption from the duration provision, there',
7256:'was no need to apply the “specific versus general” rule because there was no conflict. see also b210922, mar. 30,',
7257:'1984. 3. impoundment the duration of a continuing resolution is relevant in determining the application of the impoundment control act.',
7258:'impoundment in the context of continuing resolutions was discussed in a letter to the chairman of the house budget committee,',
7259:'b205053, dec. 31, 1981. generally, a withholding from obligation of funds provided under a continuing resolution would constitute an impoundment.',
7260:'where the continuing resolution runs for only part of the fiscal year, the withholding, even if proposed for the duration',
7261:'of the continuing resolution, should be classified as a deferral rather than a rescission. withholding funds during a temporary continuing',
7262:'resolution is different from withholding them for the life of a regular annual appropriation in that, in the former situation,',
7263:'congress is still deliberating over the regular funding levels. also, deferred funds are not permanently lost when a continuing resolution',
7264:'expires if a subsequent funding measure is passed. under this interpretation, classification as a rescission would presumably still be appropriate',
7265:'where a regular appropriation is never passed, the agency is operating under continuing resolution authority for the entire fiscal year,',
7266:'and the timing of a withholding is such that insufficient opportunity would remain to utilize the funds. see b115398, may',
7267:'9, 1975. impoundment issues under continuing resolutions may arise in other contexts as well. see, e.g., 64 comp. gen. 649',
7268:'1985 failure to make funds available based on good faith disagreement over treatment of carryover balances in calculating rate for',
7269:'operations held not to constitute an illegal rescission; b209676, apr. 14, 1983 no improper impoundment where funds were apportioned on',
7270:'basis of budget request although continuing resolution appropriated funds at rate to maintain program level, as long as apportionment was',
7271:'sufficient to maintain requisite program level. page 838 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers',
7272:'a. introduction . . . . . . . . . . . . . . . . . .',
7273:'. . . . . . . . . . . . . . . . . .94 b. general',
7274:'principles . . . . . . . . . . . . . . . . . . .',
7275:'. . . . . . . . . . . .95 1. the concepts of liability and relief .',
7276:'. . . . . . . . . . . . . . . . . . . .',
7277:'. . . 95 a. liability . . . . . . . . . . . . . .',
7278:'. . . . . . . . . . . . . . . . . . . .',
7279:'. . . . . . . . . . . . 95 b. surety bonding . . . .',
7280:'. . . . . . . . . . . . . . . . . . . .',
7281:'. . . . . . . . . . . . . . . . 98 c. relief .',
7282:'. . . . . . . . . . . . . . . . . . . .',
7283:'. . . . . . . . . . . . . . . . . . . .',
7284:'. . . . . . . 99 2. who is an accountable officer? . . . . . .',
7285:'. . . . . . . . . . . . . . . . . . . .',
7286:'. 911 a. certifying officers . . . . . . . . . . . . . . .',
7287:'. . . . . . . . . . . . . . . . . . . .',
7288:'. 913 b. disbursing officers . . . . . . . . . . . . . . .',
7289:'. . . . . . . . . . . . . . . . . . . .',
7290:'914 c. cashiers . . . . . . . . . . . . . . . . .',
7291:'. . . . . . . . . . . . . . . . . . . .',
7292:'. . . . . . . . 915 d. collecting officers . . . . . . . .',
7293:'. . . . . . . . . . . . . . . . . . . .',
7294:'. . . . . . . . 916 e. other agents and custodians . . . . . .',
7295:'. . . . . . . . . . . . . . . . . . . .',
7296:'. 917 3. funds to which accountability attaches . . . . . . . . . . . .',
7297:'. . . . . . . 920 a. appropriated funds . . . . . . . . .',
7298:'. . . . . . . . . . . . . . . . . . . .',
7299:'. . . . . . 920 1 imprest funds . . . . . . . . . .',
7300:'. . . . . . . . . . . . . . . . . . . .',
7301:'. . . . . . 920 2 flash rolls . . . . . . . . . .',
7302:'. . . . . . . . . . . . . . . . . . . .',
7303:'. . . . . . . . . 923 3 travel advances . . . . . . .',
7304:'. . . . . . . . . . . . . . . . . . . .',
7305:'. . . . . . . 925 b. receipts . . . . . . . . . .',
7306:'. . . . . . . . . . . . . . . . . . . .',
7307:'. . . . . . . . . . . . . . . 926 c. funds held in',
7308:'trust . . . . . . . . . . . . . . . . . . .',
7309:'. . . . . . . . . . . . . . . . 927 d. items which',
7310:'are the equivalent of cash . . . . . . . . . . . . . . .',
7311:'. . . 928 4. what kinds of events produce liability? . . . . . . . . .',
7312:'. . . . . . . . . . 929 5. amount of liability . . . . .',
7313:'. . . . . . . . . . . . . . . . . . . .',
7314:'. . . . . . . . . . . . . 931 6. effect of criminal prosecution .',
7315:'. . . . . . . . . . . . . . . . . . . .',
7316:'. . . . . . . 933 a. acquittal . . . . . . . . . .',
7317:'. . . . . . . . . . . . . . . . . . . .',
7318:'. . . . . . . . . . . . . . . 933 b. order of restitution',
7319:'. . . . . . . . . . . . . . . . . . . .',
7320:'. . . . . . . . . . . . . . . 934 c. physical loss or',
7321:'deficiency . . . . . . . . . . . . . . . . . . .',
7322:'. . . .935 1. statutory provisions . . . . . . . . . . . . .',
7323:'. . . . . . . . . . . . . . . . . . . .',
7324:'. . . . 935 a. civilian agencies . . . . . . . . . . . .',
7325:'. . . . . . . . . . . . . . . . . . . .',
7326:'. . . . . 935 b. military disbursing officers . . . . . . . . . .',
7327:'. . . . . . . . . . . . . . . . . . 938 2.',
7328:'who can grant relief? . . . . . . . . . . . . . . . .',
7329:'. . . . . . . . . . . . . . . . . . . 940',
7330:'a. 31 u.s.c. § 3527a . . . . . . . . . . . . . . .',
7331:'. . . . . . . . . . . . . . . . . . . .',
7332:'. 940 b. 31 u.s.c. § 3527b . . . . . . . . . . . . .',
7333:'. . . . . . . . . . . . . . . . . . . .',
7334:'. . . 942 c. role of administrative determinations . . . . . . . . . . .',
7335:'. . . . . . . . 943 3. standards for granting relief . . . . . .',
7336:'. . . . . . . . . . . . . . . . . . . .',
7337:'. . . 945 a. standard of negligence . . . . . . . . . . . .',
7338:'. . . . . . . . . . . . . . . . . . . .',
7339:'945 b. presumption of negligence/burden of proof . . . . . . . . . . . . .',
7340:'. 946 c. actual negligence . . . . . . . . . . . . . . .',
7341:'. . . . . . . . . . . . . . . . . . . .',
7342:'. . 948 d. proximate cause . . . . . . . . . . . . . .',
7343:'. . . . . . . . . . . . . . . . . . . .',
7344:'. . . 951 e. unexplained loss or shortage . . . . . . . . . . .',
7345:'. . . . . . . . . . . . . . . 954 f. compliance with regulations',
7346:'. . . . . . . . . . . . . . . . . . . .',
7347:'. . . . . . . 957 g. losses in shipment . . . . . . . .',
7348:'. . . . . . . . . . . . . . . . . . . .',
7349:'. . . . . . . . 959 h. fire, natural disaster . . . . . . .',
7350:'. . . . . . . . . . . . . . . . . . . .',
7351:'. . . . . . . 960 page 91 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of',
7352:'accountable officers i. loss by theft . . . . . . . . . . . . . .',
7353:'. . . . . . . . . . . . . . . . . . . .',
7354:'. . . . . . . 961 1 burglary: forced entry . . . . . . . .',
7355:'. . . . . . . . . . . . . . . . . . . .',
7356:'. 962 2 robbery . . . . . . . . . . . . . . . .',
7357:'. . . . . . . . . . . . . . . . . . . .',
7358:'. . . . . 963 3 riot, public disturbance . . . . . . . . . .',
7359:'. . . . . . . . . . . . . . . . . 963 4 evidence',
7360:'less than certain . . . . . . . . . . . . . . . . .',
7361:'. . . . . . . . 964 5 embezzlement . . . . . . . . .',
7362:'. . . . . . . . . . . . . . . . . . . .',
7363:'. . . . . . 968 j. agency security . . . . . . . . . .',
7364:'. . . . . . . . . . . . . . . . . . . .',
7365:'. . . . . . . . 969 k. extenuating circumstances . . . . . . . .',
7366:'. . . . . . . . . . . . . . . . . . . .',
7367:'973 d. illegal or improper payment . . . . . . . . . . . . . .',
7368:'. . . . . . . .975 1. disbursement and accountability . . . . . . . .',
7369:'. . . . . . . . . . . . . . . . . 975 a. statutory',
7370:'framework: disbursement under executive order no. 166 . . . . . . . . . . . . .',
7371:'. . . . . . . . . . . . . . . . . . . .',
7372:'. . . . . . . 975 b. automated payment systems . . . . . . . .',
7373:'. . . . . . . . . . . . . . . . . . . 978',
7374:'c. statistical sampling . . . . . . . . . . . . . . . . .',
7375:'. . . . . . . . . . . . . . . . . . 981 d.',
7376:'provisional vouchers and related matters . . . . . . . . . . . . . . .',
7377:'. 982 e. facsimile signatures and electronic certification . . . . . . . . . 984 f. gao',
7378:'audit exceptions . . . . . . . . . . . . . . . . . .',
7379:'. . . . . . . . . . . . . . . 986 2. certifying officers .',
7380:'. . . . . . . . . . . . . . . . . . . .',
7381:'. . . . . . . . . . . . . . . . . 988 a. duties',
7382:'and liability . . . . . . . . . . . . . . . . . .',
7383:'. . . . . . . . . . . . . . . . . 988 b. applicability',
7384:'of 31 u.s.c. § 3528 . . . . . . . . . . . . . . .',
7385:'. . . . . . . . . . 994 c. relief . . . . . . .',
7386:'. . . . . . . . . . . . . . . . . . . .',
7387:'. . . . . . . . . . . . . . . . . . . .',
7388:'995 3. disbursing officers . . . . . . . . . . . . . . . .',
7389:'. . . . . . . . . . . . . . . . . . . .',
7390:'. 9101 a. standards of liability and relief . . . . . . . . . . . .',
7391:'. . . . . . . . . . . 9101 b. some specific applications . . . .',
7392:'. . . . . . . . . . . . . . . . . . . .',
7393:'. . . 9108 1 fraudulent travel claims . . . . . . . . . . . .',
7394:'. . . . . . . . . . . . . . 9109 2 other cash payments fraudulently',
7395:'obtained . . . . . . . . . 9110 3 military separation vouchers . . . . .',
7396:'. . . . . . . . . . . . . . . . . 9111 4 assignment',
7397:'of contract payments . . . . . . . . . . . . . . . . .',
7398:'. 9111 5 improper purpose/payment beyond scope of legal authority . . . . . . . . . .',
7399:'. . . . . . . . . . . . . . . . . . . .',
7400:'. . . . . . . . . 9112 4. check losses . . . . . . .',
7401:'. . . . . . . . . . . . . . . . . . . .',
7402:'. . . . . . . . . . . . . . . 9113 a. check cashing operations',
7403:'. . . . . . . . . . . . . . . . . . . .',
7404:'. . . . . . . . 9113 b. duplicate check losses . . . . . . .',
7405:'. . . . . . . . . . . . . . . . . . . .',
7406:'. . . . 9118 c. errors in check issuance process . . . . . . . . .',
7407:'. . . . . . . . . . . . . 9123 5. statute of limitations . .',
7408:'. . . . . . . . . . . . . . . . . . . .',
7409:'. . . . . . . . . . . . . 9125 e. other relief statutes. . .',
7410:'. . . . . . . . . . . . . . . . . . . .',
7411:'. . . .9128 1. statutes requiring affirmative action . . . . . . . . . . .',
7412:'. . . . . . . . . . 9128 a. united states court of federal claims . .',
7413:'. . . . . . . . . . . . . . . . 9128 b. the legislative',
7414:'and judicial branches . . . . . . . . . . . . . . . . .',
7415:'. 9129 c. savings bond redemption losses . . . . . . . . . . . . .',
7416:'. . . . . . . . . 9130 2. statutes providing “automatic” relief . . . . .',
7417:'. . . . . . . . . . . . . . . . 9130 a. waiver of',
7418:'indebtedness . . . . . . . . . . . . . . . . . . .',
7419:'. . . . . . . . . . . . 9130 page 92 gao06382sp appropriations law—vol. ii chapter',
7420:'9 liability and relief of accountable officers b. compromise of indebtedness . . . . . . . . .',
7421:'. . . . . . . . . . . . . . . . . 9130 c. foreign',
7422:'exchange transactions . . . . . . . . . . . . . . . . . .',
7423:'. . . . . . 9131 d. check forgery insurance fund . . . . . . . .',
7424:'. . . . . . . . . . . . . . . . 9132 e. secretary of',
7425:'the treasury . . . . . . . . . . . . . . . . . .',
7426:'. . . . . . . . . . . 9133 f. other statutes . . . . .',
7427:'. . . . . . . . . . . . . . . . . . . .',
7428:'. . . . . . . . . . . . . . 9133 f. procedures. . . .',
7429:'. . . . . . . . . . . . . . . . . . . .',
7430:'. . . . . . . . . . . .9134 1. reporting of irregularities . . . .',
7431:'. . . . . . . . . . . . . . . . . . . .',
7432:'. . . . . . 9134 2. obtaining relief . . . . . . . . . .',
7433:'. . . . . . . . . . . . . . . . . . . .',
7434:'. . . . . . . . 9135 3. de minimis rule: payments of $100 or less . .',
7435:'. . . . . . . . . . . . . . 9136 4. relief versus grievance procedures',
7436:'. . . . . . . . . . . . . . . . . . . .',
7437:'. . 9136 g. collection action. . . . . . . . . . . . . . .',
7438:'. . . . . . . . . . . . . . .9137 1. against recipient . .',
7439:'. . . . . . . . . . . . . . . . . . . .',
7440:'. . . . . . . . . . . . . . . . 9137 2. against accountable',
7441:'officer . . . . . . . . . . . . . . . . . . .',
7442:'. . . . . . . . . . 9139 h. restitution, reimbursement, and restoration . . . .',
7443:'. . .9141 1. restitution and reimbursement . . . . . . . . . . . . .',
7444:'. . . . . . . . . . . . . 9141 2. restoration . . . .',
7445:'. . . . . . . . . . . . . . . . . . . .',
7446:'. . . . . . . . . . . . . . . . . . . 9142',
7447:'a. adjustment incident to granting of relief . . . . . . . . . . . . .',
7448:'. . 9142 b. other situations . . . . . . . . . . . . . .',
7449:'. . . . . . . . . . . . . . . . . . . .',
7450:'. . . 9143 page 93 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers the concept',
7451:'that a person should be held accountable for funds in his or a. introduction her care is not peculiar to',
7452:'the government. if you get a job as a cashier at your local supermarket and come up short at the',
7453:'end of the day, you will probably be forced to make up the shortage from your own pocket. the store',
7454:'manager does not have to prove the loss was your fault. the very fact that the money is not there',
7455:'is sufficient to make you liable. of course, if your cash register is emptied by an armed robber and you',
7456:'are in no way implicated, you will be off the hook. just like a private business enterprise, the government can',
7457:'lose money in many ways. for example, it can be physically lost, stolen, paid out improperly, or embezzled. sometimes the',
7458:'money is recovered; often it is not. if government funds are lost because of some employee’s misconduct or carelessness, and',
7459:'if the responsible employee is not required to make up the loss, the result is that the taxpayer ends up',
7460:'paying twice for the same thing, or paying for nothing. when you accept the job at the supermarket, you do',
7461:'so knowing perfectly well that you will be potentially liable for losses. there is no reason why the government should',
7462:'operate any differently. if anything, there is a stronger case for the liability of government employees since they are, in',
7463:'effect, trustees for the taxpayers themselves included. as the comptroller general once stated, “a special trust responsibility exists with regard',
7464:'to public monies and with this special trust goes personal financial responsibility.” b161457, oct. 30, 1969. this chapter will explore',
7465:'these concepts—the liability and relief of government officers and employees who are entrusted with public funds or who have certain',
7466:'specific responsibilities in their disbursement. in government language, they are called “accountable officers.”1 1 this chapter deals solely with accountability',
7467:'for funds by those classified as accountable officers. other types of accountability—accountability by employees who are not accountable officers or',
7468:'accountability for property other than funds—are covered in chapter 13 in volume iii of the second edition of principles of',
7469:'federal appropriations law. page 94 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers b. general principles',
7470:'1. the concepts of liability and relief a. liability the concept of accountability for public funds in the form of',
7471:'strict personal liability evolved during the nineteenth century. its origins can be traced to a number of congressional enactments, some',
7472:'dating back to the nation’s infancy. the legislation establishing the department of the treasury in 1789 included a provision requiring',
7473:'the comptroller of the treasury to “direct prosecutions for all delinquencies of officers of the revenue.”2 a few years later,',
7474:'in 1795, congress authorized the comptroller to require “any person who has received monies for which he is accountable to',
7475:'the united states” to render “all his accounts and vouchers, for the expenditure of the said monies,” and to commence',
7476:'suit against anyone failing to do so.3 in 1846, congress mandated that all government officials safeguard public funds in their',
7477:'custody. the statute provided that— “all public officers of whatsoever character, be, and they are hereby, required to keep safely,',
7478:'without loaning, using, depositing in banks, or exchanging for other funds than as allowed by this act, all the public',
7479:'money collected by them, or otherwise at any time placed in their possession and custody, till the same is ordered,',
7480:'by the proper department or officer of the government, to be transferred or paid out . . . .” act',
7481:'of august 6, 1846, ch. 90, § 6, 9 stat. 59, 60. this statute still exists, in modernized form, at',
7482:'31 u.s.c. § 3302a. these are civil provisions. congress also addressed fiscal accountability in a variety of criminal statutes. an',
7483:'important one is the act of june 14, 1866, ch. 122, 14 stat. 64, which declared it to be the',
7484:'duty of disbursing officers to 2 act of september 2, 1789, ch. xii, § 3, 1 stat. 65, 66. 3',
7485:'act of march 3, 1795, ch. xlviii, § 1, 1 stat. 441. page 95 gao06382sp appropriations law—vol. ii chapter 9',
7486:'liability and relief of accountable officers use public funds entrusted to them “only as . . . required for payments',
7487:'to be made . . . in pursuance of law,” and made it a felony for a disbursing officer to,',
7488:'among other things, “apply any portion of the public money intrusted to him” for his own use or for any',
7489:'purpose not prescribed by law.4 the strict liability of accountable officers became firmly established in a series of early supreme',
7490:'court decisions. in 1845, the court upheld liability in a case where money had been stolen with no fault or',
7491:'negligence on the part of the accountable officer. in an oftenquoted passage, the court said: “public policy requires that every',
7492:'depositary of the public money should be held to a strict accountability. not only that he should exercise the highest',
7493:'degree of vigilance, but that ‘he should keep safely’ the moneys which come to his hands. any relaxation of this',
7494:'condition would open a door to frauds, which might be practiced with impunity. a depositary would have nothing more to',
7495:'do than to lay his plans and arrange his proofs, so as to establish his loss, without laches on his',
7496:'part. let such a principle be applied to our postmasters, collectors of the customs, receivers of public moneys, and others',
7497:'who receive more or less of the public funds, and what losses might not be anticipated by the public?” united',
7498:'states v. prescott, 44 u.s. 3 how. 578, 588–89 1845. while some might view this passage as unduly cynical of',
7499:'human nature, it makes the important point that the laws relating to the liability and relief of accountable officers are',
7500:'intended not only to give the officers incentive to guard against theft by others, but also to protect against dishonesty',
7501:'by the officers themselves. an 1872 case, united states v. thomas, 82 u.s. 15 wall. 337, recognized that the liability',
7502:'announced in prescott, while strict, was not absolute. in that case, the court refused to hold a customs official liable',
7503:'for funds which had been forcibly taken by confederate forces during the civil war. 4 this statute also still exists',
7504:'and is found at 18 u.s.c. § 653. other criminal provisions relevant to accountable officers include 18 u.s.c. § 643',
7505:'failure to render accounts, 18 u.s.c. § 648 misuse of public funds, and 18 u.s.c. § 649 failure to deposit.',
7506:'the four provisions of title 18 of the united states code cited in this note apply to “all persons charged',
7507:'with the safekeeping, transfer, or disbursement of the public money.” 18 u.s.c. § 649b. page 96 gao06382sp appropriations law—vol. ii',
7508:'chapter 9 liability and relief of accountable officers in formulating its conclusion, the court recognized two exceptions to the strict',
7509:'liability rule: “[n]o rule of public policy requires an officer to account for moneys which have been destroyed by an',
7510:'overruling necessity, or taken from him by a public enemy, without any fault or neglect on his part.” id. at',
7511:'352. the exceptions, however, are limited. in smythe v. united states, 188 u.s. 156 1903, the court reviewed its precedents,',
7512:'including prescott and thomas, and upheld the liability of a mint official for funds that had been destroyed by fire,',
7513:'finding the loss attributable neither to “overruling necessity” nor to a public enemy. the standard that has evolved from the',
7514:'cases and statutes noted is one of strict liability. it is often said that an accountable officer is, in effect,',
7515:'an “insurer” of the funds in his or her charge. e.g., b258357, jan. 3, 1996; 64 comp. gen. 303, 304',
7516:'1985; 54 comp. gen. 112, 114 1974; 48 comp. gen. 566, 567 1969; 6 comp. gen. 404, 406 1926. see',
7517:'also united states v. heller, 1 f. supp. 1, 6 d. md. 1932. the liability is automatic and arises by',
7518:'operation of law at the moment a physical loss occurs or an erroneous payment is made. e.g., b291001, dec. 23,',
7519:'2002; 70 comp. gen. 12, 14 1990; 54 comp. gen. at 114. in addition to the applicable statutory provisions, courts',
7520:'have sometimes cited public policy considerations as a basis for an accountable officer’s strict liability. e.g., prescott, 44 u.s. at',
7521:'587–88 “the liability of the defendant . . . arises out of . . . principles which are founded upon',
7522:'public policy”; heller, 1 f. supp. at 6 strict liability “is imposed as a matter of public policy”. as discussed',
7523:'in section b.2 of this chapter, accountable officer liability does not attach to individuals who are not accountable officers even',
7524:'if they played a part—even a crucial part—in causing an improper payment. by the same token, an accountable officer’s liability',
7525:'is not diminished because other individuals induced—or even ordered—the improper payment. for example, in b271021, sept. 18, 1996, an official',
7526:'of the equal employment opportunity commission eeoc submitted a memorandum to the director of an eeoc district office asking the',
7527:'district director to provide a travel advance in order to enable a nongovernment witness to appear in an agency proceeding.',
7528:'the official concluded his request as follows: “if there is a subsequent determination that the funds should not have been',
7529:'page 97 gao06382sp appropriations law—vol. ii b. surety bonding chapter 9 liability and relief of accountable officers disbursed for the',
7530:'aforementioned purpose, i will assume liability for repayment of the funds.” the district director ordered the travel advance to be',
7531:'made; his order was passed on to an accountable officer, mr. guthrie, who complied with it and issued the travel',
7532:'advance. eeoc headquarters later determined that the payment was unauthorized and disallowed it. gao affirmed the disallowance, stating: “the fact',
7533:'that mr. guthrie may have received instructions from superiors to make the improper payment does not relieve him of responsibility',
7534:'for the deficiency in his account resulting from the improper payment. see 55 comp. gen. 297 1975; 49 comp. gen.',
7535:'38 1969.” b271021 at 4. the other eeoc official’s statement offering to assume liability if the payment proved to be',
7536:'erroneous was equally unavailing to mr. guthrie. the decision observed: “this statement . . . has no effect on the',
7537:'liability of mr. guthrie for the deficiency in his account, which is fixed by statute and regulation. the government, accordingly,',
7538:'need look no further than mr. guthrie for restitution of the deficiency.” id. at 5. similarly, a long line of',
7539:'gao decisions holds that an accountable officer is liable even where his or her subordinates actually made the improper payment.',
7540:'see, e.g., b274364, b276306, apr. 23, 1997; b260369, june 5, 1995; b241019.2, feb. 7, 1992; b246418, feb. 7, 1992, and',
7541:'decisions cited.5 as these decisions point out, however, relief from liability is appropriate where the supervising accountable officer maintained and',
7542:'ensured effective implementation of an adequate system of procedures and controls to avoid errors. the early cases also based liability',
7543:'on the accountable officer’s bond. prior to 1972, the fidelity bonding of accountable officers was required by law. 5 as',
7544:'discussed in section b.2.b of this chapter, where more than one accountable officer is involved—for example, a subordinate cashier who',
7545:'actually made an improper payment and a supervising accountable officer in whose name the account is held—both are liable. page',
7546:'98 gao06382sp appropriations law—vol. ii c. relief chapter 9 liability and relief of accountable officers see, e.g., 22 comp. gen.',
7547:'48 1942; 21 comp. gen. 976 1942. as an examination of the statement of the case in decisions such as',
7548:'united states v. prescott, 44 u.s. 3 how. 578 1845, united states v. thomas, 82 u.s. 15 wall. 337 1872,',
7549:'and smythe v. united states, 188 u.s. 156 1903, demonstrates, the terms of the bond were very similar to, and',
7550:'in fact were derived from, the 1846 “keep safely” legislation quoted above. thus, while the bond gave the government a',
7551:'more certain means of recovery, it did not impose upon accountable officers any duties that were not already required by',
7552:'statute.6 in a 1962 report, gao concluded that bonding was not costeffective,7 and recommended legislation to repeal the bonding requirement.',
7553:'gao, review of the bonding program for employees of the federal government, b8201 washington, d.c.: mar. 29, 1962. congress repealed',
7554:'the requirement in 1972, and accountable officers are no longer bonded. indeed, 31 u.s.c. § 9302 generally prohibits federal agencies',
7555:'from requiring or obtaining surety bonds to cover their officers and employees in carrying out official duties. the last sentence',
7556:'of 31 u.s.c. § 9302 specifically states that the prohibition against surety bonds “does not affect the personal financial liability”',
7557:'of individual officers or employees. thus elimination of the bonding requirement has no effect on the legal liability of accountable',
7558:'officers. 54 comp. gen. 112 1974; b191440, may 25, 1979. the early cases and statutes previously noted made no mention',
7559:'of relief from liability.8 “relief” in this context means an action, taken by someone with the legal authority to do',
7560:'so, which absolves an accountable officer from liability for a loss. prior to the world war ii period, with limited',
7561:'exceptions for certain accountable officers of the armed forces, an accountable officer had but two relief options available. first, a',
7562:'disbursing 6 the bonding requirement had been for the protection of the government, not the accountable officer. under the bonding',
7563:'system, if the united states was compensated for a loss by the bonding company, the company succeeded to the rights',
7564:'of the united states and could seek reimbursement from the accountable officer. 68 comp. gen. 470, 471 1989; b186922, apr.',
7565:'8, 1977. 7 originally, accountable officers had to pay for their own bonds. 33 comp. gen. 7 1953. legislation effective',
7566:'january 1, 1956, authorized the government to pay. pub. l. no. 84323, ch. 683, 69 stat. 618 aug. 9, 1955.',
7567:'8 the “public enemy” situation dealt with in united states v. thomas, 82 u.s. 15 wall. 337 1872, discussed in',
7568:'section b.1.a of this chapter, is not an example of relief. it is an example of a situation in which',
7569:'liability did not attach to begin with. page 99 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable',
7570:'officers officer could bring an action in what was then the court of claims now the united states court of',
7571:'federal claims under 28 u.s.c. § 2512.9 of course, the officer would probably need legal representation and would incur other',
7572:'expenses, none of which were reimbursable. second, and this became the most common approach, was private relief legislation, a burdensome',
7573:'process for amounts which were often relatively small. there was no mechanism for providing relief at the administrative level, however',
7574:'meritorious the case. 4 comp. gen. 409 1924; 27 comp. dec. 328 1920. starting in 1941, congress enacted a series',
7575:'of relief statutes, and there is now a comprehensive statutory scheme for the administrative relief of accountable officers who are',
7576:'found to be without fault. the major portion of this chapter deals with the application of this legislation. it is',
7577:'important to distinguish between liability and relief. it is not the denial of relief that makes an accountable officer liable.',
7578:'as noted previously, the basic legal liability of an accountable officer arises automatically by virtue of the loss and is',
7579:'not affected by any lack of fault or negligence on the officer’s part. relief is a separate process and may',
7580:'take lack of fault into consideration to the extent authorized by the governing statute.10 b291001, dec. 23, 2002; 54 comp.',
7581:'gen. 112 1974; b167126, aug. 28, 1978. 9 section 2512, which had its origins in the early 1900s, provides: “whenever',
7582:'the united states court of federal claims finds that any loss by a disbursing officer of the united states was',
7583:'without his fault or negligence, it shall render a judgment setting forth the amount thereof, and the [government accountability office]',
7584:'shall allow the officer such amount as a credit in the settlement of his accounts.” 28 u.s.c. § 2512. while',
7585:'the statute is still on the books, it has not been applied in over 50 years. 10 the passage of',
7586:'time, however, can eliminate the government’s ability to enforce liability in improper payment cases, even without relief. see, for example,',
7587:'section d.5 of this chapter, discussing the 3year statute of limitations that generally applies to holding accountable officers liable for',
7588:'erroneous payments, and b287043, may 29, 2001. therefore, in order to protect the government’s position, agencies should move promptly to',
7589:'address an accountable officer’s liability. implications in a few cases such as 70 comp. gen. 616, 622– 23 1991, that',
7590:'an agency can never enforce an accountable officer’s liability for an improper payment unless it has first submitted the matter',
7591:'to gao are misleading. see gao, policy and procedures manual for guidance of federal agencies, title 7, ch. 8 washington,',
7592:'d.c.: may 18, 1993, which describes agencies’ specific responsibilities in this area. page 910 gao06382sp appropriations law—vol. ii chapter 9',
7593:'liability and relief of accountable officers 2. who is an accountable officer? an accountable officer is any government officer or',
7594:'employee who by reason of his or her employment is responsible for or has custody of government funds. b288163, june',
7595:'4, 2002; 62 comp. gen. 476, 479 1983; 59 comp. gen. 113, 114 1979; b257068, oct. 22, 1994; b188894, sept.',
7596:'29, 1977. accountable officers encompass such officials as certifying officers, disbursing officers, collecting officers, and other employees who by virtue',
7597:'of their employment have custody of government funds. clearly, the relevant statutory provisions are the first place one looks for',
7598:'the source of authority conferring the status of “accountable officer” and establishing the responsibilities and liabilities that go with it.',
7599:'does this leave any room for agencies to create “accountable officers” by administrative action? until recently, gao decisions indicated that',
7600:'agencies could impose accountable officer status and liability so long as they did so by specific regulation. see b247563.3, apr.',
7601:'5, 1996; b260369, june 15, 1995; 72 comp. gen. 49, 52 1992; b241856, sept. 23, 1992, and decisions cited. these',
7602:'decisions reasoned that such liability, duly imposed by regulation, could be regarded as part of the employee’s “employment contract.” however,',
7603:'in b280764, may 4, 2000, gao reconsidered its position and held that accountable officer status and liability can only be',
7604:'created by statute. the 2000 decision overruled prior inconsistent decisions.11 the decision in b280764 concerned a defense department regulation that',
7605:'authorized the department’s certifying officers to designate as “accountable officials” certain employees engaged in developing, verifying, approving, and processing salary',
7606:'payments. specifically, the regulation defined “accountable officials” as “dod military and civilian personnel, who are designated in writing and not',
7607:'otherwise accountable under applicable law, who provide source information, data or service . . . to a certifying or disbursing',
7608:'officer in support of the payment process.” id. at 3. the regulation further provided that these employees would be pecuniarily',
7609:'liable for erroneous payments resulting from negligence in performing their duties. id. in analyzing the validity of the regulation in',
7610:'b280764, gao invoked the “unassailable proposition” that the federal employment relationship is 11 among the prior inconsistent decisions specifically mentioned',
7611:'were 72 comp. gen. 49 1992 and b241856, sept. 23, 1992. page 911 gao06382sp appropriations law—vol. ii chapter 9 liability',
7612:'and relief of accountable officers primarily governed by statute rather than contract or common law concepts, and that this is',
7613:'equally true when it comes to disciplining or penalizing employees. id. at 3. in this regard, the decision cited a',
7614:'number of judicial opinions, including bush v. lucas, 462 u.s. 367 1983; united states v. gilman, 347 u.s. 507 1954;',
7615:'and united states v. standard oil co., 332 u.s. 301 1947. applying these principles, gao concluded that the defense department',
7616:'regulation could not stand since it lacked the necessary statutory authorization: “here, as in the cases noted above, congress has',
7617:'not spoken to the issue of the liability of government employees who provide information to certifying officers that they rely',
7618:'on when performing their statutory function. . . . yet congress has clearly legislated in detail on many features of',
7619:'the certifying and disbursing function as well as the government’s employeremployee relationship. with respect to the certifying and disbursing function,',
7620:'congress has specifically provided for the personal pecuniary liability of certifying and disbursing officers, but, significantly, has not extended liability',
7621:'beyond these officers to those governmental employees whose work supports these functions. . . . pecuniary liability for negligent conduct,',
7622:'administratively imposed, is no less a penalty than would be an employee’s judicially created obligation to indemnify the government for',
7623:'losses resulting from his negligent conduct. as noted above, the supreme court counseled in gilman, standard oil co. and bush',
7624:'v. lucas that these issues are for congress to resolve. we think the same holds true for administrative extensions of',
7625:'personal liability beyond the existing statutory parameters.” b280764, may 4, 2000, at 5–6 footnotes omitted. in b280764, gao did not',
7626:'question the merits of extending accountability and potential pecuniary liability to more defense department employees, only the means of accomplishing',
7627:'that objective. in 2002, congress added a page 912 gao06382sp appropriations law—vol. ii a. certifying officers chapter 9 liability and',
7628:'relief of accountable officers new section 2773a to title 10, united states code, which supplied the department with the requisite',
7629:'statutory authority to designate additional accountable officials.12 certifying officers play a significant role in the accountability for public funds. a',
7630:'certifying officer is a government officer or employee whose job is or includes certifying vouchers including voucher schedules or invoices',
7631:'used as vouchers for payment. b280764, may 4, 2000. a certifying officer differs from other accountable officers in one key',
7632:'respect: the certifying officer has no public funds in his or her physical custody. rather, accountability is statutorily prescribed because',
7633:'of the nature of the certifying function. a certifying officer’s liability, discussed in detail later in this chapter, is established',
7634:'by 31 u.s.c. § 3528. in brief, certifying officers are responsible for the legality of proposed payments and are liable',
7635:'for the amount of illegal or improper payments resulting from their certifications. prior to enactment of the national defense authorization',
7636:'act for fiscal year 1996, pub. l. no. 104106, 110 stat. 186 feb. 10, 1996, the military departments were subject',
7637:'to a different system of accountability. the certifying officer provisions in section 3528 of title 31 of the united states',
7638:'code did not apply to them. see 31 u.s.c. § 3528d 1994. instead, the military departments operated under a system',
7639:'of subordinate and supervisory disbursing officers. supervisory disbursing officers often called “finance and accounting officers” had responsibility and liability for',
7640:'the correctness of payments similar to that of a certifying officer in a civilian agency. see b266001, may 1, 1996,',
7641:'for a general description of this system. section 913 of public law 104106 amended various provisions of titles 10, 31,',
7642:'and 37 of the united states code to change the system of accountability of the military departments. among other things,',
7643:'section 913 authorized the designation and appointment of certifying officers within the military departments. the purpose of this authorization was',
7644:'to strengthen internal controls within the military departments by providing a separation of duties between officials who authorized payments certifying',
7645:'officers and those who made payments disbursing officers, thereby placing the military departments more in line with financial procedures in',
7646:'the civilian agencies. s. rep. no. 104112, at 279 1995. 12 this provision was enacted by section 1005 of the',
7647:'bob stump national defense authorization act for fiscal year 2003, pub. l. no. 107314, 116 stat. 2458, 2631–32 dec. 2,',
7648:'2002. page 913 gao06382sp appropriations law—vol. ii b. disbursing officers chapter 9 liability and relief of accountable officers a great',
7649:'many government officials make official “certifications” of one type or another, but this does not make them certifying officers for',
7650:'purposes of accountability and liability. e.g., b247563.4, dec. 11, 1996 voucher auditors who “certified” invoices for payment by accountable officers',
7651:'did not thereby become authorized certifying officers themselves. as discussed above, this status can only be conferred by statute. thus,',
7652:'the concepts of accountability and relief discussed in this chapter apply only to “authorized certifying officers” who certify vouchers upon',
7653:'which moneys are to be paid out by disbursing officers in discharging a debt or obligation of the government. 23',
7654:'comp. gen. 953 1944. this may in appropriate circumstances include the head of a department or agency. 31 u.s.c. §',
7655:'3325a1; 21 comp. gen. 976, 979 1942. an authorized certifying officer must be so designated in writing. 31 u.s.c. §',
7656:'3325a1; i tfm § 41140 aug. 18, 1997. thus, an employee who “certified” overtime assignments in the sense of a',
7657:'timekeeper verifying that employees worked the hours of overtime claimed could not be held liable for resulting overpayments under an',
7658:'accountable officer theory. b197109, mar. 24, 1980. the same approach applies to various postcertification administrative actions, the rule being that',
7659:'once a voucher has been duly certified by an authorized official, subsequent administrative processing does not constitute certification for purposes',
7660:'of 31 u.s.c. § 3528. 55 comp. gen. 388, 390 1975. for example, the comptroller general has held that 31',
7661:'u.s.c. § 3528 does not apply to an “approving officer” who approves vouchers after they have been duly certified. 21',
7662:'comp. gen. 841 1942. a disbursing officer is an officer or employee of a federal department or agency, civilian or',
7663:'military, designated to disburse moneys and render accounts in accordance with laws and regulations governing the disbursement of public funds.',
7664:'the term is essentially selfdefining. as one court has stated: “we do not find the term ‘disbursing officer’ statutorily defined,',
7665:'probably because it is selfdefinitive. it can mean nothing except an officer who is authorized to disburse funds of the',
7666:'united states.” romney v. united states, 167 f.2d 521, 526 d.c. cir., cert. denied, 334 u.s. 847 1948. page 914',
7667:'gao06382sp appropriations law—vol. ii c. cashiers chapter 9 liability and relief of accountable officers whether an employee is a disbursing',
7668:'officer depends more on the nature of the person’s duties than on the title of his or her position. in',
7669:'some cases, the job title will be “disbursing officer.” this is the title for the disbursing officers of the treasury',
7670:'department who disburse funds for most civilian agencies under 31 u.s.c. § 3321. for the military departments, which generally do',
7671:'their own disbursing, the title may be “finance and accounting officer.” as a general proposition, any employee to whom public',
7672:'funds are entrusted for the purpose of making payments from those funds will be regarded as a disbursing officer. see',
7673:'b151156, dec. 30, 1963. there may be more than one disbursing officer for a given transaction. military disbursing operations, at',
7674:'least as they existed prior to enactment of the national defense authorization act for fiscal year 1996,13 provide an example.',
7675:'the account was often held in the name of a supervisory official such as a finance and accounting officer, with',
7676:'the actual payment made by some subordinate agent, cashier, deputy, etc.. both were regarded as disbursing officers for purposes of',
7677:'liability and relief although, as we will discuss later, the standards for relief differ. e.g., b261312, feb. 5, 1995; 62',
7678:'comp. gen. 476, 479–80 1983; b248532, oct. 26, 1992; b245127, sept. 18, 1991; b240280, may 22, 1991. the principle of',
7679:'joint liability in the case of multiple disbursing officers applies outside the military departments as well. see b288163, june 4,',
7680:'2002 clerk and deputy clerk of a bankruptcy court. a cashier is a federal officer or employee who has been',
7681:'designated as a cashier by an official delegated authority to make such designations and who is thereby authorized to perform',
7682:'limited cash disbursing functions or other cash operations. department of the treasury financial management service, manual of procedures and instructions',
7683:'for cashiers hereafter cashier’s manual, § iv april 2001, at 4. cashiers are designated in writing. id. § iii, at',
7684:'3 cashier is appointed by completing a specified form. 13 pub. l. no. 104106, 110 stat. 186 feb. 10, 1996;',
7685:'see discussion of this statute in section b.2.a of this chapter. page 915 gao06382sp appropriations law—vol. ii d. collecting officers',
7686:'chapter 9 liability and relief of accountable officers cashiers who are authorized to make payments from funds advanced to them',
7687:'are regarded as a category of disbursing officer. they deal primarily with petty cash funds known as “imprest funds.”14 cashiers',
7688:'outside the military departments exercise disbursing functions pursuant to a delegation of authority from the secretary of the treasury under',
7689:'31 u.s.c. § 3321b. cashier’s manual, § ii, at 2. with respect to disbursing functions under 31 u.s.c. § 3321,',
7690:'cashiers are divided into five categories: 1 class a cashier may not advance imprest funds to another cashier except to',
7691:'an alternate; 2 class b cashier may advance imprest funds to alternate or subcashier; 3 class d cashier receives funds',
7692:'solely for changemaking purposes; 4 subcashier may receive imprest funds from a class b or d cashier; and 5 alternate',
7693:'to a cashier or subcashier functions during short absences of the cashier but may act simultaneously if required by workload.',
7694:'cashier’s manual, § iv, at 4; § v, at 12–13; app. 1, at 16–17. cashiers are personally liable for any',
7695:'loss or shortage of funds in their custody unless relieved by proper authority. like other accountable officers, they are regarded',
7696:'as “insurers” and are subject to strict liability. b258357, jan. 3, 1996. further discussion of the role and responsibilities of',
7697:'cashiers may be found in sections iv and v of the cashier’s manual. for the most part, a cashier will',
7698:'be operating with funds advanced by his or her own employing agency. in some situations, however, such as an authorized',
7699:'interagency agreement, the funds may be advanced by another agency. liability and relief are the same in either case. 65',
7700:'comp. gen. 666, 675–77 1986. collecting officers are those who receive or collect money for the government, such as internal',
7701:'revenue collectors or customs collectors. collecting officers are accountable for all money collected. e.g., 59 comp. gen. 113, 114 1979;',
7702:'3 comp. gen. 403 1924; 1 comp. dec. 191 1895; b201673 et al., sept. 23, 1982. for example, an internal',
7703:'revenue collector is responsible for the physical safety of taxes collected, must pay over to the government all taxes collected,',
7704:'and must make good any money lost or stolen while in his or her custody unless relieved. e.g., 60 comp.',
7705:'gen. 674 1981. however, under a lockbox arrangement whereby tax payments are mailed to a financial institution at a post',
7706:'office box and then wired to a treasury account, internal revenue service officials are not accountable 14 see section b.3.a',
7707:'of this chapter for a discussion of imprest funds. page 916 gao06382sp appropriations law—vol. ii chapter 9 liability and relief',
7708:'of accountable officers e. other agents and custodians for funds in the possession of the financial institution since they do',
7709:'not gain custody or control over those funds. b223911, feb. 24, 1987. the clerk of a bankruptcy court, if one',
7710:'has been appointed under 28 u.s.c. § 156b, is the accountable officer with respect to fees paid to the court,',
7711:'as prescribed by 28 u.s.c. § 1930, by parties commencing a case under the bankruptcy code. 28 u.s.c. § 156f.',
7712:'this provision, added in 1986, essentially codified the result of two gao decisions issued the previous year, 64 comp. gen.',
7713:'535 1985 and b217236, may 22, 1985. see also b288163, june 4, 2002, for a more recent decision following the',
7714:'same approach. in some situations, certain types of receipts may be collected by a contractor. since the contractor is not',
7715:'a government officer or employee, the various accountable officer statutes discussed throughout this chapter do not apply, and the contractor’s',
7716:'liability is governed by the terms of the contract. for example, a parking service contract with the general services administration',
7717:'required the contractor to collect parking fees at certain government buildings and to remit those fees to gsa on a',
7718:'daily basis. one day, instead of remitting the receipts, an official of the contractor took the money home in a',
7719:'paper bag and claimed to have been robbed in a parking lot near her residence. when gsa withheld the amount',
7720:'of the loss from contract payments, the contractor tried to argue that the risk of loss should fall upon the',
7721:'government. the claims court disagreed. since the contract terms were clear and the contractor failed to comply, the contractor was',
7722:'held responsible for the loss. miracle contractors, inc. v. united states, 5 cl. ct. 466 1984. the department of agriculture',
7723:'has statutory authority to use volunteers to collect user fees in national forests. the volunteers, private individuals, are to be',
7724:'bonded, with the cost of the bonds paid by the department. 16 u.s.c. § 460l6ak. in 68 comp. gen. 470',
7725:'1989, gao concurred with the department that the volunteers could be regarded as agents of the forest service and, as',
7726:'such, eligible for relief for nonnegligent losses. the practical significance of this decision is that it would be difficult to',
7727:'recruit volunteers if they faced potential liability for nonnegligent losses, a possibility that would exist even under a surety bond.',
7728:'id. at 471. officers and employees who do not fit into any of the preceding categories, and who may not',
7729:'even be directly involved in government fiscal operations, are occasionally given custody of federal funds and thereby become accountable officers',
7730:'for the funds placed in their charge. note in this page 917 gao06382sp appropriations law—vol. ii chapter 9 liability and',
7731:'relief of accountable officers connection that the “safekeeping” mandate of 31 u.s.c. § 3302a made unmistakably clear by reference to',
7732:'the original 1846 language quoted in section b.1.a of this chapter applies to any government employee, regardless of job description,',
7733:'to whom public funds are entrusted in connection with the performance of government business. see, e.g., b170012, feb. 3, 1972.',
7734:'examples of employees in this general custodial category include: a messenger sent to the bank to cash checks, b226695, may',
7735:'26, 1987; a department of energy special counsel with control over petroleum overcharge refunds, b200170, apr. 1, 1981; state department',
7736:'employees responsible for packaging and shipping funds to an overseas embassy, b193830, oct. 1, 1979; a special messenger delivering cash',
7737:'to another location, b188413, june 30, 1977; and an officer in charge of a laundry operation on an army base',
7738:'who had been advanced public funds to be held as a change fund, b155149, oct. 21, 1964. as with disbursing',
7739:'officers, there may be more than one accountable officer in a given case, and the concept of accountability is not',
7740:'limited to the person in whose name the account is officially held nor is it limited to the person or',
7741:'persons for whom relief is officially requested. for example, accounts in the regional offices of the u.s. customs service are',
7742:'typically held in the name of the regional commissioner. while the regional commissioner is therefore an accountable officer with respect',
7743:'to that account, subordinate employees who actually handle the funds are also accountable officers. b197324, mar. 7, 1980; b193673, may',
7744:'25, 1979. the same principle applies to the various service centers of the internal revenue service. e.g., 60 comp. gen.',
7745:'674 1981. as demonstrated by the customs and internal revenue service situations, as well as the many cases involving military',
7746:'finance and accounting officers, a supervisory official will be an accountable officer if that official has actual custody of public',
7747:'funds, or if the account is held in the official’s name, regardless of who has physical custody. b271017, aug. 12,',
7748:'1996. absent these factors, however, a supervisor is not an accountable officer page 918 gao06382sp appropriations law—vol. ii chapter 9',
7749:'liability and relief of accountable officers and does not become one merely because he or she supervises one. e.g., b266245,',
7750:'oct. 24, 1996; 72 comp. gen. 49, 51–52 1992; b214286, july 20, 1984; b194782, aug. 13, 1979.15 in each case,',
7751:'it is necessary to examine the particular facts and circumstances to determine who had responsibility for or custody of the',
7752:'funds during the relevant stages of the occurrence or transaction. in b193830, oct. 1, 1979, money shipped from the state',
7753:'department to the american embassy in paraguay never reached its destination. while the funds were chargeable to the account of',
7754:'the class b cashier at the embassy, the state department employees responsible for packaging and shipping the funds were also',
7755:'accountable officers with respect to that transaction. in another case, a new class b cashier had been recommended at a',
7756:'peace corps office in western samoa, and had in fact been doing the job, but his official designation was not',
7757:'made until after the loss in question. since the new cashier, even though not yet formally designated, had possession of',
7758:'the funds at the time of the loss, he was an accountable officer. however, since the former cashier retained responsibility',
7759:'for the imprest fund until formally replaced, he too was an accountable officer. b188881, may 8, 1978. in sum, any',
7760:'government officer or employee who physically handles government funds, even if only occasionally, is accountable for those funds while in',
7761:'his or her custody. it may be impossible, in rare cases, to specify exactly who the proper accountable officer is.',
7762:'for example, the drug enforcement administration used a flash roll of 650 $100 bills and discovered that 15 bills had',
7763:'been replaced by counterfeits scattered throughout the roll. the “roll” was actually a number of stacks. the roll had been',
7764:'used in a number of investigations and in each instance, the transactions transfers from cashier to investigators, returns to cashier,',
7765:'transfers between different groups of investigators were recorded on receipts and the money was counted. while it was thus possible',
7766:'to determine precisely who had the roll on any given day, there was no way to determine when the substitution',
7767:'took place and hence to establish to whom the loss should be attributed. b191891, june 16, 1980. see also b288284.2,',
7768:'mar. 7, 2003 “the lack of a 15 note that, in light of b280764, may 4, 2000, discussed previously, 72',
7769:'comp. gen. 49 and b266245 are no longer controlling to the extent they suggest that an agency can impose liability',
7770:'on supervisors solely by regulation, without specific statutory authority. page 919 gao06382sp appropriations law—vol. ii chapter 9 liability and relief',
7771:'of accountable officers paper trail makes assignment of responsibility for the improper payment impossible. in situations like this, where there',
7772:'is no basis for attributing a loss or improper payment to one particular individual, we have determined that no one',
7773:'can be held liable.”; b235368, apr. 19, 1991 “[f]ailure to follow . . . procedures for transferring the fund to',
7774:'the alternate cashier makes assignment of responsibility for the loss impossible; there is no audit trail permitting placement of accountability,',
7775:'and no individual had exclusive control over the fund.”. 3. funds to which accountability attaches when we talk about the',
7776:'liability of accountable officers, we deliberately use the broad term “public funds.” as a general proposition, for purposes of accountability,',
7777:'“public funds” consist of three categories: appropriated funds, funds received by the government from nongovernmental sources, and funds held in',
7778:'trust. it is important to emphasize that when we refer to certain funds as “nonaccountable” in the course of this',
7779:'discussion, all we mean is that the funds are not subject to the laws governing the liability and relief of',
7780:'accountable officers. liability for losses may still attach on some other basis. a. appropriated funds appropriated funds are accountable funds.',
7781:'the funds may be in the treasury, which is where most appropriated funds remain pending disbursement, or they may be',
7782:'in the form of cash advanced to a government officer or employee for some authorized purpose. 1 imprest funds as',
7783:'noted previously, the definitions of the various types of cashier refer primarily to the use of “imprest funds.” an imprest',
7784:'fund is essentially a petty cash fund. more specifically, it is a fixedcash fund i.e., a fixed dollar amount advanced',
7785:'to a cashier for cash disbursements or other cash requirement purposes as specifically authorized. an imprest fund may be either',
7786:'a stationary fund, such as a changemaking fund, or a revolving fund. department of the treasury financial management service, manual',
7787:'of procedures and instructions for cashiers hereafter cashier’s manual, app. 1 april 2001, at 17 definition of “imprest fund”. page',
7788:'920 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers historically, imprest funds were commonly used for',
7789:'such things as small purchases, travel advances, and authorized emergency salary payments. on november 9, 1999, however, the treasury department’s',
7790:'financial management service issued a policy directive that required federal agencies to eliminate imprest funds by october 1, 2001, except',
7791:'for certain waived payments.16 according to the directive’s preamble, the main impetus for eliminating imprest funds was the strong preference',
7792:'for making payments by electronic funds transfer eft. specifically, the national performance review had issued a report recommending the elimination',
7793:'of imprest funds in favor of using eft transactions.17 furthermore, the debt collection improvement act of 1996 generally mandated the',
7794:'use of eft payments as of january 1, 1999, subject to waiver by the secretary of the treasury under certain',
7795:'circumstances.18 under the treasury policy directive, two conditions must be met in order for imprest funds to be used after',
7796:'october 1, 2001. first, the use of funds must qualify for waiver of the statutory prohibition against noneft payments under',
7797:'standards prescribed in 31 c.f.r. § 208.4. second, the payment must meet additional standards for waiver specified in the policy',
7798:'directive. given the waiver authorities, imprest funds have not been completely eliminated. thus, the discussion that follows retains some relevance.',
7799:'current guidance on the use of imprest funds is contained primarily in the cashier’s manual and in the federal acquisition',
7800:'regulation far, 48 c.f.r. §§ 13.3051–13.3054. agencies using imprest funds are required to issue their own implementing regulations as well.',
7801:'far, 48 c.f.r. § 13.3052c. except to the extent specified in an agency’s own regulations e.g., b220466 et al., dec.',
7802:'9, 1986, there are no special subject matter limitations on the kinds of services payable from imprest funds. 65 comp.',
7803:'gen. 806 1986; b242412, july 22, 1991. of course, like any other appropriated funds, imprest funds may not be used',
7804:'for a purpose that is not 16 this policy directive and its accompanying preamble can be found at www.fms.treas.gov/imprest/regulations.html last',
7805:'visited september 15, 2005. 17 national performance review, “from red tape to results: creating a government that works better and',
7806:'costs less,” the report on the elimination of imprest funds in the federal government through the use of electronic commerce,',
7807:'department of the treasury, financial management service january 1996. 18 31 u.s.c. § 3332f, added by the debt collection improvement',
7808:'act of 1996, pub. l. no. 104134, title iii, § 31001x1a, 110 stat. 1321, 1321376 apr. 26, 1996. page 921',
7809:'gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers authorized under the applicable appropriation. b243411, july 30,',
7810:'1991 imprest fund not available for purchase of electric shoe polisher. imprest funds of the revolving type are replenished to',
7811:'the fixed amount as spent or used. as replenishments are needed, replenishment vouchers are submitted through the certifying officer to',
7812:'the disbursing officer. replenishment vouchers must be supported by receipts or other evidence of the expenditures. at any given time,',
7813:'an imprest fund may consist of cash, uncashed government checks, and other documents such as unpaid reimbursement vouchers, sales slips,',
7814:'invoices, or other receipts for cash payments. an imprest fund cashier must at all times be able to account for',
7815:'the full amount of the fund. cashier’s manual, § iv at 8. for example, if a cash box containing a',
7816:'$1,000 imprest fund disappears, and at the time of disappearance the box contained $500 in cash and $500 in receipts',
7817:'for which reimbursement vouchers had not yet been issued, the loss to the government is the full $1,000 and the',
7818:'cashier is accountable for that full amount. a cashier’s failure to keep adequate records, thus making proper reconciliation impossible, is',
7819:'negligence. b189084, jan. 15, 1980. loss of a replenishment check before it reaches the cashier is not a situation requiring',
7820:'relief of the cashier. the proper procedure in such a situation is to report the loss to the disbursing office',
7821:'that issued the check to obtain a replacement. b203025, oct. 30, 1981. if it is in the government’s interests, a',
7822:'checking account may be set up in a private bank for imprest fund disbursements as long as adequate control procedures',
7823:'are developed. b117566, apr. 29, 1959. use of depositary accounts must be approved by the agency head or designee and',
7824:'is authorized only for cash withdrawal transactions. cashier’s manual, § iv at 10–11. the account may be interestbearing, in which',
7825:'event any interest earned must be deposited in the treasury as miscellaneous receipts. id. at 11. the method of imprest',
7826:'fund accountability changed starting with fiscal year 1985. prior to that time, funds advanced to cashiers by treasury disbursing officers',
7827:'were not “charged” to the agency’s appropriations at the time of the advance but were carried on the disbursing officers’',
7828:'records of accountability. the cashiers were regarded as agents of the disbursing officers. in fact, it was common to refer',
7829:'to cashiers as “agent cashiers.” e.g., a89775, mar. 21, 1945. charges were made to the applicable page 922 gao06382sp appropriations',
7830:'law—vol. ii chapter 9 liability and relief of accountable officers appropriation or fund accounts only when replenishment checks were issued.',
7831:'relief requests had to be submitted through the treasury’s chief disbursing officer. in 1983, the treasury department proposed removing imprest',
7832:'fund advances from the disbursing officers’ accountability inasmuch as the transactions were beyond the disbursing officers’ control. gao concurred. b212819o.m.,',
7833:'may 25, 1984. the current procedures are discussed in 70 comp. gen. 481 1991. in brief, the charge to the',
7834:'agency’s appropriation is now made at the time of the initial advance. however, since the advance does not qualify as',
7835:'an obligation under 31 u.s.c. § 1501, the charge must be in the form of a “commitment” or “reservation.” in',
7836:'general, the actual obligation occurs when the advance is used and the cashier seeks replenishment. the preliminary charge is necessary',
7837:'to protect against violating the antideficiency act. except for certain procedural matters relief requests are no longer processed through the',
7838:'applicable disbursing officer, the changes have no effect on the cashier’s liability as an accountable officer. an alternative approach to',
7839:'managing imprest funds is the “thirdparty draft” procedure described in i tfm § 43000 aug. 3, 2000. in brief, an',
7840:'agency may retain a contractor to provide the agency with payment instruments, not to exceed certain amounts, drawn on the',
7841:'contractor’s account. the face value of an individual thirdparty draft generally may not exceed $10,000, and thirdparty drafts for routine',
7842:'imprest payments are limited to $2,500. id. § 43020.10. the agency then uses these drafts for its imprest fund transactions',
7843:'and reimburses the contractor for properly payable drafts that the contractor has paid. since the funds being disbursed from the',
7844:'imprest fund under the thirdparty draft system are not government funds, personal liability does not attach to the cashier who',
7845:'issues the draft. id. § 43020; gao, policy and procedures manual for guidance of federal agencies, title 7, § 6.8.b',
7846:'washington, d.c.: may 18, 1993; b247563.4, dec. 11, 1996; b247563.3, apr. 5, 1996. however, this obviously does not mean that',
7847:'thirdparty drafts can or should be used to circumvent restrictions on the use of appropriated funds. 2 flash rolls law',
7848:'enforcement officers on undercover assignments frequently need a supply of cash to support their operations, for example, to purchase contraband',
7849:'or to use as a gambling stake. this money, often advanced page 923 gao06382sp appropriations law—vol. ii chapter 9 liability',
7850:'and relief of accountable officers from an imprest fund, is called a “flash roll.” by the very nature of the',
7851:'activities involved, flash roll money is at high risk to begin with. it is clear that a flash roll in',
7852:'the hands of a law enforcement agent retains its status as government funds. garcia v. united states, 469 u.s. 70',
7853:'1984 flash roll held to be money of the united states for purposes of 18 u.s.c. § 2114, which makes',
7854:'it a criminal offense to assault a custodian of government money. however, flash roll money will be accountable in some',
7855:'situations and nonaccountable in others, depending on the nature of the loss. if the loss is within the risk inherent',
7856:'in the operation, such as the suspect absconding with the money, it is not viewed as an “accountable officer” loss',
7857:'but may be handled internally by the agency. if the agency, under its internal investigation procedures, finds the agent with',
7858:'custody of the funds to have been negligent, it should hold the agent liable to the extent provided in its',
7859:'regulations. otherwise, it may simply record the loss as a necessary expense against the appropriation which financed the operation. if,',
7860:'on the other hand, the loss occurs in the course of the operation but is unrelated to carrying out its',
7861:'purpose, the accountable officer laws apply. the decision first recognizing this distinction is 61 comp. gen. 313 1982, applying it',
7862:'in the context of drug enforcement administration undercover operations.19 the fact pattern in the garcia case illustrates the nonaccountable situation.',
7863:'a secret service agent had been given a flash roll to buy counterfeit currency from suspects in miami. the agent',
7864:'met the suspects in a park. one of the suspects pulled a semiautomatic pistol and demanded the money. other secret',
7865:'service agents rushed to the scene and apprehended the suspects, one of whom was trying to run off with the',
7866:'money. of course there was no loss since the money was recovered. if the second suspect had gotten away with',
7867:'the money, however, the loss could have been treated as an expense of the operation, without the need to seek',
7868:'relief for anyone. gao decisions finding flash roll losses “nonaccountable” under the standards of 61 comp. gen. 313 are b238222,',
7869:'feb. 21, 1990 suspect stole flash roll during drug arrest; b232253, aug. 12, 1988 informant stole money provided to rent',
7870:'undercover apartment; and b205426, sept. 16, 1982 federal agent robbed at gunpoint while trying to purchase illegal firearms. 19 prior',
7871:'decisions, such as b192010, aug. 14, 1978, which had treated all flash roll losses as accountable officer losses, were modified',
7872:'accordingly. 61 comp. gen. at 316. page 924 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers',
7873:'an example of a case which remains subject to the accountable officer laws is b218858, july 24, 1985. a federal',
7874:'agent, posing as a narcotics trafficker, stopped at a telephone booth to make a call. two women approached the booth,',
7875:'which did not have a door. one diverted the agent’s attention while the other picked his pocket. the loss, while',
7876:'certainly incident to the undercover operation, was unrelated to its central purpose. relief was granted. other cases are: agent set',
7877:'shoulder bag containing flash money on airport counter and left it unattended for several minutes while making ticket arrangements; relief',
7878:'denied. 64 comp. gen. 140 1984. briefcase containing funds stolen when agent set it down in coffee shop for 15–20',
7879:'seconds to remove jacket; relief granted. b210507, apr. 4, 1983. agent left funds in glove compartment while making phone call',
7880:'in high crime area; agent found negligent. b220492, dec. 10, 1985. as 64 comp. gen. 140 and b210507 point out,',
7881:'losses which occur while flash money is being transported to the location where it is intended to be used are',
7882:'at best incidental to the operation and are thus governed by the accountable officer laws. the conspicuous display of a',
7883:'flash roll is not in and of itself negligence where necessary to the agent’s undercover role. b194919, nov. 26, 1980.',
7884:'3 travel advances travel advances are authorized by 5 u.s.c. § 5705. the statute expressly directs the recovery, from the',
7885:'traveler or from his or her estate, of advances not used for allowable travel expenses. like imprest funds, travel advances',
7886:'can still be used but their use is now the exception rather than the common practice. section 2 of the',
7887:'travel and transportation reform act of 1998, pub. l. no. 105264, 112 stat. 2350 oct. 19, 1998, 5 u.s.c. §',
7888:'5701 note, generally mandates the use of government contractorissued travel charge cards for payment of official government travel. under the',
7889:'general services administration regulations implementing this statute, travel advances are authorized only if an exemption from use of a travel',
7890:'charge card has been granted. 41 c.f.r. §§ 30151.1, 30151.5. page 925 gao06382sp appropriations law—vol. ii chapter 9 liability and',
7891:'relief of accountable officers a travel advance is “based upon the employee’s prospective entitlement to reimbursement” b178595, june 27, 1973',
7892:'and is essentially for the convenience of the traveler. travel advances in the hands of the traveler are regarded as',
7893:'nonaccountable and hence not governed by the accountable officer laws. rather, they are treated as loans for the personal benefit',
7894:'of the traveler. as such, if the funds are lost or stolen while in the traveler’s custody, regardless of the',
7895:'presence or absence of fault attributable to the traveler, the funds must be recovered as provided by 5 u.s.c. §',
7896:'5705, and the accountable officer relief statutes do not apply. 54 comp. gen. 190 1974; b206245, apr. 26, 1982; b183489,',
7897:'june 30, 1975; b254089, sept. 10, 1993 nondecision letter. the same principle applies to traveler’s checks. 64 comp. gen. 456,',
7898:'460 1985. in many cases, a messenger or some other clerical employee picks up the funds for the traveler. if',
7899:'the funds are lost or stolen while in the intermediary’s custody, and use of the intermediary was the traveler’s choice,',
7900:'the intermediary is the agent of the traveler and the traveler, having constructively received the funds, remains liable. b204387, feb.',
7901:'24, 1982; b200867, mar. 30, 1981. however, if use of the intermediary is required by agency or local policy, then',
7902:'the intermediary is the agent of the government and the traveler is not liable. 67 comp. gen. 402 1988. even',
7903:'though the accountable officer relief statutes do not apply, it may be possible to effectively “relieve” the nonnegligent traveler by',
7904:'considering a claim under the military personnel and civilian employees’ claims act of 1964, 31 u.s.c. § 3721, to the',
7905:'extent permissible under the agency’s implementing regulations. b208639, oct. 5, 1982; b197927, sept. 12, 1980. travel advances returned to government',
7906:'custody for reasons such as postponement of the travel regain their status as accountable funds, and an employee receiving custody',
7907:'of these funds is governed by the laws relating to the liability and relief of accountable officers. b200404, feb. 12,',
7908:'1981; b170012, mar. 14, 1972; b170012, may 3, 1971. also, where an advance greatly exceeds the employee’s legitimate travel expense',
7909:'needs and it is clear that the excess is intended to be used for operational purposes, the excess over reasonable',
7910:'needs may be treated as accountable funds and not part of the “loan.” b196804, july 1, 1980. b. receipts in',
7911:'our definitions of governmental receipts and offsetting collections in chapter 2, we noted that the government receives funds from nongovernment',
7912:'sources a from the exercise of its sovereign powers e.g., tax collections, customs duties, court fines, and b from a',
7913:'variety of page 926 gao06382sp appropriations law—vol. ii c. funds held in trust chapter 9 liability and relief of accountable',
7914:'officers businesstype activities e.g., sale of publications. these collections, whether they are to be deposited in the treasury as miscellaneous',
7915:'receipts or credited to some agency appropriation or fund, are accountable funds from the moment of receipt. some examples are:',
7916:'b288163, june 4, 2002, and 64 comp. gen. 535 1985 both cases involved registry funds and fees paid to bankruptcy',
7917:'court; 60 comp. gen. 674 1981 tax collections; b200170, apr. 1, 1981 petroleum overcharge refunds; and b194782, aug. 25, 1980',
7918:'recreational fee collections. when the government holds private funds in a trust capacity, it is obligated, by virtue of its',
7919:'fiduciary duty, to pay over those funds to the rightful owners at the proper time. thus, although the funds are',
7920:'not appropriated funds, they are nevertheless accountable funds. the principle has been stated as follows: “[t]he same relationship between an',
7921:'accountable officer and the united states is required with respect to trust funds of a private character obtained and held',
7922:'for some particular purpose sanctioned by law as is required with respect to public funds.” 6 comp. gen. 515, 517',
7923:'1927. see also woog v. united states, 48 ct. cl. 80 1913. a common example is the department of veterans',
7924:'affairs va “personal funds of patients” pfop account. patients, upon admission to a va hospital, may deposit personal funds in',
7925:'this account for safekeeping and use as needed. upon release, the balance is returned to the patient. patient funds in',
7926:'the pfop account have been consistently treated as accountable funds. 68 comp. gen. 600 1989; 68 comp. gen. 371 1989;',
7927:'b226911, oct. 19, 1987; b221447, apr. 2, 1986; b215477, nov. 5, 1984; b208888, sept. 28, 1984. another example is private',
7928:'funds of litigants deposited in a registry account of a court of the united states, to be held pending distribution',
7929:'by order of the court in accordance with 28 u.s.c. §§ 2041 and 2042. these are also accountable funds under',
7930:'the trust capacity concept. b288163, june 4, 2002; 64 comp. gen. 535 1985; 6 comp. gen. 515 1927; b200108, b198558,',
7931:'jan. 23, 1981. see also osborn v. united states, 91 u.s. 474 1875 court can summarily compel restitution of funds',
7932:'improperly withdrawn from registry account by former officers. page 927 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of',
7933:'accountable officers d. items which are the equivalent of cash other situations applying the trust capacity concept are b288284.2, mar.',
7934:'7, 2003, and b288284, may 29, 2002 embassy employees’ funds held on their behalf in a suspense deposit abroad account',
7935:'administered by the state department; b238955, apr. 3, 1991 overseas consular service fund from which embassy consular officers authorize payment',
7936:'for funerals and other expenses; 67 comp. gen. 342 1988 indian trust accounts administered by bureau of indian affairs; 17',
7937:'comp. gen. 786 1938 united states naval academy laundry fund; b190205, nov. 14, 1977 foreign currencies accepted in connection with',
7938:'accommodation exchanges authorized by 31 u.s.c. § 3342; and a22805, nov. 30, 1929 funds taken from prisoners at the time',
7939:'of their confinement, to be held in their behalf. see also b239955, june 18, 1991 treasury department personnel are held',
7940:'accountable for loss of damaged currency held in treasury mailroom pending replacement; 69 comp. gen. 314 1990 bia may contract',
7941:'with private bank for ministerial aspects of trust fund disbursements, but government disbursing officer must retain responsibility for managerial and',
7942:'judgmental aspects. not all nongovernment funds in the custody of a government official are held in a trust capacity. for',
7943:'example, in b164419o.m., may 20, 1969, gao distinguished between funds of a foreign government held by the united states incident',
7944:'to a cooperative agreement trust capacity funds, and funds of a private contractor held by a government official for safekeeping',
7945:'as a favor to the contractor. the latter situation was a mere bailment for the benefit of the contractor, and',
7946:'the official was not an accountable officer with respect to those funds. the concepts of accountability and liability discussed in',
7947:'this chapter apply primarily to money. however, for reasons which should be apparent, accountability also attaches to certain noncash items',
7948:'which are negotiable by the bearer or are otherwise the equivalent of cash. examples are: food stamps. b221580, oct. 24,',
7949:'1986 nondecision letter. government transportation requests. b239387, apr. 24, 1991. military payment certificates. b127937o.m., aug. 2, 1956. receipts signed by',
7950:'employees acknowledging that they were advanced funds to make small purchases. b288014, may 17, 2002. page 928 gao06382sp appropriations law—vol.',
7951:'ii chapter 9 liability and relief of accountable officers traveler’s checks in the custody of an accountable officer. 64 comp.',
7952:'gen. 456 1985; b235147.2, aug. 14, 1991. treasury bonds with interest coupons attached. b190506, nov. 28, 1977, aff’d on reconsideration,',
7953:'b190506, dec. 20, 1979. in the reconsideration of b190506, dec. 20, 1979, it was contended that loss of the bonds',
7954:'did not really result in a loss to the government because neither the bonds nor the coupons had been cashed',
7955:'and a “stop notice” had been placed with the federal reserve bank. gao could not agree, however, since the bonds',
7956:'were bearer bonds and the stop notice does not completely extinguish the government’s liability to pay on them. the treasury',
7957:'department no longer issues coupon bonds, although many older ones are still outstanding. 4. what kinds of events produce liability?',
7958:'the generic term for losses which trigger an accountable officer’s liability is “fiscal irregularity.” see gao, policy and procedures manual',
7959:'for guidance of federal agencies, title 7, § 8.2 washington, d.c.: may 18, 1993. fiscal irregularities are divided into two',
7960:'broad categories: 1physical loss or deficiency, and 2 illegal or improper payment. since, as we will see, the relief statutes',
7961:'are expressly tied to these categories, the proper classification of a fiscal irregularity is the essential first step in determining',
7962:'which statute to apply. a working definition of “physical loss or deficiency” may be found in b202074, july 21, 1983:',
7963:'“in sum, ‘physical loss or deficiency’ includes such things as loss by theft or burglary, loss in shipment, and loss',
7964:'or destruction by fire, accident, or natural disaster. it also includes the totally unexplained loss, that is, a shortage or',
7965:'deficiency with absolutely no evidence to explain the disappearance. . . . finally, . . . losses resulting from fraud',
7966:'or embezzlement by subordinate finance personnel may . . . be treated as physical losses.” this definition has been repeated',
7967:'in several subsequent decisions such as 70 comp. gen. 616, 621 1991 and 65 comp. gen. 881, 883 1986. a',
7968:'loss resulting from a bank failure would also be treated as a physical loss. see 18 comp. gen. 639 1939.',
7969:'page 929 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers the second type of fiscal irregularity',
7970:'is the “illegal, improper, or incorrect payment.” 31 u.s.c. §§ 3527c, 3528a4. the key word here is “payment”—“the disbursement of',
7971:'public funds by a disbursing officer or his subordinate.” b202074, july 21, 1983. improper payments include such things as payments',
7972:'obtained by fraud, whether by nongovernment persons or by government employees other than subordinate finance personnel; erroneous payments or overpayments',
7973:'resulting from human or mechanical error attributable to the government; payments prohibited by statute; and disbursements for unauthorized purposes. the',
7974:'legislative history of 31 u.s.c. § 3527c, the improper payment relief statute for disbursing officers, describes an improper payment as',
7975:'a payment “which the comptroller general finds is not in strict technical conformity” with the law. excerpts from the pertinent',
7976:'committee reports are quoted in 49 comp. gen. 38, 40 1969 and in b202074, cited above. a loss resulting from',
7977:'an uncollectible personal check may be an improper payment or a physical loss, depending on the circumstances. if the loss',
7978:'results from an authorized checkcashing transaction, it is an improper payment because government funds were disbursed to the bearer. 70',
7979:'comp. gen. 616 1991. however, if the check is tendered to pay an obligation owed to the united states or',
7980:'to purchase something from the government, the loss, to the extent an accountable loss exists, would be a physical loss.',
7981:'in this connection, treasury regulations provide: “government officers accept checks received subject to collection. if a check cannot be collected',
7982:'in full or is lost or destroyed before collection, the agency making the deposit must obtain the proper payment. payment',
7983:'by check is not effective until the full proceeds are received.” i tfm § 52010 oct. 4, 2001. if a',
7984:'personal check is accepted subject to collection, and if the government does not exchange value for the check, any resulting',
7985:'loss is not a loss within the scope of the accountable officer laws and may be adjusted administratively by the',
7986:'agency. if, however, an accountable officer purports to accept a personal check in satisfaction of an obligation due the united',
7987:'states rather than for collection only, or if the government parts with something of value in exchange for the check',
7988:'e.g., sale of government property, a resulting loss is treated as a physical loss. b201673 et al., sept. 23, 1982.',
7989:'see also 3 comp. gen. 403 1924; a44019, mar. 15, 1934; a24693, oct. 30, 1929. the distinction is summarized in',
7990:'the following passage from b201673: page 930 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers “if',
7991:'a check tendered in payment of a fine, duty, or penalty becomes uncollectible, it may be argued that the government',
7992:'incurs a loss in the sense that it does not have money to which it was legally entitled, but it',
7993:'has not lost anything that it already had. when the check is in exchange for property, the government has lost',
7994:'the property, the value of which is measured by the agreedupon sales price. of course, recovery of the property will',
7995:'remove or mitigate the loss.” the concept of b201673 has also been applied to a check seized as forfeiture under',
7996:'31 u.s.c. §§ 5316 and 5317b, and subsequently returned as uncollectible. b208398, sept. 29, 1983. a conceptually similar case is',
7997:'b216279, oct. 9, 1984. a teller at a customs service auction gave a receipt to a customer and negligently failed',
7998:'to collect the tendered funds. it was suggested that there was no loss because the teller never had physical possession',
7999:'of the funds. however, the applicable relief statute 31 u.s.c. § 3527 uses the terms “physical loss or deficiency” in',
8000:'the disjunctive, and there was clearly a deficiency in the teller’s account to the extent of the property turned over',
8001:'in exchange for the lost payment. while every fiscal irregularity by definition involves a loss or deficiency for which someone',
8002:'is accountable, not every loss or deficiency is a fiscal irregularity which triggers accountability. for example, an accountable officer is',
8003:'not liable for interest lost on collections which should have been deposited promptly but were not. 64 comp. gen. 303',
8004:'1985 failure to deposit collections in designated depositary; b190290, nov. 28, 1977 increased interest charges on funds borrowed from treasury,',
8005:'no net loss to united states. also, losses resulting from the imperfect exercise of judgment in routine business operations, where',
8006:'no law has been violated, do not create accountable officer liability. 65 comp. gen. 881 1986 loss to internal revenue',
8007:'service tax lien revolving fund caused by sale of property for substantially less than amount for which it had been',
8008:'redeemed. 5. amount of liability as a general proposition, the amount for which an accountable officer is liable is easy',
8009:'to determine: it is the amount of the physical loss or improper payment, reduced by any amounts recovered from the',
8010:'recipient thief, page 931 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers improper payee, etc.. e.g.,',
8011:'65 comp. gen. 858 1986; b194727, oct. 30, 1979. there is an exception, discussed in 65 comp. gen. at 863–64,',
8012:'in which amounts recovered from the recipient should not be used to reduce the amount of the accountable officer’s liability.',
8013:'a loss may result from a series of transactions spanning several years, each transaction giving rise to a separate debt.',
8014:'by the time the loss is discovered, recovery from the accountable officer may be partially barred by the 3year statute',
8015:'of limitations found in 31 u.s.c. § 3526c. this, however, does not affect the indebtedness of the recipient which, in',
8016:'this situation, will exceed the liability of the accountable officer. under the federal claims collection standards,20 a debtor owing multiple',
8017:'debts may specify the allocation of a voluntary partial payment. if the recipient/debtor fails to so specify, or if payment',
8018:'is involuntary, the collecting agency may allocate the money among the various debts in accordance with the best interests of',
8019:'the united states. 31 c.f.r. § 901.3c4. generally, “the best interests of the united states are clearly served by applying',
8020:'payments made by the recipients to the class of debt for which only the recipients are liable” 65 comp. gen.',
8021:'at 864, that is, those for which recovery from the accountable officer is timebarred. thus, in this type of situation,',
8022:'partial recoveries from the recipient should first be applied to the timebarred debt of the accountable officer until any such',
8023:'amounts have been recouped, and only thereafter used to reduce the accountable officer’s remaining liability. a judgment obtained against some',
8024:'third party improper payee, thief, etc. is only “potential unrealized value” and does not reduce the accountable officer’s liability until',
8025:'it is actually collected. b147747, dec. 28, 1961; b194727, oct. 30, 1979 nondecision letter. the liability of an accountable officer',
8026:'does not include interest and penalties assessed against the recipient. 64 comp. gen. 303 1985; b235037, sept. 18, 1989. the',
8027:'liability of an accountable officer resulting from the payment of fraudulent travel claims is the amount of the fraudulent payment',
8028:'and does not include nonfraudulent amounts paid for the same days. 70 comp. gen. 463 1991. previously gao had included',
8029:'both, under the socalled 20 current federal claims collection standards, issued jointly by the departments of justice and treasury, are',
8030:'in 31 c.f.r. parts 900–904 2005. page 932 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers',
8031:'“tainted day” rule.21 the 1991 decision distinguishes fraudulent payees from fraudulent claimants, concluding that the tainted day rule does not',
8032:'apply to paid claims. that decision was modified in 72 comp. gen. 154 1993 to make clear that rejected use',
8033:'of the tainted day rule was to be applied prospectively only from the date of the prior decision, may 6,',
8034:'1991. when determining the amount of a loss for which an accountable officer is to be held liable, the government',
8035:'does not “net” overages against shortages. in gao’s view, such “netting” would weaken internal controls over the accounting for cash',
8036:'balances. b212370, nov. 15, 1983; b199447, mar. 17, 1981.22 as noted in b199447, overages must generally be deposited in the',
8037:'treasury as miscellaneous receipts. in almost all cases, the amount of an accountable officer’s liability is precisely determinable at the',
8038:'outset. it may be reduced by recoveries, but it will not increase. one exception is illustrated in b239387, apr. 24,',
8039:'1991, in which an agency held an employee accountable for a booklet of missing or stolen government transportation requests. because',
8040:'the amount of the government’s loss could not be known until the gtrs were actually used and the government forced',
8041:'to honor them, additional liability accrued as each gtr was used over time. 6. effect of criminal prosecution as we',
8042:'noted previously, the body of law governing the liability and relief of accountable officers is designed not only to induce',
8043:'proper care but also to protect against dishonesty by the officers themselves. this section summarizes the relationship between criminal prosecution',
8044:'and civil liability. a. acquittal acquittal in a criminal proceeding does not extinguish civil liability and does not bar subsequent',
8045:'civil actions to enforce that liability as long as they are remedial rather than punitive. helvering v. mitchell, 303 u.s.',
8046:'391 21 under the tainted day rule, a fraudulent claim for reimbursement for any part of a single day’s subsistence',
8047:'expenses “taints” the entire day’s claim with fraud and thus precludes reimbursement for nonfraudulent items as well. 70 comp. gen.',
8048:'at 465. this rule carries a punitive element that is appropriate for those who defraud the government but not for',
8049:'accountable officers who are victims of the fraud. see 72 comp. gen. 154, 156 1993. 22 a statutorily authorized instance',
8050:'of “netting” gains and deficiencies in an account is 31 u.s.c. § 3342c2 certain checkcashing and exchange transactions, discussed later',
8051:'in this chapter in section d.4. page 933 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers',
8052:'1938. the reason is the difference in burden of proof. acquittal means only that the government was unable to prove',
8053:'guilt beyond a reasonable doubt, a standard higher than that for civil liability. “that acquittal on a criminal charge is',
8054:'not a bar to a civil action by the government, remedial in its nature, arising out of the same facts',
8055:'on which the criminal proceeding was based has long been settled.” id. at 397. see also b239134, apr. 22, 1991',
8056:'nondecision letter conviction on only a portion of the loss. the rules are the same for acquittal or reversal of',
8057:'a conviction by a military courtmartial. b235048, apr. 4, 1991. see also serrano v. united states, 612 f.2d 525 ct.',
8058:'cl. 1979 acquittal held not to bar agency from imposing civil liability and withholding pay of accountable officer. it follows',
8059:'that an accountable officer’s civil liability will be unaffected by the fact that a grand jury has refused to return',
8060:'an indictment. b186922, apr. 8, 1977. b. order of restitution a court may order a defendant to make monetary restitution',
8061:'to the victim, either as part of the sentence 18 u.s.c. § 3556 or as a condition of probation 18',
8062:'u.s.c. § 3563b2. in either case, the relevant terms and procedures are governed by 18 u.s.c. §§ 3663 and 3664.',
8063:'restitution may be ordered in a lump sum or in installments. 18 u.s.c. § 3664f3. these are general criminal statutes',
8064:'and would apply fully where the defendant is an accountable officer and the united states is the victim as well',
8065:'as the prosecutor. the statutory scheme clearly recognizes the possibility of subsequent civil proceedings by the united states as victim',
8066:'against the accountable officer. any amounts paid to a victim under a restitution order must be set off against amounts',
8067:'recovered in a subsequent civil action. 18 u.s.c. § 3664j2. in such an action, the previously convicted defendant cannot deny',
8068:'the “essential allegations” of the offense. 18 u.s.c. § 3664k1. where restitution is ordered in full, payable in installments, it',
8069:'has been held that the victim may nevertheless obtain a civil judgment for the unpaid balance, even though there has',
8070:'been no default in the installment payments. teachers insurance and annuity association v. green, 636 f. supp. 415 s.d.n.y. 1986.',
8071:'“future payments that do not fully compensate a victim in present value terms cannot be a bar to a civil',
8072:'judgment.” id. at 418. see also b128437o.m., aug. 3, 1956. page 934 gao06382sp appropriations law—vol. ii chapter 9 liability and',
8073:'relief of accountable officers where restitution is ordered in an amount less than the full amount of the loss, civil',
8074:'liability for the balance would remain, subject to the statutory setoff requirement. see 64 comp. gen. 303 1985, reaching this',
8075:'result under a prior version of the legislation. the decision further suggests that, if the record indicates that the court',
8076:'thought it was ordering restitution in full, it might be desirable to seek amendment of the restitution order. obviously, the',
8077:'fact of conviction precludes any consideration of administrative relief. id. at 304. the preceding paragraphs are presented from the perspective',
8078:'of restitution by the accountable officer. similar principles would apply with respect to restitution by a responsible party other than',
8079:'the accountable officer. see, e.g., b193673, may 25, 1979, modified on other grounds by b201673 et al., sept. 23, 1982',
8080:'partial restitution by thief reduces amount of accountable officer’s liability. see also b270863, june 17, 1996. for example, where the',
8081:'department of justice enters into a settlement with a culpable third party compromising a claim of the government, the liability',
8082:'of the accountable officer is terminated for any amounts of the claim in excess of the settlement. see b235048, apr.',
8083:'4, 1991. c. physical loss or deficiency 1. statutory provisions the two principal statutes authorizing administrative relief from liability for',
8084:'the physical loss or deficiency of public funds are 31 u.s.c. §§ 3527a and 3527b. subsection a applies to the',
8085:'civilian agencies and subsection b applies to accountable officers of the armed forces. a. civilian agencies the physical loss or',
8086:'deficiency relief statute applicable to accountable officers generally, 31 u.s.c. § 3527a, was originally enacted in 1947. pub. l. no.',
8087:'321, ch. 441, 61 stat. 720 aug. 1, 1947. its justification, similar to that for all relief statutes, was summarized',
8088:'by the senate committee on expenditures in the executive departments as follows: “the justification . . . is that, at',
8089:'the present time, relief of the kind with which this bill is concerned is required to be granted either through',
8090:'passage of a special relief bill by the congress or by the filing of suit by the responsible person in',
8091:'page 935 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers the united states court of claims,',
8092:'the latter to be done at the personal expense of the responsible person. both methods are costly and time consuming.”',
8093:'s. rep. no. 80379, at 1 1947. before the actual relief mechanism is triggered, two threshold conditions must be satisfied.',
8094:'first, the loss must be a physical loss or deficiency and not an improper payment. 31 u.s.c. § 3527a2. second,',
8095:'the person for whom relief is desired must be an “accountable officer.”23 the legislative history confirms that this includes the',
8096:'general custodial category: “there are many agents of the government who do not disburse but who, nevertheless, are fully responsible',
8097:'for funds . . . entrusted to their charge and, for that reason, the committee bill has been broadened to',
8098:'include that class of personnel.” s. rep. no. 80379, at 2. once it has been determined that there has been',
8099:'a physical loss or deficiency of “public money, vouchers, checks, securities, or records” for which an accountable officer is liable,',
8100:'the statute authorizes the comptroller general to grant relief from that liability if the head of the agency involved makes',
8101:'two administrative determinations 31 u.s.c. § 3527a1, and if the comptroller general agrees with those determinations 31 u.s.c. § 3527a3.',
8102:'e.g., b288014, may 17, 2002. first, the agency head must determine that the accountable officer was carrying out official duties',
8103:'at the time of the loss, or that the loss was attributable to the act or omission of a subordinate',
8104:'of the accountable officer. b241820, jan. 2, 1991. note that this is stated in the disjunctive. the second part, loss',
8105:'attributable to a subordinate, is designed to cover the situation, found in several agencies such as the internal revenue service',
8106:'and the customs service, in which the account is in the name of a supervisory official who does not actually',
8107:'handle the funds. in this 23 this statute will not apply to certifying officers since they do not have actual',
8108:'custody of funds. however, a certifying officer could conceivably have other duties or supervisory responsibilities and thus be accountable, and',
8109:'eligible for relief under 31 u.s.c. § 3527a, in that capacity. page 936 gao06382sp appropriations law—vol. ii chapter 9 liability',
8110:'and relief of accountable officers situation, both persons are accountable, and relief of one does not necessarily mean relief of',
8111:'the other. see b270863, june 17, 1996; b265853, jan. 23, 1996. second, the agency head must determine that the loss',
8112:'was not attributable to fault or negligence on the part of the accountable officer. this determination is necessary regardless of',
8113:'which part of the first determination applies. thus, while lack of fault does not affect the automatic imposition of liability,',
8114:'it does provide the basis for relief. see, e.g., b288166, mar. 11, 2003; b258357, jan. 3, 1996. generally, the requirement',
8115:'that the accountable officer must have been acting in the discharge of official duties does not present problems. thus, in',
8116:'the typical case, the central question becomes whether gao is able to concur with the administrative determination that the loss',
8117:'occurred without fault or negligence on the part of the accountable officer. in reviewing relief cases over the years, gao',
8118:'has developed a number of standards, the application of which to a given case requires a careful analysis of the',
8119:'particular facts. many factors may bear on the conclusion in any given case, and the result will be determined by',
8120:'the interrelationship of these factors. section 3527a applies to accountable officers of “an agency,” defined in 31 u.s.c. § 101',
8121:'as any “department, agency, or instrumentality of the united states government.” thus, section 3527a has been construed as applicable to',
8122:'the judicial branch b200108, b198558, jan. 23, 1981; b197021, may 9, 1980; b191440, may 25, 1979; b185486, feb. 5, 1976,',
8123:'and to agencies of the legislative branch b192503o.m., jan. 8, 1979, denying relief to a gao employee. gao has not',
8124:'specifically considered whether it applies to the senate or house of representatives. section 3527a has also been construed as applicable',
8125:'to those government corporations which are subject to gao’s accounts settlement authority. b88578, aug. 21, 1951; b88578o.m., aug. 21, 1951.',
8126:'page 937 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers b. military disbursing officers the need',
8127:'for physical loss relief authority for military disbursing officers became highlighted during world war i when several ships were sunk',
8128:'with funds and records on board. the first permanent administrative relief statute was enacted in 1919 and applied only to',
8129:'the navy.24 the army received similar statutory authority in 1944.25 the two were combined in 1955 and expanded to cover',
8130:'all of the military departments.26 the legislation was later codified at 31 u.s.c. § 3527b. the origins of the 1919',
8131:'law are described in 7 comp. gen. 374, 377–78 1927; the statutory evolution is detailed in b202074, july 21, 1983.',
8132:'the statute applies to both civilian and military personnel of the various military departments. b151156, dec. 30, 1963. as discussed',
8133:'later, section 3527b was further amended in 1996 to expand the coverage of the section to all military accountable officials',
8134:'and to include erroneous payments. however, since the requirements and procedures regarding physical loss or deficiency were not altered, we',
8135:'retain the discussion of the earlier version of section 3527b to give context to our decisions predating the 1996 amendments.',
8136:'as with section 3527a, two threshold conditions had to be satisfied before the relief mechanism came into play. first, like',
8137:'section 3527a, the pre1996 section 3527b applied only to physical losses or deficiencies and not to improper payments. 31 u.s.c.',
8138:'§ 3527b1b; 7 comp. gen. 374 1927; 2 comp. gen. 277 1922; b202074, july 21, 1983. the statute was intended',
8139:'to authorize relief in appropriate cases for losses “such as losses by fire, ship sinkings, thefts or physical losses resulting',
8140:'from enemy action or otherwise.” b75978, june 1, 1948. thus, a loss in shipment was cognizable under section 3527b. b200437,',
8141:'oct. 21, 1980. however, the making of a travel advance to an employee who terminated his employment without accounting for',
8142:'the advance was not a physical loss but rather “a payment voluntarily made by the disbursing officer in the course',
8143:'of his duties.” b75978, june 1, 1948. second—and here the two statutes differ—section 3527b applied only to disbursing officers and',
8144:'not to nondisbursing accountable officers. b194782, aug. 13, 1979; b194780, aug. 8, 1979; b151156, dec. 30, 1963; b144467, dec. 19,',
8145:'1960 “while all disbursing officers are accountable 24 pub. l. no. 8, ch. 9, 41 stat. 131, 132 july 11,',
8146:'1919. 25 pub. l. no. 476, ch. 552, 58 stat. 800 dec. 13, 1944. 26 pub. l. no. 365, ch.',
8147:'803, 69 stat. 687 aug. 11, 1955. page 938 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable',
8148:'officers officers, all accountable officers are not disbursing officers”. as each of the cited cases points out, physical loss relief',
8149:'for nondisbursing accountable officers of the military departments had to be sought under 31 u.s.c. § 3527a. section 3527b was',
8150:'also similar to section 3527a in that, once it had been determined that a loss is properly cognizable under the',
8151:'statute, the applicable agency head must determine that 1 the disbursing officer was carrying out official duties at the time',
8152:'of the loss or deficiency prior versions of the statute, and hence many gao decisions, use the military term “line',
8153:'of duty status”, and 2 the loss occurred without fault or negligence on the part of the disbursing officer. the',
8154:'first determination, 31 u.s.c. § 3527b1a, did not expressly include the “loss attributable to subordinate” clause found in section 3527a.',
8155:'however, it was applied in the same manner. see b155149, oct. 21, 1964; b151156, dec. 30, 1963. the administrative determinations',
8156:'under section 3527b2 were conclusive on gao. 31 u.s.c. § 3527b2. thus, once the determinations were made, the granting of',
8157:'relief was mandatory, and gao had no discretion in the matter. under section 3527a, agency determinations on the threshold issues—what',
8158:'is a physical loss and who is a disbursing officer—were not conclusive. b151156, dec. 30, 1963. as noted above and',
8159:'in sections b.2 and c.2.b of this chapter, the statutory scheme for military accountable officers was changed by section 913',
8160:'of public law no. 104106, div. a, title ix, subtitle b, 110 stat. 186, 410–12 feb. 10, 1996. section 913',
8161:'amended a number of provisions in titles 10, 31, and 37 of the united states code to authorize the designation',
8162:'and appointment of certifying and disbursing officials within the department of defense including military departments, defense agencies, and field activities',
8163:'to clearly delineate a separation of duties and accountabilities between personnel who authorize payments certifying officers and personnel who make',
8164:'payments disbursing officers. in doing so, section 913 also amended 31 u.s.c. § 3527b to apply to all accountable page',
8165:'939 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers officials of the armed forces, not just',
8166:'disbursing officers,27 and included a new section 3527b1b to provide relief for erroneous payments. 2. who can grant relief? a.',
8167:'31 u.s.c. § 3527a the statute confers the authority to grant relief on the comptroller general.28 at one time, every',
8168:'case, no matter how small the amount, involved an exchange of correspondence—a letter from the agency to gao requesting relief,',
8169:'and a letter from gao back to the agency granting or denying it. by 1969, after 20 years of experience',
8170:'under the statute, a set of standards had developed, and it became apparent that there was no need for gao',
8171:'to actually review every case. in that year, gao inaugurated the practice of setting a dollar amount, initially $150, below',
8172:'which gao delegated its authority to the agencies to apply the standards and to grant or deny relief accordingly without',
8173:'the need to obtain formal concurrence from gao. gao has raised the amount several times over the years and has',
8174:'used various formats to announce the increase.29 the current ceiling is $3,000. see b243749, oct. 22, 1991. the authorization applies',
8175:'to all physical losses or deficiencies; however, with a few exceptions to be noted later, it does 27 as discussed',
8176:'earlier in section b.2 of this chapter, the department of defense has been given the authority to hold other “departmental',
8177:'accountable officers,” besides certifying and disbursing officers, liable financially for illegal or erroneous payments resulting from their negligence. 10 u.s.c.',
8178:'§ 2773a. this would include employees whose duty it was to provide information, data, or services that are directly relied',
8179:'upon by a certifying official in the certification of vouchers for payment. 28 the department of justice has opined that',
8180:'the provisions of 31 u.s.c. §§ 3527 and 3528 are unconstitutional insofar as they authorize the comptroller general, an officer',
8181:'of the legislative branch, to relieve executive branch officials from liability. see, e.g., comptroller general’s authority to relieve disbursing and',
8182:'certifying officials from liability, 15 op. off. legal counsel 80 1991. we are aware of no judicial opinion addressing the',
8183:'constitutionality of 31 u.s.c. §§ 3527 and 3528. other than sections 3527 and 3528, there are no statutes granting federal',
8184:'administrative officers the authority to relieve accountable officers. 29 the $150 authorization was established by b161457, aug. 1, 1969 circular',
8185:'letter. it was raised to $500 in 1974. b161457, aug. 14, 1974 circular letter; 54 comp. gen. 112 1974. a',
8186:'1983 revision to title 7 of gao, policy and procedures manual for guidance of federal agencies hereafter referred to as',
8187:'gaoppm, § 8.9.c washington, d.c.: july 14, 1983 raised it to $750, and another revision on february 12, 1990, raised',
8188:'it to $1,000. the manual was last revised on may 18, 1993. page 940 gao06382sp appropriations law—vol. ii chapter 9',
8189:'liability and relief of accountable officers not extend to improper payments.30 61 comp. gen. 646 1982; 59 comp. gen. 113',
8190:'1979. as stated in 61 comp. gen. at 647: “for the most part, the law governing the physical loss or',
8191:'deficiency of government funds is clear, and most cases center around the determination of whether there was any contributing negligence',
8192:'on the part of the accountable officer. our numerous decisions in this area should provide adequate guidance to agencies in',
8193:'resolving most smaller losses.” the $3,000 limitation applies to “single incidents or the total of similar incidents which occur about',
8194:'the same time and involve the same accountable officer.” 7 gaoppm § 8.9.c. thus, two losses arising from the same',
8195:'theft, one under the limit and one over, should be combined for purposes of relief. b189795, sept. 23, 1977. in',
8196:'b193380, sept. 25, 1979, an imprest fund cashier discovered a $300 shortage while reconciling her cash and subvouchers. a few',
8197:'days later, her supervisor, upon returning from vacation, found an additional $500 missing. since the losses occurred under very similar',
8198:'circumstances, gao agreed with the agency that they should be treated together for purposes of seeking relief. another case, b187139,',
8199:'oct. 25, 1978, involved losses of $1,500, $60, and $50. since there was no indication that the losses were related,',
8200:'the agency was advised to separately resolve the $60 and $50 losses administratively. the ceiling was $500 at the time',
8201:'of b193380 and b187139. likewise, in b260862, june 6, 1995, gao granted relief to an imprest fund cashier from liability',
8202:'for the loss of $3,939 missing from a safe, apparently due to theft, but did not grant relief for an',
8203:'$820 shortage allegedly due to a bookkeeping error discovered the day prior to the theft. the $820 shortage was referred',
8204:'back to the agency for resolution since it was under the $3,000 limit. thus, in cases of physical loss or',
8205:'deficiency, it is necessary to request relief from gao only if the amount involved is $3,000 or more. for belowceiling',
8206:'losses, gao’s concurrence is, in effect, granted categorically provided the matter is properly cognizable under the statute, the agency makes',
8207:'the required determinations, and the administrative resolution is accomplished in accordance with the standards set forth in the gao decisions.',
8208:'e.g., b252809, apr. 7, 1993; b206817, feb. 10, 1983; b204740, nov. 25, 1981. 30 for example, losses resulting from mechanical',
8209:'or clerical errors during the check issuance process were included in the authorization. b245586, nov. 12, 1991. page 941 gao06382sp',
8210:'appropriations law—vol. ii chapter 9 liability and relief of accountable officers each agency should maintain a central control record of',
8211:'its belowceiling resolutions, should document the basis for its decisions, and should retain that documentation for subsequent internal or external',
8212:'audit or review. 7 gaoppm § 8.9.c. also, agencies should ensure the independence of the official or entity making the',
8213:'relief decisions. b243749, oct. 22, 1991. if an agency inadvertently submits a relief request to gao for a belowceiling loss,',
8214:'gao’s policy is simply to return the case with a brief explanation. e.g., b214086, feb. 2, 1984. gao will also',
8215:'provide any further guidance that may appear helpful. see, e.g., b249796, feb. 9, 1993. as a practical matter, gao’s authorization',
8216:'for belowceiling administrative resolution is relevant only where the agency believes relief should be granted. in these cases, the need',
8217:'for an exchange of correspondence is eliminated, and the relief process is quicker, more streamlined, and less costly. if the',
8218:'agency believes relief should not be granted, its refusal to support relief effectively ends the matter regardless of the amount.',
8219:'gao will not review an agency’s refusal to grant relief in a belowceiling case. b247581, june 4, 1992; 59 comp.',
8220:'gen. 113, 114 1979. b. 31 u.s.c. § 3527b like 31 u.s.c. § 3527a, section 3527b also specifies the comptroller',
8221:'general as the relieving authority. however, by virtue of the mandatory nature of section 3527b, the monetary ceiling concept used',
8222:'in civilian relief cases has much less relevance to military disbursing officer losses. by circular letter b198451, feb. 5, 1981,',
8223:'gao notified the military departments of a change in procedures under the pre1996 version of 31 u.s.c. § 3527b pertaining',
8224:'to relief for physical loss or deficiency of funds. since gao has no discretion with respect to the agency determinations',
8225:'and relief is mandatory as long as the determinations are made, there is no need for gao to review any',
8226:'of those determinations on a casebycase basis. thus, there is no need for the agency to submit a formal request',
8227:'for relief regardless of the amount involved. as long as the case is properly cognizable under 31 u.s.c. § 3527b',
8228:'i.e., it involves a disbursing officer and a physical loss or deficiency, it is sufficient for purposes of compliance with',
8229:'the statute for the agency to make the required determinations and to retain the documentation on file for audit purposes.',
8230:'see b303671, dec. 3, 2004. of course, should there be a question as to whether a particular case is properly',
8231:'cognizable under the statute, gao is available to provide guidance. page 942 gao06382sp appropriations law—vol. ii chapter 9 liability and',
8232:'relief of accountable officers c. role of administrative determinations as noted above and in sections b.2 and c.1.b of this',
8233:'chapter, the statutory scheme for military accountable officers was changed by section 913 of public law no. 104106, div. a,',
8234:'title ix, subtitle b, 110 stat. 186, 410–12 feb. 10, 1996. section 913 amended a number of provisions in titles',
8235:'10, 31, and 37 of the united states code to authorize the designation and appointment of certifying and disbursing officials',
8236:'within the department of defense including military departments, defense agencies, and field activities to clearly delineate a separation of duties',
8237:'and accountabilities between personnel who authorize payments certifying officers and personnel who make payments disbursing officers. in doing so, section',
8238:'913 also amended 31 u.s.c. § 3527b to apply to all accountable officials of the armed forces, not just disbursing',
8239:'officers,31 and included a new section 3527b1b to provide relief for erroneous payments made by military accountable officials. as in',
8240:'the case of a physical loss or deficiency, the finding of the secretary involved regarding whether the circumstances warrant relief',
8241:'is conclusive on the comptroller general. gao has not yet addressed relief of military accountable officials for erroneous payments under',
8242:'the revised section 3527b. both of the relief statutes described above require two essentially identical administrative determinations as prerequisites to',
8243:'granting relief. it is the making of those determinations that triggers the ability to grant relief. if the agency cannot',
8244:'in good faith make those determinations, the legal authority to grant administrative relief simply does not exist, regardless of the',
8245:'amount involved and regardless of who is actually granting relief in any given case. gao will not review an agency’s',
8246:'refusal to make the determinations under either statute, and has no authority to “direct” an agency to make them. in',
8247:'this sense, an agency’s refusal to make the required determinations is final. the best discussion of this point is found',
8248:'in 59 comp. gen. 113 1979 case arose under section 3527a but point applies equally to both statutes. while gao’s',
8249:'role under section 3527a is somewhat broader than under section 3527b, that role is still limited to concurring with determinations',
8250:'made by the agency. gao cannot make those determinations for the 31 as discussed earlier in section b.2 of this',
8251:'chapter, the department of defense has been given the authority to hold other “departmental accountable officers,” besides certifying and disbursing',
8252:'officers, liable financially for illegal or erroneous payments resulting from their negligence. 10 u.s.c. § 2773a. this would include employees',
8253:'whose duty it was to provide information, data, or services that are directly relied upon by a certifying official in',
8254:'the certification of vouchers for payment. page 943 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers',
8255:'agency. if they are absent, whatever the reason, relief cannot be granted regardless of the apparent merits of the case.',
8256:'there are numerous decisions to this effect. a few of them are b248804.2, july 5, 1994; b217209, dec. 11, 1984;',
8257:'b204464, jan. 19, 1982;32 and b197616, mar. 24, 1980. the determinations are as much required in belowceiling cases as they',
8258:'are in cases submitted to gao. 72 comp. gen. 49 1992; 59 comp. gen. 113 1979; b247581, june 4, 1992.',
8259:'on occasion gao has been willing to infer a determination that the loss occurred while the accountable officer was carrying',
8260:'out official duties where that determination was not expressly stated but the facts make it clear and there is no',
8261:'question that relief would be granted. e.g., b244723, oct. 29, 1991; b235180, may 11, 1989; b199020, aug. 18, 1980; b195435,',
8262:'sept. 12, 1979. however, the determination of no contributing fault or negligence will not be inferred but must be expressly',
8263:'stated. b241478, apr. 5, 1991. it is not sufficient to state that the investigative report did not produce affirmative evidence',
8264:'of fault or negligence. b167126, aug. 9, 1976. nor is it sufficient to state that there is “no evidence of',
8265:'willful misconduct.” b217724, mar. 25, 1985. see also 70 comp. gen. 389, 390 1991 “the mere administrative determination that there',
8266:'is no evidence of fault or negligence will not adequately rebut the presumption of negligence.”. as a practical matter, it',
8267:'will simplify the relief process if the agency’s request explicitly states all required determinations. it is best simply to follow',
8268:'the wording of the statute. agency determinations required by a relief statute must be made by an agency official authorized',
8269:'to do so. e.g., b184028, oct. 24, 1975. section 3527a requires determinations by the “head of the agency.” section 3527b',
8270:'specifies the “appropriate secretary.” of course in most cases the authority under either statute will be delegated. it has been',
8271:'held that, absent a clear expression of legislative intent to the contrary, the authority to make determinations under these statutes',
8272:'may be delegated only to officials authorized by law to act in place of the agency head, or to an',
8273:'assistant secretary. 29 comp. gen. 151 1949. many agency heads have separate statutory authority to delegate and redelegate, and this',
8274:'of course will be sufficient. see, e.g., 22 u.s.c. § 2651aa4 secretary of state. as far as gao is concerned,',
8275:'the form of the delegation is immaterial 32 in this case relief was later granted when the agency provided gao',
8276:'with the requisite determinations. b204464, may 12, 1983. page 944 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of',
8277:'accountable officers although it should, of course, be in writing. documentation of delegations need not be furnished to gao, nor',
8278:'need it be specified in relief requests, but should be available if requested. see gao, policy and procedures manual for',
8279:'guidance of federal agencies, title 7, § 8.9.b washington, d.c.: may 18, 1993. if, under agency procedures, the determinations are',
8280:'made in the first instance by someone other than the designated official e.g., a board of inquiry, the relief request',
8281:'must explicitly state the designated official’s concurrence. b207062, july 20, 1982. 3. standards for granting relief a. standard of negligence',
8282:'again, it is important to distinguish between liability and relief. the presence or absence of negligence has nothing to do',
8283:'with an accountable officer’s basic liability. the law is not that an accountable officer is liable for negligent losses. the',
8284:'officer is strictly liable for all losses, but may be relieved if found to be free from fault or negligence.',
8285:'it has frequently been stated that an accountable officer must exercise “the highest degree of care in the performance of',
8286:'his duty.” e.g., 48 comp. gen. 566, 567–68 1969; b186922, aug. 26, 1976. see also 72 comp. gen. 49, 53',
8287:'1992 “high standard of care”. statements of this type, however, have little practical use in applying the relief statutes. in',
8288:'evaluating the facts to determine whether or not an accountable officer was negligent, gao applies the standard of “reasonable care.”',
8289:'54 comp. gen. 112 1974; b196790, feb. 7, 1980. this is the standard of simple or ordinary negligence, not gross',
8290:'negligence. 54 comp. gen. at 115; b158699, sept. 6, 1968. the standard has been stated as what the reasonably prudent',
8291:'and careful person would have done to take care of his or her own property of like description under like',
8292:'circumstances. b288166, mar. 11, 2003 failure to record checks mailed for deposit “not a common practice for many reasonably prudent',
8293:'and careful people handling their own collections”; b257120, dec. 13, 1994 leaving cash under truck seat not “an action that',
8294:'a reasonably prudent and careful person would have taken”. this is an objective standard, that is, it does not vary',
8295:'with such factors as the age and experience of the particular accountable officer. see, e.g., 70 comp. gen. 389, 390',
8296:'1991. likewise, inadequate training or supervision does not affect the standard. b257120, dec. 13, 1994. page 945 gao06382sp appropriations law—vol.',
8297:'ii chapter 9 liability and relief of accountable officers b. presumption of negligence/burden of proof the doctrine of comparative negligence',
8298:'allocating the loss based on the degree of fault does not apply under the relief statutes. b211962, july 20, 1983;',
8299:'b190506, nov. 28, 1977. the mere fact that a loss or deficiency has occurred gives rise to a presumption of',
8300:'negligence on the part of the accountable officer. the presumption may be rebutted by evidence to the contrary, but it',
8301:'is the accountable officer’s burden to produce the evidence. the government does not have to produce evidence to establish that',
8302:'the accountable officer was at fault in order to hold the officer liable. rather, to be entitled to relief, the',
8303:'accountable officer must produce evidence to show that there was no contributing fault or negligence on his or her part,',
8304:'that is, that he or she exercised the requisite degree of care. this rule originated in decisions of the court',
8305:'of claims under 28 u.s.c. § 2512, before any of the administrative relief statutes existed, and has been consistently followed.',
8306:'an early statement is the following from boggs v. united states, 44 ct. cl. 367, 384 1909: “[t]here is at',
8307:'the outset a presumption of liability, and the burden of proof must rest upon the officer who has sustained the',
8308:'loss.” a later case quoting and applying boggs is o’neal v. united states, 60 ct. cl. 413 1925. more recently,',
8309:'the court said: “[t]he government does not have the burden of proving fault or negligence on the part of plaintiff;',
8310:'plaintiff has the sole burden of proving that he was without fault or negligence in order to qualify for [relief].”',
8311:'serrano v. united states, 612 f.2d 525, 532–33 ct. cl. 1979. gao follows the same rule, stating it in literally',
8312:'dozens of relief cases. e.g., b288014, may 17, 2002; b271896, mar. 4, 1997; 72 comp. gen. 49, 53 1992; page',
8313:'946 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers 67 comp. gen. 6 1987; 65 comp.',
8314:'gen. 876 1986; 54 comp. gen. 112 1974; 48 comp. gen. 566 1969.33 the amount and types of evidence that',
8315:'will suffice to rebut the presumption vary with the facts and circumstances of the particular case. however, there must be',
8316:'affirmative evidence. it is not enough to rely on the absence of implicating evidence, nor is the mere administrative determination',
8317:'that there was no fault or negligence, unsupported by evidence, sufficient to rebut the presumption. e.g., b272613, oct. 16, 1996',
8318:'assertions of “the absence of negligence, or mere administrative determinations that there was no fault or negligence on the part',
8319:'of the accountable officer are not sufficient to rebut the presumption of negligence when unsupported by the evidence.”; b257120, dec.',
8320:'13, 1994 accountable officer “must rebut presumption with convincing evidence that the loss was not caused by the accountable officer’s',
8321:'negligence or lack of reasonable care.”; b242830, sept. 24, 1991 mere absence of evidence implicating the accountable officer in the',
8322:'loss is not sufficient to rebut the presumption of negligence.. see also 70 comp. gen. 12, 14 1990; b204647, feb.',
8323:'8, 1982; b167126, aug. 9, 1976. if the record clearly establishes that the loss resulted from burglary or robbery, the',
8324:'presumption is easily rebutted. see, e.g., b288014, may 17, 2002; b265856, nov. 9, 1995, and cases cited therein. but the',
8325:'evidence does not have to explain the loss with absolute certainty. if the evidence is not all that clear, the',
8326:'accountable officer may still be able to rebut the presumption by presenting evidence tending to corroborate the likelihood of theft',
8327:'or showing that some factor beyond his or her control was the proximate cause of the loss. if such evidence',
8328:'exists, and if the record shows that the accountable officer complied fully with all applicable regulations and procedures, the agency’s',
8329:'determination of no fault or negligence will usually be accepted and relief granted. see, e.g., b260862, june 6, 1995; b242830,',
8330:'sept. 24, 1991. gao will consider the results of a polygraph lie detector test as an additional factor in the',
8331:'equation, but does not regard those results, 33 many decisions prior to 1970, such as 48 comp. gen. 566, dealt',
8332:'with postal employees. since enactment of the postal reorganization act of 1970, responsibility for the relief of postal employees is',
8333:'with the united states postal service. 39 u.s.c. § 2601; 50 comp. gen. 731 1971; b164786, oct. 8, 1970. while',
8334:'the comptroller general no longer relieves postal employees, the principles enunciated in the earlier decisions are nonetheless applicable to other',
8335:'accountable officers. page 947 gao06382sp appropriations law—vol. ii c. actual negligence chapter 9 liability and relief of accountable officers standing',
8336:'alone, as dispositive. this applies whether the results are favorable b260862, june 6, 1995; b206745, aug. 9, 1982, rev’d on',
8337:'submission of additional evidence, b206745, may 11, 1983; b204647, feb. 8, 1982; b142326, mar. 31, 1960; b182829o.m., feb. 3, 1975',
8338:'or unfavorable b209569, apr. 13, 1983. see also b192567, aug. 4, 1983, aff’d upon reconsideration, b192567, june 21, 1988. another',
8339:'situation in which the presumption is easily rebutted is where the accountable officer does not have control of the funds',
8340:'at the time of the loss. an example is losses occurring while the accountable officer is on leave or duty',
8341:'absence. as a practical matter, relief will be granted unless there is evidence of actual contributing negligence on the part',
8342:'of the accountable officer. b196960, nov. 18, 1980; b184028, mar. 2, 1976; b175756o.m., june 14, 1972. of course, where contributing',
8343:'negligence exists, relief will be denied and the role of the presumption never comes into play. b182480, feb. 3, 1975.',
8344:'the presumption of negligence may be criticized as unduly harsh. it is, however, necessary both in order to preserve the',
8345:'concept of accountability and to protect the government against dishonesty as well as negligence. see b191440, may 25, 1979; b167126,',
8346:'aug. 28, 1978. as stated in one decision, the presumption of negligence— “is a reasonable and legal basis for the',
8347:'denial of relief where the accountable officers have control of the funds and the means available for their safekeeping but',
8348:'the shortage nevertheless occurs without evidence of forcible entry or other conclusive explanation which would exclude negligence as the proximate',
8349:'cause of the loss.” b166519, oct. 6, 1969. indeed, if liability is strict and automatic, a legal presumption against the',
8350:'accountable officer is virtually necessary as a starting point. if the facts indicate negligence on the part of the accountable',
8351:'officer, and if it appears that the negligence was the proximate cause of the loss, then relief must be denied.',
8352:'one group of cases involves failure to lock a safe. it is negligence for an accountable officer to place money',
8353:'in a safe in an area which is accessible to others, and then leave the safe unlocked for a period',
8354:'of time when he or she is not physically present. e.g., b190506, nov. 28, 1977; b139886, page 948 gao06382sp appropriations',
8355:'law—vol. ii chapter 9 liability and relief of accountable officers july 2, 1959. it is also negligence to leave a',
8356:'safe unattended in a “day lock” position. b199790, aug. 26, 1980; b188733, mar. 29, 1979, aff’d, b188733, jan. 17, 1980;',
8357:'b187708, apr. 6, 1977. compare these cases with b180863, apr. 24, 1975, in which an accountable officer who had left',
8358:'a safe on “day lock” was relieved in view of her lack of knowledge or instruction regarding the day lock',
8359:'mechanism. thus, an accountable officer who leaves a safe unlocked either by leaving the door open or closing the door',
8360:'but not rotating the combination dial, and then leaves the office for lunch or for the night will be denied',
8361:'relief. b204173, jan. 11, 1982, aff’d, b204173, nov. 9, 1982; b183559, aug. 28, 1975; b180957, apr. 24, 1975; b142597, apr.',
8362:'9, 1960; b181648o.m., aug. 21, 1974. merely being physically present may not be enough. a degree of attentiveness, dictated by',
8363:'the circumstances and common sense, is also required. in b173710o.m., dec. 7, 1971, relief was denied where the cashier did',
8364:'not lock the safe while a stranger, posing as a building maintenance man, entered the cashier’s cage ostensibly to repair',
8365:'the air conditioning system and erected a temporary barrier between the cashier and the safe. another group involves the failure',
8366:'to use available security facilities. as we will see in our discussion of agency security, a good rule of thumb',
8367:'for the accountable officer is: you do the best you can with what is available to you. failure to do',
8368:'so, without compelling justification, does not meet the standard of reasonable care. some examples in which relief was denied are:',
8369:'accountable officer left unlocked cash box in safe to which several other persons had access. b172614o.m., may 4, 1971; b167596o.m.,',
8370:'aug. 21, 1969. cashier left funds overnight in locked desk drawer instead of safe provided for that purpose. b177730o.m., feb.',
8371:'9, 1973. cashier left funds in unlocked drawer while at lunch instead of locked drawer provided for that purpose. b161229o.m.,',
8372:'apr. 20, 1967. funds disappeared from barlocking file cabinet. combination safe was available but not used. b192567, june 21, 1988.',
8373:'inattentiveness or simple carelessness which facilitates a loss may constitute negligence and thus preclude relief. 64 comp. gen. 140 1984',
8374:'page 949 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers shoulder bag with money left unattended',
8375:'on airport counter for several minutes; b257120, dec. 13, 1994 cash left under a truck seat; b233937, may 8, 1989',
8376:'bag with money set on ledge in crowded restaurant; b208888, sept. 28 1984 evidence suggested that funds were placed on',
8377:'desk and inadvertently knocked into trash can; b127204, apr. 13, 1956 pay envelopes left on top of desk in cashier’s',
8378:'cage 19 inches from window opening on hallway to which many persons had access. the best way to know how',
8379:'much cash you have is to count it. failure to do so where reasonable prudence would dictate otherwise is negligence.',
8380:'b247581, june 4, 1992 alternate cashier failed to count cash upon receipt from principal or upon return to principal; b206820,',
8381:'sept. 9, 1982 accountable officer handed money over to another employee without counting it or obtaining receipt; b193380, sept. 25,',
8382:'1979 cashier cashed checks at bank and failed to count the cash received. a deficiency in an accountable officer’s account',
8383:'caused by the acceptance of a counterfeit note constitutes a physical loss for purposes of 31 u.s.c. § 3527a. b140836,',
8384:'oct. 3, 1960; b108452, may 15, 1952; b101301, july 19, 1951. whether accepting counterfeit money is negligence depends on the',
8385:'facts of the particular case, primarily whether the counterfeit was readily detectable. b271895, sept. 3, 1996 “superdollars”. see also b239724,',
8386:'oct. 11, 1990; b191891, june 16, 1980; b163627o.m., mar. 11, 1968. relief was granted in these four cases. if the',
8387:'quality of the counterfeit is such that a prudent person in the same situation would question the authenticity of the',
8388:'bill, relief should not be granted. b155287, sept. 5, 1967. also, failure to check a bill against a posted list',
8389:'of serial numbers will generally be viewed as negligence. b155287, sept. 5, 1967; b166514o.m., july 23, 1969. finally, failure without',
8390:'compelling justification to use an available counterfeit detection machine is negligence. b243685, july 1, 1991. other examples of conduct which',
8391:'does or does not constitute negligence are scattered throughout this chapter, for example, in the sections on compliance with regulations',
8392:'and agency security. in all cases, including those which cannot be neatly categorized, the approach is to apply the standard',
8393:'of reasonable care to the conduct of the accountable officer in light of all surrounding facts and circumstances. for example,',
8394:'in b196790, feb. 7, 1980, a patient at a then veterans administration hospital, patient “x,” had obtained a cashier’s check',
8395:'from a bank on may 9, 1978. on september 12, 1978, another patient, patient “y,” presented the check at the',
8396:'hospital for deposit to patient x’s personal funds account. on the following day, patient x withdrew the money and left.',
8397:'the bank refused to honor the page 950 gao06382sp appropriations law—vol. ii d. proximate cause chapter 9 liability and relief',
8398:'of accountable officers check because, unknown to hospital personnel, patient x had gone to the bank on may 17, stated',
8399:'that he had never received the check, and the bank had refunded its face value. as noted in the decision,',
8400:'patient x had “cleverly managed to double his bank account by collecting the same funds twice.” the issue was whether',
8401:'it was negligence for the hospital cashier to accept the check dated four months earlier or to permit patient x',
8402:'to withdraw the funds the day after the check was deposited. gao considered the nature of a cashier’s check, noted',
8403:'the absence of applicable regulations, applied the reasonable care standard, and granted relief, but recommended that the agency pursue further',
8404:'collection efforts against the bank. an accountable officer may be found negligent and nevertheless relieved from liability if it can',
8405:'be shown that the negligence was not the “proximate cause” of the loss or shortage. e.g., b272613, oct. 16, 1996,',
8406:'fn. 2; b235147, aug. 14, 1991. a precise definition of the term “proximate cause” does not exist.34 the concept means',
8407:'that, first, there must be a causeandeffect relationship between the negligence and the loss. in other words, the negligence must',
8408:'have contributed to the loss. however, as one authority notes, the cause of an event can be argued in a',
8409:'philosophical sense to “go back to the dawn of human events” and its consequences can “go forward to eternity.” prosser',
8410:'and keeton, § 41. obviously a line must be drawn someplace. thus, the concept also means that the causeandeffect relationship',
8411:'must be reasonably foreseeable; that is, a reasonably prudent person should have anticipated that a given consequence could reasonably follow',
8412:'from a given act. before proceeding, we must refer again to the accountable officer’s burden of proof. the court of',
8413:'claims said, in serrano v. united states, 612 f.2d 525, 531–32 ct. cl. 1979: “it is argued that the .',
8414:'. . fault or negligence involved must be the proximate cause of the loss. thus the secretary . . .',
8415:'could not deny relief unless the loss was proximately attributable to plaintiff. this argument has no merit. if such 34',
8416:'“there is perhaps nothing in the entire field of law which has called forth more disagreement, or upon which the',
8417:'opinions are in such a welter of confusion.” prosser and keeton, the law of torts, § 41 5th ed. 1984.',
8418:'see fedorczyk v. caribbean cruise lines, 82 f.3d 69, 73 3rd cir. 1996. page 951 gao06382sp appropriations law—vol. ii chapter',
8419:'9 liability and relief of accountable officers an argument were to be accepted by this court, it would shift the',
8420:'burden of proof . . . to the government. . . . “shifting of the burden of proof, and forcing',
8421:'the government to prove that plaintiffs conduct was a proximate cause of the loss, would be intolerable. this shift would',
8422:'negate the special responsibility that disbursing officers have in handling public funds.” emphasis in original. thus, the government does not',
8423:'have to prove causation any more than it has to prove negligence. rather, the accountable officer who has been negligent',
8424:'must, in order to be eligible for relief, show that some other factor or combination of factors was the proximate',
8425:'cause of the loss, or at least that the totality of evidence makes it impossible to fix responsibility. b272613, oct.',
8426:'16, 1996 relief denied when accountable officer failed to provide plausible evidence that some factor other than his negligence was',
8427:'the proximate cause of the loss. in analyzing proximate cause, it may be helpful to ask certain questions. first, if',
8428:'the accountable officer had not been negligent, would the loss have occurred anyway? if the answer to this question is',
8429:'yes, the negligence is not the proximate cause of the loss and relief will probably be granted. however, it may',
8430:'not be possible to answer this question with any degree of certainty. if not, the next question to ask is',
8431:'whether the negligence was a “substantial factor” in bringing about the loss. if this question is answered yes, relief will',
8432:'probably be denied. a couple of simple examples will illustrate: an accountable officer leaves cash visible and unguarded on a',
8433:'desk top while at lunch, during which time the money disappears. there can be no question that the negligence was',
8434:'the proximate cause of the loss. as noted previously, failure to count cash received at a bank window is negligence.',
8435:'suppose, however, that the accountable officer is attacked and robbed by armed marauders while returning to the office. the failure',
8436:'to count the cash, even though negligent, would not be the proximate cause of the loss since presumably the robbers',
8437:'would have taken the entire amount anyway. another good illustration is b201173, aug. 18, 1981. twelve armed men in two',
8438:'volkswagen minibuses broke into the west african consolidated page 952 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of',
8439:'accountable officers services center at the american embassy in lagos, nigeria. they forcibly entered the cashier’s office and proceeded to',
8440:'carry the safe down the stairs. the burglars dropped the safe while carrying it, the safe opened upon being dropped,',
8441:'and the burglars took the money and fled. the reason the safe opened when dropped was that the cashier had',
8442:'not locked it, clearly an act of negligence. however, even if the safe had been locked, the burglars would presumably',
8443:'have continued to carry it away, loaded it onto their minibus, and forcibly opened it somewhere else. thus, the cashier’s',
8444:'failure to lock the safe, while negligent, was not the proximate cause of the loss. proximate cause considerations are often',
8445:'relevant in cases involving weaknesses in agency security, and the topic is explored further under the agency security heading in',
8446:'section c.3.j of this chapter. the following are a few additional examples of cases in which relief was granted even',
8447:'though the accountable officer was or may have been negligent, because the negligence was found not to be the proximate',
8448:'cause of the loss or deficiency. accountable officer left safe combination in unlocked desk drawer. burglars found combination and looted',
8449:'safe. had this been the entire story, relief could not be granted. however, burglars also pried open locked desk drawers',
8450:'throughout the office. thus, locking the desk drawer would most likely not have prevented the theft. b229587, jan. 6, 1988.',
8451:'accountable officer in afghanistan negligently turned over custody of funds to unauthorized person. money was taken by rioters in severe',
8452:'civil disturbance. relief was granted because negligence was not the proximate cause of the loss. whether the person holding the',
8453:'funds was or was not an authorized custodian was not a matter of particular concern to the rioters. b144148o.m., nov.',
8454:'1, 1960. cashier discovered loss upon return from 2week absence. it could not be verified whether she had locked the',
8455:'safe when she left. however, time of loss could not be pinpointed, other persons worked out of the same safe,',
8456:'and it would have been opened daily for normal business during her absence. thus, even if she had failed to',
8457:'lock the safe negligence, proximate cause chain was much too conjectural. b191942, sept. 12, 1979. page 953 gao06382sp appropriations law—vol.',
8458:'ii chapter 9 liability and relief of accountable officers even if there is a clearly identified intervening cause, relief may',
8459:'still be denied depending on the extent to which the accountable officer’s negligence facilitated the intervening cause or contributed to',
8460:'the loss. in such a case, the negligence will be viewed as the proximate cause notwithstanding the intervening cause. the',
8461:'following cases will illustrate. accountable officer failed to make daily deposits of collections as required by regulations. funds were stolen',
8462:'from locked safe in burglary. relief was denied because officer’s negligence was proximate cause of loss in that funds would',
8463:'not have been in the safe to be stolen if they had been properly deposited. b71445, june 20, 1949. see',
8464:'also b203726, july 10, 1981; b164449, dec. 8, 1969; b168672o.m., june 22, 1970. accountable officer negligently left safe on “day',
8465:'lock” position door closed, dial or handle partially turned but not rotated, so that partial turning in one direction, without',
8466:'knowledge of combination, will permit door to open. thief broke into premises, opened safe without using force, and stole funds.',
8467:'relief was denied because negligence facilitated theft by making it possible for thief to open safe without force or knowledge',
8468:'of combination. b188733, mar. 29, 1979, aff’d, b188733, jan. 17, 1980. although cash was stolen, negligence by the accountable officer',
8469:'in placing the cash under the seat of a truck while she went shopping enabled the theft to occur and',
8470:'was thus the proximate cause of the loss. accordingly, relief was denied. b257120, dec. 13, 1994. e. unexplained loss or',
8471:'the cases cited under the actual negligence heading all contained clear shortage evidence of negligence on the part of the',
8472:'accountable officer. absent a proximate cause issue, these cases are relatively easy to resolve. such evidence, however, is not necessary',
8473:'in order to deny relief in the situation we refer to as the “unexplained loss or shortage.” in the typical',
8474:'case, a safe is opened at the beginning of a business day and money is found missing, or an internal',
8475:'audit reveals a shortage in an account. there is no evidence of negligence or misconduct on the part of the',
8476:'accountable officer; there is no evidence of burglary or any other reason for the disappearance. all that is known with',
8477:'any certainty is that the money is gone. in other words, the loss or shortage is totally unexplained. in many',
8478:'cases, a formal investigation confirms this conclusion. page 954 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable',
8479:'officers the presumption of negligence has perhaps its clearest impact in the unexplained loss situation. if the burden of proof',
8480:'is on the accountable officer to establish eligibility for relief, the denial of relief follows necessarily. since there is no',
8481:'evidence to rebut the presumption, there is no basis on which to grant relief. see, e.g., b272613, oct. 16, 1996;',
8482:'70 comp. gen. 389 1991; b238955, apr. 3, 1991. the presumption and its application to unexplained losses were discussed in',
8483:'48 comp. gen. 566, 567–68 1969 as follows: “while there is no positive or affirmative evidence of negligence on the',
8484:'part of [the accountable officer] in connection with this loss, we have repeatedly held that positive or affirmative evidence of',
8485:'negligence is not necessary, and that the mere fact that an unexplained shortage occurred is, in and of itself, sufficient',
8486:'to raise an inference or presumption of negligence. a government official charged with the custody and handling of public moneys',
8487:'. . . is expected to exercise the highest degree of care in the performance of his duty and, when',
8488:'funds . . . disappear without explanation or evident reason, the presumption naturally arises that the responsible official was derelict',
8489:'in some way. moreover, granting relief to government officials for unexplained losses or shortages of this nature might tend to',
8490:'make such officials lax in the performance of their duties.”35 the rationale is fairly simple. money does not just get',
8491:'up and walk away. if it is missing, there is an excellent chance that someone took it. if the accountable',
8492:'officer exercised the requisite degree of care and properly safeguarded the funds, it is unlikely that anyone else could have',
8493:'taken the money without leaving some evidence of forced entry. therefore, where there is no evidence to explain a loss,',
8494:'the leading probabilities are that the accountable officer either took the money or was negligent in some way that facilitated',
8495:'theft by someone else. be that as it may, denial of relief in an unexplained loss case is not intended',
8496:'to imply dishonesty by the particular accountable officer; it means merely that there was insufficient evidence to rebut the applicable',
8497:'legal presumption. see b122688, sept. 25, 35 a few additional examples are 70 comp. gen. 389 1991; b213427, dec. 13,',
8498:'1983, aff’d upon reconsideration, b213427, mar. 14, 1984; b159987, sept. 21, 1966. page 955 gao06382sp appropriations law—vol. ii chapter 9',
8499:'liability and relief of accountable officers 1956. see also b258357, jan. 3, 1996 loss of receipts creates “unexplained loss” from',
8500:'imprest fund for which cashier is liable. despite the strictness of the rule, there are many unexplained loss cases in',
8501:'which the presumption can be rebutted and relief granted. see, e.g., b242830, sept. 24, 1991. by definition, the evidence will',
8502:'not be sufficient to “explain” the loss; otherwise there would not be an unexplained loss to begin with. there is',
8503:'no simple formula to apply in determining the kinds or amount of evidence that will rebut the presumption. it is',
8504:'necessary to evaluate the totality of available evidence, including statements by the accountable officer and other agency personnel, investigation reports,',
8505:'and any relevant circumstantial evidence. compare b206745, aug. 9, 1982 denial of relief in “unexplained loss” case, with b206745, may',
8506:'11, 1983 reversing on submission of additional evidence b206745, aug. 9, 1982. in some cases, for example, it may be',
8507:'possible to reasonably conclude that any negligence that may have occurred was not the proximate cause of the loss. these',
8508:'cases tend to involve security weaknesses and are discussed under the agency security heading, section c.3.j of this chapter. the',
8509:'evidence, in conjunction with the lack of any evidence to the contrary and the agency’s “no fault or negligence” determination,',
8510:'supports the granting of relief. for example, relief from an unexplained loss was granted in b271896, mar. 4, 1997, when',
8511:'a cashier was forced to operate in a lax security environment. in this case, agency management allowed other employees access',
8512:'to the cash area of the cashier’s office, failed to fix a safe combination lock that had been broken for',
8513:'over a week, and failed to heed repeated warnings to correct the security deficiencies. see also b235147.2, aug. 14, 1991',
8514:'proximate cause of loss was “general lack of concern and sense of laxity” that pervaded agency. since the burden of',
8515:'proof rests with the accountable officer, the accountable officer’s own statements take on a particular relevance in establishing due care,',
8516:'and relief should never be denied without obtaining and carefully analyzing them. naturally, the more specific and detailed the statement',
8517:'is, and the more closely tied to the time of the loss, the more helpful it will be. while the',
8518:'accountable officer’s statement is obviously selfserving and may not be enough if there are no other supporting factors, it has',
8519:'been enough to tip the balance in favor of granting relief when page 956 gao06382sp appropriations law—vol. ii chapter 9',
8520:'liability and relief of accountable officers f. compliance with regulations combined with other evidence, however slight or circumstantial, which by',
8521:'itself would not have been sufficient.36 if a particular activity of an accountable officer is governed by a regulation, failure',
8522:'to follow that regulation will be considered negligence. if that failure is the proximate cause of a loss or deficiency,',
8523:'relief must be denied. 70 comp. gen. 12 1990; 54 comp. gen. 112, 116 1974. the relationship of this rule',
8524:'to the standard of reasonable care discussed earlier is the premise that the prudent person exercising the requisite degree of',
8525:'care will become familiar with, and will follow, applicable regulations. indeed, it has been stated that accountable officers have a',
8526:'duty to familiarize themselves with pertinent treasury department and agency rules and regulations. b229207, july 11, 1988; b193380, sept. 25,',
8527:'1979. treasury department regulations on disbursing, applicable to all agencies for which treasury disburses under 31 u.s.c. § 3321, are',
8528:'found in volume i of the treasury financial manual, especially part 4, “disbursing,” and part 5, “deposit regulations.” the treasury',
8529:'regulations establish general requirements for sound cash control, and failure to comply may result in the denial of relief. e.g.,',
8530:'70 comp. gen. 12 1990 cashier kept copy of safe combination taped to underside of desk pullout panel.37 the same',
8531:'principle applies with respect to violations of individual agency regulations and written instructions. e.g., b193380, sept. 25, 1979 cashier violated',
8532:'agency regulations by placing the key to a locked cash box in an unlocked cash box and then leaving both',
8533:'in a locked safe to which more than one person had the combination. the decision further pointed out 36 e.g.,',
8534:'b242830, sept. 24, 1991 cashier’s statement supported by another employee; safe had been opened for only one transaction in early',
8535:'afternoon; b214080, mar. 25, 1986 cashier made sworn and unrefuted statement to local police and secret service; b210017, june 8,',
8536:'1983 cashier’s statement corroborated by witness; b188733, mar. 29, 1979, aff’d jan 17, 1980 forcible entry to office but not',
8537:'to safe itself; cashier’s statement that he locked safe on day of robbery accepted. 37 losses by agency cashiers typically',
8538:'involve “imprest funds.” as discussed above, in 1999, treasury required that federal agencies eliminate agency imprest funds by oct. 1,',
8539:'2001. department of the treasury, “imprest fund policy directive,” nov. 9, 1999. exceptions may be made only for certain payments',
8540:'typically involving national security, law enforcement, small payments, overseas payments, or emergencies. see 31 c.f.r. § 208. guidance regarding those',
8541:'imprest funds for which a waiver has been granted is contained in department of the treasury, financial management service, manual',
8542:'of procedures and instructions for cashiers cashier’s manual april 2001. see the further discussion of imprest funds and the cashier’s',
8543:'manual in section b.3.a of this chapter. page 957 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable',
8544:'officers that oral instructions to the cashier to leave the cash box unlocked could not be considered to supersede published',
8545:'agency regulations. however, if agency regulations are demonstrably ambiguous, relief may be granted. b169848o.m., dec. 8, 1971. see also b288166,',
8546:'mar. 11, 2003 accountable officer granted relief when he complied with agency regulations. negligence will not be imputed to an',
8547:'accountable officer who fails to comply with regulations where full compliance is prevented by circumstances beyond his or her control.',
8548:'this recognizes the fact that compliance is sometimes up to the agency and beyond the control of the individual. for',
8549:'example, violating a regulation which requires that funds be kept in a safe is not negligence where the agency has',
8550:'failed to provide the safe. b78617, june 24, 1949. note, however, that instructions from superiors to disregard regulations do not,',
8551:'in themselves, relieve an accountable officer of responsibility to follow those regulations. see, e.g., b271021, sept. 18, 1986 improper payment',
8552:'case. also, as with other types of negligence, failure to follow regulations will not prevent the granting of relief if',
8553:'the failure was not the proximate cause of the loss or deficiency. b229207, july 11, 1988; b229587, jan. 6, 1988;',
8554:'b185666, july 27, 1976. see also libby v. united states, 81 f. supp. 722, 727 ct. cl. 1948. in b185666,',
8555:'for example, a cashier kept her cash box key and safe combination in a sealed envelope in an unlocked desk',
8556:'drawer, in violation of the cashier’s manual. relief was nevertheless granted because the seal on the envelope had not been',
8557:'broken and the negligence could therefore not have contributed to the loss. while failure to comply with regulations is generally',
8558:'considered negligence, the converse is not always true. to be sure, the fact that an accountable officer has complied with',
8559:'all applicable regulations and instructions is highly significant in evaluating eligibility for relief. it is not conclusive, however, because the',
8560:'accountable officer might have been negligent in a matter not covered by the regulations. in a 1979 case, an accountable',
8561:'officer accepted a $10,000 personal check at a customs auction sale and turned over the property without attempting to verify',
8562:'the existence or adequacy of the purchaser’s account. the check bounced. it was not clear whether existing regulations applied to',
8563:'that situation. even without regulations, however, accepting a personal check for a large amount without attempting verification was viewed as',
8564:'not meeting the standard of reasonable care, and relief was denied. b193673, may 25, 1979, modified on other grounds, b201673',
8565:'et al., sept. 23, 1982. page 958 gao06382sp appropriations law—vol. ii g. losses in shipment chapter 9 liability and relief',
8566:'of accountable officers government funds are occasionally lost or stolen in shipment. the postal service or other carrier is the',
8567:'agent of the sender, and funds in shipment remain in the “custody” of the accountable officer who shipped them until',
8568:'delivered, notwithstanding the fact that they are in the physical possession of the carrier. b185905o.m., apr. 23, 1976. thus, a',
8569:'loss in shipment is a physical loss for which an accountable officer is liable. for the most part, relief for',
8570:'losses in shipment is the same as relief for other losses, and the rules discussed in this chapter with respect',
8571:'to negligence and proximate cause apply. for example, relief was denied in one case because transmitting cash by ordinary firstclass',
8572:'mail rather than registered or certified mail was held not to meet the reasonable care standard. b164450o.m., sept. 5, 1968.',
8573:'however, relief for losses in shipment differs from relief for other losses in one important respect. a loss in shipment',
8574:'is not viewed as an “unexplained loss” and there is no presumption of negligence. b164450o.m., sept. 5, 1968. the reason',
8575:'for this distinction is that there is no basis to infer negligence when a loss occurs while funds are totally',
8576:'beyond the control of the accountable officer. thus, where funds are lost in shipment, in the absence of positive evidence',
8577:'of fault or negligence, an accountable officer will be relieved if he or she conformed fully with applicable regulations and',
8578:'procedures for the handling and safeguarding of the funds and they were nevertheless lost or stolen. b142058, mar. 18, 1960;',
8579:'b126362, feb. 21, 1956; b119567, jan. 10, 1955; b95504, june 16, 1950. the government losses in shipment act glisa, 40',
8580:'u.s.c. §§ 17301– 17309, authorizes agencies to file claims with the treasury department for funds or other valuables lost or',
8581:'destroyed in shipment. see generally b244473.2, may 13, 1993. the treasury department has a revolving fund for the payment of',
8582:'these claims and has issued regulations, found at 31 c.f.r. parts 361 and 362, to implement the statute. the treasury',
8583:'department will generally disallow a claim unless there has been strict compliance with the statute and regulations. see, e.g., b200437,',
8584:'oct. 21, 1980. if a loss in shipment occurs, the agency should first consider filing a claim under glisa, and',
8585:'should seek relief only if this fails. 70 comp. gen. 9 1990. denial of a glisa claim should prompt further',
8586:'inquiry since it suggests the possibility that someone at the point of shipment may have been negligent, but it will',
8587:'not automatically preclude the granting of relief. for example, it is possible for a claim to be denied for reasons',
8588:'that do not page 959 gao06382sp appropriations law—vol. ii h. fire, natural disaster chapter 9 liability and relief of accountable',
8589:'officers suggest negligence. in b126362, feb. 21, 1956, the accountable officer had reimbursed the government from personal funds, and a',
8590:'claim under glisa was denied because there was no longer any loss. gao nevertheless granted relief and the accountable officer',
8591:'was reimbursed. disallowance of a glisa claim for failure to strictly comply with the regulations carries with it an even',
8592:'stronger suggestion of negligence, but it is still appropriate to examine the facts and circumstances of the particular case to',
8593:'evaluate the relationship of the noncompliance to the loss. for example, gao granted relief in b191645, oct. 5, 1979, despite',
8594:'the denial of a glisa claim, because there was no question that the funds had arrived at their initial destination',
8595:'although they never reached the intended recipient. even if there had been negligence at the point of shipment, it could',
8596:'not have been the proximate cause of the loss. see also b193830, oct. 1, 1979, and b193830, mar. 30, 1979',
8597:'both cases arising from the same loss. earlier in this chapter, we noted the supreme court’s conclusion in united states',
8598:'v. thomas, 82 u.s. 15 wall. 337, 352 1872, that strict liability and hence the need for relief would not',
8599:'attach in two situations: funds destroyed by an “overruling necessity” and funds taken by a “public enemy,” provided there is',
8600:'no contributing fault or negligence by the accountable officer. the court gave only one example of an “overruling necessity”: “suppose',
8601:'an earthquake should swallow up the building and safe containing the money, is there no condition implied in the law',
8602:'by which to exonerate the receiver from responsibility?” id. at 348. we are aware of no subsequent judicial attempts to',
8603:'further define “overruling necessity,” although some administrative formulations have used the term “acts of god.” e.g., 48 comp. gen. 566,',
8604:'567 1969. thus, at the very least, assuming no contributing fault or negligence, an accountable officer is not liable for',
8605:'funds lost or destroyed in an earthquake, and hence there is no need to seek relief. contributing negligence might occur,',
8606:'for example, if an accountable officer failed to periodically deposit collections and funds were therefore on hand which should not',
8607:'have been. see b71445, june 20, 1949. gao granted relief in one case involving an earthquake, b229153, oct. 29, 1987,',
8608:'in which most of the funds were recovered. while arguably there was no need to seek relief in that case,',
8609:'it makes no difference as a practical page 960 gao06382sp appropriations law—vol. ii i. loss by theft chapter 9 liability',
8610:'and relief of accountable officers matter since relief would be granted as a matter of routine unless there is contributing',
8611:'negligence, in which event the accountable officer would be liable even under thomas. more recently, gao relieved an accountable officer',
8612:'from liability for the loss of the “confidential fund” of the secret service field office resulting from the destruction of',
8613:'the world trade center on sept. 11, 2001. b300677, june 19, 2003. see also b249372, aug. 13, 1992 rioting forced',
8614:'evacuation of the american embassy in somalia, resulting in loss of funds in safe. whatever the scope of the “overruling',
8615:'necessity” exception, it is clear that it does not extend to destruction by fire, even though money destroyed by fire',
8616:'is no longer available to be used by anyone else and can be replaced simply by printing new money. in',
8617:'smythe v. united states, 188 u.s. 156, 173–74 1903, the supreme court declined to apply thomas and expressly rejected the',
8618:'argument that an accountable officer’s liability for notes destroyed by fire should be limited to the cost of printing new',
8619:'notes. see also 1 comp. dec. 191 1895, in which the comptroller of the treasury similarly declined to apply the',
8620:'thomas exception to a loss by fire. thus, a loss by fire is a physical loss for which the accountable',
8621:'officer is liable, but for which relief will be granted under 31 u.s.c. § 3527 if the statutory conditions are',
8622:'met. examples are b212515, dec. 21, 1983, and b203726, july 10, 1981. if money is taken in a burglary, robbery,',
8623:'or other form of theft, the accountable officer will be relieved of liability if the following conditions are met: there',
8624:'is sufficient evidence that a theft took place;38 there is no evidence implicating, or indicating contributing negligence by, the accountable',
8625:'officer; and the agency has made the administrative determinations required by the relief statute. the fact patterns tend to fall',
8626:'into several welldefined categories. 38 the mere designation of a loss as a “burglary” without supporting evidence is not enough',
8627:'to remove it from the “unexplained loss” category. e.g., b210358, july 21, 1983. page 961 gao06382sp appropriations law—vol. ii chapter',
8628:'9 liability and relief of accountable officers 1 burglary: forced entry forced entry cases tend to be fairly straightforward. in',
8629:'the typical case, a government office is broken into while the office is closed for the night or over a',
8630:'weekend, and money is stolen. evidence of the forced entry is clear. as long as there is no evidence implicating',
8631:'the accountable officer, no other contributing fault or negligence, and the requisite administrative determinations are made, relief is granted. a',
8632:'few examples follow:39 burglars broke into the welding shop at a government laboratory, took a blowtorch and acetylene tanks to',
8633:'the administrative office and used them to cut open the safe. b242773, feb. 20, 1991. cashier’s office was robbed over',
8634:'a weekend. office had been forcibly entered, but there was no evidence of forced entry into the safe. federal bureau',
8635:'of investigation found no evidence of negligence or breach of security by any government personnel associated with the office. b193174,',
8636:'nov. 29, 1978. see also b260862, june 6, 1995. persons unknown broke front door lock of bureau of indian affairs',
8637:'office in alaska and removed safe on sled. sled tracks led to an abandoned building in which the safe was',
8638:'found with its door removed. b182590, feb. 3, 1975. unsecured bolt cutters found on premises used to remove safe padlock.',
8639:'no contributing negligence because there was no separate facility in which to secure the tools. b202290, june 5, 1981. the',
8640:'same principles apply to theft from a hotel room. 69 comp. gen. 586 1990; b229847, jan. 29, 1988. note, however,',
8641:'that relief was not granted in the case of a theft of cash stashed under the front seat of a',
8642:'locked vehicle left in an area where several vehicles had been broken into recently, since leaving cash in such a',
8643:'manner was not a prudent way to safeguard the funds. b257120, dec. 13, 1994. 39 there are numerous forced entry',
8644:'cases in which gao granted relief under similar circumstances. a few additional examples are b241820, jan. 2, 1991; b239780, june',
8645:'18, 1990; b230607, june 20, 1988; b205428, dec. 31, 1981; b201651, feb. 9, 1981. page 962 gao06382sp appropriations law—vol. ii',
8646:'chapter 9 liability and relief of accountable officers 2 robbery in this situation, one or more individuals, armed or credibly',
8647:'pretending to be armed, rob an accountable officer. again, as long as there is no evidence implicating the accountable officer',
8648:'and no contributing negligence, relief is granted. the accountable officer is not expected to risk his or her life by',
8649:'resisting. depending on the circumstances, it is not necessary that the thief be, or pretend to be, armed. an example',
8650:'is the common pursesnatching incident. b197021, may 9, 1980; b193866, mar. 14, 1979. some illustrative robbery cases follow:40 armed robber',
8651:'forced cashier to open the safe at gunpoint, shot the cashier, and stole the funds. b261261, aug. 31, 1995. gunman',
8652:'entered cashier’s office, knocked cashier unconscious, and robbed safe. b235458, aug. 23, 1990. man entered cashier’s office in a veterans',
8653:'hospital and handed cashier a note demanding all of her $20 bills. although he did not display a weapon, he',
8654:'said he was armed. b191579, may 22, 1978. a very similar case is b237420, dec. 8, 1989 man gave cashier',
8655:'note indicating bomb threat; upon running off with the money, he left a second note saying “no bomb”. 3 riot,',
8656:'public disturbance this category includes the popular pastime of ransacking american embassies. the supreme court’s second exception in united states',
8657:'v. thomas, 82 u.s. 15 wall. 337 1872 see fire, natural disaster in section c.3.h of this chapter to an',
8658:'accountable officer’s strict liability is funds taken by a “public enemy.” that case concerned the civil war. as with the',
8659:'“overruling necessity” exception, we are aware of no further definition of “public enemy” in this context, and the cases cited',
8660:'here have consistently been treated as accountable officer losses. in any event, relief 40 some other examples are b260915, apr.',
8661:'3, 1995; b217773, mar. 18, 1985; b211945, july 18, 1983; and b201126, jan. 27, 1981. page 963 gao06382sp appropriations law—vol.',
8662:'ii chapter 9 liability and relief of accountable officers is routinely granted unless there is contributing negligence. thus, gao granted',
8663:'relief in the following cases:41 armed soldiers forced entry into u.s. information agency compound in beirut, lebanon, and looted safe.',
8664:'b195435, sept. 12, 1979. cash equivalents stolen when embassy in belgrade, federal republic of yugoslavia, was ransacked. b288014, may 17,',
8665:'2002. funds taken during attack on american embassy in tehran, iran. b229753, dec. 30, 1987; b194666, aug. 6, 1979 separate',
8666:'attacks, both occurring in 1979. loss of secret service confidential funds resulting from terrorist attack on world trade center on',
8667:'september 11, 2001. b300677, june 19, 2003. safes looted by cuban detainees during prison riot. b232252, jan. 5, 1989; b230796,',
8668:'apr. 8, 1988. 4 evidence less than certain in all of the cases cited above dealing with forced entry, armed',
8669:'robbery, or rioting, the fact that a theft had taken place was beyond question. however, there are many cases in',
8670:'which the evidence of theft is not all that clear. the losses are unexplained in the sense that what happened',
8671:'cannot be determined with any certainty. the problem then becomes whether the indications of theft are sufficient to classify the',
8672:'loss as a theft and thereby to rebut the presumption of negligence. these tend to be the most difficult cases',
8673:'to resolve. the difficulty stems from the fact, which we have noted previously, that the accountable officer laws are designed',
8674:'to protect the government against dishonesty as well as negligence. on the one hand, an accountable officer who did all',
8675:'he or she could to safeguard the funds should be relieved of liability. but on the other hand, the application',
8676:'of the relief statutes should not provide a blueprint for or absolution from dishonesty. recognizing that complete certainty is impossible',
8677:'in many if not most cases, the decisions try to 41 further examples are b249372, aug. 13, 1992 somalia; b230606.2,',
8678:'sept. 6, 1988 iran; b227422, june 18, 1987 tripoli; b207059, july 1, 1982 chad; and b190205, nov. 14, 1977 zaire.',
8679:'page 964 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers achieve a balance between these two',
8680:'considerations. thus, gao gives weight to the administrative determinations and to statements of the individuals concerned, but these factors cannot',
8681:'be conclusive and the decision will be based on all of the evidence. other relevant factors include how and where',
8682:'the safe combination was stored, when it was last changed, whether the combination dial was susceptible of observation while the',
8683:'safe was being opened, access to the safe and to the facility itself, and the safeguarding of keys to cash',
8684:'boxes. for example, in b198836, june 26, 1980, funds were kept in the bottom drawer of a fourdrawer file cabinet.',
8685:'each drawer had a separate key lock and the cabinet itself was secured by a steel bar and padlock. upon',
8686:'arriving at work one morning, the cashier found the bottom drawer slightly out of alignment with several pry marks on',
8687:'its edges. a police investigation was inconclusive. gao viewed the evidence as sufficient to support a conclusion of burglary and,',
8688:'since the record contained no indication of negligence on the part of the cashier, granted relief. in another case, a',
8689:'safe was found unlocked with no signs of forcible entry. however, there was evidence that a thief had entered the',
8690:'office door by breaking a window. the accountable officer stated that he had locked the safe before going home the',
8691:'previous evening, and there was no evidence to contradict this or to indicate any other negligence. gao accepted the accountable',
8692:'officer’s uncontroverted statement and granted relief. b188733, mar. 29, 1979. see also b260862, june 6, 1995; b242830, sept. 24, 1991;',
8693:'b210017, june 8, 1983. in b170596o.m., nov. 16, 1970, the accountable officer stated that she had found the padlock on',
8694:'and locked in reverse from the way she always locked it. her statement was corroborated by the agency investigation. in',
8695:'addition, the lock did not conform to agency specifications, but this was not the cashier’s responsibility. she had used the',
8696:'facilities officially provided for her. relief was granted. relief was also granted in b170615o.m., nov. 23, 1971, reversing upon reconsideration',
8697:'b170615o.m., dec. 2, 1970. in that case, there was some evidence that the office lock had been pried open but',
8698:'there were no signs of forcible entry into the safe. this suggested the possibility of negligence either in failing to',
8699:'lock the safe or in not adequately safeguarding the combination. however, the accountable officer’s supervisor stated that he the supervisor',
8700:'had locked the safe at the close of business on the preceding workday, and two safe company representatives provided page',
8701:'965 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers statements that the safe was vulnerable and',
8702:'could have been opened by anyone with some knowledge of safe combinations. see also b242830, sept. 24, 1991. the occurrence',
8703:'of more than one loss under similar circumstances within a relatively short time will tend to corroborate the likelihood of',
8704:'theft. b199021, sept. 2, 1980; b193416, oct. 25, 1979. in b199021, two losses occurred in the same building within several',
8705:'weeks of each other. all agency security procedures had been followed and the record indicated that the cashier had exercised',
8706:'a very high degree of care in safeguarding the funds. in b193416, the first loss was totally unexplained, and the',
8707:'entire cash box disappeared a week later. the safe combination had been kept in a sealed envelope in a “working',
8708:'safe” to which other employees had access. although the seal on the envelope was not broken, an investigation showed that,',
8709:'while the combination could not be read by holding the envelope up to normal light, it could be read by',
8710:'holding it up to stronger light. in neither case was there any evidence of forcible entry or of negligence on',
8711:'the part of the accountable officer. balancing the various relevant factors in each case, gao granted relief. the disappearance of',
8712:'an entire cash box will also be viewed as an indication of theft. however, this factor standing alone will not',
8713:'be conclusive since there is nothing to prevent a dishonest employee from simply taking the whole box rather than a',
8714:'handful of money from it. signs of forced entry to the safe or file cabinet will naturally reinforce the theft',
8715:'conclusion. e.g., b229136, jan. 22, 1988; b186190, may 11, 1976. far more difficult are cases in which a cash box',
8716:'disappears with no signs of forcible entry to the container in which it was kept. note the various additional factors',
8717:'viewed as relevant in each of the following cases: police were able to open file cabinet with a different key,',
8718:'and other thefts had occurred around the same time. relief granted. b223602, aug. 25, 1986. safe was not rated for',
8719:'burglary protection and could have been opened fairly easily by manipulating the combination dial. relief granted. b189658, sept. 20, 1977.',
8720:'supervisor’s secretary maintained a log of all safe and barlock combinations, a breach of security which could have resulted in',
8721:'the compromise of the combination. relief granted. b189896, nov. 1, 1977. page 966 gao06382sp appropriations law—vol. ii chapter 9 liability',
8722:'and relief of accountable officers cashier locked safe and checked it in the presence of a guard. several other employees',
8723:'had access to the safe combination. relief granted. b173133o.m., dec. 10, 1973. multiple access also contributed to the granting of',
8724:'relief in b241201.2, apr. 15, 1992; b235167, jan. 8, 1990; b217945, july 23, 1985; and b212605, apr. 19, 1984.42 safe',
8725:'was malfunctioning at time of loss. relief granted. b183284, june 17, 1975. extensive security violations attributable to agency. relief granted.',
8726:'b211649, aug. 2, 1983. see also b235167, jan. 8, 1990; b197799, june 18, 1980. some evidence of forced entry to',
8727:'door of cashier’s office but not to safe or safe drawer. cash box later found in men’s room. negligence by',
8728:'cashier in improperly storing keys and safe combination in unlocked desk drawer not proximate cause of loss since seal on',
8729:'envelope was found intact. relief granted. b185666, july 27, 1976. compare 70 comp. gen. 12 1990 cashier denied relief because',
8730:'she negligently stored the cash box key, not in an envelope, in the back of her top center desk drawer',
8731:'which did not lock and kept a copy of the safe combination taped to the underside of an accessible pullout',
8732:'panel on her desk. cash box disappeared during 2week absence of cashier. even assuming cashier negligently failed to lock safe',
8733:'prior to her absence, there was no way to establish this as the proximate cause of the loss since box',
8734:'had been kept in a “working safe” which would have been opened daily in her absence. relief granted. b191942, sept.',
8735:'12, 1979. cashier went on leave without properly securing key to file cabinet or entrusting it to an alternate. relief',
8736:'denied. b182480, feb. 3, 1975. cashier had been experiencing difficulty trying to lock the safe and stated she might have',
8737:'left it unlocked inadvertently. relief denied. b184028, mar. 2, 1976. 42 a key inquiry in this type of case, and',
8738:'a crucial factor in deciding whether to grant or deny relief, is the extent to which the accountable officer is',
8739:'responsible for the nonexclusive access to the safe combination. page 967 gao06382sp appropriations law—vol. ii chapter 9 liability and relief',
8740:'of accountable officers to summarize the “cash box” cases, the disappearance of an entire cash box suggests theft but is',
8741:'not conclusive. in such cases, even though the cause of the loss cannot be definitely attributed, relief will probably be',
8742:'granted if there is uncontroverted evidence that the safe was locked, no other evidence of contributing fault or negligence on',
8743:'the part of the accountable officer, and especially if there are other factors present tending to corroborate the likelihood of',
8744:'theft. in no case has relief been granted based solely on the fact that a cash box disappeared; without more,',
8745:'it is simply another type of unexplained loss for which there is no basis for relief. 5 embezzlement the term',
8746:'“embezzlement” means the fraudulent misappropriation of property by someone to whom it has lawfully been entrusted. black’s law dictionary 540',
8747:'7th ed. 1999. losses due to embezzlement or fraudulent acts of subordinate finance personnel, acting alone or in collusion with',
8748:'others, are treated as physical losses and relief will be granted if the statutory conditions are met. b260563, mar. 31,',
8749:'1995; b244113, nov. 1, 1991; b202074, july 21, 1983, at 6; b211763, july 8, 1983; b133862o.m., nov. 29, 1957; b101375o.m.,',
8750:'apr. 16, 1951. an illustrative group of cases involves the embezzlement of tax collections, under various schemes, by employees of',
8751:'the internal revenue service irs. in each case the irs pursued the perpetrators, and most were prosecuted and convicted. the',
8752:'irs recovered what it could from the now former employees, and sought relief for the balance for the pertinent supervisor',
8753:'in whose name the account was held. in each case, gao agreed with the “no fault or negligence” determination and',
8754:'granted relief. b270863, june 17, 1996; b265853, jan. 23, 1996; b260563, mar. 31, 1995; b244113, nov. 1, 1991; b226214 et',
8755:'al., june 18, 1987; b215501, nov. 5, 1984; b192567, nov. 3, 1978; b191722, aug. 7, 1978; b191781, june 30, 1978.',
8756:'the accountable officer in each of the irs cases was a supervisor who did not actually handle the funds. the',
8757:'approach to evaluating the presence or absence of negligence when the accountable officer is a supervisor is to review the',
8758:'existence and adequacy of internal controls and procedures and to ask whether the accountable officer provided reasonable supervision. if internal',
8759:'controls and management procedures are reasonable and were being followed, relief will be granted. as noted in b226214 et al.,',
8760:'june 18, 1987, the standard does not expect perfection and recognizes that a clever page 968 gao06382sp appropriations law—vol. ii',
8761:'j. agency security chapter 9 liability and relief of accountable officers criminal scheme can outwit the most carefully established and',
8762:'supervised system. see also b270863, june 17, 1996; b260563, mar. 31, 1995. losses resulting from the fraudulent acts of other',
8763:'than subordinate finance personnel e.g., payments on fraudulent vouchers are not physical losses but must be treated as improper payments.',
8764:'see b287043, may 29, 2001; 2 comp. gen. 277 1922; b248517, oct. 20, 1992; b202074, july 21, 1983; b76903, july',
8765:'13, 1948; b133862o.m., nov. 29, 1957. in evaluating virtually any physical loss case, physical security—the existence, adequacy, and use of',
8766:'safekeeping facilities and procedures—is a crucial consideration. the department of the treasury financial management service’s manual of procedures and instructions',
8767:'for cashiers hereafter cashier’s manual april 2001 sets forth many of the requirements.43 for example, the cashier’s manual provides that',
8768:'safe combinations should be changed annually, whenever there is a change of cashiers, or when the combination has been compromised,',
8769:'and prescribes procedures for safeguarding the combination. it also reflects what is perhaps the most fundamental principle of sound cash',
8770:'control—that an employee with custody of public funds should have exclusive control over those funds. in addition, agencies should have',
8771:'their own specific regulations or instructions tailored to individual circumstances. cashier’s manual, § vi at 14. the first step in',
8772:'analyzing the effect of a security violation or deficiency is to determine whether the violation or deficiency is attributable to',
8773:'the accountable officer or to the agency. two fundamental premises drive this analysis: 1 the accountable officer is responsible for',
8774:'safeguarding the funds in his or her custody; and 2 the agency is responsible for providing adequate means to do',
8775:'so. adequate means includes both physical facilities and administrative procedures. basically, if the accountable officer fails to use the facilities',
8776:'and procedures that have been provided, this failure will be viewed as negligence and, unless some other factor appears to',
8777:'be the proximate cause of the loss, will preclude the granting of relief. several examples have been previously cited under',
8778:'the actual negligence heading, section c.3.c of this chapter. 43 see also the discussion of the cashier’s manual and imprest',
8779:'funds in sections b.2.c and b.3.aof this chapter. page 969 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of',
8780:'accountable officers another element of the accountable officer’s responsibility is the duty to report security weaknesses to appropriate supervisory personnel.',
8781:'e.g., 63 comp. gen. 489, 492 1984, rev’d on other grounds, 65 comp. gen. 876 1986. if the agency fails',
8782:'to respond, a loss attributable to the reported weakness is not the accountable officer’s fault. e.g., b235147.2, aug. 14, 1991;',
8783:'b208511, may 9, 1983. ultimately, an accountable officer can do no more than use the best that has been made',
8784:'available, and relief will not be denied for failure to follow adequate security measures which are beyond the accountable officer’s',
8785:'control. e.g., b226947, july 27, 1987 u.s. mint employees stole coins from temporarily leased facility which was incapable of adequate',
8786:'security; b207062, may 12, 1983 agent kept collections in his possession because, upon returning to office at 4:30 p.m., he',
8787:'found all storage facilities locked and all senior officials had left for the day; b210245, feb. 10, 1983 lockable gun',
8788:'cabinet was the most secure item available; b186190, may 11, 1976 funds kept in safe with padlock because combination safe,',
8789:'which had been ordered, had not yet arrived; b78617, june 24, 1949 agency failed to provide safe. of course, the',
8790:'accountable officer is expected to act to correct weaknesses that are subject to his or her control. b127204, apr. 13,',
8791:'1956. the principle that relief will be granted if the agency fails to provide adequate security and that failure is',
8792:'viewed as the proximate cause of the loss manifests itself in a variety of contexts. one group of cases involves',
8793:'multiple violations. in b182386, apr. 24, 1975, imprest funds were found missing when a safe was opened for audit. the',
8794:'accountable officer was found to be negligent for failing to follow approved procedures. however, the agency’s investigation disclosed a number',
8795:'of security violations attributable to the agency. two cashiers operated from the same cash box; transfers of custody were not',
8796:'documented; the safe combination had not been changed despite several changes of cashiers; at least five persons knew the safe',
8797:'combination. the agency, in recommending relief, concluded that the loss was caused by “pervasive laxity in the protection and administration',
8798:'of the funds . . . on all levels.” gao agreed, noting that the lax security “precludes the definite placement',
8799:'of responsibility” for the loss, and granted relief. in several later unexplained loss cases no sign of forcible entry, no',
8800:'indication of fault or negligence on the part of the accountable officer, gao has regarded overall lax security on the',
8801:'part of the agency, similar to that in b182386, as the proximate cause of the loss and thus granted relief.',
8802:'page 970 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers b271896, mar. 4, 1997; b243324, apr.',
8803:'17, 1991; b229778, sept. 2, 1988; b226847, june 25, 1987; b217876, apr. 29, 1986; b211962, dec. 10, 1985; b211649, aug.',
8804:'2, 1983. all of these cases involved numerous security violations beyond the accountable officer’s control, and several adopt the “pervasive',
8805:'laxity” characterization of b182386. however, in order for relief to be granted, security weaknesses attributable to the agency need not',
8806:'rise to the level of “pervasive laxity” encountered in the cases cited in the preceding paragraph. thus, relief will usually',
8807:'be granted where several persons other than the accountable officer have access to the funds through knowledge of the safe',
8808:'combination since “multiple access” makes it impossible to attribute the loss to the accountable officer. b241201.2, apr. 15, 1992; b235368,',
8809:'apr. 19, 1991; b235072, july 5, 1989; b228884, oct. 13, 1987; b214080, mar. 25, 1986; b211233, june 28, 1983; b209569,',
8810:'apr. 13, 1983; b196855, dec. 9, 1981; b199034, feb. 9, 1981. additional cases are cited in our earlier discussion of',
8811:'missing cash boxes. if multiple access to a safe will support the granting of relief for otherwise unexplained losses, it',
8812:'follows that multiple access to a cash box or drawer will have the same effect. the cashier’s manual provides that',
8813:'cashiers should never work out of the same cash box or drawer. cashier’s manual, § vi at 14. violation of',
8814:'this requirement, where beyond the control of the accountable officer, is a security breach that, in appropriate cases, has supported',
8815:'the granting of relief. b227714, oct. 20, 1987; b204647, feb. 8, 1982. if it is necessary for more than one',
8816:'cashier to work out of the same safe, the safe should preferably have separate builtin locking drawers rather than removable',
8817:'cash boxes. b191942, sept. 12, 1979. the following security deficiencies have also contributed to the granting of relief: cash box',
8818:'could be opened with other keys. b203646, nov. 30, 1981; b197270, mar. 7, 1980. crimping device used to seal cash',
8819:'bags did not use sequentially numbered seals and was accessible to several employees. b246988, feb. 27, 1992. failure to change',
8820:'safe combination as required by treasury regulations. b211233, june 28, 1983; b196855, dec. 9, 1981. both cases also involve multiple',
8821:'access. page 971 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers safe combination and key to',
8822:'cash drawer were kept in an unlocked desk drawer. b177963o.m., mar. 21, 1973. the result would most likely be different',
8823:'if the violation were the fault of the accountable officer or if the accountable officer passively acquiesced in the breach.',
8824:'see b185666, july 27, 1976. safe combination could be read through the sealed envelope in which it was kept. b243324,',
8825:'apr. 17, 1991. safe malfunctioning, defective, or otherwise not secure. b271896, mar. 4, 1997; b221447, june 1, 1987; b215477, nov.',
8826:'5, 1984; b183284, june 17, 1975. the preceding cases are mostly unexplained losses. it naturally follows that security violations of',
8827:'the type noted will contribute to rebutting the presumption of negligence in cases where there is clear evidence of theft.',
8828:'in b184493, oct. 8, 1975, for example, there was evidence of forced entry to the office door but not to',
8829:'the safe. the record showed that, despite the accountable officer’s best efforts, it was impossible for him to shield the',
8830:'dial from observation while opening the safe. in view of the office layout, the position of the safe, and the',
8831:'number of persons allowed access to the office, gao granted relief.44 other examples are: b241201.2, apr. 15, 1992, b243324, apr.',
8832:'17, 1991, and b180664o.m., apr. 23, 1974 multiple access to safe; and b170251o.m., oct. 24, 1972 insecure safe. if there',
8833:'is evidence of negligence on the part of the accountable officer in conjunction with security deficiencies attributable to the agency,',
8834:'the accountable officer’s negligence must be balanced against the agency’s negligence. relief may be granted or denied based largely on',
8835:'the proximate cause analysis. as with the unexplained loss cases, relief has been granted in a number of cases where',
8836:'the agency’s violations could be said to amount to “pervasive laxity.” b235147.2, aug. 14, 1991; b197799, june 19, 1980; b182386,',
8837:'apr. 24, 1975; b169756o.m., july 8, 1970. similarly, agency security violations which do not amount to pervasive laxity may support',
8838:'the granting of relief. such violations must either be the proximate cause of the loss or make it impossible to',
8839:'attribute the loss to the accountable officer. in a 1971 case, for example, a cashier kept the combinations to three',
8840:'safes on an adding machine tape in her wallet. the 44 an explanation of this type may or may not',
8841:'be sufficient, depending on the particular facts. see b170012, aug. 11, 1970; b127204, apr. 13, 1956. page 972 gao06382sp appropriations',
8842:'law—vol. ii chapter 9 liability and relief of accountable officers agency failed to change the combinations after the wallet was',
8843:'stolen. also, safe company representatives stated that one safe was vulnerable and could readily have been opened. the fact that',
8844:'only the vulnerable safe had been robbed supported the conclusion that the stolen combinations had not been used. b170615o.m., nov.',
8845:'23, 1971. other cases in which agency security violations were found to override negligence by the accountable officer are b232744,',
8846:'dec. 9, 1988 safe combination not changed despite several requests by accountable officer following possible compromise; b205985, july 12, 1982',
8847:'multiple access, safe combination not changed as required; b199128, nov. 7, 1980 multiple access; b191440, may 25, 1979 two cashiers',
8848:'working out of same drawer. the result in these cases should not be taken too far. poor agency security does',
8849:'not guarantee relief; it is merely another factor to consider in the proximate cause equation. another relevant factor is the',
8850:'nature and extent of the accountable officer’s efforts to improve the situation. where security weaknesses exist, a supervisor will normally',
8851:'be in a better position to take or initiate corrective action, and a supervisor who is also an accountable officer',
8852:'may be found negligent for failing to do so. 63 comp. gen. 489 1984, rev’d upon reconsideration, 65 comp. gen.',
8853:'876 1986 new evidence presented; 60 comp. gen. 674, 676 1981. however, a new supervisor should not be held immediately',
8854:'responsible for the situation he or she inherited. b209715, apr. 4, 1983 supervisor relieved in pervasive laxity situation where loss',
8855:'occurred only a week after he became accountable. a close reading of the numerous security cases reveals the somewhat anomalous',
8856:'result that an accountable officer who works in a sloppy operation stands a much better chance of being relieved than',
8857:'one who works in a wellmanaged office. true as this may be, it would be wrong to hold accountable officers',
8858:'liable for conditions beyond their control. rather, the solution lies in the proper recognition and implementation of the responsibility of',
8859:'each agency, mandated by the federal managers’ financial integrity act of 1982, 31 u.s.c. § 3512c1, to safeguard its assets',
8860:'against loss and misappropriation. k. extenuating circumstances since relief under 31 u.s.c. §§ 3527a and b is a creature of',
8861:'statute, it must be granted or denied solely in accordance with the statutory conditions. when congress desires that “equitable” concerns',
8862:'be taken into page 973 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers consideration, it expressly',
8863:'so states. examples are waiver statutes such as 5 u.s.c. § 5584 and 10 u.s.c. § 2774.45 in contrast, the',
8864:'physical loss relief statutes do not authorize the granting of relief on the basis of equitable considerations or extenuating or',
8865:'mitigating circumstances. thus, where an accountable officer has been found negligent, the following factors have been held not relevant, nor',
8866:'are they sufficient to rebut the presumption of negligence: acceptance of extra duties by the accountable officer; shortage of personnel.',
8867:'b186127, sept. 1, 1976. financial hardship of having to repay loss. b239387, apr. 24, 1991; b241478, apr. 5, 1991; b216279.2,',
8868:'dec. 30, 1985. good work record; long period of loyal and dependable service; evidence of accountable officer’s good reputation and',
8869:'character. b241478, apr. 5, 1991; b204173, nov. 9, 1982; b170012, aug. 11, 1970; b158699, sept. 6, 1968. heavy work load.',
8870:'67 comp. gen. 6 1987; 48 comp. gen. 566 1969; b241201, aug. 23, 1991, rev’d on reconsideration, b241201.2, apr. 15,',
8871:'1992 reversed on other grounds—new evidence submitted indicating multiple access. inexperience; inadequate training or supervision. 70 comp. gen. 389 1991;',
8872:'b257120, dec. 13, 1994; b189084, jan. 3, 1979; b191051, july 31, 1978. 45 these statutory provisions authorize, in certain circumstances,',
8873:'the waiver of claims against federal employees and service members for recovery of erroneous payments of pay and allowances “the',
8874:'collection of which would be against equity and good conscience and not in the best interests of the united states.”',
8875:'page 974 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers d. illegal or improper payment 1.',
8876:'disbursement and accountability a. statutory framework: disbursement under executive order no. 6166 in order to understand the laws governing liability',
8877:'and relief for improper payments, and how the application of those laws evolved over the last quarter of the twentieth',
8878:'century, it is helpful to start by summarizing, from the accountability perspective, a few points relating to how the federal',
8879:'government disburses its money. for most of the nineteenth century and the early decades of the twentieth century, federal disbursement',
8880:'was decentralized. each agency had its own disbursing offices, and the function was performed by a small army of disbursing',
8881:'officers and clerks who were accountable officers scattered among the various agencies and throughout the country. in part, the reason',
8882:'for this was the primitive state of communication and transportation then existing. one of the weaknesses of this system was',
8883:'that, in many cases, vouchers were prepared, examined, and paid by the same person. 20 comp. dec. 859, 869 1914.',
8884:'this resulted in the growth of large disbursing offices in several agencies, some of which exceeded in size that of',
8885:'the treasury department. gao, annual report of the comptroller general of the united states for the fiscal year ended june',
8886:'30, 1939 washington, d.c.: 1939, at 98. from the perspective of accountability for improper payments, the modern legal structure of',
8887:'federal disbursing evolved in three major steps. first, congress enacted legislation on august 23, 1912,46 the remnants of which are',
8888:'found at 31 u.s.c. § 3521a, to prohibit disbursing officers from preparing and auditing their own vouchers. with this newly',
8889:'mandated separation of voucher preparation and examination from actual payment, payment was accomplished by having some other administrative official “certify”',
8890:'the correctness of the voucher to the disbursing officer. the 1912 legislation was thus the genesis of what would later',
8891:'become a new class of accountable officer—the certifying officer. disbursing officers remained accountable for improper payments, the standard now reflecting',
8892:'the more limited nature of the function. since the 46 pub. l. no. 299, ch. 350, 37 stat. 375. page',
8893:'975 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers 1912 law was intended to prohibit the',
8894:'disbursing officer from duplicating the detailed voucher examination already performed by the certifying officer, disbursing officers were held liable only',
8895:'for errors apparent on the face of the voucher, as well as, of course, payments prohibited by law or for',
8896:'which no appropriation was available. 20 comp. dec. 859 1914. in a sense, the 1912 statute operated in part as',
8897:'a relief statute, with credit being allowed or disallowed in the disbursing officer’s account based on the application of this',
8898:'standard. e.g., 4 comp. gen. 991 1925; 3 comp. gen. 441 1924. the second major step in the evolution was',
8899:'section 4 of executive order no. 6166, signed by president roosevelt on june 10, 1933 see note at 5 u.s.c.',
8900:'§ 901. the first paragraph of section 4, codified at 31 u.s.c. § 3321a, consolidated the disbursing function in the',
8901:'treasury department, eliminating the separate disbursing offices of the other executive departments. the second paragraph, codified at 31 u.s.c. §',
8902:'3321b, authorizes treasury to delegate disbursing authority to other executive agencies for purposes of efficiency and economy. the third paragraph',
8903:'gave new emphasis to the certification function: “the division of disbursement [treasury department] shall disburse moneys only upon the certification',
8904:'of persons by law duly authorized to incur obligations upon behalf of the united states. the function of accountability for',
8905:'improper certification shall be transferred to such persons, and no disbursing officer shall be held accountable therefor.” the following year,',
8906:'executive order no. 6728, may 29, 1934 see note at 5 u.s.c. § 901, exempted the military departments from the',
8907:'centralization. this exemption, an exemption for the united states marshals service which originated in a 1940 reorganization plan, and an',
8908:'exemption for certain expenditures of the coast guard47 are codified at 31 u.s.c. § 3321c. executive order no. 6166 provided',
8909:'the framework for the disbursing system still in effect today. apart from the specified exemptions, the certifying officer is now',
8910:'an employee of the spending agency, and the disbursing officer is an employee of the treasury department. 47 the coast',
8911:'guard exemption was added by pub. l. no. 104201, div. a, title x, § 1009a1, 110 stat. 2422, 2633 sept.',
8912:'23, 1996. page 976 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers disbursing officers continued to',
8913:'be liable for their own errors, as under the 1912 legislation. e.g., 13 comp. gen. 469 1934. however, a major',
8914:'consequence of executive order no. 6166 was to make the certifying officer an accountable officer as well. the certifying officer',
8915:'became liable for improper payments “caused solely by an improper certification as to matters not within the knowledge of or',
8916:'available to the disbursing officer.” 13 comp. gen. 326, 329 1934. see also 15 comp. gen. 986 1936; 15 comp.',
8917:'gen. 362 1935. over the next few years, confusion and disagreement developed as to the precise relationship of certifying officers',
8918:'and disbursing officers with respect to liability for improper payments. in the annual report of the comptroller general of the',
8919:'united states for the fiscal year ended june 30, 1940 washington, d.c.: 1941 at pages 63–66, gao summarized the problem',
8920:'and recommended legislation to specify the allocation of responsibilities “to provide the closest possible relationship between liability and fault” id.',
8921:'at 64. the third major evolutionary step was the enactment of public law no. 77389, ch. 641, 55 stat. 875',
8922:'dec. 29, 1941 to implement gao’s recommendation. section 1, 31 u.s.c. § 3325a, reflects the substance of the third paragraph',
8923:'of executive order no. 6166, § 4, quoted above. it requires that a disbursing officer disburse money only in accordance',
8924:'with a voucher certified by the head of the spending agency or an authorized certifying officer who, except for some',
8925:'interagency transactions, will also be an employee of the spending agency. as with the amended executive order no. 6166 itself,',
8926:'section 3325a does not apply to disbursements of the military departments or certain expenses of the coast guard. 31 u.s.c.',
8927:'§ 3325b. the rest of the statute, which we will discuss in detail later, delineates the responsibilities of certifying and',
8928:'disbursing officers and provides a mechanism for the administrative relief of certifying officers. comparable authority to relieve disbursing officers from',
8929:'liability for improper payments was not to come about until 1955. further detail on the federal disbursement system may be',
8930:'found in the treasury financial manual, volume i, part 4 2004, and gao’s policy and procedures manual for guidance of',
8931:'federal agencies, title 7, chapter 6 washington, d.c.: may 18, 1993. it should be apparent that control of the public',
8932:'treasury must repose in the hands of federal officials. however, this does not mean that every task in the disbursement',
8933:'process must be performed by a government employee. for example, gao has advised that the bureau of indian affairs is',
8934:'page 977 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers b. automated payment systems authorized as',
8935:'a matter of law to contract with a private bank to perform certain ministerial or operational aspects of disbursing indian',
8936:'trust fund money, such as printing checks, delivering checks to payees, and debiting amounts from accounts. however, in order to',
8937:'comply with 31 u.s.c. §§ 3321 and 3325, a federal disbursing officer must retain managerial and judgmental responsibility. 69 comp.',
8938:'gen. 314 1990. the decision concluded: “[w]e see no reason to object to a contractual arrangement whereby a private contractor',
8939:'provides disbursement services, so long as a government disbursing officer remains responsible for reviewing and overseeing the disbursement operations through',
8940:'agency installed controls designed to assure accurate and proper disbursements.” id. at 319. to intrude further into this responsibility would',
8941:'require clear statutory authority. e.g., b210545o.m., june 6, 1983 indian health service would need statutory authority to use fiscal intermediaries',
8942:'to pay claims by providers; memorandum cites examples of such authority in medicare legislation. the statutory framework we have just',
8943:'described came into existence at a time when all disbursing was done manually. the certifying officer and his or her',
8944:'staff would review the supporting documentation for each payment voucher. the certifying officer would then sign the voucher, certifying to',
8945:'its legality and accuracy, and send it on to the disbursing officer. the increased use of automated payment systems has',
8946:'changed the way certifying officers must operate. perhaps the clearest example is payroll certification. a certifying officer may be asked',
8947:'to certify a grand total accompanied by computer tapes containing payrolls involving millions of dollars. there is no way the',
8948:'certifying officer can verify that each payment is accurate and legal. even if it were reasonably possible, the cost of',
8949:'doing it would be prohibitive. with the onslaught of the computer age, it was natural and inevitable to ask how',
8950:'accountability would function in a computerized environment. since many of the assumptions of a manual system were unrealistic under an',
8951:'automated system, something had to change. gao reviewed the impact of computerization in a report entitled new methods needed for',
8952:'checking payments made by computers, fgmsd7682 washington, d.c.: nov. 7, 1977. the report recognized that, while the certifying officer’s basic',
8953:'legal liability remains, the conditions in which a certifying officer may be page 978 gao06382sp appropriations law—vol. ii chapter 9',
8954:'liability and relief of accountable officers relieved under an automated payment system must be different to reflect the new realities.',
8955:'the approach to relief in this context stems from the following premises discussed in the report: in automated systems, evidence',
8956:'that the payments are accurate and legal must relate to the system rather than to individual transactions. certifying and disbursing',
8957:'officers should be provided with information showing that the system on which they are largely compelled to rely is functioning',
8958:'properly. reviews should be made at least annually, supplemented by interim checks of major system changes, to determine that the',
8959:'automated systems are operating effectively and can be relied on to produce payments that are accurate and legal. the report',
8960:'then concluded: “in the future, when a certifying or disbursing officer requests relief from an illegal, improper, or incorrect payment',
8961:'made using an automated system, gao will continue to require the officer to show that he or she was not',
8962:'negligent in certifying payments later determined to be illegal or inaccurate. however, consideration will be given to whether or not',
8963:'the officer possessed evidence at the time of the payment approval that the system could be relied on to produce',
8964:'accurate and legal payments. in cases in which the designated assistant secretary or comparable official provides the agency head and',
8965:'gao with a written statement that effective system controls could not be implemented prior to voucher preparation and certifies that',
8966:'the payments are otherwise proper, gao will not consider the absence of such controls as evidence of negligence in determining',
8967:'whether the certifying official should be held liable for any erroneous payment prior to receipt of an advance decision. of',
8968:'course, the traditional requirements that due care be exercised in making the payments and that diligent effort be made to',
8969:'recoup any erroneous payments will still be considered in any requests for waiver of liability. also, should the certifying official',
8970:'fail to take reasonable steps to establish adequate controls for future payments, the reasons for such failure will be taken',
8971:'into account in any page 979 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers requests for',
8972:'waiver of liability concerning such future payments.” fgmsd7682, at 17–18. a few years later, the concepts and premises of the',
8973:'gao report were explored and reported, with implementing recommendations, in a key study by the joint financial management improvement program',
8974:'entitled assuring accurate and legal payments—the roles of certifying officers in federal government washington, d.c.: june 1980.48 further guidance from',
8975:'the internal control perspective may be found in gao, public key infrastructure: examples of risks and internal control objectives associated',
8976:'with certification authorities, gao041023r washington, d.c.: aug. 10, 2004; gao, streamlining the payment process while maintaining effective internal control, gao/aimd21.3.2',
8977:'washington, d.c.: may 1, 2000; gao, policy and procedures manual for guidance of federal agencies hereafter gaoppm, title 7 washington,',
8978:'d.c.: may 18, 1993; omb circular no. a123, management accountability and control june 21, 1995; and omb circular no. a127,',
8979:'financial management systems july 23, 1993. see also a gao publication entitled critical factors in developing automated accounting and financial',
8980:'management systems, document accession no. 132042 washington, d.c.: january 1987. thus, in considering requests for relief under an automated payment',
8981:'system where verification of individual transactions is impossible as a practical matter, the basic question will be the reasonableness of',
8982:'the certifying officer’s reliance on the system to continually produce legal and accurate payments. b178564, jan. 27, 1978 confirming the',
8983:'conceptual feasibility of using automated systems to perform preaudit functions under various child nutrition programs. see also b201965, june 15,',
8984:'1982. contexts in which system reliance is relevant are discussed in b291001, dec. 23, 2002 proposed time and attendance system;',
8985:'59 comp. gen. 85 1989 automated “zip plus 4” address correction system; 59 comp. 48 the jfmip was a joint',
8986:'undertaking of gao, the office of management and budget, the treasury department, and the office of personnel management, working in',
8987:'cooperation with each other and other federal agencies to improve financial management practices in the federal government. leadership and program',
8988:'guidance were provided by the four principals of jfmip—the comptroller general, the secretary of the treasury, and the directors of',
8989:'omb and opm. although jfmip ceased to exist as a standalone organization as of december 1, 2004, the jfmip principals',
8990:'continue to meet at their discretion. page 980 gao06382sp appropriations law—vol. ii c. statistical sampling chapter 9 liability and relief',
8991:'of accountable officers gen. 597 1980 electronic funds transfer program. regardless of what system is used, there is of course',
8992:'no authority to make known overpayments. b205851, june 17, 1982; b203993o.m., july 12, 1982. statistical sampling is a procedure whereby',
8993:'a random selection of items from a universe is examined, and the results of that examination are then projected to',
8994:'the entire universe based on the laws of probability. in 1963, the comptroller general held that reliance on a statistical',
8995:'sampling plan for the internal examination of vouchers prior to certification would not operate to relieve a certifying officer from',
8996:'liability for improper or erroneous payments. 43 comp. gen. 36 1963. gao recognized in the decision that an adequate statistical',
8997:'sampling plan could produce overall savings to the government, but was forced to conclude that it was not authorized under',
8998:'existing law. in response to this, congress enacted legislation in 1964, now found at 31 u.s.c. §§ 3521b–d. the statute',
8999:'authorizes agency heads, upon determining that economies will result, to prescribe the use of adequate and effective statistical sampling procedures',
9000:'in the prepayment examination of disbursement vouchers. as originally enacted, 31 u.s.c. § 3521b was limited to vouchers not exceeding',
9001:'$100. a 1975 amendment to the statute removed the $100 limit and authorized the comptroller general to prescribe maximum dollar',
9002:'limits. the current limit is $2,500. gao, policy and procedures manual for guidance of federal agencies hereafter gaoppm, title 7,',
9003:'§ 7.4.e washington, d.c.: may 18, 1993. for further guidance, see 7 gaoppm app. iii, and gao, using statistical sampling,',
9004:'gao/pemd10.1.6 washington, d.c.: may 2, 1992. for vouchers over the prescribed limit, unless gao has approved an exception 7 gaoppm',
9005:'app. iii, § b, 43 comp. gen. 36 would continue to apply. the relevance of all this to accountable officers',
9006:'is spelled out in the statute. a certifying or disbursing officer acting in good faith and in conformity with an',
9007:'authorized statistical sampling procedure will not be held liable for any certification or payment on a voucher which was not',
9008:'subject to specific examination because of the procedure. however, this does not affect the liability of the payee or recipient',
9009:'of the improper payment, and relief may be denied if the agency has not diligently pursued collection action against the',
9010:'recipient. 31 u.s.c. §§ 3521c–d. see b254436, mar. 1, 1994, where gao found that disbursing and certifying officers are not',
9011:'liable for payments made on unaudited vouchers under the statistical sampling page 981 gao06382sp appropriations law—vol. ii chapter 9 liability',
9012:'and relief of accountable officers d. provisional vouchers and related matters procedure provided that the agency carries out diligent collection',
9013:'actions on any improper payment. gao has approved the use of statistical sampling to test the reliability of accelerated payment',
9014:'or “fast pay” systems. see, e.g., gao, streamlining the payment process while maintaining effective internal control, gao/aimd21.3.2 washington, d.c.: may',
9015:'1, 2000; 60 comp. gen. 602, 606 1981. in 67 comp. gen. 194 1988, gao for the first time considered',
9016:'the use of statistical sampling for postpayment audit in conjunction with “fast pay” procedures. the question arose in connection with',
9017:'a general services administration proposal to revise its procedures for paying and auditing utility invoices. gao approved the proposal in',
9018:'concept, subject to several conditions: 1 the economic benefit to the government must exceed the risk of loss; 2 the',
9019:'plan must provide for a meaningful sampling of all invoices not subject to 100 percent audit; and 3 the plan',
9020:'must provide a reliable and defensible basis for the certification of payments. gao then considered and approved gsa’s specific plan',
9021:'in 68 comp. gen. 618 1989. as a general proposition, however, approaching the problem through system improvements is preferable to',
9022:'an alternative that involves relaxing controls or audit requirements. 7 gaoppm § 7.4.f. apart from questions of automation or statistical',
9023:'sampling, proposals arise from time to time, prompted by a variety of legitimate concerns, to expedite or simplify the payment',
9024:'process. proposals of this type invariably raise the potential for overpayments or erroneous payments. therefore, their consequences in terms of',
9025:'the liability and relief of certifying and disbursing officers must always be considered. a 1974 case involved a proposal by',
9026:'the environmental protection agency for the certification of “provisional vouchers” for periodic payments under costtype contracts. under the proposal, monthly',
9027:'vouchers certified for payment would be essentially unaudited except for basic mathematical and cumulative cost checks, subject to adjustment upon',
9028:'audit when the contract is completed. under this system, as with statistical sampling, some errors could escape detection. however, certifying',
9029:'officers would not have the benefit of the protection afforded by the statistical sampling legislation. since there would be a',
9030:'complete audit upon contract completion, the provisional vouchers could be certified upon a somewhat lesser standard of prepayment examination, but',
9031:'gao pointed out that any such system should provide, at a minimum, for periodic audit of the provisional vouchers. to',
9032:'better protect the certifying officers, gao suggested following a defense department procedure under which “batch page 982 gao06382sp appropriations law—vol.',
9033:'ii chapter 9 liability and relief of accountable officers audits” of accumulated vouchers are conducted as frequently as deemed necessary',
9034:'based on the reliability of each contractor’s accounting and billing procedures, but not less than annually, again subject to final',
9035:'audit upon contract completion. b180264, mar. 11, 1974. in order to meet processing deadlines, time and attendance forms are often',
9036:'“certified” by appropriate supervisory personnel before the end of the pay period covered, raising the possibility that information for the',
9037:'latter days of the pay period may turn out to be erroneous. since necessary adjustments can easily be made in',
9038:'the subsequent pay period and since the risk of loss to the government is viewed as remote, the provisional certification',
9039:'of payroll vouchers based on these “provisional” time and attendance records is acceptable. b145729, aug. 17, 1977 internal memorandum. simplification',
9040:'plans may be prompted by nothing more exotic than understaffing of audit resources. in b201408, apr. 19, 1982, an agency',
9041:'proposed an “audit resources utilization plan” whereby it would 1 attempt to identify high risk contractors through preaward questionnaires; 2',
9042:'for low risk contracts below a monetary limit, substitute desk audits for field contract audits; and 3 encourage the use',
9043:'of systems audits where possible. gao found no “conceptual objection” to the proposal, noting that the final audits discussed in',
9044:'b180264, mar. 11, 1974, did not necessarily have to be field audits, but emphasized that high risk contractors should be',
9045:'subject to contract audits in all cases. the decision also discusses the certifying officer’s role. another type of simplification proposal',
9046:'involves lessening the degree of scrutiny on small payments. for example, the department of veterans affairs va is authorized to',
9047:'reimburse certain lowcost supplies furnished to veterans under statutory training and rehabilitation programs. experience taught the va that participants could',
9048:'reasonably be expected to incur at least $35 of reimbursable supply expenses. the va proposed to waive documentation and review',
9049:'requirements on invoices of up to $35 for miscellaneous supplies, and to pay essentially unsupported invoices up to that amount.49',
9050:'gao concurred, but added that the va should be able to demonstrate that prior audits have not revealed a significant',
9051:'number of false or inappropriate claims, and that it has internal controls adequate to 49 invoices may be used in',
9052:'place of vouchers to support disbursements as long as they contain all required information. gao, policy and procedures manual for',
9053:'guidance of federal agencies, title 7, § 6.2.c washington, d.c.: may 18, 1993; i tfm 42025.20. page 983 gao06382sp appropriations',
9054:'law—vol. ii chapter 9 liability and relief of accountable officers e. facsimile signatures and electronic certification detect multiple claims for',
9055:'the same individual. b221949, june 30, 1987. an unstated consequence of the decision is that a certifying officer who relied',
9056:'on the system, assuming it was set up in accordance with the specified criteria, would be relieved from liability should',
9057:'any of the payments turn out to be erroneous. signature devices other than the traditional penandink signature are called “facsimile',
9058:'signatures.” the term has been defined as “an impression of a signature made by a rubber stamp, metal plate, or',
9059:'other mechanical contrivance.” b194970, july 3, 1979. as a general proposition, there is no prohibition on the use of facsimile',
9060:'signatures on financial documents as long as adequate controls and safeguards are observed. the rule was stated as follows in',
9061:'b48123, nov. 5, 1965 nondecision letter: “generally, an acceptable facsimile of a signature may be made by a rubber stamp',
9062:'impression or may be reproduced on a metal plate or by other mechanical contrivances, the validity of which is derived',
9063:'from a signed original. an otherwise proper document may be so authenticated mechanically with the knowledge and consent or under',
9064:'an express delegation of authority from the signer of the original provided that appropriate safeguards are observed in those respects.”',
9065:'the rule has statutory recognition. in any federal statute unless otherwise specified, the term “signature” includes “a mark when the',
9066:'person making the same intended it as such.” 1 u.s.c. § 1; 71 comp. gen. 109 1991 definition of writing',
9067:'in 1 u.s.c. § 1 encompasses electronic data interchange technologies; 65 comp. gen. 806, 810 1986. when facsimile signatures are',
9068:'to be used by government officials, the safeguards should include: standards for the authorization of the use of facsimile signatures,',
9069:'an enumeration of the types of documents on which facsimile signatures may be used, physical control of the signature device',
9070:'to prevent unauthorized use, and page 984 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers notification',
9071:'to officials authorized to use facsimile signatures that use of a signature device in no way lessens their responsibility or',
9072:'liability. b140697, oct. 28, 1959 approving use of facsimile signatures in the execution of contracts. other cases approving the use',
9073:'or acceptance of facsimile signatures are 40 comp. gen. 5 1960 use by air force on purchase orders for small',
9074:'purchases; 33 comp. gen. 297 1954 certification of invoice bearing only rubber stamp signature of vendor; b194970, july 3, 1979',
9075:'certification of voucher/purchase order bearing only facsimile signature of contracting officer; b150395, dec. 21, 1962 use by navy on purchase',
9076:'orders; b126776o.m., mar. 5, 1956 use by army on certificates of availability of government quarters and/or mess in support of',
9077:'military travel vouchers; b104590, sept. 12, 1951 use on vouchers in federal educational grant programs.50 a more recent case held',
9078:'that payment could be certified on the basis of a contractor’s facsimile “fax” invoice, again provided that the agency has',
9079:'adequate internal controls to guard against fraud and overpayments and it determines that accepting facsimiles is beneficial to and costeffective',
9080:'for the government. see b242185, feb. 13, 1991, citing several cases authorizing the acceptance of carbon copies. one place where',
9081:'facsimile signatures are not permitted is the standard form 210, the signature/designation card for certifying officers which must be filed',
9082:'with the treasury department and which must bear the certifying officer’s original, manual signature. 1 tfm 41125. most of the',
9083:'cases cited thus far have involved relatively primitive devices such as rubber stamps or signature machines. when we move into',
9084:'the realm of computerized data transmission, the equipment is far more sophisticated but the underlying principles are the same—there is',
9085:'no prohibition but there must be adequate safeguards. in the 1980s, gao and the treasury department began to consider the',
9086:'feasibility of electronic certification of payment vouchers. in a 1984 memorandum to one of gao’s audit divisions, gao’s general counsel',
9087:'agreed with the treasury department that there is no specific legal requirement that a certifying officer’s certification be limited to',
9088:'writing on 50 an early case, b36459, apr. 6, 1944, suggesting that use of facsimile signatures somehow required gao approval',
9089:'has not been followed and should be disregarded. page 985 gao06382sp appropriations law—vol. ii f. gao audit exceptions chapter 9',
9090:'liability and relief of accountable officers paper. then, applying the precedent of the earlier rubber stamp cases, the memorandum concluded',
9091:'that electronic certification, with adequate safeguards, was not legally objectionable. the “signature” could be an appropriate symbol adopted by the',
9092:'certifying officer, which should be unique, within the certifying officer’s sole control or custody, and capable of verification by the',
9093:'disbursing officer. b216035o.m., sept. 20, 1984. treasury subsequently developed a proposal for a prototype electronic certification system, which gao found',
9094:'to adequately satisfy the statutory requirements for voucher certification and payment. b216035o.m., sept. 25, 1987.51 in 1998, congress enacted legislation',
9095:'that required executive agencies to implement procedures for the use and acceptance of electronic signatures. government paperwork elimination act, pub.',
9096:'l. no. 105277, § 1703, 112 stat. 2681, 2681749 oct. 21, 1998, at 44 u.s.c. § 3504 note. the egovernment',
9097:'act of 2002 contains a provision to ensure the compatibility of executive agency methods for use and acceptance of electronic',
9098:'signatures.52 treasury issued guidelines in 1998 for the full implementation of an electronic certification system as the required method of',
9099:'submission of vouchers and schedule of payments to the financial management service. 1 tfm 42030.10. the guidelines provide that an',
9100:'authorized ecs electronic certifying system certifying officer “will be held responsible for the correctness of the facts stated on the',
9101:'voucher or its supporting documents, and to the effect that payment is proper from the appropriations shown on the basic',
9102:'voucher or voucherschedule.” 1 tfm 42040.10. “taking an exception” is a device gao uses to formally notify an accountable officer',
9103:'of a fiscal irregularity which may result in personal liability. today, this device is very rarely used. at one time,',
9104:'accountable officers had to submit all of their account documents to gao, and gao “settled” the accounts 31 u.s.c. §',
9105:'3526a by physically examining each piece of paper. exceptions were common during that era. the nature of the process has',
9106:'evolved in recent decades in recognition of the increased responsibility of agencies in establishing their own financial systems and controls.',
9107:'account settlement now is more a matter of systems evaluation and the review of administrative surveillance and the effectiveness of',
9108:'51 a related issue is the use of electronic technology in creating obligations under 31 u.s.c. § 1501. for more',
9109:'information on this topic, see the discussion in chapter 7. 52 pub. l. no. 107347, § 203, 116 stat. 2899,',
9110:'2912 dec. 17, 2002, at 44 u.s.c. § 3501 note. page 986 gao06382sp appropriations law—vol. ii chapter 9 liability and',
9111:'relief of accountable officers collection and disbursement procedures. examination of individual transactions by gao is minimal. see gao, policy and',
9112:'procedures manual for guidance of federal agencies hereafter gaoppm, title 7, § 8.5 washington, d.c.: may 18, 1993. however, fiscal',
9113:'irregularities still come to gao’s attention in various ways through its normal audit activities, agency irregularity reports, etc., and gao',
9114:'may invoke the exception procedure when warranted by the circumstances. the process is summarized in 7 gaoppm § 8.6. examples',
9115:'are noted in 65 comp. gen. 858, 861 1986, modified by 70 comp. gen. 463 1991 massive travel fraud scheme,',
9116:'and b194727, oct. 30, 1979 fraudulent misappropriation of mass transit grant funds by government employee. the first step in the',
9117:'exception process is the issuance of a “notice of exception” to the agency concerned. the issuance of a notice of',
9118:'exception does not itself constitute a definite determination of liability. it has been described as “in the nature of a',
9119:'challenge to the propriety of a certifying officer’s action in certifying the voucher for payment.” b69611, oct. 27, 1947. the',
9120:'certifying or disbursing officer, through his or her agency, then has the opportunity to respond to the exception. it is',
9121:'the accountable officer’s responsibility to establish the propriety of the payment. 13 comp. gen. 311 1934. if the reply to',
9122:'the exception is satisfactory, the exception is withdrawn. e.g., b78091, nov. 2, 1948. if the reply does not provide a',
9123:'satisfactory basis to remove the exception, the item is “disallowed” in the account. technically, the term “disallowance” applies only to',
9124:'disbursing officers since a certifying officer does not have physical custody of funds and does not have an “account” in',
9125:'the same sense that a disbursing officer does. thus, strictly speaking, gao “disallows an expenditure” in the account of a',
9126:'disbursing officer and “raises a charge” against a certifying officer. see 32 comp. gen. 499, 501 1953; a48860, apr. 14,',
9127:'1950. for account settlement purposes, a certifying officer’s “account” consists of the certified vouchers and supporting documents on the basis',
9128:'of which payments have been made by a disbursing officer and included in the disbursing officer’s account for a particular',
9129:'accounting period. b147293o. m., feb. 21, 1962. the taking of an exception does not preclude submission of a relief request',
9130:'under applicable relief legislation. as a practical matter, if the agency has been unable to respond satisfactorily to the notice',
9131:'of exception, the likelihood of there being adequate basis for relief is diminished page 987 gao06382sp appropriations law—vol. ii chapter',
9132:'9 liability and relief of accountable officers correspondingly. however, as in 65 comp. gen. 858, it can happen, and the',
9133:'possibility should therefore not be dismissed. 2. certifying officers a. duties and liability as we have seen, a certifying officer',
9134:'is the official who certifies a payment voucher to a disbursing officer. the responsibility and accountability of certifying officers are',
9135:'specified in 31 u.s.c. § 3528a, part of the previously noted 1941 legislation enacted to clarify the roles of accountable',
9136:'officers under executive order no. 6166, june 10, 1933 see note at 5 u.s.c. § 901. the certifying officer is',
9137:'responsible for 1 the existence and correctness of the facts stated in the certificate, voucher, and supporting documentation; 2 the',
9138:'correctness of computations on the voucher; and 3 the legality of a proposed payment under the appropriation or fund involved.',
9139:'the statute further provides that a certifying officer will be accountable for the amount of any “illegal, improper, or incorrect”',
9140:'payment resulting from his or her false or misleading certification, as well as for any payment prohibited by law or',
9141:'which does not represent a legal obligation under the appropriation or fund involved. there is a recurring appropriation act provision,',
9142:'discussed in section c.4.b of chapter 4 under the heading “employment of aliens,” which bars the use of appropriated funds',
9143:'to pay the compensation of a government employee who is not a united states citizen, subject to certain exceptions. the',
9144:'provision applies only to employees whose post of duty is in the continental united states. thus, a certifying officer or',
9145:'disbursing officer in the continental united states must be a u.s. citizen unless one of the exceptions applies. there is',
9146:'no comparable requirement applicable to employees outside the continental united states. b206288o.m., aug. 4, 1982. a certifying officer must normally',
9147:'be an employee of the agency whose funds are being spent, but may be an employee of another agency under',
9148:'an authorized interagency transaction or agreement. 72 comp. gen. 279 1993; 59 comp. gen. 471 1980; 44 comp. gen. 100',
9149:'1964. a certifying officer is liable the moment an improper payment is made as the result of an erroneous or',
9150:'misleading certification. e.g., 54 comp. gen. 112, 114 1974. this is true whether the certification involves a matter of fact,',
9151:'a question of law, or a mixed question of law and fact. page 988 gao06382sp appropriations law—vol. ii chapter 9',
9152:'liability and relief of accountable officers 55 comp. gen. 297, 298 1975 citing several other cases. as a general proposition,',
9153:'the government looks first to the certifying officer for reimbursement even though some other agency employee may be liable to',
9154:'the certifying officer under administrative regulations. 32 comp. gen. 332 1953; 15 comp. gen. 962 1936. the fact that a',
9155:'certifying officer receives instructions from superiors to make the improper payment does not relieve him from liability. b271021, sept. 18,',
9156:'1996. also, the certifying officer’s liability does not depend on the government’s ability or lack of ability to recoup from',
9157:'the recipient of the improper payment. 31 comp. gen. 17 1951; 28 comp. gen. 17, 20 1948. what this means',
9158:'is that the government is not obligated to seek first to recoup from the recipient, although it frequently does so,',
9159:'and of course any recovery from the recipient will reduce the certifying officer’s liability, at least in most cases. occasionally',
9160:'there may be two certifying officers involved with a given payment, socalled “successive certifications.” the rule is that the responsibility',
9161:'of the certifying officer certifying the basic voucher is not diminished by the subsequent action. gao stated the principle as',
9162:'follows in a letter to the secretary of the treasury, b142380, mar. 30, 1960: “where the certifying officer who certifies',
9163:'the voucher and schedule of payments is different from the certifying officer who certifies the basic vouchers, . . .',
9164:'the certifying officer who certifies the basic vouchers is responsible for the correctness of such vouchers and the certifying officer',
9165:'who certifies the voucherschedule is responsible only for errors made in the preparation of the voucherschedule.” see also 67 comp.',
9166:'gen. 457 1988. an illustration of how this principle may apply is 55 comp. gen. 388 1975, involving the liability',
9167:'of general services administration certifying officers under interagency service and support agreements with certain independent agencies. under the arrangement in',
9168:'question, the agency would assume certification responsibility for the basic expenditure vouchers, but they would be processed for final payment',
9169:'through gsa, with gsa preparing and certifying a master voucher and schedule to be accompanied by a master magnetic tape.',
9170:'again quoting the above passage from b142380, gao concluded that the legal liability of the gsa certifying officer would be',
9171:'limited to errors made in the final processing. see also 72 comp. gen. 279 1993, where a state department certifying',
9172:'officer could certify an “emergency extraordinary expense voucher,” submitted by page 989 gao06382sp appropriations law—vol. ii chapter 9 liability and',
9173:'relief of accountable officers a defense attaché, which was not accompanied by supporting documentation because of security considerations. the certifying',
9174:'officer was only responsible for errors made on his own processing of the voucher and not for the underlying propriety',
9175:'of the certification by the defense attaché. similarly, the statutory accountability does not apply to an official who certifies an',
9176:'“adjustment voucher” used to make adjustments between accounts or funds in the treasury in respect of an obligation already paid',
9177:'and which therefore does not involve paying money out of the treasury to discharge an obligation. 23 comp. gen. 953',
9178:'1944. although certification even in this situation should not be reduced to a “matter of form,” the accountability would attach',
9179:'to the certifying officer who certified the basic payment voucher. see 23 comp. gen. 181, 183–84 1943. the function of',
9180:'certification is not perfunctory, but involves a high degree of responsibility. 55 comp. gen. 297, 299 1975; 20 comp. gen.',
9181:'182, 184 1940. this responsibility is not alleviated by the press of other work. b147747, dec. 28, 1961.53 it also',
9182:'involves an element of verification, the extent of which depends on the circumstances. for example, a voucher for goods or',
9183:'services should be supported by evidence that the goods were received or the services performed. 39 comp. gen. 548 1960.',
9184:'agencies are authorized to implement fast pay processes using certain controls to pay vendors subject to postpayment verification of the',
9185:'receipt and acceptance of goods and services ordered and the accuracy of invoices received. federal acquisition regulation far, 48 c.f.r.',
9186:'pt. 13 2005; gao, policy and procedures manual for guidance of federal agencies, title 7, § 7.4.d washington, d.c.: may',
9187:'18, 1993. generally, an independent investigation of the facts is not contemplated. e.g., b257334, june 30, 1995; 28 comp. gen.',
9188:'571 1949. similarly, where proper administrative safeguards exist, certifying officers need not examine time, attendance, and leave records in order',
9189:'to certify the correctness of amounts shown on payrolls submitted to them. 31 comp. gen. 17 1951.54 a 1982 decision,',
9190:'61 comp. gen. 477, reviewed the safeguards proposed by a bonneville power administration certifying officer for certifying recurring payments 53',
9191:'but see b138601, jan. 18, 1960, in which the volume of work was taken into consideration in a somewhat extreme',
9192:'case. 54 many of the cases noted in the text, such as 31 comp. gen. 17, arose under manual systems.',
9193:'while they would still apply under a manual system, it is important to keep in mind the previously discussed differences',
9194:'in approach between manual and automated systems. page 990 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable',
9195:'officers to a regional planning body and found them adequate to satisfy 31 u.s.c. § 3528. in the case of',
9196:'a compensatory damages award in settlement of an employee discrimination claim, certifying officers needed to ensure that all the items',
9197:'covered in the lump sum payment were statutorily permissible, that the amount of the payment did not exceed statutory limits,',
9198:'and that correct administrative procedures were followed. b257334, june 30, 1995. an example of the role of a certifying officer',
9199:'in verifying a payment is in b301184, jan. 15, 2004, in which certifying officers twice questioned payment for the cost',
9200:'of food at a program that was offered to employees at their permanent duty station for which appropriated funds were',
9201:'not available. in the decision, it was stated that: “in matters such as this, we carefully consider the views of',
9202:'certifying officers who request a decision pursuant to 31 u.s.c. § 3529a2, in addition to those positions advanced by the',
9203:'agency’s program officials, because the agency’s certifying officers are the agency officials who, statutorily, are responsible for the propriety of',
9204:'all expenditures. 31 u.s.c. § 3528a3 ‘a certifying official certifying a voucher is responsible for . . . the legality',
9205:'of a proposed payment under the appropriation or fund involved’. unlike other agency officials, certifying officers are personally financially liable',
9206:'for improper payments that they certify. 31 u.s.c. § 3528a4 ‘a certifying official certifying a voucher is responsible for .',
9207:'. . repaying a payment . . . a illegal, improper or incorrect because of an inaccurate or misleading certificate;',
9208:'b prohibited by law; or c that does not represent a legal obligation under the appropriation or fund involved’.” whatever',
9209:'else the certifying officer’s verification burden may or may not involve, it certainly involves questioning items on the face of',
9210:'vouchers or supporting documents, which simply do not look right. for example, a certifying officer who certifies a voucher for',
9211:'payment in the full amount claimed, disregarding the fact that the accompanying records indicate an outstanding indebtedness to the government',
9212:'against which the sum claimed is available for offset, is accountable for any resulting overpayment. 28 comp. gen. 425 1949.',
9213:'similarly, certifying a voucher in the full amount within a prompt payment discount period without taking the discount will result',
9214:'in liability for the amount of the lost discount. however, a certifying officer is not liable for failing, even if',
9215:'negligently, to page 991 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers certify a voucher within',
9216:'the time discount period. 45 comp. gen. 447 1966. a clear illustration of a certifying officer’s responsibility and liability occurred',
9217:'when a department of transportation employee fraudulently misappropriated more than $850,000 in 1977. the fraud was discovered by virtue of',
9218:'the employee’s ostentatious purchases, including several luxury automobiles and a “topless” bar in washington, d.c. the employee was found guilty',
9219:'and sent to jail. however, investigation revealed negligence on the part of a department certifying officer. the employee had perpetrated',
9220:'the fraud by inserting his own name on six payment vouchers for urban mass transportation administration grants. each voucher contained',
9221:'a list of approximately ten payees with individual amounts, and the total amount, and each had been certified by the',
9222:'certifying officer. the negligence occurred in one of two ways. if the employee inserted his own name and address on',
9223:'the voucher before presenting it to the certifying officer, the certifying officer was negligent in not spotting the name of',
9224:'an individual whose name he should have known with an address in suburban maryland on a list of payees the',
9225:'rest of which were mass transit agencies. if the employee presented a partial voucher and added his own name after',
9226:'it was certified, the total as presented to the certifying officer could not have agreed with the sum of the',
9227:'individual amounts, and the certifying officer was negligent in not verifying the computation. gao raised exceptions to the certifying officer’s',
9228:'account, and advised the department of transportation that it must proceed with collection action against the certifying officer for the',
9229:'full amount of the excepted payments less any amounts recovered from the employee or through the sale of assets, like',
9230:'the topless bar, which the justice department seized. see b194727, oct. 30, 1979. apparently in view of the clear negligence,',
9231:'relief was never requested. at this point, it should be noted that no one involved in the process remotely expects',
9232:'that the government will be able to recover several hundred thousand dollars from a certifying officer, or from any other',
9233:'accountable officer, except perhaps one who has himherself stolen the money. however, the burden of having to repay even a',
9234:'portion in cases of losses of this size sends an important message and reinforces the certain if indeterminable deterrent effect',
9235:'of the statute. certifying officers should not certify payment vouchers that are unsupported by pertinent documentation indicating that procedural safeguards',
9236:'regarding payment have been observed. vouchers that are page 992 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of',
9237:'accountable officers deficient in this regard should be returned to the appropriate administrative officials for proper approvals and supporting documents.',
9238:'b257334, june 30, 1995; b179916, mar. 11, 1974. an area in which a certifying officer’s duty to question is minimal',
9239:'is payments to a contractor determined under a statutory or contractual disputes procedure. in the absence of fraud or bad',
9240:'faith by the contractor, a payment determination made under a disputes clause procedure is final and conclusive and may not',
9241:'be questioned by a certifying officer, gao, or the justice department. s&e contractors, inc. v. united states, 406 u.s. 1',
9242:'1972; b201408, apr. 19, 1982. it does not follow that any administrative settlement is entitled to the same effect. in',
9243:'b239592, aug. 23, 1991, gao found that an “informal settlement” of a personnel action between an agency and one of',
9244:'its employees was without legal authority and found the certifying officer liable for the unauthorized payments. a subsequent letter, b239592.2,',
9245:'sept. 1, 1992, clarified that this meant the authorized certifying officer, not an official who had signed certain documents as',
9246:'“approving official” but was not responsible for determining the legality of the payment. a different issue involving an administrative settlement',
9247:'arose in 67 comp. gen. 385 1988. after an investigation by federal and state officials, the forest service determined that',
9248:'it was responsible for a fire in a national forest in oregon, and reimbursed the state for fire suppression expenses',
9249:'incurred under a cooperative agreement. subsequently, a private landowner sued for damages resulting from the same fire, and the court',
9250:'made a finding of fact that the forest service was not liable. the certifying officer was concerned that the court’s',
9251:'finding might have the effect of invalidating the prior payment to oregon and making him liable for an erroneous payment.',
9252:'the decision concluded that the payment was proper when made, and that the court finding did not impose any duty',
9253:'on the certifying officer to reopen and reexamine it. see also b262110, mar. 19, 1997, where the environmental protection agency',
9254:'used a cooperative agreement to provide for payment of the costs of travel and related expenses by nonfederal attendees of',
9255:'an epa conference. if epa had used a procurement agreement, as required, these costs would not have been allowable. relief',
9256:'was granted the certifying officer and recipient of the funding because both acted in good faith in fulfilling obligations and',
9257:'had no basis for questioning the use of the inappropriate agreement. a certifying officer has the statutory right to seek',
9258:'and obtain an advance decision from the comptroller general regarding the lawfulness of any page 993 gao06382sp appropriations law—vol. ii',
9259:'chapter 9 liability and relief of accountable officers b. applicability of 31 u.s.c. § 3528 payment to be certified. 31',
9260:'u.s.c. § 3529.55 this procedure will insulate the certifying officer against liability. following the advice of agency counsel, on the',
9261:'other hand, does not guarantee protection against liability. e.g., 55 comp. gen. 297 1975. having said this, we do not',
9262:'wish to imply that consulting agency counsel is a pointless gesture. see b257893, june 1, 1995 certifying officer’s good faith',
9263:'was demonstrated, in part, by reliance on agency counsel approval of settlement agreement. on the contrary, it is to be',
9264:'encouraged. seeking internal legal advice prior to certification of matters on which the certifying officer is unsure will in many',
9265:'cases obviate any need for an advance decision. in other cases it may help define those situations in which consulting',
9266:'gao may be desirable. as a final note, the treasury department has published a supplement to the treasury financial manual',
9267:'entitled now that you’re a certifying officer revised march 2005, which can be found at www.fms.treas.gov/publications.html last visited september 15,',
9268:'2005. written expressly for certifying officers, it provides a good overview of the importance of the job and the responsibilities',
9269:'which accompany it. there are two major exceptions to 31 u.s.c. § 3528a. first, it applies only to the executive',
9270:'branch. while section 3528a is not limited by its terms to the executive branch, 31 u.s.c. § 3325a, the basic',
9271:'requirement that disbursing officers disburse only upon duly certified vouchers, is expressly limited to the executive branch, and sections 3325a',
9272:'and 3528a originated as sections 1 and 2 of the same 1941 enactment. thus, gao has concluded that 31 u.s.c.',
9273:'§ 3528a does not apply to the legislative branch. 21 comp. gen. 987 1942; b191036, july 7, 1978; b236141.2, feb.',
9274:'23, 1990 internal memorandum. see also b39695, mar. 27, 1945. it has also been held that 31 u.s.c. § 3325a',
9275:'does not apply to the judicial branch. b6061, a51607, apr. 27, 1942. it follows that section 3528a would be equally',
9276:'inapplicable to the judicial branch. b236141.2, cited above. in 1996, the 55 the general accounting office act of 1996, pub.',
9277:'l. no. 104316, title ii, § 204, 110 stat. 3826, 3845–46, oct. 19, 1996, amended the comptroller general’s authority under',
9278:'31 u.s.c. § 3529 and transferred the authority to issue advance decisions with respect to transferred settlement functions under the',
9279:'act to the director of omb, who in turn delegated specific functions to the departments of defense and treasury, the',
9280:'general services administration, and the office of personnel management. the comptroller general retains the authority to issue decisions to disbursing',
9281:'or certifying officers and heads of agencies on matters involving the use of appropriated funds that do not involve settling',
9282:'a claim or other functions transferred to omb. in addition, the comptroller general retains the authority under 31 u.s.c. §§',
9283:'3527 and 3528 to grant relief to disbursing and certifying officers. see b275605, mar. 17, 1997. page 994 gao06382sp appropriations',
9284:'law—vol. ii c. relief chapter 9 liability and relief of accountable officers united states code was amended to authorize the',
9285:'designation and appointment of certifying and disbursing officers within the department of defense. see national defense authorization act for fiscal',
9286:'year 1996, pub. l. no. 104106, div. a, title ix, subtitle b, § 913, 110 stat. 186, 410–12 feb. 10,',
9287:'1996. previously, 31 u.s.c. § 3528 specifically exempted military departments from its applicability except for departmental pay and expenses in',
9288:'the district of columbia. some legislative branch agencies now have their own legislation patterned after 31 u.s.c. § 3528. see',
9289:'statutes listed in section e.1.b of this chapter. until recently, gao decisions indicated that agencies that do not have their',
9290:'own legislation, including legislative branch agencies, nevertheless had the authority, within their discretion, to create their own certifying officers and',
9291:'to make them accountable by administrative regulation. the 1990 memorandum cited above, b236141.2, contains a detailed discussion. see also b247563.3,',
9292:'apr. 5, 1996; b260369, june 15, 1995; 21 comp. gen. at 989. these decisions reasoned that such liability, duly imposed',
9293:'by regulation, could be regarded as part of the employee’s “employment contract.” however, in b280764, may 4, 2000, gao reconsidered',
9294:'its position in a case involving the department of defense dod and held that accountable officer status and liability can',
9295:'only be created by statute. gao found no authority that would permit dod to impose pecuniary liability by regulation on',
9296:'officials whom it refers to as “accountable officials” but who are not certifying or disbursing officers for erroneous payments resulting',
9297:'from information that they “negligently provide” to certifying officers. the 2000 decision overruled prior inconsistent decisions, which would include those',
9298:'applying to legislative branch agencies. there is a further discussion of b280764 in section b.2 of this chapter. informally known',
9299:'as the certifying officers’ relief act, 31 u.s.c. § 3528b establishes a mechanism for the administrative relief of certifying officers',
9300:'governed by 31 u.s.c. § 3528a.56 there are two standards for relief. the comptroller general may relieve a certifying officer',
9301:'from liability for an illegal, improper, or incorrect payment upon determining that— the certification was based on official records and',
9302:'the certifying officer did not know, and by reasonable diligence and inquiry could not have discovered, the actual facts; or',
9303:'56 for a discussion of military certifying officers as of 1996, see sections b.2, c.1.b, and c.2.b. page 995 gao06382sp',
9304:'appropriations law—vol. ii chapter 9 liability and relief of accountable officers the obligation was incurred in good faith, the payment',
9305:'was not specifically prohibited by statute, and the united states received value for the payment. under either standard, relief may',
9306:'be denied if the agency fails to diligently pursue collection action against the recipient of the improper payment. 31 u.s.c.',
9307:'§ 3528b2. unlike the physical loss relief statutes previously discussed, 31 u.s.c. § 3528b does not require administrative determinations by',
9308:'the agency as a prerequisite to relief. the determinations under section 3528b are made by the comptroller general. also, the',
9309:'relief standards under section 3528b are stated in the alternative; relief may be granted if either of the two standards',
9310:'can be established. it makes no difference whether the improper payment is discovered by gao or the agency concerned. b137435o.m.,',
9311:'oct. 14, 1958. relief is discretionary the statute says “may relieve”, although no case has been discovered in which a',
9312:'certifying officer who met either of the standards was not relieved. there is no special form of request under 31',
9313:'u.s.c. § 3528b. relief may be requested by the agency on behalf of the certifying officer, or directly by the',
9314:'certifying officer. see, e.g., 31 comp. gen. 653 1952 example of the latter. relief requests must present sufficient information to',
9315:'permit gao to make one of the required findings. e.g., b288284, may 29, 2002; b251994, sept. 24, 1993; b191900, july',
9316:'21, 1978. one of the objectives of 31 u.s.c. § 3528b was to reduce the volume of private relief legislation',
9317:'recommended on behalf of certifying officers. the legislative history of the statute indicates that an agency should seek relief from',
9318:'gao before considering relief legislation. as to those “less meritorious cases” in which relief may be denied, relief legislation remains',
9319:'an available option. 30 comp. gen. 298 1951. the first relief standard, 31 u.s.c. § 3528b1a, relates essentially to the',
9320:'certification of incorrect facts, and permits relief if the certification was based on official records and if the certifying officer',
9321:'did not know, and could not reasonably have learned, the actual facts. gao has never attempted to formulate a general',
9322:'rule as to what acts may support relief from the certification of incorrect facts. rather, the approach is as stated',
9323:'in 55 comp. gen. 297, 299–300 1975: page 996 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable',
9324:'officers “[w]e have sought to apply the relief provisions by considering the practical conditions and procedures under which certifications of',
9325:'fact are made. consequently, the diligence to be required of a certifying officer before requests for relief under the act',
9326:'will be considered favorably is a matter of degree dependent upon the practical conditions prevailing at the time of certification,',
9327:'the sufficiency of the administrative procedures protecting the interest of the government, and the apparency of the error.” for example,',
9328:'social security administration certifying officers who certify large numbers of awards each month may, apart from obvious errors, rely on',
9329:'the award documents presented for certification. b119248o.m., apr. 14, 1954. moreover, in b247563.3, apr. 5, 1996, we recognized that certifying',
9330:'officers located at automated finance centers at the department of veterans affairs rely, necessarily, on the integrity of the automated',
9331:'payment system as a whole and do not physically examine hard copy documentation vouchers in each and every case. the',
9332:'reasonableness of the certifying officer’s reliance on an automated payment system must be based on a “showing that the system',
9333:'on which they rely is functioning properly and reviews should be made at least annually to determine that the automated',
9334:'payment system is operating effectively and can be relied upon to make accurate and legal payments.” id. in b237419, dec.',
9335:'5, 1989, relief was granted to a forest service certifying officer who certified the refund of a timber purchaser’s cash',
9336:'bond deposit without knowing that the refund had already been made. the certifying officer had followed proper procedures by checking',
9337:'to see if the money had been refunded, but did not discover the prior payment because it had not been',
9338:'properly recorded. also, the agency was pursuing collection efforts against the payee. in b254385, mar. 22, 1994, relief was granted',
9339:'to a certifying officer at the national science foundation nsf who certified a payment to the wrong contractor because an',
9340:'incorrect code had been entered into nsf’s automated payment system. we noted that because of the high volume of payments,',
9341:'it would be an undue burden to require the certifying officer to examine the supporting materials of each payment. gao’s',
9342:'policy and procedures manual for guidance of federal agencies recognizes the impracticality of requiring accountable officers to examine, personally, each',
9343:'transaction and advises that accountable officers may rely on the adequacy of automated systems and controls and the personnel who',
9344:'page 997 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers operate these systems and process individual',
9345:'transactions. gao, policy and procedures manual for guidance of federal agencies, title 7, § 7.2a, washington, d.c.: may 18, 1993.',
9346:'another case in which relief was granted under 31 u.s.c. § 3528b1a is b246415, july 28, 1992. a certifying officer',
9347:'paid a contract invoice to a financing institution to which payments had been assigned under the assignment of claims act',
9348:'without discovering that the contract file contained a prior assignment. the contracting officer had erroneously acknowledged the second assignment when',
9349:'he should have either rejected it or invalidated the first one. the agency remained liable to the first assignee and',
9350:'was unable to recover the improper payment from the second. the certifying officer had checked the contract file, and neither',
9351:'agency procedures nor reasonable diligence required her to keep looking once she found what appeared on its face to be',
9352:'a properly acknowledged assignment. the case also illustrates how an agency the panama canal commission in this case should respond',
9353:'to a loss—by reviewing its procedures to determine if they can be improved, within reason, to prevent recurrence. in this',
9354:'instance, the agency began requiring that contract files include a “milestone” log and that assignments be tabbed in the file',
9355:'and reviewed prior to acknowledgment. see also b287043, may 29, 2001. in b288284.2, mar. 7, 2003, due to widespread violence',
9356:'in the republic of the congo, the staff of the american embassy in kinshasa was evacuated to the embassy in',
9357:'brazzaville in june 1993. during this crisis, air afrique apparently threatened to cut off its transportation services to embassy personnel',
9358:'unless a payment was made for evacuating embassy pets during a similar crisis in 1991. the certifying officer certified the',
9359:'payment, relying on fiscal data provided over the telephone by kinshasa staff. this same certifying officer had not authorized the',
9360:'1991 payment, questioning it as being personal expenses of embassy staff. we granted relief to the certifying officer under 31',
9361:'u.s.c. § 3528b1a, noting that given the circumstances in the congo at that time and the urgency of the need',
9362:'to evacuate government employees and their families from a dangerous situation, it would have been an undue burden to require',
9363:'that the certifying officer seek further documentation or personally examine supporting materials behind the kinshasa official’s authorization and transmission of',
9364:'fiscal data. as a general rule, however, a certifying officer may not escape liability for losses resulting from improper certification',
9365:'merely by stating either that he was not in a position to determine that each item on a voucher was',
9366:'page 998 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers correctly stated, or that he must',
9367:'depend on the correctness of the computations of his subordinates. a certifying officer who relies upon statements and computations of',
9368:'subordinates must assume responsibility for the correctness of their statements and computations, unless it can be shown that neither the',
9369:'certifying officer nor his or her subordinates, in the reasonable exercise of care and diligence, could have known the true',
9370:'facts. 55 comp. gen. 297, 299 1975; 26 comp. gen. 578 1947; 20 comp. gen. 182 1940. in 49 comp.',
9371:'gen. 486 1970, a certifying officer asked if he would be held accountable where his own agency would not tell',
9372:'him exactly what he was being asked to certify. the agency took the position that the expenses in question were',
9373:'confidential and could be disclosed only to those with a need to know, which did not include the certifying officer.',
9374:'gao disagreed. the situation would be different if the agency were operating under “unvouchered expenditure” authority such as 31 u.s.c.',
9375:'§ 3526e2. under that type of authority, a certifying officer who is not informed of the object or purpose of',
9376:'the expenditure is not accountable for its legality. 24 comp. gen. 544 1945. in the case at hand, however, the',
9377:'agency had no such authority. therefore, the certifying officer would not be protected against liability if he certified a voucher',
9378:'without knowing what it represented. as gao pointed out several years later, any other answer would defeat the purpose of',
9379:'the certification requirement, which is to protect the united states against illegal or erroneous payments. 55 comp. gen. 297, 299',
9380:'1975. except for statutorily authorized unvouchered expenditures, “i don’t know and they wouldn’t tell me” cannot be sufficient. the second',
9381:'relief standard, 31 u.s.c. § 3528b1b, contains three elements, all of which must be satisfied—obligation incurred in good faith, payment',
9382:'not specifically prohibited, united states received value for the payment. if a certifying officer qualifies for relief under this standard,',
9383:'it becomes irrelevant whether he or she could also have qualified under the first standard. this is particularly useful because,',
9384:'in many cases, what would constitute reasonable diligence and inquiry for purposes of the first standard is far from clear.',
9385:'there is no simple formula for determining good faith. an important factor in evaluating good faith for purposes of 31',
9386:'u.s.c. § 3528 is whether the certifying officer had, or reasonably should have had, doubt regarding the propriety of the',
9387:'payment and, if so, what he or she did about it. whether the certifying officer reasonably should have been in',
9388:'doubt depends on a weighing of all surrounding facts and circumstances and cannot be page 999 gao06382sp appropriations law—vol. ii',
9389:'chapter 9 liability and relief of accountable officers resolved by any “hard and fast rule.” 70 comp. gen. 723, 726',
9390:'1991. in many cases, good faith is found simply by the absence of any evidence to the contrary. id. see',
9391:'also b262110, mar. 19, 1997. at one time, the failure to obtain an advance decision from gao on matters considered',
9392:'doubtful was viewed as an impediment to establishing good faith. e.g., 14 comp. gen. 578, 583 1935. depending on the',
9393:'circumstances, following the advice or instructions of some administrative official in lieu of seeking an advance decision may not constitute',
9394:'“reasonable inquiry” under the first relief standard of 31 u.s.c. § 3528. 31 comp. gen. 653 1952. however, it has',
9395:'become increasingly recognized that consulting agency counsel is a relevant factor in demonstrating good faith under the second standard. b191900,',
9396:'july 21, 1978; b127160, apr. 3, 1961. in b250884, mar. 18, 1993, gao granted relief to a certifying officer who',
9397:'relied, not on agency counsel directly, but on agency guidelines, which had been reviewed by agency counsel. gao also noted',
9398:'in that decision that agency guidelines had been subsequently revised. similarly, in b257893, june 1, 1995, gao found that the',
9399:'certifying officer’s good faith was demonstrated, in part, by reliance on a settlement agreement which had been approved by agency',
9400:'counsel. to understand the second element—“no law specifically prohibited the payment”—it is helpful to note the language of the original',
9401:'1941 enactment, which was “the payment was not contrary to any statutory provision specifically prohibiting payments of the character involved.”',
9402:'pub. l. no. 389, ch. 641, 55 stat. 875–76 dec. 29, 1941. this means statutes that expressly prohibit payments for',
9403:'specific items or services. 70 comp. gen. 723, 726 1991; b191900, july 21, 1978. in b300192, nov. 13, 2002, we',
9404:'described section 117 of public law no. 107229, 116 stat. 1465, 1468 sept. 30, 2002 the fiscal year 2003 continuing',
9405:'resolution as amended, as such a statute. section 117 prohibits the use of fiscal year 2003 appropriated funds to pay',
9406:'for printing of the budget of the united states other than by the government printing office. other examples are 31',
9407:'u.s.c. § 1348a telephones in private residences and 44 u.s.c. § 3702 newspaper advertisements without prior written authorization. under this',
9408:'interpretation, the phrase “no law specifically prohibited the payment” is not the same as the more general “payment prohibited by',
9409:'law.” it does not include violations of general fiscal statutes such as the page 9100 gao06382sp appropriations law—vol. ii chapter',
9410:'9 liability and relief of accountable officers antideficiency act 31 u.s.c. § 1341 or the general purpose statute 31 u.s.c.',
9411:'§ 1301a. b142871o.m., sept. 15, 1961.57 the third element, value received, normally implies the receipt of goods or services with',
9412:'a readily determinable dollar value. e.g., b241879, apr. 26, 1991 automatic data processing equipment maintenance contract extended without proper delegation',
9413:'of procurement authority, services were performed. but cf. b303177, oct. 20, 2004 certifying officer denied relief where government did not',
9414:'receive any value as a result of the erroneous payments. however, in appropriate circumstances, an intangible item may constitute value',
9415:'received where the payment in question has achieved a desired program result. in b257893, june 1, 1995, for example, the',
9416:'national archives and records administration received the benefits associated with avoiding litigation and related costs by entering into a settlement',
9417:'agreement, despite the fact that the agreement had improperly included the payment of attorney fees. see also b250884, mar. 18,',
9418:'1993; b191900, july 21, 1978; b127160, apr. 3, 1961. 3. disbursing officers a. standards of liability and relief as with',
9419:'certifying officers, the responsibilities and accountability of disbursing officers are mandated by statute. a disbursing officer in the executive branch',
9420:'must 1 disburse money only in accordance with vouchers certified by the head of the spending agency or an authorized',
9421:'certifying officer, and 2 examine the vouchers to the extent necessary to determine that they are a in proper form,',
9422:'b certified and approved, and ccorrectly computed on the basis of the facts certified. the disbursing officer is accountable for',
9423:'these functions, except that accountability for the correctness of computations lies with the certifying officer. 31 u.s.c. § 3325a. disbursing',
9424:'officers render their accounts quarterly. 31 u.s.c. § 3522a1. 57 one case, b222048, feb.10, 1987, implying that an antideficiency act',
9425:'violation would preclude relief under 31 u.s.c. § 3528b1b, is inconsistent with the weight of authority as discussed in the',
9426:'text. page 9101 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers the administrative relief provision for',
9427:'nonmilitary disbursing officers is 31 u.s.c. § 3527c, enacted in 1955.58 the comptroller general is authorized to relieve present or',
9428:'former disbursing officers from liability for deficiencies in their accounts resulting from illegal, improper, or incorrect payments, upon determining that',
9429:'the payment was not the result of bad faith or lack of reasonable care by the disbursing officer. the determination',
9430:'may be made by the agency and concurred in by gao, or it may be made by gao on its',
9431:'own initiative. as in the case of certifying officers, relief may be denied if the agency concerned fails to diligently',
9432:'pursue collection action against the recipient of the improper payment. the statute further provides that the granting of relief under',
9433:'section 3527c does not affect the liability or authorize the relief of the beneficiary or recipient of the improper payment',
9434:'nor does it diminish the government’s duty to pursue collection action against the beneficiary or recipient. 31 u.s.c. § 3527d2.',
9435:'in contrast with the certifying officer relief statute, 31 u.s.c. § 3527c is not limited to the executive branch. e.g.,',
9436:'b288163, june 4, 2002; b200108, b198558, jan. 23, 1981 judicial branch. the relief statute contemplates the consideration of individual cases',
9437:'and does not authorize the blanket relief of unknown disbursing officers for unknown amounts. b165743, may 11, 1973. once it',
9438:'is determined that there has been an improper payment for which a disbursing officer is accountable, and that relief is',
9439:'desired, the primary issue is whether the payment was or was not the result of bad faith or lack of',
9440:'reasonable care on the part of the disbursing officer. “bad faith” is difficult to define with any precision. it is',
9441:'somewhere between negligence and actual dishonesty, and closer to the latter. bad faith cases tend to be relatively uncommon. far',
9442:'more common are cases involving the reasonable care standard. this standard—whether the disbursing officer exercised reasonable care under the circumstances—is',
9443:'the legal definition of negligence and is the same standard applied in physical loss cases. 65 comp. gen. 858, 861–62',
9444:'1986; 54 comp. gen. 112 1974. 58 pub. l. no. 365, ch. 803, 69 stat. 687 aug. 11, 1955. see',
9445:'also section b.2.b, including the discussion of military disbursing officers. page 9102 gao06382sp appropriations law—vol. ii chapter 9 liability and',
9446:'relief of accountable officers the determination of whether a payment was or was not the result of bad faith or',
9447:'lack of due care must be made on the basis of the facts and circumstances surrounding the particular payment in',
9448:'question. a high error rate in the disbursing office involved does not automatically establish lack of due care in the',
9449:'making of a particular payment nor does a low error rate and a record of an exemplary operation automatically establish',
9450:'due care. b141038o.m., nov. 17, 1959; b136027o.m., june 13, 1958. the continued existence of an “inherently dangerous” procedure, however, does',
9451:'indicate lack of due care on the part of the responsible disbursing officer. b162629o.m., nov. 9, 1967. it is difficult,',
9452:'if not impossible, to state hard and fast rules applicable inflexibly to all cases involving relief under the provisions of',
9453:'31 u.s.c. § 3527c. what may be considered good faith and the exercise of due care in one set of',
9454:'circumstances may not be so considered in another. however, it may be stated generally that gao will grant relief where',
9455:'1 the agency has made proper efforts to collect from the recipient of the improper payment, 2 the agency has',
9456:'determined that the payment was not the result of bad faith or lack of due care on the part of',
9457:'the disbursing officer, and 3 no evidence to the contrary is available. also, relief may be granted without the administrative',
9458:'determination where due care and the absence of bad faith are evident from the facts. actual negligence which contributes to',
9459:'an improper payment will, of course, preclude the granting of relief. for example, making a payment on the basis of',
9460:'documents which have been obviously altered, without first seeking clarification, is not the exercise of due care. b233276, oct. 31,',
9461:'1989, aff’d upon reconsideration, b233276, june 20, 1990; b138593o.m., feb. 18, 1959; b135910o.m., july 14, 1958. similarly, relief was denied',
9462:'in the following cases: disbursing officer made duplicate payments on voucher schedule covering payments already made. disbursing officer had requested',
9463:'guidance on new procedures, and “duplicate” schedule with instructions had been sent to her in response to that request, with',
9464:'a cover letter clearly stating that the schedule covered payments previously made. the payment could only have been due to',
9465:'lack of due care. b142051, mar. 22, 1960. disbursing officer continued to pay new mexico gasoline tax after state attorney',
9466:'general and judge advocate general had both concluded that the united states was not liable for the tax. although page',
9467:'9103 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers the disbursing officer was aware of the',
9468:'rulings, he claimed that he had not received specific instructions to stop paying. b135811, may 29, 1959. disbursing officer reimbursed',
9469:'imprest fund on the basis of fictitious requisitions not supported by dealers’ invoices or delivery slips. b137723o.m., dec. 10, 1958.',
9470:'as with physical losses, failure to follow applicable regulations is generally regarded as negligence, and if an improper payment is',
9471:'attributable to that failure, relief will be denied. for example, in b271608, june 21, 1996, relief was denied a disbursing',
9472:'officer who failed to exercise due care, as evidenced by his failure to follow prescribed procedures. see also 54 comp.',
9473:'gen. 112, 116 1974; 44 comp. gen. 160 1964. in b271021, sept. 18, 1996, a disbursing officer failed to follow',
9474:'regulations and was denied relief, even though the disbursing officer had received instructions from superiors to make the improper payment.',
9475:'compliance with regulations will help establish due care, but the mere fact of compliance with regulations which are clearly insufficient',
9476:'may not always satisfy the standard. b192558, dec. 7, 1978. the concept of proximate cause is also applicable, and relief',
9477:'is appropriate where any negligence that may have existed was not the proximate cause of the improper payment. in one',
9478:'case, for example, local operating procedures at a military installation were found inadequate because they permitted personal checks to be',
9479:'cashed without checking identification cards. however, since the cashiers checked id cards on their own initiative, and did so in',
9480:'the case for which relief was sought, the inadequacy could not have contributed to the loss. b221415, mar. 26, 1986.',
9481:'also, in b288163, june 4, 2002, a bankruptcy judge had ordered a disbursing officer to pay funds to a false',
9482:'claimant. in that case, we found that the disbursing officer’s error was not the proximate cause of the loss because',
9483:'the judge had ordered the payment. for other examples, see b227436, july 2, 1987, and b217663, july 16, 1985. the',
9484:'essence of negligence is the existence of a duty to exercise reasonable care in a particular situation and the violation',
9485:'of that duty. in b188744, july 15, 1977, a bureau of indian affairs disbursing officer erroneously made a payment to',
9486:'the wrong heir. unknown to him, the probate and title determinations on which he had based the payment had been',
9487:'reopened and revised. under established procedures, the disbursing officer was neither page 9104 gao06382sp appropriations law—vol. ii chapter 9 liability',
9488:'and relief of accountable officers required nor expected to verify inheritance determinations. since the verification was not within the scope',
9489:'of his duty, and was not something anyone in his position would reasonably be expected to do, there was no',
9490:'lack of due care. see also b137223o.m., jan. 18, 1960. thus, negligence will generally not be imputed to a disbursing',
9491:'officer where payment is made on the basis of facts of record upon which the disbursing officer is or reasonably',
9492:'can be expected to rely, even though such facts are subsequently found to be erroneous. this assumes that there is',
9493:'nothing on the face of the documents presented to the disbursing officer which should reasonably have alerted him or her',
9494:'that something appeared to be wrong. a disbursing officer is accountable for payments made by his or her subordinates. however,',
9495:'relief may be granted under 31 u.s.c. § 3527c if the improper payment was not the result of bad faith',
9496:'or lack of due care attributable to the disbursing officer personally. b141038o.m., nov. 17, 1959. where the actual disbursement is',
9497:'made by a subordinate, relief for the supervisory disbursing officer requires a showing that the disbursing officer exercised adequate supervision.',
9498:'adequate supervision in this context means that the disbursing officer 1 maintained an adequate system of controls and procedures to',
9499:'avoid errors, and 2 took appropriate steps to ensure that the system was effective and was being followed at the',
9500:'time of the payment in question. e.g., 62 comp. gen. 476, 480 1983. a relief request must contain sufficient information',
9501:'to enable an independent evaluation. b235037, sept. 18, 1989. gao has not attempted to define the elements of an adequate',
9502:'supervisory system. there can in fact be no fixed formula, as the system will vary based on such factors as',
9503:'the size of the disbursing operation and the types of payments or transactions involved. nevertheless, several elements which commonly appear',
9504:'in good systems can be identified although no single case lists them as such: compliance with agency regulations. for example,',
9505:'a disbursing office at an american embassy will need to ensure compliance with any pertinent directives or financial management regulations',
9506:'of the state department. see b271896, mar. 4, 1997. locally developed instructions often called standard operating procedures or sops tailored',
9507:'to the needs of the particular disbursing office. relief requests should include copies of any relevant sops. in b241019, aug.',
9508:'19, 1991, we initially denied relief to a supervisory disbursing officer because the record did not contain evidence either page',
9509:'9105 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers that 1 the officer maintained an adequate',
9510:'system of procedures and controls sops were inadequate, or 2 that the officer took steps to ensure that the procedures',
9511:'were implemented effectively. this case was reversed upon reconsideration in b241019.2, feb. 7, 1992, when additional information pertaining to the',
9512:'procedures was provided to gao. while sops are extremely helpful, the lack of a written sop will not in and',
9513:'of itself cause a system to “flunk” the relief standard. e.g., b215226, apr. 16, 1985. training. this includes both initial',
9514:'training for new personnel and periodic refresher training, again tailored to the needs of the particular office. training in this',
9515:'context does not necessarily mean formal classroom training, but may be in the form of onthejob training and may include',
9516:'such devices as reading files which are circulated periodically and especially when pertinent changes occur. periodic review or inspection by',
9517:'the supervisor. the forms this may take will vary with the size and nature of the operation. the adequacy of',
9518:'a supervisory system is not, nor could it realistically be, measured against a zeroerror standard. many cases have made the',
9519:'point that a skillfully executed criminal scheme can occasionally outwit an adequate and wellsupervised system. e.g., b241880, aug. 14, 1991;',
9520:'b202911, june 29, 1981. similarly, human error will occur even in the most carefully established and supervised system. the best',
9521:'system cannot be expected to eliminate or detect every clerical error by a subordinate. e.g., b224961, sept. 8, 1987; b212336,',
9522:'aug. 8, 1983. the cases also recognize that, in a large operation, the supervisory disbursing officer cannot reasonably be expected',
9523:'to personally review every check that is issued or every cash payment that is made. e.g., b215734, nov. 5, 1984',
9524:'check cashed with fraudulent endorsement; b194877, july 12, 1979 amounts of two payments inadvertently switched, resulting in overpayment to one',
9525:'payee; b187180, sept. 21, 1976 wrong amounts inserted on checks. see also b266001, may 1, 1996. thus, it is possible',
9526:'for a supervisor to be relieved for an error by a subordinate which, if attributable to the disbursing officer personally,',
9527:'would have resulted in the denial of relief. we previously cited several cases denying relief for payments made on the',
9528:'basis of obviously altered documents. these were cases in which the disbursing officer saw or should have seen the documents.',
9529:'relief has been granted for similar losses occurring in otherwise adequate systems under which the supervisor was not required page',
9530:'9106 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers to see, and in fact did not',
9531:'see, the altered document. b141038o.m., nov. 17, 1959. where the subordinate who made the payment is also an accountable officer',
9532:'a cashier, for example, the standard for relieving the subordinate is whether the individual complied with established procedures and whether',
9533:'anything occurred which should reasonably have made the individual suspicious that something was wrong. e.g., b246418, feb. 3, 1992; b233997.3,',
9534:'nov. 25, 1991; b241880, aug. 14, 1991. depending on the particular facts, in cases involving two disbursing officers accountable for',
9535:'a payment, one a supervisor and the other a subordinate, it is possible for relief to be granted to both,',
9536:'denied to both, or granted to one and denied to the other. examples of cases applying the above standards in',
9537:'which relief was granted to both the supervisor and the subordinate disbursing officer are b271017, aug. 12, 1996, and b260753,',
9538:'jan. 11, 1996. examples of cases applying the above standards in which relief was granted to the supervisor but not',
9539:'the subordinate are: b260369, june 15, 1995 cashier failed to follow procedures; b231503, june 28, 1988 cashier failed to observe',
9540:'annotations on voucher; and b214436, apr. 6, 1984 agency declined to seek relief for subordinate who had failed to follow',
9541:'established procedures. in our coverage of physical loss cases, we emphasized the importance of statements by the accountable officer. the',
9542:'principle applies equally in improper payment cases. the existence of adequate controls and procedures is usually documented, but this is',
9543:'not always the case, and the passage of time may make it impossible to locate a copy of the specific',
9544:'version of the sops in effect at the time of the payment. also, testimony of the accountable officers and other',
9545:'involved persons is often the only way of establishing how the controls and procedures were being implemented at the time',
9546:'of the payment. while the disbursing officer’s own statement is obviously not disinterested and cannot be regarded as conclusive, it',
9547:'is always given appropriate weight and, as with unexplained loss cases, has often been enough to tip the balance in',
9548:'favor of relief where the record contains no controverting evidence or where documentary evidence is no longer available. examples are',
9549:'b234962, sept. 28, 1989; b215226, apr. 16, 1985; b217637, mar. 18, 1985; b216726, jan. 9, 1985; b215833, dec. 21, 1984;',
9550:'and b212603 et al., dec. 12, 1984. page 9107 gao06382sp appropriations law—vol. ii b. some specific applications chapter 9 liability',
9551:'and relief of accountable officers finally, a disbursing officer has the same statutory right as a certifying officer to obtain',
9552:'an advance decision from the comptroller general. 31 u.s.c. § 3529.59 see b270801, mar. 19, 1996. obviously, if the decision',
9553:'is to serve the purpose of protecting the disbursing officer, the request must include the facts which gave rise to',
9554:'the doubt. 20 comp. gen. 759 1941. following administrative advice in lieu of seeking a gao decision may, depending on',
9555:'the circumstances, bear upon the issue of whether the disbursing officer exercised due care. e.g., 49 comp. gen. 38 1969.',
9556:'we previously noted that consulting agency counsel will help a certifying officer establish good faith. there is no reason why',
9557:'it should not equally help a disbursing officer establish good faith and due care, although it may not be enough',
9558:'if the advice received flies in the face of contrary information in the hands of the disbursing officer. e.g., 65',
9559:'comp. gen. 858 1986, aff’d upon reconsideration, b217114.5, june 8, 1990, modified on other grounds, 70 comp. gen. 463 1991.',
9560:'whichever course of action is chosen, the disbursing officer faced with a doubtful payment needs to do something. the road',
9561:'to relief will be very difficult if a disbursing officer who is admittedly in doubt proceeds to make the payment',
9562:'without consulting either gao or appropriate agency officials. see 23 comp. gen. 578 1944. the federal government disburses money in',
9563:'an immense variety of situations—payments to employees salary, allowances, awards, payments to contractors, payments under assistance programs, payments to various',
9564:'claimants, etc. every situation in which proper payments can be made presents the potential for improper payments, resulting from such',
9565:'things as fraud, government error, or the misapplication of legal authority or limitations. to illustrate some of the situations that',
9566:'may arise, we present here a selection of improper payments for which relief has been sought under 31 u.s.c. §',
9567:'3527c. in each case, the relief question was approached by applying the principles and standards discussed in the previous section',
9568:'d.3.a. as noted above in sections b.2, c.1.b, and c.2.b of this chapter, the statutory scheme for military accountable officers',
9569:'was 59 effective on the date of enactment, section 204 of the general accounting office act of 1996, pub. l.',
9570:'no. 104316, 110 stat. 3826, 3845–46 oct. 19, 1996, amended the comptroller general’s authority under 31 u.s.c. § 3529 and',
9571:'transferred the authority to issue advance decisions with respect to the claims settlement functions transferred by section 211 of the',
9572:'act to the director of omb or to the agency to which the function was delegated. the comptroller general retains',
9573:'the authority to issue decisions to disbursing or certifying officers and heads of agencies on matters involving the use of',
9574:'appropriated funds that do not involve settling a claim or other function transferred to omb. page 9108 gao06382sp appropriations law—vol.',
9575:'ii chapter 9 liability and relief of accountable officers changed by section 913 of public law no. 104105, div. a,',
9576:'title ix, subtitle b, 110 stat. 186, 410–12 feb. 10, 1996. section 913 amended 31 u.s.c. § 3527b to apply',
9577:'to all accountable officials of the armed forces and included a new section 3527b1b providing relief for erroneous payments made',
9578:'by military accountable officials. as in the case of a physical loss or deficiency, the finding of the secretary involved',
9579:'regarding whether the circumstances warrant relief is conclusive on the comptroller general. gao has not yet addressed relief of military',
9580:'accountable officials for erroneous payments under the revised section 3527b. nevertheless, consideration of the principles addressed in the following cases',
9581:'is still useful. 1 fraudulent travel claims cases under this heading range from single payments to massive schemes. they involve',
9582:'two distinct situations—fraudulently obtained travel advances and payments based on fraudulent travel vouchers. in b240654, feb. 6, 1991, an imposter,',
9583:'using falsified travel orders and a phony military identification card, obtained travel advances at six air force bases totaling nearly',
9584:'$74,000. the air force was able to identify the imposter and he was arrested, but committed suicide before trial. see',
9585:'also b248532, oct. 26, 1992; b248251, june 30, 1992. in another case, an individual stole an identification card from an',
9586:'athletic locker at the pentagon and used it to obtain travel advances at several army installations. the fraud was successful',
9587:'because the thief bore a sufficient resemblance to the card’s owner. b217440, b217440.2, apr. 16, 1985; b217440, feb. 13, 1985.',
9588:'the losses in these cases were attributed to skillfully executed criminal activities. other cases involving fraudulently obtained travel advances include',
9589:'b261312, feb. 5, 1995; b246371, june 23, 1992; b234962, sept. 28, 1989; b221395, mar. 26, 1986. the second group of',
9590:'cases is similar except that the fraudulent document is a travel voucher rather than a travel order. several related cases',
9591:'involve a conspiracy carried out over several years by employees of the army corps of engineers. basically, the employees presented',
9592:'vouchers based on fraudulent lodging receipts, often provided by friends or relatives. the scheme eluded detection for several years until',
9593:'it was discovered that the providers of the receipts, who had “verified” the accuracy of the receipts to the corps,',
9594:'were themselves participants in the fraud. the disbursing officer in one district was relieved in part, but relief was denied',
9595:'for payments made after he had received information putting him on notice of page 9109 gao06382sp appropriations law—vol. ii chapter',
9596:'9 liability and relief of accountable officers the possibility of fraud. 65 comp. gen. 858 1986. in another district, the',
9597:'disbursing officer stopped making payments immediately upon being advised of the investigation, and was relieved in full. b217114.2, feb. 3,',
9598:'1988. a simpler situation is b215737, nov. 5, 1984, in which an individual presented to an army cashier a travel',
9599:'voucher which had been issued to someone else. relief was granted to the finance and accounting officer, but denied to',
9600:'the cashier because she failed to compare the name on the presenter’s identification card with the different name on the',
9601:'voucher. some additional fraudulent travel voucher cases are b241880, aug. 14, 1991; b229274, jan. 15, 1988; b222915, sept. 16, 1987;',
9602:'b213824, july 13, 1987; and b224832, july 2, 1987. 2 other cash payments fraudulently obtained it may be noted, somewhat',
9603:'cynically, that if there is a way to obtain cash from the federal government, someone will try to do it',
9604:'fraudulently. in some cases, losses can be prevented by the exercise of due care. in 68 comp. gen. 371 1989,',
9605:'for example, an individual deposited two “greenback money drafts” in the patients’ account at a department of veterans affairs hospital.',
9606:'these are drafts, resembling checks, which the issuing bank provides to various public places. a person with an account in',
9607:'the issuing bank can sign one of the forms and cash it elsewhere. the back of the form explicitly states,',
9608:'“you must call [the issuing bank] before cashing,” so that the bank can verify the existence of the account and',
9609:'the sufficiency of funds. in this instance, the cashier accepted the drafts without calling the issuing bank, the patient withdrew',
9610:'the funds shortly thereafter, and it was subsequently discovered that the drafts had been fraudulently negotiated. relief was denied because',
9611:'of the cashier’s negligent failure to follow the explicit printed instructions. in another case, relief was denied to a cashier',
9612:'who made a cash payment to a courier without requiring any identification. the courier turned out to be an imposter.',
9613:'b178953, aug. 8, 1973. in many cases, due care will not prevent the loss, and relief is granted. illustrative cases',
9614:'involving miscellaneous military cash payments, similar to the travel advance cases noted above, are b245127, sept. 18, 1991 transient/reaccession payment;',
9615:'b226174, june 18, 1987 casual payment; b215226, apr. 16, 1985 special reenlistment bonus; and b209717.2, july 1, 1983 military pay',
9616:'voucher with separation orders. page 9110 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers relief was',
9617:'denied to a cashier in another casual payment case, b227209, aug. 5, 1987, for neglecting to spot inconsistencies on the',
9618:'face of the voucher. 3 military separation vouchers the cases under this heading involve overpayments on military separation vouchers attributable',
9619:'to government error rather than fraud on the part of the recipient. in each case, the supervisory disbursing officer was',
9620:'relieved, illustrating the previously noted proposition that even a wellestablished and carefully supervised system of controls and procedures cannot be',
9621:'expected to totally eliminate human error. in b230842, apr. 13, 1988, and b227412, july 2, 1987, a cashier made an',
9622:'overpayment by using the amount from the wrong block on the voucher. in b228946, jan. 15, 1988, the cashier failed',
9623:'to clear a previous transaction from her adding machine. in all three cases, the agency sought relief for the supervisor',
9624:'while holding the cashier liable. similar cases are b222685, june 20, 1986; b221453, june 18, 1986; and b212293, nov. 21,',
9625:'1983. relief has been granted to the cashier in cases where the cashier followed applicable procedures and the error was',
9626:'attributable to someone else. e.g., b226614, may 6, 1987; b221471, jan. 7, 1986. 4 assignment of contract payments under the',
9627:'assignment of claims act, 31 u.s.c. § 3727 and 41 u.s.c. § 15, when a contractor assigns future contract payments',
9628:'to a financing institution assignee, the assignee must file written notice of the assignment and a copy of the assignment',
9629:'with the pertinent disbursing officer. once this is done, the government’s obligation is to make future payments to the assignee,',
9630:'and payments made directly to the contractor are erroneous. in b270715, july 23, 1996, an assignment bound the government, even',
9631:'though notice of the assignment was not given to the agency as required under the act, because the agency was',
9632:'fully aware of the assignment and had “recognized” the assignment. in b213720, oct. 2, 1984, an assignment under an army',
9633:'corps of engineers contract was properly filed with the disbursing officer, who acknowledged receipt but neglected to retain a copy.',
9634:'also, a copy was inexplicably not placed in the contract file. a few months later, an invoice was submitted clearly',
9635:'stating that payment should be made to the assignee bank. a voucher examiner functioning as a certifying officer failed to',
9636:'make page 9111 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers appropriate inquiry to confirm the',
9637:'existence of the assignment and instead followed the advice of the purchasing agent to pay the contractor. the disbursing officer',
9638:'then made payment to the contractor, notwithstanding the information on the face of the invoice indicating the existence of an',
9639:'assignment. since the army voucher examiner was not a statutory certifying officer, primary liability remained with the disbursing officer. given',
9640:'the disbursing officer’s failure to retain a copy of the assignment and to verify the proper payee, relief was denied.',
9641:'however, in b270801, mar. 19, 1996, a disbursing officer was relieved of liability for payment to a contractor, although there',
9642:'had been an assignment made to a financial corporation. the corporation had mailed a copy of the assignment to the',
9643:'disbursing office, as required, but the mailroom apparently lost the copy. the disbursing officer had followed established procedures and did',
9644:'not have actual notice of the assignment. in other cases in which a military finance and accounting officer is responsible',
9645:'for both certifying and disbursing functions, relief has been granted where the errors are solely those of subordinates and there',
9646:'is no lack of due care attributable to the disbursing officer personally. b216246, may 22, 1985 voucher examiner/certifying officer failed',
9647:'to follow standard operating procedures, nothing on face of voucher to suggest existence of assignment; b214273, dec. 11, 1984 unknown',
9648:'clerk had misfiled notice of assignment, office processed over 3,000 vouchers a month and could preaudit only on random basis.',
9649:'5 improper purpose/payment beyond scope of legal authority most improper purpose and similar cases will be certifying officer cases. those',
9650:'that involve disbursing officers are either military cases or disbursements by imprest fund cashiers.60 the point to remember is that',
9651:'relief is governed by the standards of 31 u.s.c. § 3527c, and the fact that a payment is unauthorized does',
9652:'not automatically indicate lack of due care. several imprest fund cashiers have been relieved where the vouchers were proper on',
9653:'their face and included approvals by appropriate agency officials, including a contracting officer. b221940, oct. 7, 1987 60 on november',
9654:'9, 1999, treasury issued a policy directive requiring that federal agencies eliminate agency imprest funds, with certain exceptions, by october',
9655:'1, 2001. see section b.3.a of this chapter for more information on imprest funds. page 9112 gao06382sp appropriations law—vol. ii',
9656:'chapter 9 liability and relief of accountable officers refreshments at seminar; b211265, june 28, 1983 air purifier; b203553, feb. 22,',
9657:'1983 air purifier. prior approvals of similar purchases may also be relevant in establishing due care. 61 comp. gen. 634,',
9658:'637 1982. note that the purchase in each case was not plainly illegal. refreshments may be authorized under the government',
9659:'employees training act and air purifiers are authorized in some situations.61 also, in b302993, june 25, 2004, gao considered whether',
9660:'particular expenditures that were once viewed as personal expenses of the employee may in certain circumstances be considered an official',
9661:'expense of the agency. in b217668, sept. 12, 1986, relief was denied to an army finance and accounting officer who',
9662:'purchased beer for troops engaged in a joint military exercise. while the beer could have been purchased with nonappropriated funds',
9663:'or—dare we suggest—paid for by the individuals who drank it, it is not an appropriate use of the taxpayers’ money.',
9664:'the decision recognized that relief might nevertheless be possible if the standards for relief of a supervisor under 31 u.s.c.',
9665:'§ 3527c were met, but the record did not contain sufficient information to enable an independent judgment. 4. check losses',
9666:'a. check cashing operations check cashing by disbursing officers is governed by 31 u.s.c. § 3342. subsection a authorizes disbursing',
9667:'officers to— “1 cash and negotiate negotiable instruments payable in united states currency or currency of a foreign country; “2',
9668:'exchange united states currency, coins, and negotiable instruments and currency, coins, and negotiable instruments of foreign countries; and “3 cash',
9669:'checks drawn on the treasury to accommodate united states citizens in a foreign country, but only if— 61 see the',
9670:'discussion of refreshments in section c.5.b and air purifiers in section c.13.c of chapter 4. page 9113 gao06382sp appropriations law—vol.',
9671:'ii chapter 9 liability and relief of accountable officers “a satisfactory banking facilities are not available in the foreign country;',
9672:'and “b a check is presented by the payee who is a united states citizen.” transactions under subsections a1 and',
9673:'a2 are authorized for official purposes or to accommodate certain classes of persons, including government personnel and their dependents under',
9674:'certain circumstances, hospitalized veterans, contractors working on government projects, authorized nongovernmental agencies operating with government agencies, federal credit unions, and',
9675:'members of the military forces of an allied or coalition nation participating in a combined operation, combined exercise, or combined',
9676:'humanitarian or peacekeeping mission with the u.s. military if certain conditions are met. 31 u.s.c. § 3342b. these are sometimes',
9677:'called “accommodation transactions.” the statute applies to legislative branch and presumably judicial branch agencies as well as executive branch agencies.',
9678:'64 comp. gen. 152 1984. the treasury department is authorized to issue implementing regulations and may delegate that authority to',
9679:'other agencies. 31 u.s.c. § 3342d. in 1999, the treasury department directed agencies to eliminate most imprest funds, so accommodation',
9680:'transactions are now limited mainly to department of defense and department of state overseas offices.62 furthermore, internal defense department and',
9681:'state department regulations allow accommodation transactions only if local commercial banking facilities are not available or are inadequate. department of',
9682:'defense financial management regulation no. 7000.14r, vol. 5, ch. 4, check cashing service january 2004; department of state foreign affairs',
9683:'handbook, 4fah3 h361.2, guidelines for authorizing accommodation exchange. of particular relevance here are 31 u.s.c. §§ 3342c2 and c4: “2',
9684:'the head of an agency having jurisdiction over a disbursing official may offset, within the same fiscal year, a deficiency',
9685:'resulting from a transaction under subsection a of this section with a gain from a transaction under 62 see the',
9686:'discussion of treasury’s november 9, 1999, policy directive on imprest funds in section b.3.a of this chapter. page 9114 gao06382sp',
9687:'appropriations law—vol. ii chapter 9 liability and relief of accountable officers subsection a. a gain in the account of a',
9688:'disbursing official not used to offset deficiencies under subsection a shall be deposited in the treasury as miscellaneous receipts. “4',
9689:'amounts necessary to adjust for deficiencies in the account of a disbursing official because of transactions under subsection a of',
9690:'this section are authorized to be appropriated.” one important application of the offsetting authority of 31 u.s.c. § 3342c2 is',
9691:'losses resulting from certain foreign currency exchange transactions, and cases involving this application are noted later in this chapter. however,',
9692:'nothing in the statute limits it to foreign exchange transactions. the offsetting authority applies by its terms to “a deficiency',
9693:'resulting from a transaction under subsection a,” and this includes check cashing operations as authorized by subsections a1 and b.',
9694:'decisions rendered shortly after the statute was enacted applied it to uncollectible checks cashed over forged endorsements and explicitly recognized',
9695:'the statute as a form of relief. the first such case was 27 comp. gen. 211 1947, stating at 213:',
9696:'“since the cashing of a check is an operation authorized under the act, any loss arising out of such transaction',
9697:'properly may be considered as coming within the purview of the term ‘any deficiencies’ for which relief is contemplated under',
9698:'the act.” this holding was followed in 27 comp. gen. 663 1948. the original version of 31 u.s.c. § 3342,',
9699:'enacted in 1944,63 did not include the offsetting authority. see b39771, sept. 26, 1950. it was added in 1953.64 thus,',
9700:'the “relief” referred to in 27 comp. gen. 211 and 27 comp. gen. 663 was simply the authority to use',
9701:'agency appropriations to adjust the deficiencies. both cases involved the army, which at the time received annual appropriations 63 pub.',
9702:'l. no. 554, ch. 716, 58 stat. 921 dec. 20, 1944. 64 pub. l. no. 61, ch. 115, § 2,',
9703:'67 stat. 61, 62 june 16, 1953. page 9115 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable',
9704:'officers for this purpose. the army was thus in a position to invoke the statute, and the adjustments had the',
9705:'effect of relieving the disbursing officers. for the next four decades, the principles established by 27 comp. gen. 211 saw',
9706:'little use, and check cashing losses during that period were mostly treated as improper payments requiring relief under whatever authorities',
9707:'were available 31 u.s.c. § 3527c since 1955. a 1991 decision to the air force, 70 comp. gen. 616, changed',
9708:'this and, in effect, reverted to the approach of 27 comp. gen. 211, now augmented by the offsetting authority. after',
9709:'reviewing precedent and legislative history, the decision concluded that— “section 3342 may be applied to check cashing losses. thus, an',
9710:'agency may use section 3342 to offset losses from cashing uncollectible checks with gains from other section 3342a activities.” offsetting',
9711:'under section 3342c2 is done on a fiscalyear basis. an uncollectible check becomes a deficiency not when it is cashed',
9712:'by the disbursing officer, but when it is dishonored and returned to be charged to the disbursing officer’s account. if',
9713:'these events occur in different fiscal years, the deficiency is chargeable to the latter year. b120737, dec. 27, 1954. if',
9714:'an item is charged as a deficiency in one year and collected in a subsequent year, the collection should be',
9715:'charged to the fiscal year account in which the collection is made regardless of the fiscal year in which the',
9716:'deficiency was charged. id. for checks cashed within the authority of 31 u.s.c. § 3342, following the procedures of that',
9717:'statute eliminates the need to pursue relief under 31 u.s.c. § 3527c. if there is a net gain in an',
9718:'account for a given fiscal year, the net gain is deposited in the treasury as miscellaneous receipts and that ends',
9719:'the matter. if there is a net loss, and the agency is able to make an adjustment from an available',
9720:'appropriation, the adjustment clears the disbursing officer’s account and similarly ends the matter. a net loss resulting from the application',
9721:'of 31 u.s.c. § 3342c is not an antideficiency act violation. 61 comp. gen. 649 1982. it must be emphasized',
9722:'that 31 u.s.c. § 3342 does not make an agency’s appropriations available for these adjustments. it merely authorizes appropriations for',
9723:'that purpose. for disbursing officers within the department of defense, permanent authority exists to use appropriated funds for “losses in',
9724:'the accounts of disbursing officials and agents in page 9116 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of',
9725:'accountable officers accordance with law.” 10 u.s.c. § 27812. civilian agencies will need comparable authority which may be in the',
9726:'form of permanent legislation, specific appropriations, or specific language in a lumpsum appropriation for example, “including adjustments as authorized by',
9727:'31 u.s.c. § 3342”. the july 1991 decision made two other very important points. first, the offsetting authority of 31',
9728:'u.s.c. § 3342 is discretionary. an agency is not required to use it, but retains the option of refusing to',
9729:'adjust a disbursing officer’s account, in which event the relief avenue of 31 u.s.c. § 3527c remains available. second, while',
9730:'good faith and due care are prerequisites to relief under 31 u.s.c. § 3527c, section 3342 contains no comparable requirement.',
9731:'thus, the use of section 3342 does not require findings of good faith and due care. decisions stating or implying',
9732:'the contrary, such as 27 comp. gen. 211, were modified to that extent. be that as it may, it is',
9733:'undesirable as a matter of policy to use 31 u.s.c. § 3342 to relieve a disbursing officer for losses attributable',
9734:'to bad faith or lack of due care, and an agency is well within its discretion to decline use of',
9735:'those procedures in such cases. the discretion to use 31 u.s.c. § 3342 applies only to checks cashed within the',
9736:'scope of the statute. losses resulting from checks cashed beyond the scope of that authority i.e., not for an official',
9737:'purpose or for a person not within one of the classes specified in subsection 3342b may not be offset or',
9738:'adjusted under the authority of section 3342, but are improper payments for which administrative relief is available only under 31',
9739:'u.s.c. § 3527c. 70 comp. gen. 420 1991; b127608o.m., may 28, 1956. the losses under consideration—uncollectible check losses resulting from',
9740:'check cashing operations—fall into several distinct but related fact patterns. cases cited below which predate gao’s july 1991 decision are',
9741:'all section 3527c relief cases resolved under the principles and standards previously discussed; all could now be resolved under the',
9742:'offset and adjustment authority of 31 u.s.c. § 3342. uncollectible personal check. cases in this category tend to involve either',
9743:'of two general situations: thief steals someone else’s personal checks and cashes them in conjunction with stolen or fraudulent identification.',
9744:'b246418, feb. 3, 1992; b240440, mar. 27, 1991; b212588, aug. 14, 1984. page 9117 gao06382sp appropriations law—vol. ii b. duplicate',
9745:'check losses chapter 9 liability and relief of accountable officers thief cashes checks from a fraudulently established checking account in',
9746:'the name of some other real or fictitious person. b229827, jan. 14, 1988; b221415, mar. 26, 1986; b220737, b220981, dec.',
9747:'10, 1985. fraudulent endorsement of government check. in this situation, a thief steals a legitimately issued government check paycheck, tax',
9748:'refund check, etc. and cashes it with the aid of stolen or fraudulent identification. e.g., b227436, july 2, 1987; b216726,',
9749:'jan. 9, 1985; b214436, apr. 6, 1984. fraudulent alteration of amount on government check. if the amount is fraudulently raised',
9750:'by the payee, the liability of the disbursing officer is the difference between the original amount and the fraudulent amount.',
9751:'b228859, sept. 11, 1987. if the amount is altered and the check cashed by someone other than the payee, the',
9752:'disbursing officer’s liability is the full amount of the payment. b221144, apr. 22, 1986. the opportunity for fraudulent alteration of',
9753:'amounts naturally decreases when the amount is also spelled out in words on the face of the check. 62 comp.',
9754:'gen. 476, 481 1983. however, spelling the amount out in words is not required on government checks, and treasury checks',
9755:'generally do not do so. see i tfm § 45035.50d. if a disbursing officer is in compliance with the tfm',
9756:'and applicable agency regulations, relief will not be denied solely because the amount is not written out in words. 65',
9757:'comp. gen. 299 1986; b209697, nov. 21, 1983. postal money order. the authority of 31 u.s.c. § 3342a1 is not',
9758:'limited to checks but applies to “negotiable instruments” generally, which includes postal money orders. e.g., b217663, july 16, 1985 fraudulent',
9759:'alteration of amount; b213874, sept. 6, 1984 forged endorsement. the department of defense has established strict internal controls for accommodation',
9760:'transactions, which aim to virtually preclude fraudulent transactions and thus limits the grounds for granting relief to a disbursing officer',
9761:'who cashes a forged instrument. department of defense financial management regulation no. 7000.14r, vol. 5, ch. 4, check cashing service',
9762:'january 2004. a duplicate check loss, as we use the term here, is a loss resulting when 1a payee claims',
9763:'nonreceipt of an original check, 2 the government issues a replacement check, and 3 both checks are negotiated. page 9118',
9764:'gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers replacement checks are issued under the authority of',
9765:'31 u.s.c. § 3331. if an original check “is lost, stolen, destroyed in any part, or is so defaced that',
9766:'the value to the owner or holder is impaired,” the secretary of the treasury may issue a replacement check, and',
9767:'may delegate that authority to other agencies. 31 u.s.c. §§ 3331b and g. the secretary has discretionary authority to require',
9768:'an indemnification agreement from the owner or holder prior to issuing the replacement check. id. § 3331e. the current system',
9769:'for issuing replacement checks, developed by the treasury department in the mid1980s, is reflected in 31 c.f.r. parts 245 and',
9770:'248 and i tfm chapter 47000.65 in brief, upon receipt of a claim for loss or nonreceipt of an original',
9771:'check, the spending agency may certify a new payment. 31 c.f.r. § 245.5. in agencies for which treasury disburses, an',
9772:'agency certifying officer certifies the replacement check to a treasury disbursing officer. for agencies which do their own disbursing, most',
9773:'notably the military departments, the “recertification” is an internal procedure based on agency as well as treasury regulations. the replacement',
9774:'check, which has a different serial number from the original check, is called a “recertified check.” formerly, most replacement checks',
9775:'were “substitute checks” with the same serial number as the original check. with the implementation of the recertification procedure, treasury',
9776:'announced that substitute checks would generally no longer be available.66 the treasury regulations specify the responsibilities of the payee. if',
9777:'the original check shows up before the claimant receives the replacement check, the claimant should notify the agency and follow',
9778:'the agency’s instructions. 31 c.f.r. § 245.8a. if the original check shows up after receipt of the replacement check, the',
9779:'claimant is to return the original to the issuing agency. “under no circumstances should both the original and replacement checks',
9780:'be cashed.” id. § 245.8b. payees do not always read treasury regulations, however, and sometimes cash both checks. since the',
9781:'agency’s obligation is to make payment once, cashing both checks results in an erroneous payment for which some 65 prior',
9782:'approaches had produced complex problems and were unsatisfactory. see 62 comp. gen. 91 1982; gao, millions paid out in duplicate',
9783:'and forged government checks, afmd8168 washington, d.c.: oct. 1, 1981. 66 the regulations now use the term “substitute check” only',
9784:'in 31 c.f.r. part 248 in the context of “depositary checks,” checks drawn on accounts maintained in depositary banks in',
9785:'u.s. territories or foreign countries. page 9119 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers accountable',
9786:'officer is liable unless relieved. in the most common situation, the payee cashes both checks. the first check satisfies the',
9787:'government’s original obligation, and issuing the replacement check is an authorized transaction. thus, the loss occurs “when the second check',
9788:'is wrongfully presented and paid. the actual sequence in which the payee negotiates the original check and the replacement check',
9789:'is immaterial.” 62 comp. gen. 91, 94 1982. depending on the agency and the nature of the error, the proper',
9790:'relief statute will be either 31 u.s.c. § 3528 certifying officer or 31 u.s.c. § 3527c disbursing officer. for the',
9791:'military departments, even though they may employ a “recertification” procedure, the proper statute is section 3527c. 66 comp. gen. 192,',
9792:'194 1987. gao’s first relief decision under the recertification procedure was 65 comp. gen. 811 1986. relief for a duplicate',
9793:'check loss is granted if 1the accountable officer followed applicable regulations and procedures, 2there is no indication of bad faith,',
9794:'and 3 the agency has pursued or is pursuing adequate collection action to recover the overpayment. id. at 812. this',
9795:'is essentially the same standard that had been applied under the former “substitute check” system. e.g., 65 comp. gen. 812,',
9796:'813 1986; 62 comp. gen. 91, 97 1982. a few more recent cases applying this standard are b260753, jan. 11,',
9797:'1996 air force; 70 comp. gen. 298 1991 navy; b237343, jan. 23, 1991 army; and b232773, jan. 12, 1989 defense',
9798:'logistics agency. of course, relief cannot be granted until a loss actually occurs. 70 comp. gen. 9, 12 1990; 66',
9799:'comp. gen. 192, 194 1987. the documentation required to support a relief request in a duplicate check case is spelled',
9800:'out in b221720, may 8, 1986, and includes such things as copies of both checks, the claim of nonreceipt, the',
9801:'agency’s stop payment request, treasury’s debit voucher, and documentation of collection efforts. if the disbursing officer is a supervisor and',
9802:'the duplicate check is actually issued by a subordinate, both are accountable officers for purposes of liability and relief. b271017,',
9803:'aug. 12, 1996; b260639, june 15, 1995; 62 comp. gen. 476, 479–80 1983. the relief standards are those set forth',
9804:'in section d.3.a of this chapter for improper payments generally. as with other relief situations, lack of due care, failure',
9805:'to follow established procedures for example, will not preclude relief if it was not the proximate cause of the loss.',
9806:'70 comp. gen. 298 1991; b225932, mar. 27, 1987. treasury regulations encourage, but do not require, the agency to obtain',
9807:'a signed statement from the claimant before issuing or certifying a replacement check. i tfm § 47060.20a. if the agency’s',
9808:'own regulations require the statement, failure to obtain it will generally be regarded as lack page 9120 gao06382sp appropriations law—vol.',
9809:'ii chapter 9 liability and relief of accountable officers of due care. relief is granted or denied depending upon whether',
9810:'lack of due care was the proximate cause of the improper payment. b225932, mar. 27, 1987. if the statement is',
9811:'obtained but turns out to be a misrepresentation, it is not the accountable officer’s fault. b247062, june 9, 1992. in',
9812:'70 comp. gen. 9 1990, gao advised the navy that it could waive its own requirement for claimant statements where',
9813:'a box containing over 4,600 checks was lost en route to the philippines, and obtaining individual statements prior to issuing',
9814:'replacement checks would have caused undue delay and hardship. gao has expressed concern over issuing replacement checks prematurely, that is,',
9815:'without giving the original check a reasonable time to arrive. while the timing is essentially a matter of agency discretion,',
9816:'it is also a factor which may bear upon the issue of due care. 63 comp. gen. 337 1984. timing',
9817:'should include risk assessment. thus, a shorter waiting period may be appropriate where the payee has a continuing relationship with',
9818:'the agency and recoupment by offset is therefore presumably easier. i tfm § 47060.20e; b226116, feb. 20, 1987. as a',
9819:'general proposition, gao has said that it will not raise a question solely on the basis of a 3day waiting',
9820:'period, but it might be a factor to be considered in determining whether a disbursing officer has exercised due care.',
9821:'63 comp. gen. 337; i tfm § 47060.20a. for checks mailed prior to the actual payment date, the 3day period',
9822:'may include mailing days. b230658, june 14, 1988. a waiting period of less than 3 days needs to be specifically',
9823:'justified. see b215433, b215515, july 2, 1984. a good example is b246369, feb. 3, 1992 payee who was in virginia',
9824:'could not have received original check inadvertently mailed to florida. it is possible, although the cases are and should be',
9825:'rare, for duplicate check losses to occur with checks issued to a bank under direct deposit procedures. recoupment efforts should',
9826:'be directed against the bank which made the error, leaving it to the bank to then recover from the individual',
9827:'depositor as an independent transaction. b215431, b215432, jan. 2, 1985. related decisions arising from the same set of losses are',
9828:'b215432.3, aug. 22, 1991 finally granting relief upon documentation of collection efforts, and b215432 et al., july 6, 1984. an',
9829:'agency’s internal controls and procedures form an important line of defense against duplicate check losses. one agency, for example, will',
9830:'issue a recertified check prior to obtaining the status of the original check only if the employee has sufficient funds',
9831:'in his or her retirement account to cover a potential loss, and requires specific clearances upon termination of page 9121',
9832:'gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers employment. these procedures, gao commented, “will better safeguard',
9833:'federal funds.” b232615, sept. 28, 1988. agencies should also develop guidelines for dealing with persons requesting several replacement checks within',
9834:'a relatively short time period. three replacement check requests within an 11month period, for example, should trigger some concern. b221398,',
9835:'sept. 19, 1986. guidelines may include such things as counseling employees to take advantage of direct deposit procedures and delaying',
9836:'recertification until the status of the original check has been determined. the exact content of any such guidelines is up',
9837:'to the agency. b217947, b226384, mar. 27, 1987; b220500, sept. 12, 1986. indemnification agreements may be desirable in some circumstances,',
9838:'even where not required. see 66 comp. gen. 192, 194–95 1987. chargeback data received from treasury should be processed and',
9839:'forwarded to the pertinent finance office as promptly as possible. b226316 et al., apr. 9, 1987. cases occasionally present variations',
9840:'on the factual theme, but the basic relief approach is the same. e.g., b226769, july 29, 1987 agency issued replacement',
9841:'for wrong amount; b195396, oct. 1, 1979 agency inadvertently issued two replacement checks. in our coverage of physical losses, we',
9842:'discussed the dollar amount gao has established, currently $3,000, below which agencies may grant relief without the need for gao',
9843:'involvement. in october 1991, gao started extending the limit selectively to certain categories of improper payments, one of which is',
9844:'duplicate check losses. for duplicate check losses not exceeding $3,000, agencies may grant or deny relief administratively, without the need',
9845:'for gao concurrence, in accordance with applicable statutes, regulations, and gao decisions. b243749, oct. 22, 1991 civilian; b244972, oct. 22,',
9846:'1991 military.67 section c.2 of this chapter contains more detail on how the $3,000 limit operates. in the cases cited',
9847:'and discussed thus far, it was the payee who negotiated both checks. where the original check is fraudulently negotiated by',
9848:'someone else, the situation is a bit different. here, the replacement check rather than the original check satisfies the government’s',
9849:'obligation to the payee, and the loss results from negotiating the original check. 66 comp. gen. 192, 194 1987. more',
9850:'precisely, the loss results from payment on the original check since there is nothing improper or incorrect in issuing the',
9851:'67 the process actually started with a limited authorization for the army, b214372, oct. 9, 1987, which was revoked by',
9852:'the more inclusive b244972. page 9122 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers c. errors',
9853:'in check issuance process original check. id. if forgery is established, treasury will seek to recover from the bank which',
9854:'negotiated the check. see b232772, oct. 17, 1989. the october 1991 decisions just cited authorizing administrative resolution of duplicate check',
9855:'losses not exceeding $3,000 extended the authorization to another category of erroneous payments—those resulting from “mechanical and/or clerical errors during',
9856:'the check issuance process.” thus, agencies may grant or deny relief for losses in this category within the monetary ceiling,',
9857:'as with duplicate check losses, in accordance with applicable statutes, regulations, and gao decisions. b243749, oct. 22, 1991civilian; b244972, oct.',
9858:'22, 1991 military. the relief standards are the same as those previously discussed for other types of improper or erroneous',
9859:'payments. cases under this heading may result from any type of check payment— salary payments, payments to contractors, benefit payments,',
9860:'etc.—and include a variety of fact patterns. a few cases involving erroneous tax refund checks will illustrate. in each case,',
9861:'the disbursing officer was a director of one of treasury’s regional financial centers formerly called disbursing centers, a supervisory official.',
9862:'in b241098, b241137, dec. 27, 1990, the printing system rejected two checks and automatically produced substitutes; the printing operator failed',
9863:'to remove and void the original checks; the originals and substitutes were issued and cashed by the payees. in b187180,',
9864:'sept. 21, 1976, a keypunching error transposed two numerals, resulting in issuance of a check for $718 instead of the',
9865:'correct amount of $178. in b235037, sept. 18, 1989, an overpayment was made due to an error during the “typing',
9866:'operation and proof reading process.” relief was granted in the first two cases by applying the standards for relieving a',
9867:'supervisor; in the third, it was denied because the request contained neither a description of relevant controls and procedures nor',
9868:'statements by the individuals concerned. as demonstrated in b241098, b241137 where the irs printing system rejected two tax refund checks',
9869:'and automatically produced substitutes and the printing operator failed to void the originals, most mechanical errors are not purely mechanical,',
9870:'but involve human error as well, such as failure to spot the error during a verification process. also, many of',
9871:'these cases involve the issuance of duplicate checks, the difference between these and the previously discussed duplicate check losses being',
9872:'that these losses do not result from a claim of nonreceipt but from the simultaneous issuance of duplicate checks attributable',
9873:'to government error. similar cases involving other types of payments are b239371, june 13, 1990; b239094, june 13, page 9123',
9874:'gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers 1990; b237082 et al., may 8, 1990; b235044',
9875:'et al., mar. 20, 1990; and b235036, oct. 17, 1989. some factual variations follow: machine that stuffs checks into envelopes',
9876:'was misaligned, obscuring the names and addresses. treasury decided to shred the original checks and reissue them. one of the',
9877:'originals was inadvertently delivered rather than shredded, causing a duplicate payment. b245586, nov. 12, 1991 relief granted. due to mechanical',
9878:'failure, a checkprinting machine failed to advance a voucher schedule and a second check was issued to a person with',
9879:'the same name but different middle initial than the correct payee. a clerk failed to notice the error during verification.',
9880:'in view of the volume of work at the disbursing center, the error was viewed as the type that will',
9881:'occasionally escape even in a wellestablished and carefully supervised system. b195106, july 12, 1979 relief granted. malfunction of feed mechanism',
9882:'on printing machine caused one check to skip, printing the inscription on the next check. the first check was replaced',
9883:'without noticing the duplicate; both checks were issued. relief was granted on the same basis as in b195106. b212431, nov.',
9884:'21, 1983. “clerical error” means human error without contributing mechanical malfunction. relief standards remain the same. the cases noted in',
9885:'the following groupings, as with the last three tax refund cases cited above, are intended to illustrate factual variations. payment',
9886:'of wrong amount. the person preparing a check for a military separation voucher misread a dollar sign as the number',
9887:'“8,” and printed a check for $899 instead of the correct amount of $99. b238863, july 11, 1991 relief granted.',
9888:'a voucher examiner preparing a partial payment to a contractor erroneously used the total amount due on the contract instead',
9889:'of the amount of the partial payment. b227410, aug. 18, 1987 relief granted. payment to wrong person. a clerk consolidating',
9890:'two contract payment vouchers in a single check payable to a credit union erroneously listed only one account number, causing',
9891:'an overpayment to one contractor and necessitating a replacement check to the other. b238802, dec. 31, 1990 relief granted. further',
9892:'examples are: b254385, mar. 22, 1994 incorrect processing code generated payment page 9124 gao06382sp appropriations law—vol. ii chapter 9 liability',
9893:'and relief of accountable officers to wrong contractor; relief granted; b234197, mar. 15, 1989 misreading of documents resulted in payment',
9894:'to subcontractor instead of prime contractor; relief granted; b212336, aug. 8, 1983 voluntary child support allotment paid to wrong person',
9895:'due to error in assignment of organization code; relief granted; b192109, june 3, 1981 check issued to wrong person with',
9896:'slightly different name than correct payee; relief granted; and b194877, july 12, 1979 amounts of two checks inadvertently switched; relief',
9897:'granted. duplicate payment. treasury financial center was issuing replacements for a batch of mutilated checks. one mutilated check became separated',
9898:'from the rest and was erroneously released along with its replacement. a computer operator had failed to verify each replacement',
9899:'check against the corresponding mutilated check. because controls were in place which would have prevented the error had they been',
9900:'followed, and considering the large volume of work at the disbursing center, relief was granted to the disbursing officer, the',
9901:'center’s director. the computer operator is not an accountable officer. b231551, sept. 12, 1988 relief granted. most duplicate payments are',
9902:'recovered, but many either are not or involve the expense of collection action or litigation. especially in the area of',
9903:'payments to contractors, duplicate payment losses can involve large amounts. duplicate payments are considered improper payments, reportable under the improper',
9904:'payments information act, pub. l. no. 107300, 116 stat. 2350 nov. 26, 2002. gao has emphasized the importance of adequate',
9905:'internal controls, as well as strong support and active involvement from agency management, the administration, and congress, in reducing duplicate',
9906:'payments and other types of improper payments. see gao, financial management: status of the governmentwide efforts to address improper payment',
9907:'problems, gao0499 washington, d.c.: oct. 17, 2003; general services administration needs to improve its internal controls to prevent duplicate payments,',
9908:'gao/afmd8570 washington, d.c.: aug. 20, 1985; strengthening internal controls would help the department of justice reduce duplicate payments, gao/afmd85 72',
9909:'washington, d.c.: aug. 20, 1985. a case involving a duplicate payment to a contractor in which relief was granted on',
9910:'the basis of adequate controls is b241019.2, feb. 7, 1992. 5. statute of limitations the accounts of accountable officers must',
9911:'be settled by gao within 3 years “after the date the comptroller general receives the account.” page 9125 gao06382sp appropriations',
9912:'law—vol. ii chapter 9 liability and relief of accountable officers 31 u.s.c. § 3526c1. once this 3year period has expired,',
9913:'no charges may be raised against the account except for losses due to fraud or criminal action on the part',
9914:'of the accountable officer. id. § 3526c2. enacted in 1947,68 this legislation effectively operates as a limitation on establishing an',
9915:'accountable officer’s liability for improper expenditures. as the defense department pointed out in recommending the legislation, a time limitation is',
9916:'desirable because passage of time diminishes the chances of recovering from the payee or recipient, leaving the liability solely with',
9917:'the accountable officer. s. rep. no. 8099 1947. unlike other statutes of limitations which merely affect the remedy for example,',
9918:'by barring the commencement of legal proceedings, 31 u.s.c. § 3526c completely eliminates the debt. b181466, nov. 19, 1974 nondecision',
9919:'letter. once an account has been settled, it cannot be reopened except for fraud or criminality, as noted above, and',
9920:'the authority to grant or deny relief no longer exists. thus, an accountable officer can escape liability for an improper',
9921:'expenditure if the government does not raise a charge against the account within the 3year period. e.g., 62 comp. gen.',
9922:'498 1983; b223372, dec. 4, 1989; b198451.2, sept. 15, 1982. once an accountable officer’s liability has been timely established, section',
9923:'3526c does not limit the government’s recovery from that officer. 31 u.s.c. § 3526c4b. an accountable officer’s liability can be',
9924:'established by the officer’s agreement to repay the erroneous payment or by a denial of relief made by the agency.',
9925:'70 comp. gen. 616 1991; b258735, dec. 15, 1994. the statute of limitations of 31 u.s.c. § 3526c applies only',
9926:'to improper payments and not to physical losses or deficiencies. b260563, mar. 31, 1995; 60 comp. gen. 674 1981. an',
9927:'accountable officer’s liability for a physical loss or deficiency is wholly independent of anyone’s “raising a charge” against that officer’s',
9928:'account. the original version of 31 u.s.c. § 3526c was enacted at a time when accounts were physically transmitted to',
9929:'gao for settlement, gao reviewed every piece of paper, and then issued a certificate of settlement to the accountable officer,',
9930:'“disallowing” credit for questionable items. as a result of changes in audit methods, this is no longer done. rather, accounts',
9931:'are now retained by the various agencies, and an account is regarded as settled by operation of law at the',
9932:'end of the 3year period except for 68 pub. l. no. 72, ch. 78, 61 stat. 101 may 19, 1947.',
9933:'page 9126 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers unresolved items. gao, policy and procedures',
9934:'manual for guidance of federal agencies, title 7, § 8.7 washington, d.c.: may 18, 1993 hereafter gaoppm. to reflect these',
9935:'changes in audit procedures, the date a “substantially complete” account is in the hands of the agency and available for',
9936:'audit is now generally considered as the point from which the 3year period begins to run. e.g., b258735, dec. 15,',
9937:'1994. assuming that supporting documents are available at the end of the time period covered by an accountable officer’s statement',
9938:'of accountability, this will usually mean the date on which that statement of accountability is certified. 7 gaoppm § 8.7.',
9939:'for example, in b251994, sept. 24, 1993, the agency’s disbursing officer prepared monthly statements of accountability, and thus the 3year',
9940:'period for both the disbursing and certifying officer would begin on the last day of the month covered by the',
9941:'accountability statement that included the improper payment.69 there are situations, however, in which the 3year period does not begin to',
9942:'run until some later date. where a loss is due to fraud, the period begins when the loss is discovered',
9943:'and reported to appropriate agency officials. b272615, may 19, 1997; b270442.2, feb. 12, 1996. where an agency has no way',
9944:'of knowing that an improper payment has occurred until it receives a debit voucher from the treasury department duplicate check',
9945:'losses, for example, the 3year period begins to run when the agency receives the debit voucher. b226393, apr. 29, 1988.',
9946:'if the date of receipt cannot be determined, the date of the debit voucher is used.70 id. if an irregularity',
9947:'has not been resolved by the agency within 2 years from the time the statute of limitations begins to run,',
9948:'the irregularity should at that time be reported to gao. this may be in the form of a relief request',
9949:'or 69 unlike disbursing officers, certifying officers are not custodians of public funds, and thus do not have accounts and',
9950:'statements of accountability in the same manner disbursing officers do. for purposes of audit and settlement, gao considers the certifying',
9951:'officer’s account to be the certified vouchers and supporting papers relating to payments made by a disbursing officer over a',
9952:'particular accounting period. in other words, for payments comprising a disbursing officer’s statement of accountability, the 3year period is essentially',
9953:'the same for the disbursing officer and for the certifying officers on whose certifications the disbursing officer relied. b251994, sept.',
9954:'24, 1993. 70 prior decisions had not been entirely clear on precisely which date to use. e.g., b220689, sept. 24,',
9955:'1986 date of debit voucher; b213874, sept. 6, 1984 inclusion in statement of accountability. b226393 established the propositions stated in',
9956:'the text and modified prior decisions accordingly. page 9127 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable',
9957:'officers a copy of the agency’s irregularity report. this is designed to provide adequate time to consider a relief request',
9958:'or to otherwise prevent expiration of the statute of limitations where necessary. 7 gaoppm § 8.4.c. see also 62 comp.',
9959:'gen. 476, 480 1983; b227538, july 8, 1987; b217741, oct. 15, 1985. of course, nothing prevents an agency from seeking',
9960:'relief sooner if appropriate. as noted above, the 3year limitation does not apply to losses attributable to fraud or other',
9961:'criminal action by the accountable officer. 31 u.s.c. § 3526c2. it is automatically suspended during war. id. § 3526c3. and',
9962:'it may be suspended by the comptroller general with respect to a specific item to get additional evidence or explanation',
9963:'necessary to settle an account. id. § 3526g. this may be in the form of a timely notice of exception',
9964:'b226176, may 26, 1987, or other written notification b272615, may 19, 1997; b270715, july 23, 1996. the mere submission of',
9965:'a relief request within the 3year period, however, is not sufficient to toll the 3year statute of limitations. 62 comp.',
9966:'gen. 91, 98 1982; b220689, sept. 24, 1986. finally, 31 u.s.c. § 3526c deals solely with the liability of an',
9967:'accountable officer. it has no effect on the liability of the payee or recipient of an improper payment. it does',
9968:'not establish a limitation on recoveries against the improper payee or recipient nor does it affect the agency’s obligation to',
9969:'pursue collection action against the payee or recipient. 31 u.s.c. § 3526c4a; arnold v. united states, 404 f.2d 953 ct.',
9970:'cl. 1968; b205587, june 1, 1982. nor does 31 u.s.c. § 3526c affect an agency’s ability to pay a voluntary',
9971:'creditor’s claim for reimbursement, which is governed by 31 u.s.c. § 3702. b278805, july 21, 1999. the relief statutes discussed',
9972:'thus far—31 u.s.c. §§ 3527a, b, c, and e. other relief 3528—are the ones most commonly encountered and will cover',
9973:'the vast statutes majority of cases. several others exist, however. our listing here is not intended to be complete. 1.',
9974:'statutes requiring the statutes in this group are similar to 31 u.s.c. §§ 3527 and 3528 in that they require',
9975:'someone to actually make a relief decision. affirmative action a. united states court of the relief authority of the court',
9976:'of federal claims is found in two federal claims provisions of law: page 9128 gao06382sp appropriations law—vol. ii chapter 9',
9977:'liability and relief of accountable officers b. the legislative and judicial branches “the united states court of federal claims shall',
9978:'have jurisdiction to render judgment upon any claim by a disbursing officer of the united states or by his administrator',
9979:'or executor for relief from responsibility for loss, in line of duty, of government funds, vouchers, records or other papers',
9980:'in his charge.” 28 u.s.c. § 1496. “whenever the united states court of federal claims finds that any loss by',
9981:'a disbursing officer of the united states was without his fault or negligence, it shall render a judgment setting forth',
9982:'the amount thereof, and the [government accountability office] shall allow the officer such amount as a credit in the settlement',
9983:'of his accounts.” 28 u.s.c. § 2512. these provisions, which originated together in legislation enacted in 1866,71 predate all of',
9984:'the other relief statutes and were once the only relief mechanism available apart from private relief legislation. the supreme court',
9985:'has termed this legislation “a very curious provision” in that it permits a disbursing officer to establish a defense to',
9986:'a claim which “the government can only establish judicially in some other court.” united states v. clark, 96 u.s. 6',
9987:'otto 37, 43 1877. in effect, it authorizes the court of federal claims to render a declaratory as opposed to',
9988:'money judgment. ralcon, inc. v. united states, 13 cl. ct. 294, 300 1987. now, in view of the comprehensive scheme',
9989:'of administrative relief that congress has enacted, this statute is rarely used. since 31 u.s.c. § 3728, the primary certifying',
9990:'officer relief statute, does not apply to the legislative or judicial branches, congress has enacted specific statutes for several legislative',
9991:'branch agencies and for the judicial branch authorizing or requiring the designation of certifying officers, establishing their accountability, and authorizing',
9992:'the comptroller general to grant relief. patterned after 31 u.s.c. § 3728, they are: 2 u.s.c. § 142b library of',
9993:'congress, 2 u.s.c. § 142e congressional budget office, 2 u.s.c. § 142l office of compliance, 2 u.s.c. § 1904 capitol',
9994:'police, and 44 u.s.c. § 308 71 act of may 9, 1866, ch. 75, 14 stat. 44. page 9129 gao06382sp',
9995:'appropriations law—vol. ii chapter 9 liability and relief of accountable officers c. savings bond redemption losses government printing office. the',
9996:'relevant provision for the judicial branch is 28 u.s.c. § 613. losses resulting from the redemption of savings bonds are',
9997:'replaced from the fund used to pay claims under the government losses in shipment act. 31 u.s.c. § 3126a. the',
9998:'statute further provides that “an officer or employee of the department of the treasury is relieved from liability to the',
9999:'united states government for the loss when the secretary [of the treasury] decides that the loss did not result from',
10000:'the fault or negligence of the . . . officer, or employee.” relief is mandatory if the government does not',
10001:'give the officer or employee written notice of his or her liability or potential liability within 10 years from the',
10002:'date of the erroneous payment. id. 2. statutes providing “automatic” relief the statutes in this group either 1 provide that',
10003:'taking a certain authorized action which might otherwise be regarded as creating a loss will not result in accountable officer',
10004:'liability, or 2 authorize the resolution of certain losses in such a manner as not to produce liability. a. waiver',
10005:'of indebtedness many statutes authorize the government to waive the recovery of indebtedness resulting from various overpayments or erroneous payments',
10006:'if certain conditions are met. waiver statutes commonly include a provision to the effect that accountable officers will not be',
10007:'held liable for any amounts waived. for example, the statutes authorizing waiver of overpayments of pay and allowances require that',
10008:'full credit be given in the accounts of accountable officers for any amounts waived under the statute. 5 u.s.c. §',
10009:'5584d civilian employees; 10 u.s.c. § 2774d military personnel; 32 u.s.c. § 716d national guard. once waiver is granted, the',
10010:'payment is deemed valid and there is no need to consider the question of relief. e.g., b184947, mar. 21, 1978.',
10011:'this result applies even where relief has been denied under the applicable relief statute. b177841o.m., oct. 23, 1973. examples of',
10012:'comparable provisions in other waiver statutes are 5 u.s.c. § 8129c overpayments under federal employees compensation act, 38 u.s.c. §',
10013:'5302d overpayment of veterans’ benefits, and 42 u.s.c. § 404c social security act. b. compromise of under the federal claims',
10014:'collection act as amended, if a debt claim is indebtedness compromised in accordance with the statute and implementing page 9130',
10015:'gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers c. foreign exchange transactions regulations, no accountable officer',
10016:'will be held liable for the portion unrecovered by virtue of the compromise. 31 u.s.c. § 3711c. earlier in this',
10017:'chapter we discussed 31 u.s.c. § 3342c, which authorizes, with respect to activities authorized under section 3342a, losses to be',
10018:'offset against gains on a fiscalyear basis, and also authorizes appropriations to make adjustments for net losses. our prior discussion',
10019:'was in the context of check cashing operations. another important use of 31 u.s.c. § 3342c is accounting for certain',
10020:'foreign exchange losses. to implement this authority in the foreign exchange area, the treasury department has issued regulations in i',
10021:'tfm part 4, chapter 9000, and has established an account entitled “gains and deficiencies on exchange transactions.” see i tfm',
10022:'§ 49065.10. as with the check cashing context, the relevant point here is that the use of 31 u.s.c. §',
10023:'3342c accomplishes the necessary account adjustment and obviates the need to seek relief for any accountable officer. b249796, feb. 9,',
10024:'1993. one use of the gains and deficiencies account is the adjustment of losses due to exchange rate fluctuations. e.g.,',
10025:'70 comp. gen. 616 1991 agency has discretion whether to offset gains and losses; 64 comp. gen. 152 1984 restoration',
10026:'of losses in library of congress foreign currency accounts attributable to currency devaluations; 61 comp. gen. 649 1982 determination of',
10027:'proper exchange rate; b245760, jan. 16, 1992 devaluation of laotian currency. however, in order to use the gains and deficiencies',
10028:'account, losses must result from “disbursing officer transactions” of the type authorized by 31 u.s.c. § 3342a. 45 comp. gen.',
10029:'493 1966. in that case, the american embassy in cairo had made a payment for certain property in egyptian pounds.',
10030:'the sales agreement was not executed and the money was refunded. at the time of the refund, the exchange rate',
10031:'had changed and the same amount of egyptian pounds was worth less in u.s. dollars, resulting in a loss to',
10032:'the account. gao agreed with the treasury department that the loss resulted from an administrative collection and not from a',
10033:'disbursing officer transaction, and should therefore be borne by the relevant program appropriation rather than the gains and deficiencies account.',
10034:'gao has also considered the use of the gains and deficiencies account in a number of cases involving vietnamese and',
10035:'cambodian currency after the american evacuation from those countries in the mid1970s. 56 comp. gen. 791 1977. see also 61',
10036:'comp. gen. 132 1981 piaster currency physically abandoned or left in accounts in vietnam chargeable to gains and deficiencies; b197708,',
10037:'apr. 8, 1980 vietnamese and cambodian page 9131 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers',
10038:'d. check forgery insurance fund currency received by treasury from u.s. disbursing officers at exchange rate in effect at time',
10039:'of evacuation subsequently became valueless; loss held to be of the type contemplated by 31 u.s.c. § 3342c. however, u.s.',
10040:'currency which was thought to have been burned but which subsequently turned up in the united states had to be',
10041:'treated as a physical loss. 56 comp. gen. at 793–96. relief was granted for this loss under 31 u.s.c. §',
10042:'3527a in b209978, july 18, 1983. the check forgery insurance fund is a revolving fund the purpose of which is',
10043:'to make replacement payments to payees whose treasury checks have been lost or stolen and cashed over a forged endorsement',
10044:'in limited situations.31 u.s.c. § 3343. before the fund may be used, three conditions must be satisfied: 1 the check',
10045:'is lost or stolen without fault of the payee; 2the check is subsequently negotiated over the payee’s forged endorsement; and',
10046:'3 the payee did not participate in any part of the proceeds of the check. id. § 3343b. any recoveries',
10047:'from a forger, a transferee, or party on the check are restored to the fund. id. § 3343d. a forged',
10048:'endorsement for purposes of the statute has been held to include an unauthorized endorsement purported to be made in a',
10049:'representative capacity. strann v. united states, 2 cl. ct. 782 1983 plaintiff’s attorney endorsed tax refund check without authority. the',
10050:'third condition, participation in the proceeds, does not require a knowing participation. koch v. department of health, education, and welfare,',
10051:'590 f.2d 260 8th cir. 1978; duden v. united states, 467 f.2d 924 ct. cl. 1972. in duden, for example,',
10052:'the plaintiff’s former husband endorsed her name on a tax refund check and subsequently paid her part of the proceeds',
10053:'for support. she had no way of knowing that the payment came from those proceeds. while the endorsement was held',
10054:'not to be a forgery under the facts involved, the court also noted that the plaintiff’s participation in the proceeds',
10055:'would preclude recovery from the check forgery insurance fund. duden, 467 f.2d at 930. the bank presenting a check to',
10056:'the treasury for payment guarantees the genuineness of prior endorsements. 31 c.f.r. § 240.3. thus, in many cases, the government',
10057:'will be able to recover from the presenting bank. e.g., olson v. united states, 437 f.2d 981, 986–87 ct. cl.,',
10058:'cert. denied, 404 u.s. 939 1971. there is no mention of accountable officers in 31 u.s.c. § 3343. however, a',
10059:'payment from the check forgery insurance fund means that only one payment is charged to the appropriations of the agency',
10060:'incurring the page 9132 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers original obligation, with the',
10061:'effect that no accountable officer of that agency incurs any liability. see b10929, feb. 1, 1972. e. secretary of the',
10062:'treasury enacted in 1947,72 31 u.s.c. § 3333 provides that the secretary of the treasury will not be liable for',
10063:'payments made “in due course and without negligence” of checks drawn on the treasury or a depositary, or other obligations',
10064:'guaranteed or assumed by the united states, and that the comptroller general “shall credit” the appropriate accounts for such payments.',
10065:'at one time, many duplicate check losses were handled under 31 u.s.c. § 3333. see 62 comp. gen. 91 1982.',
10066:'it was treasury’s practice to accumulate the cases and submit them in groups, for example, b115388, oct. 12, 1976, and',
10067:'b71585, sept. 22, 1955, with credit being allowed as a matter of routine. with the development of treasury’s previously discussed',
10068:'recertification procedure, much of the need to invoke 31 u.s.c. § 3333 evaporated. while many of the earlier cases involved',
10069:'an exchange of correspondence between treasury and gao, nothing in the statute requires it, especially since gao no longer maintains',
10070:'accounts and “relief” is mandatory anyway. f. other statutes there are several other statutes affecting the liability of accountable officers',
10071:'in a variety of contexts. a few of them are: 5 u.s.c. § 8321. accountable officers are not liable for',
10072:'payments in violation of statutes prescribing forfeiture of retirement annuities or retired pay as long as the payments are made',
10073:'“in due course and without fraud, collusion, or gross negligence.” the reason for this statute was to avoid having to',
10074:'deny relief under 31 u.s.c. § 3528b for payments made in good faith solely because the payments are specifically prohibited',
10075:'by law. b122068, mar. 18, 1955. 31 u.s.c. § 3521c. previously noted, this statute protects accountable officers from liability for',
10076:'losses under an authorized statistical sampling procedure to audit vouchers. 31 u.s.c. § 3528c. certifying officials are not liable for',
10077:'overpayments made to a common carrier if the overpayment occurred only because the administrative audit before payment did not verify',
10078:'transportation rates, freight classifications, or landgrant deductions 72 pub. l. no. 333, ch. 455, 61 stat. 730 aug. 4, 1947.',
10079:'page 9133 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers and the administrator of general services',
10080:'has determined that verification by a prepayment audit would not adequately protect the interests of the government. 42 u.s.c. §',
10081:'659f. disbursing officers are not liable for a payment under a garnishment process for enforcement of child support and alimony',
10082:'obligations which is “regular on its face” and in compliance with 42 u.s.c. § 659. see 73 comp. gen. 194',
10083:'1994; 61 comp. gen. 229 1982. f. procedures 1. reporting of irregularities agencies are required to document each fiscal irregularity',
10084:'that affects the account of an accountable officer whose accounts are required to be settled by gao under 31 u.s.c.',
10085:'§ 3526, regardless of how it is discovered. the report is retained as part of the account records and a',
10086:'copy provided to the accountable officer and to gao if the irregularity is not resolved within 2 years after the',
10087:'date the accounts are made available for audit. gao, policy and procedures manual for guidance of federal agencies, title 7,',
10088:'§ 8.4.b washington, d.c.: may 18, 1993 hereafter gaoppm. the contents of the report are set forth in 7 gaoppm',
10089:'§ 8.12.a, and include such things as a description of how the irregularity occurred and a description of any known',
10090:'procedural deficiencies and corrective action. the agency’s next job is to attempt to resolve the irregularity, most importantly by pursuing',
10091:'collection action against the improper payee or recipient where possible. recovery of the funds of course ends the matter. if',
10092:'the funds cannot be recovered and the case is one in which the agency may grant relief without gao involvement,',
10093:'consideration of relief is the next step. if the matter is resolved administratively in either of these ways, the record',
10094:'should be further documented as specified in 7 gaoppm § 8.12.b required administrative determinations, etc.. there is no need to',
10095:'report resolved irregularities to gao. if the irregularity cannot be resolved administratively within 2 years after the date the account',
10096:'is available for audit, and if the loss exceeds the monetary limit established for administrative resolution, the agency should then',
10097:'submit to gao a copy of the updated irregularity report and a relief request if appropriate. 7 gaoppm § 8.4.c.',
10098:'this 2year guideline is page 9134 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers especially important',
10099:'for improper payments in view of the 3year statute of limitations of 31 u.s.c. § 3526c.73 thus, belowceiling losses need',
10100:'not be reported to gao at all; aboveceiling losses should be reported only if unresolved at the end of the',
10101:'2year period. of course, the agency may request relief sooner if desired. 2. obtaining relief the gao official designated to',
10102:'exercise the comptroller general’s authority under the various relief statutes is the managing associate general counsel for goal 3, office',
10103:'of general counsel, who is responsible for appropriations law matters. relief requests where gao action is necessary should be addressed',
10104:'to gao’s office of general counsel. the request may be in simple letter format and should include all items specified',
10105:'in gao, policy and procedures manual for guidance of federal agencies, title 7, § 8.12.c washington, d.c.: may 18, 1993.',
10106:'these include a copy of the irregularity report, a description of collection actions taken, and any required administrative determinations. of',
10107:'particular importance is a written statement by the accountable officer or a notation that the accountable officer chooses not to',
10108:'submit a separate statement. the accountable officer’s liability arises by operation of law and the government is not required to',
10109:'prove negligence. therefore, it is important that all accountable officers be given the opportunity to include a statement in their',
10110:'relief requests because they have the burden of demonstrating that the loss occurred without any fault or negligence on their',
10111:'part. id. relief will be granted or denied in the form of a letter addressed to the official who submitted',
10112:'the request. in any case in which gao has denied relief, the agency, or the accountable officer through appropriate administrative',
10113:'channels, may ask gao to reconsider. gao will not hesitate to reverse a decision shown to be wrong. any request',
10114:'for reconsideration should set forth the errors which the applicant believes have been made and should include evidence not mere',
10115:'unsupported allegations to support the basis for relief, for example, that the original denial failed to consider certain evidence or',
10116:'to give it appropriate weight or relied too heavily on other evidence in the record. denials of relief are often',
10117:'based not so much on the merits of the case but 73 the 3year limitation period begins to run when',
10118:'the agency’s accounts are substantially complete for audit purposes i.e., when various documents supporting the applicable statement of accountability are',
10119:'available to the agency and gao for audit. see 7 gaoppm § 8.7. page 9135 gao06382sp appropriations law—vol. ii chapter',
10120:'9 liability and relief of accountable officers simply on the failure of the original request to include sufficient information to',
10121:'enable an independent evaluation. of course, if the agency cannot or is unwilling to make a required statutory determination, there',
10122:'is nothing gao can do and a request for reconsideration is pointless. 3. de minimis rule: payments of $100 or',
10123:'less in b161457, july 14, 1976, a circular letter to all department and agency heads, and disbursing and certifying officers,',
10124:'the comptroller general advised as follows: “[i]n lieu of requesting a decision by the comptroller general for items of $25',
10125:'or less, disbursing and certifying officers may hereafter rely upon written advice from an agency official designated by the head',
10126:'of each department or agency. a copy of the document containing such advice should be attached to the voucher and',
10127:'the propriety of any such payment will be considered conclusive on the general accounting office in its settlement of the',
10128:'accounts involved.” the amount has since been raised to $100. gao, policy and procedures manual for guidance of federal agencies,',
10129:'title 7, § 8.3 washington, d.c.: may 18, 1993. this does not preclude a certifying or disbursing officer from seeking',
10130:'a decision if deemed necessary since the entitlement to advance decisions is statutory, but it does provide a means for',
10131:'simplifying the payment of very small amounts. an accountable officer is not liable for a payment made under this authority',
10132:'even if the payment is later found to be improper or erroneous. the $100 threshold applies equally to questions arising',
10133:'after payment has been made. 61 comp. gen. 646, 648 1982. 4. relief versus grievance procedures federal employees have the',
10134:'right to organize and to bargain collectively with respect to conditions of employment. 5 u.s.c. § 7102. collective bargaining agreements',
10135:'may include negotiated grievance procedures, which may in turn provide for dispute resolution by binding arbitration. id. § 7121. the',
10136:'federal labor relations authority flra decides questions of an agency’s duty to bargain in good faith under 5 u.s.c. §',
10137:'7105a2e. agencies have a duty to bargain in good faith to the extent not inconsistent with federal law. id. §',
10138:'7117. the flra also decides appeals alleging that an arbitration award is contrary to federal law. id. § 7122. page',
10139:'9136 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers since the authority to relieve accountable officers',
10140:'is provided by statute, both gao and the flra have determined that negotiated grievance procedures may not be used as',
10141:'a substitute for making the relief decision. b213804, aug. 13, 1985; national treasury employees union and internal revenue service, 14',
10142:'f.l.r.a. 65 1984. the same result applies to the state department’s separate statutory grievance procedures. 67 comp. gen. 457 1988.',
10143:'however, a grievance procedure may encompass an agency head’s determination that an accountable officer is negligent, as distinguished from the',
10144:'actual relief decision. see national treasury employees union and internal revenue service, 33 f.l.r.a. 229 1988, citing 59 comp. gen.',
10145:'113 1979 for the proposition that gao’s statutory role does not arise until after the agency head has made the',
10146:'requisite determination under section 3527 for disbursing officials. g. collection action 1. against recipient a person who receives money from',
10147:'the government to which he or she is not entitled, however innocently, has no right to keep it. the recipient',
10148:'is indebted to the government, and the agency making the improper or erroneous payment has a duty to attempt to',
10149:'recover the funds, wholly independent of any question of liability or relief of an accountable officer. the duty to aggressively',
10150:'pursue collection action and the means of doing so are found primarily in the federal claims collection act as amended',
10151:'by the debt collection improvement act of 1996, at 31 u.s.c. § 3711, and the implementing regulations in the federal',
10152:'claims collection standards, 31 c.f.r. parts 900–904,74 the details of which are covered elsewhere in this publication. indeed, many of',
10153:'the statutes we have previously discussed emphasize that the relief process does not diminish this duty. e.g., 31 u.s.c. §§',
10154:'3333b, 3343g, 3526c4, 3527d2. 74 the standards were previously promulgated jointly by the department of justice and gao and were',
10155:'published at 4 c.f.r. parts 101–105. however, the secretary of the treasury was subsequently added as a copromulgator and the',
10156:'comptroller general removed. see debt collection improvement act of 1996, pub. l. no. 104134, § 31001d2a, 110 stat. 1321, 1321359',
10157:'apr. 26, 1996; general accounting office act of 1996, pub. l. no. 104316, § 115g1, 110 stat. 3826, 3834–35 oct.',
10158:'19, 1996. page 9137 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers recovery from the improper',
10159:'payee or recipient removes the accountable officer’s liability regardless of whether relief has or has not been sought because there',
10160:'is no longer any loss. however, merely “flagging” the retirement account of an employee who has received an overpayment, for',
10161:'possible collection at some unpredictable future time, is not enough as it would delay indefinitely the final settlement of the',
10162:'account. 31 comp. gen. 17 1951. in a sense, the recipient and the unrelieved accountable officer share an element of',
10163:'joint liability. the occasional decision has referred to this as “joint and several” liability, but it has been pointed out',
10164:'that this is incorrect. e.g., b228946, jan. 15, 1988. if two debtors are “jointly and severally” liable, the creditor has',
10165:'the option of collecting the full amount from either, with the debtor who pays then having a right of contribution',
10166:'against the remaining debtors. certainly no one would suggest that someone who has defrauded the government and repays the debt',
10167:'has any right of contribution against the accountable officer. also, under joint and several liability, the creditor may seek to',
10168:'collect a portion from each debtor. the agency in an accountable officer loss has no such option. b212602, apr. 5,',
10169:'1984. the agency’s first obligation is to seek recovery from the recipient. the recipient of an improper payment is liable',
10170:'for the full amount, with any amounts collected used to reduce the accountable officer’s liability. id. ; 30 comp. gen.',
10171:'298, 300 1951. see also 62 comp. gen. 476, 478–79 1983; 54 comp. gen. 112, 114 1974. so strong is',
10172:'this duty to seek recovery from the improper payee or recipient that the two primary relief statutes for improper payments',
10173:'explicitly authorize gao to deny relief if the agency has failed to diligently pursue collection action against the recipient. 31',
10174:'u.s.c. §§ 3527c disbursing officers, 3528b2 certifying officers. see also b271017, aug. 12, 1996. gao is extremely reluctant to deny',
10175:'relief solely on the basis of inadequate collection action because often the failure is attributable to the agency rather than',
10176:'the accountable officer. however, it has been done. e.g., b234815, oct. 3, 1989 disbursing officer failed to initiate collection action',
10177:'despite repeated advice from agency counsel. adequate collection action means compliance with the federal claims collection act and standards. 62',
10178:'comp. gen. 476, 478–79 1983; b233870, may 30, 1989. accordingly, once it has been determined that the improper payments were',
10179:'not the result of bad faith or a lack of reasonable care on the part of the accountable officer, the',
10180:'issue is whether the agency undertook diligent collection agency. b270715, july 23, 1996. a single page 9138 gao06382sp appropriations law—vol.',
10181:'ii chapter 9 liability and relief of accountable officers demand letter is generally not enough, and an agency should pursue',
10182:'additional means of collection if there is no response to the letter. 62 comp. gen. 91, 98 1982. see also',
10183:'31 c.f.r. § 901.2. resort to the federal claims collection act and standards includes those collection measures, as and to',
10184:'the extent authorized, which result in collection of less than the full amount, for example, compromise. a compromise, including one',
10185:'by the justice department, not only resolves the claim against the recipient but operates as well to relieve the accountable',
10186:'officer for any amounts unrecovered because of the compromise. 31 u.s.c. § 3711d; 65 comp. gen. 371 1986. whether or',
10187:'not the accountable officer is entitled to relief does not affect the compromise authority. b154400o.m., jan. 29, 1968. however, 31',
10188:'u.s.c. § 3711c does not apply to any liability which may fall upon one who is not an accountable officer.',
10189:'b235048, apr. 4, 1991. the authority to suspend or terminate collection action is also available, but only in accordance with',
10190:'the claims collection act and regulations. 67 comp. gen. 457, 464 1988; b253582, dec. 13, 1993; b212337, feb. 17, 1984;',
10191:'b211660, dec. 15, 1983. unlike a compromise, the termination of collection action against the recipient does not eliminate the accountable',
10192:'officer’s liability for any unrecovered balance. 67 comp. gen. at 464. adequate collection action also requires referral of the claim',
10193:'to the appropriate collection office within the agency without undue delay. gao has advised the army, for example, that a',
10194:'delay of more than 3 months will generally not be regarded as diligent. 65 comp. gen. 811 1986; b227187, june',
10195:'16, 1987; b227218, june 5, 1987. while diligent collection action is a necessary element of the relief equation, the fact',
10196:'that collection efforts have been unsuccessful, however diligent, does not by itself provide the basis for relieving the accountable officer.',
10197:'b141838, feb. 8, 1960; b114042, oct. 31, 1956. 2. against accountable officer if a loss cannot be recovered from the',
10198:'thief or other improper payee or recipient, and relief cannot be granted to the accountable officer, the accountable officer becomes',
10199:'indebted to the government for the amount involved. at that point, it is the agency’s responsibility to initiate collection action',
10200:'against the accountable officer in accordance with the federal claims collection act and standards. e.g., b223726, june 26, 1987; b177430,',
10201:'oct. 30, 1973. page 9139 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers if the accountable',
10202:'officer is still employed by the government, additional statutes come into play. offset against salary is prescribed by 5 u.s.c.',
10203:'§ 5512a: “the pay of an individual in arrears to the united states shall be withheld until he has accounted',
10204:'for and paid into the treasury of the united states all sums for which he is liable.” this statute does',
10205:'not apply to ordinary debtors but only to accountable officers. 37 comp. gen. 344 1957; 23 comp. gen. 555 1944;',
10206:'b248376, jan. 11, 1993. it has also been held that the provisions of 5 u.s.c. § 5512a are mandatory and',
10207:'cannot be waived. 64 comp. gen. 606 1985; 39 comp. gen. 203 1959; 19 comp. gen. 312 1939. the application',
10208:'of 5 u.s.c. § 5512a to certain military accountable officers is limited by 37 u.s.c. § 1007a, which prohibits withholding',
10209:'the pay “of an officer” under section 5512 unless the indebtedness is “admitted by the officer or shown by the',
10210:'judgment of a court, upon a special order issued in the discretion of the secretary of defense,75 or upon denial',
10211:'of relief of an officer under 31 u.s.c. § 3527.” subsection 1007a applies to “officers,” meaning commissioned or warrant officers,',
10212:'and not to enlisted personnel or civilian accountable officers. 37 comp. gen. 344, 348 1957. the admission may be oral',
10213:'or written but, if oral, a certificate of a commissioned officer that the accountable officer clearly and unequivocally admitted the',
10214:'shortage would be sufficient evidence. 42 comp. gen. 83 1962. the discretion to apply 5 u.s.c. § 5512a exists only',
10215:'in the absence of an admission or court judgment. id. the original version of 5 u.s.c. § 5512a, enacted in',
10216:'1828,76 provided that “no money shall be paid” to the person in arrears until the debt is repaid. thus, several',
10217:'early decisions exist for the somewhat barbaric proposition that the statute requires complete stoppage of pay. e.g., 9 comp. gen.',
10218:'272 1930; 7 comp. gen. 4 1927. while these and similar early decisions have not been explicitly overruled, the current',
10219:'view is that the statute will be 75 the special order is issued in the discretion of the secretary of',
10220:'homeland security in the case of an officer of the coast guard when the coast guard is operating as a',
10221:'service in the navy. 37 u.s.c. § 1007a. 76 act of january 25, 1828, ch. 2, 4 stat. 246. page',
10222:'9140 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers satisfied by withholding in reasonable installments. 64',
10223:'comp. gen. 606 1985; b180957o.m., sept. 25, 1979. the amount of the installment payments will be determined by the agency.',
10224:'b241478, apr. 5, 1991. collection in installments is also authorized when operating under 37 u.s.c. § 1007c for members of',
10225:'the uniformed services. for employees no longer on the payroll, offset under 5 u.s.c. § 5512a has been held to',
10226:'embrace collection from retirement funds to the extent authorized. parker v. united states, 187 ct. cl. 553, 559 1969; 39',
10227:'comp. gen. 203, 206 1959. gao has also approved “flagging” the retirement account of an accountable officer still on the',
10228:'payroll. b217114, feb. 29, 1988. when applying 5 u.s.c. § 5512a or 37 u.s.c. § 1007a, the procedures to be',
10229:'followed are those prescribed by 31 c.f.r. § 901.3 for administrative offsets under 31 u.s.c. § 3716. 64 comp. gen.',
10230:'142 1984. if pay is withheld under 5 u.s.c. § 5512a, the statute provides a means to obtain judicial review',
10231:'of the indebtedness. under 5 u.s.c. § 5512b, gao is required, upon the request of the individual or his or',
10232:'her agent or attorney to immediately report the balance due to the attorney general, and the attorney general is required',
10233:'within 60 days to order suit to be commenced against the individual. this provision was part of the original 1828',
10234:'legislation, several decades prior to either the tucker act or the establishment of the court of claims, at a time',
10235:'when there was no other means available for the accountable officer to initiate judicial proceedings. it now exists as one',
10236:'way among several. installment deductions are not required to stop during the litigation; if the accountable officer prevails, amounts collected',
10237:'are refunded. 64 comp. gen. 606, 608 1985. examples of referrals under 5 u.s.c. § 5512b are included at 64',
10238:'comp. gen. 605 1985; b217114.7, may 6, 1991; and b220492, dec. 10, 1985. h. restitution, reimbursement, and restoration 1. restitution',
10239:'and reimbursement in the present context, restitution means the repayment of a loss by an accountable officer from personal funds;',
10240:'reimbursement means the refunding to an accountable officer of amounts previously paid in restitution. prior to 1955, there was no',
10241:'statutory authority to permit the page 9141 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers reimbursement',
10242:'of an accountable officer who had made restitution to the government for a physical loss. once an accountable officer made',
10243:'restitution if, for example, the agency required it, the decisions held that there was no longer a deficiency in the',
10244:'account for which relief could be considered. 27 comp. gen. 404 1948; b101301, july 19, 1951. legislation in 1955 amended',
10245:'what is now 31 u.s.c. § 3527a and 31 u.s.c. § 3527b to expressly authorize reimbursement of the accountable officer',
10246:'for any amounts paid in restitution, if relief is granted.77 accordingly, restitution by the accountable officer in physical loss cases',
10247:'is no longer an impediment to the granting of relief. e.g., b155149, oct. 21, 1964; b126362, feb. 21, 1956. the',
10248:'1955 legislation amended only the physical loss relief statutes. there is no comparable reimbursement authority in the improper payment relief',
10249:'statutes, 31 u.s.c. §§ 3527c and 3528. b226393, apr. 29, 1988; b223840, nov. 5, 1986; b128557, sept. 21, 1956. an',
10250:'obvious limitation on the reimbursement authority was illustrated in b187021, jan. 19, 1978. an imprest fund cashier sought reimbursement, claiming',
10251:'that she had discovered money missing from her cash box and replaced it from personal funds. however, by virtue of',
10252:'her actions in initially concealing the loss, she was unable to show that the loss had in fact ever occurred.',
10253:'since the loss could not be established, reimbursement was denied. thus, an accountable officer should always report a loss before',
10254:'making restitution. 2. restoration restoration of an account suffering a loss or deficiency—an accounting adjustment to restore the shortage with',
10255:'funds from some other source—is authorized under two provisions of law, 31 u.s.c. §§ 3527d and 3530. the comptroller general',
10256:'is required by 31 u.s.c. § 3530c to prescribe implementing regulations. these are found in title 7 of gao’s policy',
10257:'and procedures manual for guidance of federal agencies, § 8.14 washington, d.c.: may 18, 1993. a. adjustment incident to if',
10258:'relief is granted under either 31 u.s.c. § 3527a or 31 u.s.c. § 3527c, granting of relief gao may authorize',
10259:'restoration of the account. under subsection d, restoration is accomplished by charging either an appropriation specifically available for that purpose',
10260:'or, if there is no such appropriation, 77 pub. l. no. 334, ch. 694, 69 stat. 626 aug. 9, 1955.',
10261:'page 9142 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers the appropriation or fund available for',
10262:'the accountable function. see b288163, june 4, 2002. the charge is made to the fiscal year in which the adjustment',
10263:'is made, and not the fiscal year in which the loss occurred. subsection d applies only to subsections a and',
10264:'c, and not to subsection b military disbursing officers. however, the military departments have separate authority in 10 u.s.c. §§',
10265:'2777b and 2781. there is no restoration provision in 31 u.s.c. § 3528, which sets out the responsibilities and relief',
10266:'from liability for certifying officials. whenever account adjustment is deemed necessary, the agency should include in its relief request a',
10267:'citation account symbol to the appropriation it proposes to charge. gao, policy and procedures manual for guidance of federal agencies,',
10268:'title 7, § 8.14.a washington, d.c.: may 18, 1993 hereafter gaoppm. in cases where agencies are authorized to grant relief',
10269:'without gao involvement, they may also exercise the restoration authority of 31 u.s.c. § 3527d without gao involvement. 7 gaoppm',
10270:'§8.14.c. a 1957 decision, 37 comp. gen. 224, considered the application of 31 u.s.c. § 3527d where one agency is',
10271:'disbursing funds on behalf of other agencies. state department disbursing officers overseas, acting under delegations from the treasury department, were',
10272:'authorized to receive and disburse funds on behalf of other government agencies as well as the state department. if the',
10273:'services were sufficiently extensive to warrant reimbursement, state charged the “user” agencies. construing 31 u.s.c. § 3527d, the comptroller general',
10274:'held that losses in such a situation for which relief was granted but which could not be related to the',
10275:'functions of any particular agency or agencies should be charged to state department appropriations because they were the appropriations available',
10276:'for the accountable function. “this phraseology clearly is intended to mean the appropriation of the department or agency to which',
10277:'the expenses of carrying on the particular disbursing function are chargeable.” 37 comp. gen. at 226. such adjustments could then',
10278:'be considered as part of the costs of the disbursing function for purposes of determining charges assessed against the user',
10279:'agencies and thus distributed to all user agencies in the same manner as other costs. id. twenty years later, gao',
10280:'reached the same result with respect to losses of united states currency incident to the 1975 evacuation from vietnam. 56',
10281:'comp. gen. 791, 796–97 1977. b. other situations if a loss is due to fault or negligence by an accountable',
10282:'officer, and the agency head determines that the loss is uncollectible, the amount of the loss may be restored by',
10283:'a charge to the appropriation or fund available for page 9143 gao06382sp appropriations law—vol. ii chapter 9 liability and relief',
10284:'of accountable officers the expenses of the accountable function. 31 u.s.c. § 3530a. uncollectible includes uncollectible from the accountable officer.',
10285:'e.g., b177910, feb. 20, 1973. as with adjustments under 31 u.s.c. § 3527d, section 3530a requires the loss to be',
10286:'charged to the appropriation available for the fiscal year in which the adjustment is made appropriation “currently available”. this authority',
10287:'applies 1 where relief is denied, or 2where the agency does not seek relief, the uncollectibility determination being required in',
10288:'either event. representative cases are b271608, june 21, 1996; b235405, mar. 19, 1990; b219246, sept. 9, 1985; b188715, jan. 31,',
10289:'1978; and b167827, feb. 4, 1975. assuming the statutory conditions are met, adjustments under 31 u.s.c. § 3530 are made',
10290:'directly by the agency with no need for specific authorization or concurrence from gao. gao, policy and procedures manual for',
10291:'guidance of federal agencies, title 7, § 8.14.d washington, d.c.: may 18, 1993. restoration under section 3530 is merely an',
10292:'accounting adjustment and does not affect the accountable officer’s personal liability. 31 u.s.c. § 3530b. thus, although the adjustment is',
10293:'premised on a determination of uncollectibility, collection efforts should resume if warranted by future developments. b241725, feb. 19, 1991. the',
10294:'statutes described above, 31 u.s.c. §§ 3527d and 3530, will cover most situations in which restoration is needed in that',
10295:'relief is mostly either granted or denied or not sought. there are, however, situations in which neither statute applies. for',
10296:'example, a thief fraudulently obtained over $10,000 from the patients trust account at a department of veterans affairs va hospital.',
10297:'he was convicted and ordered to make restitution. the restitution order was lifted 3 years later, but the va had',
10298:'by then recovered only a small portion of the loss. the va decided that pursuing the thief any further would',
10299:'be fruitless, and it had previously determined that there had been no fault or negligence by the accountable officer. the',
10300:'va was faced with a dilemma. clearly the loss had to be restored since the trust account consisted of money',
10301:'belonging to patients, and just as clearly va’s operating appropriations were the only available source. the problem was how to',
10302:'get there. since the 3year statute of limitations on account settlement 31 u.s.c. § 3526c had expired, relief could no',
10303:'longer be considered, so 31 u.s.c. § 3527d could not be used. equally unavailing was 31 u.s.c. § 3530 since',
10304:'the loss did not result from the accountable officer’s fault or negligence. however, since the va had an undisputed obligation',
10305:'as trustee to return the trust funds to their rightful owners upon demand, the loss could be viewed as an',
10306:'expense of managing the trust page 9144 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers fund.',
10307:'the solution therefore was to restore funds from the unobligated balance of va’s operating appropriation for the fiscal year in',
10308:'which the loss occurred. 68 comp. gen. 600 1989. see also b239955, june 18, 1991. the authority to make adjustments',
10309:'from the unexpended balances of prior years’ appropriations is now found in 31 u.s.c. § 1553a. once an account has',
10310:'been closed, generally five fiscal years after expiration,78 31 u.s.c. § 1553b requires that the adjustment be charged, within certain',
10311:'limits, to current appropriations. thus, the authority now found in 31 u.s.c. § 1553 may provide an alternative if neither',
10312:'31 u.s.c. § 3527d nor 31 u.s.c. § 3530 is available. of course, if the account to be restored has',
10313:'itself been closed pursuant to 31 u.s.c. §§ 1552a or 1555, restoration is no longer possible. 78 see 31 u.s.c.',
10314:'§ 1552a. page 9145 gao06382sp appropriations law—vol. ii chapter 9 liability and relief of accountable officers page 9146 gao06382sp appropriations',
10315:'law—vol. ii chapter 10 federal assistance: grants and cooperative agreements a. introduction . . . . . . . .',
10316:'. . . . . . . . . . . . . . . . . . . .',
10317:'. . . . . . .103 b. grants versus procurement contracts . . . . . . . .',
10318:'. . . . . .106 1. judicial and gao decisions on the nature of grants . . . .',
10319:'. . . . . 106 a. contractual aspects of grants . . . . . . . . .',
10320:'. . . . . . . . . . . . . . . . 106 b. differences between',
10321:'grants and contracts . . . . . . . . . . . . . . . 109 c.',
10322:'grants as “hybrids” . . . . . . . . . . . . . . . . .',
10323:'. . . . . . . . . . . . . . . . . 1011 2. the',
10324:'federal grant and cooperative agreement act . . . . . . . . . 1013 a. purposes and provisions',
10325:'of the act . . . . . . . . . . . . . . . . .',
10326:'. . . . 1013 b. agency implementation of the act . . . . . . . . .',
10327:'. . . . . . . . . . . . . 1017 c. decisions interpreting the act .',
10328:'. . . . . . . . . . . . . . . . . . . .',
10329:'. . . . 1018 3. competition for discretionary grant awards . . . . . . . . .',
10330:'. . . . . . 1025 c. some basic concepts. . . . . . . . . .',
10331:'. . . . . . . . . . . . . . . . .1027 1. the grant',
10332:'as an exercise of congressional spending power . . 1028 a. constitutionality of grant conditions . . . . .',
10333:'. . . . . . . . . . . . . . 1028 1 conditions must be in',
10334:'pursuit of the general welfare and related to the purpose of the expenditure . . . . . . .',
10335:'1029 2 conditions must be unambiguous . . . . . . . . . . . . . .',
10336:'. . . . 1030 3 conditions must be otherwise constitutional . . . . . . . . 1032',
10337:'b. effect of grant conditions . . . . . . . . . . . . . . .',
10338:'. . . . . . . . . . . . . 1034 2. availability of appropriations . .',
10339:'. . . . . . . . . . . . . . . . . . . .',
10340:'. . . . . . 1036 a. purpose . . . . . . . . . . .',
10341:'. . . . . . . . . . . . . . . . . . . .',
10342:'. . . . . . . . . . . . . 1036 b. time . . . .',
10343:'. . . . . . . . . . . . . . . . . . . .',
10344:'. . . . . . . . . . . . . . . . . . . .',
10345:'. . . 1039 c. amount . . . . . . . . . . . . . .',
10346:'. . . . . . . . . . . . . . . . . . . .',
10347:'. . . . . . . . . . 1043 3. agency regulations . . . . . .',
10348:'. . . . . . . . . . . . . . . . . . . .',
10349:'. . . . . . . . . . 1045 a. general principles . . . . . .',
10350:'. . . . . . . . . . . . . . . . . . . .',
10351:'. . . . . . . . . 1045 b. office of management and budget circulars and the “common',
10352:'rules” . . . . . . . . . . . . . . . . . . .',
10353:'. . . . . . . . . . . . . . . . . 1047 c. the',
10354:'federal financial assistance management improvement act . . . . . . . . . . . . . .',
10355:'. . . . . . . . . . . . . . . . . . . .',
10356:'. . 1051 d. the “cognizant agency” concept . . . . . . . . . . . .',
10357:'. . . . . . . . . . 1052 4. contracting by grantees . . . . .',
10358:'. . . . . . . . . . . . . . . . . . . .',
10359:'. . . . . . . 1053 5. liability for acts of grantees . . . . . .',
10360:'. . . . . . . . . . . . . . . . . . . .',
10361:'. . 1054 a. liability to grantee’s contractors . . . . . . . . . . . .',
10362:'. . . . . . . . . . 1055 b. liability for grantee misconduct . . . .',
10363:'. . . . . . . . . . . . . . . . . . . 1058',
10364:'6. types of grants: categorical versus block . . . . . . . . . . . . .',
10365:'. . . . 1060 7. the single audit act . . . . . . . . . .',
10366:'. . . . . . . . . . . . . . . . . . . .',
10367:'. . . . . . 1063 d. funds in hands of grantee: status and application of appropriation restrictions .',
10368:'. . . . . . . . . . . . . . . . . . .1068 e.',
10369:'grant funding . . . . . . . . . . . . . . . . . .',
10370:'. . . . . . . . . . . . . . .1076 1. advances of grant/assistance funds',
10371:'. . . . . . . . . . . . . . . . . . . .',
10372:'. . 1077 2. cash management of grants . . . . . . . . . . . .',
10373:'. . . . . . . . . . . . . . . . 1078 a. general rule',
10374:'on interest on grant advances . . . . . . . . . . . . . 1078 page',
10375:'101 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements b. state governments and interest on grant',
10376:'advances . . . . . . . 1082 1 intergovernmental cooperation act . . . . . . .',
10377:'. . . . . . . . . 1082 2 decisions under the intergovernmental cooperation act . . .',
10378:'. . . . . . . . . . . . . . . . . . . .',
10379:'. . . . . . . . . . . . . . . . . . . .',
10380:'. 1084 c. other cash management requirements . . . . . . . . . . . . .',
10381:'. . . . 1087 3. program income . . . . . . . . . . . .',
10382:'. . . . . . . . . . . . . . . . . . . .',
10383:'. . . . . . . 1089 4. costsharing . . . . . . . . . .',
10384:'. . . . . . . . . . . . . . . . . . . .',
10385:'. . . . . . . . . . . . 1092 a. local or matching share . .',
10386:'. . . . . . . . . . . . . . . . . . . .',
10387:'. . . . . . . . 1093 1 general principles . . . . . . . .',
10388:'. . . . . . . . . . . . . . . . . . . .',
10389:'. . . 1093 2 hard and soft matches . . . . . . . . . . .',
10390:'. . . . . . . . . . . . . . . . 1096 3 matching one',
10391:'grant with funds from another . . . . . . . . 1097 4 relocation allowances . . .',
10392:'. . . . . . . . . . . . . . . . . . . .',
10393:'. . . . 1099 5 payments by other than grantor agency . . . . . . . .',
10394:'. . . . 10100 b. maintenance of effort . . . . . . . . . . .',
10395:'. . . . . . . . . . . . . . . . . . . .',
10396:'10102 f. obligation of appropriations for grants . . . . . . . . . .10106 1. requirement for',
10397:'obligation . . . . . . . . . . . . . . . . . . .',
10398:'. . . . . . . . . . 10106 2. changes in grants . . . . .',
10399:'. . . . . . . . . . . . . . . . . . . .',
10400:'. . . . . . . . . . . . 10107 g. grant costs . . . .',
10401:'. . . . . . . . . . . . . . . . . . . .',
10402:'. . . . . . . . . .10111 1. allowable versus unallowable costs . . . . .',
10403:'. . . . . . . . . . . . . . . . 10111 a. the concept',
10404:'of allowable costs . . . . . . . . . . . . . . . . .',
10405:'. . . . . 10111 b. grant cost cases . . . . . . . . . .',
10406:'. . . . . . . . . . . . . . . . . . . .',
10407:'. . . . . 10117 1 scope of judicial review . . . . . . . . .',
10408:'. . . . . . . . . . . . . . . . 10117 2 court case',
10409:'examples . . . . . . . . . . . . . . . . . . .',
10410:'. . . . . . . . . 10119 3 gao case examples . . . . . .',
10411:'. . . . . . . . . . . . . . . . . . . .',
10412:'. . 10124 c. note on accounting . . . . . . . . . . . . .',
10413:'. . . . . . . . . . . . . . . . . . . .',
10414:'10126 2. preaward costs retroactive funding . . . . . . . . . . . . . .',
10415:'. . . . 10129 h. recovery of grantee indebtedness . . . . . . . . . .',
10416:'. . . . .10132 1. government’s duty to recover . . . . . . . . . .',
10417:'. . . . . . . . . . . . . . . . 10132 2. offset and',
10418:'withholding of claims under grants . . . . . . . . . . . 10144 page 102 gao06382sp',
10419:'appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements the federal government provides assistance in many forms, financial',
10420:'and a. introduction otherwise. assistance programs are designed to serve a variety of purposes. objectives may include fostering some element',
10421:'of national policy, stimulating private sector involvement, or furnishing aid of a type or to a class of beneficiaries the',
10422:'private market cannot or is unwilling to otherwise accommodate. the term “assistance” is statutorily defined in many federal laws. for',
10423:'example, the federal program information act broadly defines “assistance” as “the transfer of anything of value for a public purpose',
10424:'of support or stimulation authorized by [law].” 31u.s.c. § 61013. a similar definition of “assistance” is found in the intergovernmental',
10425:'cooperation act, which adds the qualification, for purposes of that act, that the federal government provide such a transfer through',
10426:'grant or contractual arrangements. 31 u.s.c. § 65011. another definition is provided in the single audit act, which defines “federal',
10427:'financial assistance” as “assistance that nonfederal entities receive or administer in the form of grants, loans, loan guarantees, property, cooperative',
10428:'agreements, interest subsidies, insurance, food commodities, direct appropriations, or other assistance.” 31 u.s.c. § 7501a5.1 grants constitute one form of',
10429:'federal assistance. the intergovernmental cooperation act defines a grant as “money, or property provided instead of money, that is paid',
10430:'or provided by the united states government under a fixed annual or total authorization, to” an eligible beneficiary. 31 u.s.c.',
10431:'§ 65014a and b. the act defines eligible beneficiaries as including state and local governments as well as certain private',
10432:'nonprofit organizations. id. the act specifically excludes from this definition such things as a loan, shared revenue, and payments under',
10433:'a research and development procurement contract. id. § 65014c. similarly, gao’s budget glossary defines a grant as a “federal financial',
10434:'assistance award making payment in cash or in kind for a specified purpose,” adding: “the term ‘grant’ is used broadly',
10435:'and may include a grant to nongovernmental recipients as well as one to a state or local government, while the',
10436:'term 1 the intergovernmental cooperation act and the single audit act are discussed later in this chapter. page 103 gao06382sp',
10437:'appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements ‘grantinaid’ is commonly used to refer only to a',
10438:'grant to a state or local government.”2 thus, a federal grant is a form of assistance authorized by statute in',
10439:'which a federal agency the grantor transfers something of value to a party the grantee for a purpose, undertaking, or',
10440:'activity of the grantee that the government has chosen to assist. the “thing of value” is usually money, but may,',
10441:'depending on the program legislation, also include property or services.3 the grantee, again depending on the program legislation, may be',
10442:'a state or local government, a nonprofit organization, or a private individual or business entity. federal grants to state and',
10443:'local governments comprise the largest category, involving federal outlays of more than $406 billion in fiscal year 2004, which constituted',
10444:'17.7 percent of total federal outlays and 3.5percent of gross domestic product.4 the past four decades have witnessed a dramatic',
10445:'growth in federal grants, both in absolute dollar terms and as a proportion of total federal spending. the domestic working',
10446:'group’s recent publication, guide to opportunities for improving grant accountability washington, d.c.: october 2005, at 1–2, illustrates this growth.5 the',
10447:'guide focuses on grants to state and 2 gao, a glossary of terms used in the federal budget process, gao05734sp',
10448:'washington, d.c.: september 2005, at 60. the drafters of the federal grant and cooperative agreement act of 1977, 31 u.s.c.',
10449:'§§ 6301–6308, discussed in section b.2 of this chapter, opted against including a separate statutory definition for the term “grantinaid”',
10450:'in favor of using the simpler term “grant” to encompass all such transactions regardless of the identity of the recipient.',
10451:'s. rep. no. 95449, at 9 1977. 3 the earliest grant programs were land grants. monetary grants appear to have',
10452:'entered the stage in 1879, but they are largely a 20th century development. madden, the constitutional and legal foundations of',
10453:'federal grants, in federal grant law 9 m. mason ed. 1982. one example of land grants is the morrill act',
10454:'of 1862, pub. l. no. 37108, 12 stat. 503 july 2, 1862, through which congress assisted states with higher education',
10455:'by providing land grants to establish universities focused on agriculture, mechanics, and military science. library of congress, congressional research service,',
10456:'no. rl30705, federal grants to state and local governments: a brief history feb. 19, 2003, at 3–4. 4 office of',
10457:'management and budget, budget of the united states government, fiscal year 2006, historical tables washington, d.c. 2005, at 221. 5',
10458:'the domestic working group, chaired by the comptroller general, consists of 19 federal, state, and local audit organizations. its purpose',
10459:'is to identify current and emerging challenges of mutual interest and to explore opportunities for greater collaboration within the intergovernmental',
10460:'audit community. the guide describes a number of ideas and best practices to enhance grant management and administration. it covers',
10461:'several topics that are discussed in this chapter. an electronic copy of the guide can be found at www.epa.gov/oig/dwg/reports last',
10462:'visited november 5, 2005. page 104 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements local governments,',
10463:'which make up about 80 percent of all federal grants. in 1960, such grants amounted to approximately $7 billion, representing',
10464:'about 7 percent of the total federal outlays. in the president’s budget request for fiscal year 2006, about $450 billion',
10465:'was included to fund over 700 grant programs. as noted above, this represents over 17 percent of total federal outlays.',
10466:'“cooperative agreements” constitute another form of federal assistance relationship. as we will discuss in section b of this chapter, cooperative',
10467:'agreements are very much like grants in that they are used to transfer something of value to the recipient in',
10468:'order to accomplish a public purpose as authorized by law. the key difference is that the federal agency providing the',
10469:'assistance has more involvement with the recipient in carrying out the activity being funded under a cooperative agreement than it',
10470:'does in the case of a grant. given the similarity between these two forms of assistance, our discussion of grants',
10471:'in the remainder of this chapter applies as well to cooperative agreements except as otherwise noted. indeed, the distinction between',
10472:'grants and cooperative agreements is rarely, if ever, the focus of gao and judicial decisions. rather, as discussed hereafter, the',
10473:'decisions typically involve issues concerning the use of procurement contracts versus assistance relationships. in july 2005, according to the most',
10474:'recent information available from the catalog of federal domestic assistance,6 58 federal agencies administered 1,621 assistance programs. to be sure,',
10475:'a large number of these are not grant programs since the catalog includes loan and loan guarantee programs plus certain',
10476:'types of nonfinancial assistance. nevertheless, it is a safe statement that there are hundreds of federal grant programs administered by',
10477:'dozens of agencies. grant programs typically are governed by detailed legislation and even more detailed regulations. as a result, many',
10478:'judicial and administrative grant cases are not amenable to broad treatment in this chapter since they 6 the catalog of',
10479:'federal domestic assistance is published annually by the general services administration and the office of management and budget pursuant to',
10480:'31 u.s.c. § 6104 and omb circular no. a89, federal domestic assistance program information aug. 17, 1984. the catalog is',
10481:'a governmentwide list of financial and nonfinancial federal assistance programs, projects, services, and activities administered by federal agencies that provide',
10482:'assistance or benefits to the american public. 31 c.f.r. § 205.2 2005. the most recently updated print edition and the',
10483:'more frequently updated online version can both be accessed through the catalog’s website at www.cfda.gov last visited september 15, 2005.',
10484:'page 105 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements hinge on specific statutory or regulatory',
10485:'provisions having limited general applicability. nevertheless, it is still possible to extract a number of principles of “grant law” from',
10486:'the perspective of the availability and use of appropriated funds. before we do so, it is necessary to discuss the',
10487:'differences and similarities of grants, cooperative agreements, and procurement contracts. b. grants versus procurement contracts from the perspective of legal',
10488:'analysis, what precisely is a grant and when is it the appropriate funding vehicle for a federal agency to use?',
10489:'how do grants differ from contracts and what do they have in common? this section will explore these and related',
10490:'questions. we will first discuss judicial and gao case law that often applies some basic contract law principles to grants',
10491:'but also recognizes significant differences between grants and contracts, particularly federal procurements. as noted previously, grants are essentially the same',
10492:'as cooperative agreements for purposes of these cases. we will then discuss statutory and administrative principles that have been developed',
10493:'to clarify the distinctions among grants, contracts, and cooperative agreements and when each should be used by a federal agency.',
10494:'1. judicial and gao decisions on the nature of grants a. contractual aspects of grants courts frequently look to contract',
10495:'law principles to define the rights and obligations of the parties to a federal grant. in particular, the courts view',
10496:'the acceptance of a grant of federal funds subject to conditions that must be met by the grantee as creating',
10497:'a “contract” between the united states and the grantee. the “grant as a type of contract” approach evolved from early',
10498:'supreme court decisions. in what may be the earliest case on the subject, the government had made a grant of',
10499:'land to a state on the condition that the state would use the land, or the proceeds from its sale,',
10500:'for certain reclamation purposes. the court stated: “it is not doubted that the grant by the united states to the',
10501:'state upon conditions, and the acceptance of the grant by the state, constituted a contract. all the elements of a',
10502:'contract met in the transaction—competent parties, proper page 106 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative',
10503:'agreements subjectmatter, sufficient consideration, and consent of minds.” mcgee v. mathis, 71 u.s. 4 wall. 143, 155 1866. see also',
10504:'united states v. northern pacific railway co., 256 u.s. 51, 63–64 1921. the supreme court has consistently followed this approach',
10505:'in upholding conditions that congress imposes upon recipients of federal grants. see, e.g., jackson v. birmingham board of education, 544',
10506:'u.s. , 125 s. ct. 1497 2005; davis v. monroe county board of education, 526 u.s. 629 1999; pennhurst state',
10507:'school & hospital v. halderman, 451 u.s. 1 1981. consistent with the analogy to contract principles, the key consideration in',
10508:'many of these cases is whether the grantee was sufficiently aware of the condition to constitute acceptance of it. as',
10509:'the court observed in jackson, 125 s. ct. at 1509: “when congress enacts legislation under its spending power, that legislation',
10510:'is ‘in the nature of a contract: in return for federal funds, the states agree to comply with federally imposed',
10511:'conditions.’ pennhurst state school and hospital v. halderman, 451 u.s. 1, 17, 101 s. ct. 1531, 67 l.ed.2d 694 1981.',
10512:'as we have recognized, ‘[t]here can . . . be no knowing acceptance [of the terms of the contract] if',
10513:'a state is unaware of the conditions [imposed by the legislation on its receipt of funds].’ ibid.”7 lower courts also',
10514:'have applied contract principles to grants in various contexts: to enforce grantee compliance with grant conditions;8 to determine jurisdiction under',
10515:'the tucker act 28 u.s.c. § 1491 for claims 7 see section c.1.b of this chapter for further discussion of',
10516:'congressional use of grants in the exercise of its constitutional spending power. congress’s spending power is also discussed in chapter',
10517:'1, section b. 8 e.g., united states v. miami university, 91 f. supp. 2d 1132, 1142–44 s.d. ohio 2000, aff’d,',
10518:'294 f.3d 797 6th cir. 2002; united states v. frazer, 297 f. supp. 319, 322–23 m.d. ala. 1968; united states',
10519:'v. sumter county school district no. 2, 232 f. supp. 945, 950 e.d.s.c. 1964; united states v. county school board,',
10520:'221 f. supp. 93, 99–100 e.d. va. 1963. page 107 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and',
10521:'cooperative agreements against the united states;9 and to analyze the nature of the government’s obligations under a particular grant statute',
10522:'or agreement.10 gao decisions likewise analogize grants to contracts for certain purposes. e.g., b303927, june 7, 2005; 68 comp. gen.',
10523:'609 1989; 50 comp. gen. 470 1970; 42 comp. gen. 289, 294 1962; 41 comp. gen. 134, 137 1961; b232010,',
10524:'mar. 23, 1989; b167790, jan. 15, 1973. in 50 comp. gen. 470, for example, a medical teaching facility, recipient of',
10525:'a reimbursementtype construction grant under a federal statute, was caught in a cash flow crisis because disbursement of grant funds',
10526:'was much less frequent than its contractor’s need for progress payments. the question was whether the grant could be regarded',
10527:'as a “contract or claim” so the recipient could assign future grant proceeds to a bank in return for an',
10528:'interim loan, pursuant to the assignment of claims act, 41 u.s.c. § 15. under the assignment of claims act, any',
10529:'party that has or will have a right to payment of $1,000 or more under a contract with the u.s.',
10530:'government may assign this right to a bank, trust company, or other financing company, assuming the party meets all the',
10531:'requirements of the act. id. § 15b. noting that the accepted grant constituted a “valid contract” and that assignment was',
10532:'not prohibited by the program legislation, regulations of the grantor agency, or the terms of the grant agreement, gao concluded',
10533:'that assignment under the assignment of claims act was permissible. 9 e.g., pennsylvania department of public welfare v. united states,',
10534:'48 fed. cl. 785 2001; moore v. united states, 48 fed. cl. 394 2000; thermalon industries, ltd. v. united states,',
10535:'34 fed. cl. 411 1995; cole county regional sewer district v. united states, 22 cl. ct. 551 1991; county of',
10536:'suffolk v. united states, 19 cl. ct. 295 1990; kentucky ex rel. cabinet for human resources v. united states, 16',
10537:'cl. ct. 755, 762 1989; rogers v. united states, 14 cl. ct. 39, 44 1987; idaho migrant council, inc. v.',
10538:'united states, 9 cl. ct. 85, 88–89 1985; missouri health & medical organization, inc. v. united states, 641 f.2d 870',
10539:'ct. cl. 1981; texas v. united states, 537 f.2d 466 ct. cl. 1976. while most of these cases use language',
10540:'carefully crafted to avoid confusion between a grant agreement and a “traditional,” that is, procurement, contract, the essence of the',
10541:'jurisdictional finding is that the grant claim is based on some form of “contract.” the tucker act cases are discussed',
10542:'in more detail later in section b.2.c of this chapter in relation to the federal grant and cooperative agreement act.',
10543:'10 e.g., knight v. united states, 52 fed. cl. 243 2002, rev’d on other grounds, 65 fed. appx. 286 fed.',
10544:'cir. 2003; pennsylvania department of public welfare v. united states; henke v. department of commerce, 83 f.3d 1445 d.c. cir.',
10545:'1996; arizona v. united states, 494 f.2d 1285 ct. cl. 1974. see also city of manassas park v. united states,',
10546:'633 f.2d 181 ct. cl., cert. denied, 449 u.s. 1035 1980 claim found to be noncontractual, but agreement referred to',
10547:'as “grant contract” and grantorgrantee relationship as “privity of contract”. page 108 gao06382sp appropriations law—vol. ii chapter 10 federal assistance:',
10548:'grants and cooperative agreements b. differences between grants and contracts as indicated above, the researcher will find a body of',
10549:'judicial and gao case law standing for the proposition that there are certain contractual aspects to a grant relationship. it',
10550:'does not follow, however, nor has gao or to our knowledge any court suggested, that all of the trappings of',
10551:'a procurement contract somehow attach to a grant. while grant relationships have certain “contractual” relationships, the contract analogy has its',
10552:'limits. take, for example, the issue of consideration. while the typical grant agreement may well include sufficient legal consideration from',
10553:'the standpoint of supporting a legal obligation, it may be quite different from the consideration found in procurement contracts. as',
10554:'noted earlier in this chapter, a grant is a form of assistance to a designated class of recipients authorized by',
10555:'statute to meet recognized needs. grant needs, by definition, are not needs for goods or services required by the federal',
10556:'government itself. the needs are those of a nonfederal entity, whether public or private, which the congress has decided to',
10557:'assist as being in the public interest. an illustration of where this distinction on the issue of consideration can lead',
10558:'is 41 comp. gen. 134 1961. that decision involved a statutory provision authorizing grants to states for the construction of',
10559:'sewage treatment works, up to a stated percentage of estimated costs, with the grantee to pay all remaining costs. strong',
10560:'demand for limited funds meant that grants were frequently awarded for amounts less than the permissible ceiling. the question was',
10561:'whether these grants could be amended in a subsequent fiscal year to increase the amount to, or at least closer',
10562:'to, the statutory ceiling. if a straight “grant equals contract” approach had been applied, the answer would have been no,',
10563:'unless the government received additional consideration. however, gao concluded that the amendments were authorized, noting that the “consideration” flowing to',
10564:'the government under these grants in sharp contrast with procurement contracts consisted only of “the benefits to accrue to the',
10565:'public and the united states” through use of the funds to construct the desired facilities. id. at 137. in recognition',
10566:'of the essential distinctions between a grant agreement and a procurement contract, the supreme court has stated: “although we agree',
10567:'. . . that . . . [the] grant agreements [at issue] had a contractual aspect, . . . the',
10568:'program cannot be viewed in the same manner as a bilateral contract governing a discrete transaction. . . . unlike',
10569:'normal contractual page 109 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements undertakings, federal grant programs',
10570:'originate in and remain governed by statutory provisions expressing the judgment of congress concerning desirable public policy.” bennett v. kentucky',
10571:'department of education, 470 u.s. 656, 669 1985. the state in that case had argued that, since the grant was',
10572:'“in the nature of a contract,” the court should apply the principle, drawn from contract law, that ambiguities in the',
10573:'grant agreement should be resolved against the government as the drafting party. id. at 666. based on the analysis summarized',
10574:'in the quoted passage, the supreme court declined to do so. similarly, the contract law doctrine of “impossibility of performance”',
10575:'has been held inapplicable to a grant. maryland department of human resources v. united states department of health & human',
10576:'services, 762 f.2d 406 4th cir. 1985. in that case, the government had imposed a zero error standard on states',
10577:'under a grant program. the state argued that errorfree administration was impossible. while agreeing with that factual proposition, the court',
10578:'nevertheless held that the zero tolerance level was permissible under the governing statute and regulations. the impossibility of performance doctrine,',
10579:'said the court, “relates to commercial contracts and not to grant in aid programs.” id. at 409. a 1971 decision,',
10580:'51 comp. gen. 162, illustrates another distinction. in that case, the comptroller general concluded that an ineligible grantee could not',
10581:'be reimbursed for expenditures under quantum meruit principles. quantum meruit is a “contractimpliedin law” theory founded on the principle that',
10582:'a party who receives a tangible benefit from another is entitled to compensation. in the typical grant situation, the grantee’s',
10583:'activities are not performed solely for the direct benefit of the government and the government does not receive any measurable,',
10584:'tangible benefit in the traditional contract sense. similarly, the courts are reluctant to apply the “contract implied in fact” concept',
10585:'in the grant context. e.g., capitol boulevard partners v. united states, 31 fed. cl. 758 1994; blaze construction, inc. v.',
10586:'united states, 27 fed. cl. 646 1993; eubanks v. united states, 25 cl. ct. 131 1992; somerville technical services v.',
10587:'united states, 640 f.2d 1276 ct. cl. 1981. the reasoning, in part, is that a grant is a sovereign act',
10588:'binding the government only to the extent of its express undertakings. in american hospital association v. schweiker, 721 f.2d 170',
10589:'7th cir. 1983, cert. denied, 466 u.s. 958 1984, the court rejected the contention page 1010 gao06382sp appropriations law—vol. ii',
10590:'c. grants as “hybrids” chapter 10 federal assistance: grants and cooperative agreements that otherwise valid regulations of the department of',
10591:'health and human services impaired contractual rights of grantees under the hillburton hospital assistance program: “[t]he relationship between the government',
10592:'and the hospitals here cannot be wholly captured by the term ‘contract’ and the analysis traditionally associated with that term.',
10593:'. . . the contract analogy thus has only limited application.” 721 f.2d at 182–83. additionally, the court in united',
10594:'states v. kensington hospital, 760 f. supp. 1120 e.d. pa. 1991, refused to apply the anti kickback act of 198611',
10595:'to government claims for fraud under the medicare and medicaid programs, finding that the government’s relationship with its grantees under',
10596:'these programs could not be characterized as “prime contracts” for purposes of the act. finally, appropriations law restrictions may not',
10597:'apply to grants in the same manner as they apply to contracts. thus, gao has held that the principle of',
10598:'“severability,” as embodied in the bona fide needs rule for purposes of contracts, is irrelevant to assistance agreements. see b289801,',
10599:'dec. 30, 2002 dealing with multiple year education department grants; b229873, nov. 29, 1988 dealing with small business administration cooperative',
10600:'agreements. these cases are discussed in section c.1 of this chapter. perhaps most aptly, some courts have described grants as',
10601:'“hybrid” instruments in view of both their similarities to and differences from contracts. mayor and city council of baltimore v.',
10602:'browner, 866 f. supp. 249, 252 d. md. 1994; town of fallsburg v. united states, 22 cl. ct. 633, 642',
10603:'1991. in this regard, the court in browner stated: “essentially, grants are contracts with statutory and regulatory terms superimposed upon',
10604:'them.” 866 f. supp. at 252. the court held that the appropriate standard of judicial review depended on the nature',
10605:'of the dispute before it. if the issues arose under the grant statute or regulations as they did in this',
10606:'case, the court would review the agency’s actions under an abuse of discretion standard; other issues would be considered contractual',
10607:'and subject to de 11 the antikickback act of 1986, pub. l. no. 99634, § 2 a, 100 stat. 3523',
10608:'nov. 7, 1986, codified at 41 u.s.c. §§ 51–58, imposes criminal and civil sanctions against subcontractors who provide money, gifts,',
10609:'or other “kickbacks” to prime contractors in order to secure their subcontracts as part of a larger government contract. page',
10610:'1011 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements novo review applying contract law principles. fallsburg,',
10611:'which the browner court followed, took the same approach in determining the appropriate standard for judicial review. see also, to',
10612:'the same effect, united states v. hatcher, 922 f.2d 1402, 1406–07 9th cir. 1991, in which the court reviewed the',
10613:'federal funding agency’s actions under the administrative procedure act rather than contract law principles since the issues arose under the',
10614:'program statute in this case a program of individual scholarships. other cases have followed the same approach without specifically referring',
10615:'to grants as hybrids. these cases emphasize that the rights and obligations of the parties, while contractual in nature, cannot',
10616:'be determined solely by reference to the terms of the grant agreement itself. rather, the court must also look to',
10617:'such sources as the applicable grant statute, its legislative history, the grantor agency’s regulations, and applicable office of management and',
10618:'budget guidance. see, e.g., westside mothers v. haveman, 289 f.3d 852, 858 6th cir., cert. denied, 537 u.s. 1045 2002;',
10619:'institute for technology development v. brown, 63 f.3d 445, 449 5th cir. 1995. in sum, it is clear that the',
10620:'many varied rules and principles of contract law will not be automatically applied to grants. nevertheless, it is equally clear',
10621:'that the creation of a grant relationship results in certain legal obligations flowing in both directions grantor and grantee that',
10622:'will be enforceable by the application of some basic contract rules. as the then claims court now court of federal',
10623:'claims stated: “[a] notice of a federal grant award in return for the grantee’s performance of services can create cognizable',
10624:'obligations to the extent of the government’s undertakings therein.” community relationssocial development commission v. united states, 8 cl. ct. 723,',
10625:'725 1985. thus, if a grantee does what it has committed itself to do and incurs allowable costs, the government',
10626:'is obligated to pay. e.g., b181332, dec. 28, 1976. conversely, the government has a right to expect that the grantee',
10627:'will use the grant funds only for authorized grant purposes and only in accordance with the terms and conditions of',
10628:'the grant. the right of a grantor agency to oversee the expenditure of funds by the grantee to ensure that',
10629:'the money is used only for authorized purposes, and the grantee’s corresponding duty to account to the grantor for its',
10630:'use of the funds, are implicit in the grant relationship and are not dependent upon page 1012 gao06382sp appropriations law—vol.',
10631:'ii chapter 10 federal assistance: grants and cooperative agreements specific language in the authorizing legislation. see, e.g., b303927, june 7,',
10632:'2005; 64 comp. gen. 582 1985. 2. the federal grant and cooperative agreement act a. purposes and provisions of the',
10633:'act longstanding confusion and concern over federal agency use of grant relationships versus procurement relationships led the commission on government',
10634:'procurement, in its 1972 report, to recommend the enactment of legislation to distinguish assistance from procurement and to further refine',
10635:'the concept of assistance by clearly distinguishing grants from cooperative agreements.12 while congress did not enact all of the commission’s',
10636:'recommendations, it did enact these two in the form of the federal grant and cooperative agreement act of 1977, pub.',
10637:'l. no. 95224, 92 stat. 3 feb. 3, 1978, codified at 31 u.s.c. §§ 6301–6308. referring to the commission’s findings,',
10638:'the report on this legislation by the then senate committee on governmental affairs now the senate committee on homeland security',
10639:'and governmental affairs observed: “no uniform statutory guideline exists to express the sense of congress on when executive agencies should',
10640:'use either grants, cooperative agreements or procurement contracts. failure to distinguish between procurement and assistance relationships has led to both',
10641:'the inappropriate use of grants to avoid the requirements of the procurement system, and to unnecessary red tape and administrative',
10642:'requirements in grants.” s. rep. no. 95449, at 6 1977. the federal grant and cooperative agreement act was enacted to—',
10643:'“prescribe criteria for executive agencies in selecting appropriate legal instruments to achieve— 12 see generally 3 report of the commission',
10644:'on government procurement, chs. 1–3 dec. 31, 1972. page 1013 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and',
10645:'cooperative agreements a uniformity in their use by executive agencies; ba clear definition of the relationships they reflect; and c',
10646:'a better understanding of the responsibilities of the parties to them.” 31 u.s.c. § 63012. to achieve these purposes, the',
10647:'act established standards that agencies are to use in selecting the most appropriate funding vehicle: a procurement contract, a grant,',
10648:'or a cooperative agreement. the standards are contained in sections 4, 5, and 6 of the act, codified at 31',
10649:'u.s.c. §§ 6303–6305, which are summarized below: procurement contracts. an agency is to use a procurement contract when “the principal',
10650:'purpose of the instrument is to acquire by purchase, lease, or barter property or services for the direct benefit or',
10651:'use of the united states government.” 31 u.s.c. § 6303 emphasis added. grant agreements. an agency is to use a',
10652:'grant agreement when the principal purpose of the relationship is to transfer a thing of value [money, property, services, etc.]',
10653:'to the recipient “to carry out a public purpose of support or stimulation authorized by a law of the united',
10654:'states instead of acquiring by purchase, lease, or barter property or services for the direct benefit or use of the',
10655:'united states government,” and “substantial involvement is not expected” between the agency and the recipient when carrying out the contemplated',
10656:'activity. 31 u.s.c. § 6304 emphasis added. cooperative agreements. an agency is to use a cooperative agreement when the principal',
10657:'purpose of the relationship is to transfer a thing of value to the recipient “to carry out a public purpose',
10658:'of support or stimulation authorized by a law of the united states instead of acquiring by purchase, lease, or barter',
10659:'property or services for the direct benefit or use of the united states government,” and “substantial involvement is expected” between',
10660:'the agency and the recipient when carrying out the contemplated activity. 31 u.s.c. § 6305 emphasis added. the federal grant',
10661:'and cooperative agreement act authorizes the director of the office of management and budget omb to provide additional guidance in',
10662:'interpreting the act to “promote consistent and efficient use of page 1014 gao06382sp appropriations law—vol. ii chapter 10 federal assistance:',
10663:'grants and cooperative agreements procurement contracts, grant agreements, and cooperative agreements.” 31 u.s.c. § 63071. omb published such guidance on',
10664:'august 18, 1978 43 fed. reg. 36860, which is still in effect.13 the federal grant and cooperative agreement act’s basic',
10665:'criterion on when to use a procurement contract rather than one of the two assistance arrangements a grant or cooperative',
10666:'agreement is clear and turns on the underlying purpose of the arrangement: if the federal agency’s primary purpose is to',
10667:'acquire goods or services for the direct benefit or use of the government, then a procurement contract must be used.',
10668:'on the other hand, the act calls for use of a grant or a cooperative agreement when the agency’s primary',
10669:'purpose is to provide assistance for the recipient to use in order to accomplish a public objective authorized by law.',
10670:'thus, procurement contracts differ from either grants or cooperative agreements in terms of their basic purpose. under the act, a',
10671:'grant and a cooperative agreement are closely related assistance arrangements with essentially the same basic purpose: to encourage the recipient',
10672:'of funding to carry out activities in furtherance of a public goal. the difference is the degree of involvement between',
10673:'the federal agency and the recipient in the performance of the activity being funded. when the involvement is expected to',
10674:'be “substantial,” the act requires use of a cooperative agreement rather than a grant. the act does not define “substantial”',
10675:'in this context. however, the senate report on the federal grant and cooperative agreement act provided the following examples of',
10676:'situations that might require substantial federal involvement: federal project management or federal program or administrative assistance would be helpful due',
10677:'to the novelty or complexity involved for example, in some construction, information systems development, and demonstration projects; federal/recipient collaboration in',
10678:'performing the work is desirable for example, in collaborative research, planning or problem solving; 13 for two articles discussing the',
10679:'omb guidance, see paul g. dembling, the federal grant and cooperative agreement act: its use and misuse, 51 federal lawyer',
10680:'12 february 2004; kurt m. rylander, scanwell plus: challenging the propriety of a federal agency’s decision to use a federal',
10681:'grant and cooperative agreement, 28 pub. cont. l. j. 69 fall 1998. page 1015 gao06382sp appropriations law—vol. ii chapter 10',
10682:'federal assistance: grants and cooperative agreements federal monitoring is desirable to permit specified kinds of direction or redirection of the',
10683:'work because of interrelationships among projects in areas such as applied research; and federal involvement is desirable in the early',
10684:'stages of ongoing programs, such as welfare or law enforcement programs, where standards are being developed or the application of',
10685:'standards requires a period of adjustment until recipient capability has been developed. s. rep. no. 95449, at 9–10. the omb',
10686:'guidance expands on what substantial involvement means. see 43 fed. reg. at 36863. it should be emphasized that substantial involvement',
10687:'here refers to federal participation in the performance of the funded activity. this should not be taken to imply that',
10688:'a federal grantor agency lacks an oversight role when lack of substantial involvement calls for the use of a grant.14',
10689:'quite the contrary, gao has held that grantor agencies have an affirmative duty to oversee grant performance and that, “[a]s',
10690:'a matter of law, a grantor agency may not disassociate itself from the performance of its grant.” b303927, june 7,',
10691:'2005, at 8–9. the decision in b303927 cited a provision of the single audit act, 31 u.s.c. § 7504a1 “each',
10692:'federal agency shall, in accordance with guidance issued by the director [of the office of management and budget], . .',
10693:'. monitor nonfederal entity use of federal awards”, as well as gao and judicial decisions that emphasize the contractual nature',
10694:'of grant obligations. the federal grant and cooperative agreement act authorizes omb to exempt a transaction or program of an',
10695:'executive agency from its application. id. § 63072. the original act provided this exemption authority only on a temporary basis.',
10696:'however, congress later made the authority permanent. pub. l. no. 97162, 96 stat. 23 apr. 1, 1982. the legislative history',
10697:'of public law 97162 noted that omb had used the exemption authority sparingly only for nonmonetary grants and certain revenue',
10698:'sharing programs and stated the expectation that future exemptions would likewise be few in number and limited to individual transactions',
10699:'or programs. s. rep. no. 97180, at 2 1981. 14 in this regard, omb guidance specifically states that substantial involvement',
10700:'refers to performance of the funded activity rather than oversight. 43 fed. reg. at 36863. page 1016 gao06382sp appropriations law—vol.',
10701:'ii chapter 10 federal assistance: grants and cooperative agreements b. agency implementation of the act specific legislation may also exempt',
10702:'programs from the federal grant and cooperative agreement act’s requirements. this was the case in b279338, jan. 4, 1999, where',
10703:'a provision of the indian selfdetermination and education assistance act, 25 u.s.c. § 450e1, made such an exemption. in view',
10704:'of this exemption, the comptroller general upheld the interior department’s use of a contract, rather than a grant, to fund',
10705:'a land acquisition for an indian tribe using authority in the selfdetermination act that ordinarily applied to a grant program.',
10706:'in determining the correct funding instrument to use, the threshold question to consider is whether the agency has statutory authority',
10707:'to engage in assistance transactions at all. while federal agencies generally have “inherent” authority to enter into contracts to procure',
10708:'goods or services for their own use, there is no comparable inherent authority to enter into assistance relationships, that is,',
10709:'to give away the government’ s money or property, either directly or by the release of vested rights, to benefit',
10710:'someone other than the government. 65 comp. gen. 605, 607 1986; b210655, apr. 14, 1983. therefore, the relevant legislation must',
10711:'be studied to determine whether an assistance relationship is authorized at all, and if so, under what circumstances and conditions.',
10712:'see, e.g., 64 comp. gen. 582, 584 1985; 59 comp. gen. 1, 8 1979. it is important to note that',
10713:'the federal grant and cooperative agreement act does not expand an agency’s substantive authority in this regard. while the act',
10714:'provides criteria for examining whether an arrangement should be a contract, grant, or cooperative agreement, determinations of whether an agency',
10715:'has authority to enter into such arrangements in the first instance must be based on the agency’s authorizing or program',
10716:'legislation. once the necessary underlying authority is found, the legal instrument contract, grant, or cooperative agreement that fits the arrangement',
10717:'as contemplated must be used, using the statutory definitions for guidance as to which instrument is appropriate. the analysis of',
10718:'the agency’s program authority is not a matter of discretion; the requisite authority either is there or it is not.',
10719:'in this regard, however, the focus should be on the substance of an agency’s program authority rather than the particular',
10720:'labels used or not used. in this connection, a senate committee on governmental affairs report stated: “[the federal grant and',
10721:'cooperative agreement act] was never intended to be an independent grant of authority to agencies to enter into assistance or',
10722:'contractual page 1017 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements c. decisions interpreting the act',
10723:'relationships where no such authority can be found in authorizing legislation. rather, it was and is intended to force agencies',
10724:'to use a legal instrument that, according to the criteria established by the act, matches the intended and authorized relationship—regardless',
10725:'of the terminology used in existing legislation to characterize the instrument to be used in the transaction.”15 further discussion on',
10726:'this point may be found in b196872o.m., mar. 12, 1980, and a gao report entitled agencies need better guidance for',
10727:'choosing among contracts, grants, and cooperative agreements, ggd8188 washington, d.c.: sept. 4, 1981. it is important that an agency identify',
10728:'the appropriate funding instrument because procurement contracts are subject to a variety of statutory and regulatory requirements that generally do',
10729:'not apply to assistance transactions. if the type of relationship is not determined properly, assistance arrangements could be used to',
10730:'evade competition and other legal requirements applicable to procurement contracts. conversely, legitimate assistance awards should not be burdened by all',
10731:'of the formalities of procurement contracts. the following decisions illustrate how the act’s criteria have been applied. in 61 comp.',
10732:'gen. 428 1982, gao agreed with the department of energy’s use of a cooperative agreement with a private company to',
10733:'design and construct a “prototype solar parabolic dish/sterling engine system module,” finding that the proposal’s primary purpose was to encourage',
10734:'development and early market entry rather than to acquire the particular item for its own use, although it would eventually',
10735:'have governmental applications. therefore, gao held that the arrangement did not constitute a procurement contract requiring competition. in contrast, some',
10736:'decisions have held that a procurement contract is the appropriate instrument. for example, the comptroller general determined in b262110, mar.',
10737:'19, 1997, that the environmental protection agency should have acquired conference support services using a procurement contract rather than a',
10738:'cooperative agreement because the support services 15 s. rep. no. 97180, at 4 1981. this report is on legislation that',
10739:'amended the original act rather than direct legislative history on the original act. nevertheless, it is important as a clear',
10740:'statement from one of the relevant jurisdictional committees. page 1018 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and',
10741:'cooperative agreements were a direct benefit to the agency. similarly, the comptroller general concluded in b257430, sept. 12, 1994, that',
10742:'the office of personnel management opm should have used a procurement contract to obtain survey services because the services directly',
10743:'benefited opm by providing opm assistance in performing the agency’s statutory duty and because opm exercised significant influence over the',
10744:'survey arrangements.16 the issue of whether an agency was improperly using an assistance instrument instead of a procurement contract has',
10745:'also been raised in judicial decisions. the court in chem service, inc. v. environmental monitoring systems laboratory, 12 f.3d 1256',
10746:'3rd cir. 1993, after reviewing the relevant authorizing legislation and its legislative history, held that the plaintiff company could challenge',
10747:'whether a cooperative research and development agreement between the environmental protection agency and a private laboratory actually constituted a procurement',
10748:'contract that should have been subject to competition requirements under federal law. one common situation in which the question of',
10749:'the principal purpose of the funding relationship is raised is the socalled “third party” or “intermediary” situation where a federal',
10750:'agency provides assistance to specified recipients by using an intermediary. in these situations, it is necessary to examine the agency’s',
10751:'program authority to determine the authorized forms of assistance. the agency’s relationship with the intermediary should normally be a procurement',
10752:'contract if the intermediary is not itself a member of a class eligible to receive assistance from the government. in',
10753:'other words, if an agency program contemplates provision of technical advice or services to a specified group of recipients, the',
10754:'agency may provide the advice or services itself or hire an intermediary to do it for the agency. in that',
10755:'case, the proper vehicle to fund the intermediary is a procurement contract. the agency is “buying” the services of the',
10756:'intermediary for its own purposes, to relieve the agency of the need to provide the advice or services with its',
10757:'own staff. thus, it is acquiring the services for “the direct benefit or use of the united states government,” 16',
10758:'additional decisions holding that a procurement contract rather than an assistance instrument should have been used are: 67 comp. gen.',
10759:'13 1987, aff’d upon reconsideration, b227084.6, dec. 19, 1988 operation of research and training programs at a government facility funded',
10760:'by maritime administration; 65 comp. gen. 605 1986 proposed study, sponsored by council on environmental quality, of risks and benefits',
10761:'of certain pesticides, intended for use by federal regulatory agencies; b210655, apr. 14, 1983 funding by department of energy of',
10762:'college campus forums on nuclear energy. page 1019 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements',
10763:'which mandates the use of a procurement contract under the federal grant and cooperative agreement act. on the other hand,',
10764:'if the program purpose contemplates support to certain types of intermediaries to provide consultation or other specified services to third',
10765:'parties, the comptroller general has approved the agency’s choice of a grant rather than a contract as the preferred funding',
10766:'vehicle. thus, in 58 comp. gen. 785 1979, the comptroller general found that the department of commerce could properly award',
10767:'a noncompetitive grant to an intermediary organization to provide management and technical assistance to minority business firms. although the point',
10768:'was not detailed in the decision, the agency clearly had the requisite program authority to provide grant assistance to the',
10769:'intermediary. the comptroller general came to the opposite conclusion in 61 comp. gen. 637 1982. in that case, the department',
10770:'of housing and urban development had awarded a cooperative agreement to a nonprofit organization to provide technical assistance to certain',
10771:'block grant recipients. while the department’s authority to provide technical assistance to the block grant recipients was clear, there was',
10772:'no authority to provide assistance to the intermediary organization. the essence of the intermediary transaction was the acquisition of services',
10773:'for ultimate delivery to authorized recipients. thus, the comptroller general concluded that a procurement contract should have been used. the',
10774:'senate committee report on legislation that amended the original federal grant and cooperative agreement act addressed the intermediary issue and',
10775:'agreed with gao’s interpretation: “the choice of instrument for an intermediary relationship depends solely on the principal federal purpose in',
10776:'the relationship with the intermediary. the fact that the product or service produced by the intermediary may benefit another party',
10777:'is irrelevant. what is important is whether the federal government’s principal purpose is to acquire the intermediary’s services, which may',
10778:'happen to take the form of producing a product or carrying out a service that is then delivered to an',
10779:'assistance recipient, or if the government’s principal purpose is to assist the intermediary to do the same thing. where the',
10780:'recipient of an award is not receiving assistance from the federal agency but is merely used to provide a service',
10781:'to another entity page 1020 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements which is eligible',
10782:'for assistance, the proper instrument is a procurement contract.” s. rep. no. 97180, at 3 1981. the foregoing cases deal',
10783:'with the specific issue of which funding instrument to use, procurement contract versus assistance agreement. however, the analysis required by',
10784:'the federal grant and cooperative agreement act may also be relevant when the main issue concerns the applicability of other',
10785:'federal laws to a particular funding instrument. the following cases provide examples. in b196690, mar. 14, 1980, the interior department',
10786:'asked whether it could use its 1978 and 1979 appropriations to fund expenses of the american samoan judiciary related to',
10787:'entertainment and the purchase of motor vehicles. using the guidelines of the federal grant and cooperative agreement act, the comptroller',
10788:'general reviewed the relationship between the interior department and the american samoan judiciary and concluded that it was essentially a',
10789:'grant relationship. therefore, restrictions such as those relating to entertainment and motor vehicles that would apply to the direct expenditure',
10790:'of appropriations by the federal government or through a contractor did not apply to expenditures by the grant recipient, absent',
10791:'some provision to the contrary in the appropriation, agency regulations, or grant agreement.17 for fiscal year 1980, congress changed the',
10792:'statutory language to specifically appropriate funds “for grants to the judiciary in american samoa,” thus removing any doubt that the',
10793:'samoan judiciary is a grant recipient. pub. l. no. 96126, 93 stat. 954, 965 nov. 27, 1979. in 59 comp.',
10794:'gen. 424 1980, the comptroller general viewed the environmental protection agency’s public participation program of providing financial assistance to certain',
10795:'intervenors in proceedings before the agency as essentially a grant relationship rather than a contractual one. accordingly, the decision held',
10796:'that 31 u.s.c. § 3324, which generally prohibits the government from making payments for goods or services in 17 of',
10797:'course, similar restrictions on allowable costs can be, and frequently are, imposed on grantees. for example, entertainment costs are unallowable',
10798:'grant costs under several omb circulars. see omb circular no. a21, cost principles for educational institutions may 10, 2004, attachment',
10799:'j, § 17; omb circular no. a122, cost principles for nonprofit organizations may 10, 2004, attachment b, § 14. section',
10800:'g of this chapter discusses grant cost issues in more detail. page 1021 gao06382sp appropriations law—vol. ii chapter 10 federal',
10801:'assistance: grants and cooperative agreements advance of delivery,18 did not to preclude participants from receiving funds in advance of the',
10802:'completion of their participation, subject to the provision of adequate fiscal controls. in another case, b290900, mar. 18, 2003, the',
10803:'comptroller general held that the general requirement under 44 u.s.c. § 501 that the government printing office perform printing and',
10804:'binding “for the government” did not apply to the publication of an educational brochure about the michigan lighthouse project that',
10805:'the bureau of land management blm had helped to fund. the michigan lighthouse project involved a cooperative agreement between blm',
10806:'and other federal, state, and nonprofit entities to preserve historical lighthouses. while the decision did not refer specifically to the',
10807:'federal grant and cooperative agreement act, it did apply reasoning similar to the analysis called for by the act. the',
10808:'decision noted that the brochure was published as part of the cooperative agreement and thus generally benefited all of the',
10809:'parties to the agreement. accordingly, for the same reason that the transaction did not involve work “for the government” within',
10810:'the meaning of 44 u.s.c. § 501, it did not represent the acquisition of services principally “for the direct benefit',
10811:'or use of the united states government.” judicial decisions also have considered the federal grant and cooperative agreement act in',
10812:'considering the applicability of other laws. in hammond v. donovan, 538 f. supp. 1106 w.d. mo. 1982, the court held',
10813:'that the relationship between the labor department and a state employment office was a grant, and therefore not subject to',
10814:'a statute requiring that certain procurement contracts contain an affirmative action for veterans provision. the court in partridge v. reich,',
10815:'141 f.3d 920 9th cir. 1998, reached the same conclusion in rejecting the contention that a grant was subject to',
10816:'the same statute considered in hammond. before leaving the subject of the federal grant and cooperative agreement act, it is',
10817:'worth highlighting some judicial decisions that have considered the act in relation to a topic discussed in the previous section:',
10818:'whether and to what extent grants and cooperative agreements should be regarded as contracts. 18 for a more detailed explanation',
10819:'of 31 u.s.c. § 3324 and advance payments in general, see chapter 5, section c. for more on advance payments',
10820:'in the grant context, see section e of this chapter. page 1022 gao06382sp appropriations law—vol. ii chapter 10 federal assistance:',
10821:'grants and cooperative agreements the issue in several of the cases is whether assistance agreements can give rise to enforceable',
10822:'contract rights and obligations. the tucker act gives the court of federal claims jurisdiction over claims against the united states',
10823:'“founded . . . upon any express or implied contract with the united states . . .” 28 u.s.c. §',
10824:'1491a1. in trauma service group, ltd. v. united states, 33 fed. cl. 426 1995, the court determined that a memorandum',
10825:'of agreement moa between the defense department and a health care provider was a cooperative agreement within the meaning of',
10826:'the federal grant and cooperative agreement act. reasoning that all federal agreements must fall into one of the act’s three',
10827:'categories, the court reasoned that the moa, therefore, could not be a contract for purposes of the tucker act. trauma',
10828:'service group, 33 fed. cl. at 429–30. accordingly, the court dismissed the claim. another judge of the same court came',
10829:'to the opposite conclusion in a case decided just a few months later, thermalon industries, ltd. v. united states, 34',
10830:'fed. cl. 411 1995. the thermalon court held that a national science foundation research grant could give rise to contract',
10831:'rights enforceable under the tucker act so long as the grant embodied the traditional elements of a contract: offer, acceptance',
10832:'by an officer having authority to bind the united states, and consideration. the court rejected the agency’s argument that the',
10833:'federal grant and cooperative agreement act precluded treating the grant as a contract for tucker act purposes: “there is no',
10834:'suggestion in the [federal grant and cooperative agreement act] that procurement contracts are the only type of contracts enforceable under',
10835:'the tucker act or that grant agreements that satisfy all of the ordinary requirements for a government contract should not',
10836:'be classified as contracts enforceable under the tucker act.” thermalon, 34 fed. cl. at 417. considering the federal grant and',
10837:'cooperative agreement act’s legislative history, the court viewed that act as addressing “a very different set of concerns” than tucker',
10838:'act contract jurisdiction. id. at 418. to the extent that its interpretation of the act was inconsistent with the analysis',
10839:'in trauma service group, the court “respectfully disagree[d] with that analysis.” id. at fn. 4. later, in trauma service group,',
10840:'ltd. v. united states, 104 f.3d 1321 1997, the court of appeals for the federal circuit affirmed the federal claims',
10841:'court’s dismissal in that case, but actually sided with the thermalon decision’s analysis on the federal grant and cooperative page',
10842:'1023 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements agreement act point. the federal circuit determined',
10843:'that the plaintiff in trauma service group had not established a violation of any duty owed to it under the',
10844:'terms of the moa; thus, there could be no breach of contract. however, the federal circuit rejected the lower court’s',
10845:'conclusion that a cooperative agreement could never be a contract for purposes of the tucker act: “[a]ny agreement can be',
10846:'a contract within the meaning of the tucker act, provided that it meets the requirements for a contract with the',
10847:'government, specifically: mutual intent to contract including an offer and acceptance, consideration, and a government representative who had actual authority',
10848:'to bind the government. see city of el centro, 922 f.2d at 820; thermalon, 34 fed.cl. at 414. as such,',
10849:'contrary to the opinion of the trial court, a moa can also be a contract—whether this one is, we do',
10850:'not decide.” 104 f.3d at 1326. most recently, the court of federal claims in pennsylvania department of public welfare v.',
10851:'united states, 48 fed. cl. 785, 790–91 2001, reiterated in dicta that a grant could confer jurisdiction under the tucker',
10852:'act if it contained all of the elements of a contract. in this regard, the court cited its prior decision',
10853:'in trauma service group as well as the thermalon decision and a number of cases that preceded the enactment of',
10854:'federal grant and cooperative agreement act. however, the court held that the grant in the case before it did not',
10855:'include the necessary elements of a contract. other courts have also declined to interpret the federal grant and cooperative agreement',
10856:'act as precluding the treatment of assistance agreements as contracts for purposes unrelated to determining the appropriate funding instrument for',
10857:'a federal agency to use. see henke v. department of commerce, 83 f.3d 1445 d.c. cir. 1996 privacy act disclosure',
10858:'exemption, 5 u.s.c. § 552ak5, pertaining to “federal contracts” applied to a national science foundation grant that embodied the essential',
10859:'elements of a contract; united states v. president & fellows of harvard college, 323 f. supp. 2d 151 d. mass.',
10860:'2004 cooperative agreements between the agency for international development and harvard were contracts for purposes of a breach of contract',
10861:'action initiated by the united states. by way of summary, the federal grant and cooperative agreement act provides criteria that',
10862:'agencies must use in deciding which funding page 1024 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative',
10863:'agreements instrument to use from among contracts, grants, and cooperative agreements. this choice assumes, of course, that the agency has',
10864:'the requisite statutory authority to enter into assistance relationships in the form of a grant or cooperative agreement. the federal',
10865:'grant and cooperative agreement act does not in itself supply such authority. legal issues concerning the choice of instrument invariably',
10866:'focus on procurement versus assistance relationships, with the underlying concern often being whether competition requirements should apply. the comptroller general',
10867:'and the courts may also look to the criteria in the federal grant and cooperative agreement act to classify a',
10868:'funding transaction for purposes of determining the applicability of other laws. in this context, however, the clear weight of authority',
10869:'is that the act’s classifications are not mutually exclusive. thus, something that is clearly a “grant” for purposes of the',
10870:'act still may be a “contract” or at least have contract features for purposes of other laws.19 3. competition for',
10871:'discretionary grant awards grant programs are either mandatory or discretionary. in a mandatory grant program, congress directs awards to one',
10872:'or more classes of prospective recipients who meet specific criteria for eligibility, in specified amounts. these grants, sometimes called “entitlement”',
10873:'or “formula” grants, are often awarded on the basis of statutory formulas.20 while the grantor agency may disagree on the',
10874:'application of the formula, it has no basis to refuse to make the award altogether. city of los angeles v.',
10875:'coleman, 397 f. supp. 547 d.d.c. 1975. thus, questions of grantee selection, and hence of competition, do not arise. the',
10876:'concept of competition can only apply when the grantor has discretion to choose one applicant over another. therefore, the following',
10877:'discussion is limited to discretionary grants. the federal grant and cooperative agreement act encourages competition in assistance programs where appropriate,',
10878:'in order to identify 19 for additional background on many of the cases and issues discussed in this section, see',
10879:'andreas baltatzis, the changing relationship between federal grants and federal contracts, 32 pub. cont. l. j. 611 spring 2003; jeffrey',
10880:'c. walker, enforcing grants and cooperative agreements as contracts under the tucker act, 26 pub. cont. l. j. 683 summer',
10881:'1997. 20 see, e.g., b289801, dec. 30, 2002, at fn. 1, referring to an education department regulation now found at',
10882:'34 c.f.r. § 75.200 2005, that describes the difference between discretionary and formula grants. page 1025 gao06382sp appropriations law—vol. ii',
10883:'chapter 10 federal assistance: grants and cooperative agreements and fund the best possible projects to achieve program objectives. 31 u.s.c.',
10884:'§ 63013. this, however, is merely a statement of purpose. there are few other legislative pronouncements specifying how this objective',
10885:'is to be achieved, certainly nothing approaching the detail and specificity of statutes applicable to procurement contracts such as the',
10886:'competition in contracting act of 1984.21 statutory requirements for competition in grantee selection do exist in certain contexts, but they',
10887:'tend to be very general and do not specify actual procedures. two examples involving the department of defense are 10',
10888:'u.s.c. § 2361a1 competitive procedures required for defense department research and development grants to colleges and universities, and 10 u.s.c.',
10889:'§ 2196icompetitive procedures also required for defense department manufacturing engineering education grants. in view of the essential differences between grants',
10890:'and procurement contracts, gao has declined to use its bid protest mechanism, prescribed to assure the fairness of awards of',
10891:'contracts, to rule on the propriety of individual grant awards.22 that is, gao will not consider a complaint by a',
10892:'rejected applicant that it should have received the grant rather than the recipient to whom it was actually awarded. see,',
10893:'e.g., b203096, may 20, 1981; b199247, aug. 21, 1980; b199147, june 24, 1980; b190092, sept. 22, 1977. this does not',
10894:'affect gao’s jurisdiction to render decisions on the legality of federal expenditures, however, so gao can and will render decisions',
10895:'on the legality of grant awards in terms of compliance with applicable statutes and regulations. of course, gao may also',
10896:'evaluate competition in grant awards from an audit perspective. one such evaluation is gao, discretionary grants: opportunities to improve federal',
10897:'discretionary award practices, gao/hrd86108 washington, d.c.: sept. 15, 1986. 21 pub. l. no. 98369, div. b, title vii, 98 stat.',
10898:'494, 1175 july 18, 1984 codified in scattered sections of titles 10, 31, and 41, united states code. 22 under',
10899:'various statutory and regulatory authorities, gao has served for more than 75 years as an independent forum for the resolution',
10900:'of disputes commonly referred to as “bid protests” concerning the award of federal contracts. see 31 u.s.c. §§ 3551–3556 and',
10901:'4 c.f.r. pt. 21 2005, which are the current statutory and regulatory provisions. for more information on the bid protest',
10902:'function, see gao, bid protests at gao: a descriptive guide, gao03539sp washington, d.c.: 2003. a copy of the guide can',
10903:'be found on the gao web site at www.gao.gov/decisions/bidpro/bidpro.htm last visited september 15, 2005. page 1026 gao06382sp appropriations law—vol. ii',
10904:'chapter 10 federal assistance: grants and cooperative agreements gao has adopted a similar position with respect to cooperative agreements. see,',
10905:'e.g., b255780, nov. 23, 1993, in which the comptroller general dismissed a protest against the small business administration’s use of',
10906:'a cooperative agreement to obtain management and technical assistance services because a provision in the small business act gave the',
10907:'agency the discretion to choose whether to provide such services through grants, cooperative agreements, or procurement contracts. gao will not',
10908:'consider a “protest” against the award of a cooperative agreement unless it appears that a conflict of interest exists or',
10909:'that the agency is using the cooperative agreement to avoid the competition requirements of the procurement laws and regulations i.e.,',
10910:'in violation of the federal grant and cooperative agreement act. see, e.g., b281439.3, 281439.4, mar. 23, 1999; b260514, june 16,',
10911:'1995; 64 comp. gen. 669 1985; 61 comp. gen. 428 1982; b258267, dec. 21, 1994; b256586, b256586.2, may 9, 1994;',
10912:'b255780, nov. 23, 1993; b216587, oct. 22, 1984. again, this refers to review under gao’s “bid protest” jurisdiction and does',
10913:'not affect review under gao’s other available authorities. in summary, assuming the proper instrument has been selected, gao will not',
10914:'question funding decisions in discretionary federal assistance programs. b228675, aug. 31, 1987 denial of an application for funding renewal was',
10915:'held to be a policy matter within the grantor agency’s discretion because nothing in the program legislation provided otherwise and',
10916:'the agency had complied with all the applicable procedural requirements. see also city of sarasota v. environmental protection agency, 813',
10917:'f.2d 1106 11th cir. 1987 court declined to review agency refusal to award grant for construction of a wastewater treatment',
10918:'project; massachusetts department of correction v. law enforcement assistance administration, 605 f.2d 21 1st cir. 1979 court upheld agency’s refusal',
10919:'to award grant, finding that procedural deficiencies, even though they amounted to “sloppiness,” were not sufficiently grave as to deprive',
10920:'the applicant of fair consideration. c. some basic concepts a number of principles have evolved that are unique to grant',
10921:'law. these will be discussed in subsequent sections of this chapter. many cases, however, involve the application of principles of',
10922:'law which are not unique to grants. as a general proposition, the fundamental principles of appropriations law discussed in preceding',
10923:'chapters apply to grants just as they apply to other expenditures. this section is designed to highlight a few of',
10924:'these areas, each of which is covered in detail elsewhere in this publication, and to show how they may apply',
10925:'in assistance contexts. page 1027 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements 1. the grant',
10926:'as an exercise of congressional spending power a. constitutionality of grant conditions when congress enacts grant legislation and provides appropriations',
10927:'to fund the grants, it is exercising the spending power conferred upon it by the constitution.23 as such, it is',
10928:'clear that congress has the power to attach terms and conditions to the availability or receipt of grant funds, either',
10929:'in the grant legislation itself or in a separate enactment. oklahoma v. civil service commission, 330 u.s. 127 1947 provision',
10930:'of hatch act prohibiting political activity by employees of state or local government agencies receiving federal grant funds upheld as',
10931:'within congressional power. see also west virginia v. united states department of health & human services, 289 f.3d 281 4th',
10932:'cir. 2002 upholding amendment to medicaid legislation requiring states to recoup expenses from estates of deceased beneficiaries. in south dakota',
10933:'v. dole, 483 u.s. 203, 207 1987 citations omitted, the supreme court observed: “‘[t]he power of congress to authorize expenditure',
10934:'of public moneys for public purposes is not limited by the direct grants of legislative power found in the constitution.’',
10935:'thus, objectives not thought to be within article i’s ‘enumerated legislative fields’ . . . may nevertheless be attained through',
10936:'the use of the spending power and the conditional grant of federal funds.” the supreme court and lower courts have',
10937:'repeatedly affirmed the power of congress to attach conditions to grant funds provided that the conditions are 1 in pursuit',
10938:'of the general welfare, 2 expressed unambiguously, 3 reasonably related to the purpose of the expenditure, and 4 not in',
10939:'violation of other constitutional provisions. new york v. united states, 505 u.s. 144, 171–72 1992. in this case, the supreme',
10940:'court upheld the constitutionality of statutory grant conditions that imposed on states milestones for disposing of radioactive waste, although it',
10941:'declared unconstitutional another aspect of the statute. the following are additional examples of cases upholding grant conditions: united states v.',
10942:'american 23 u.s. const. art. i, § 8, cl. 1 is often referred to as the principal source of congressional',
10943:'spending power. congress may be acting under other enumerated powers as well. “congress is not required to identify the precise',
10944:'source of its authority when it enacts legislation.” nevada v. skinner, 884 f.2d 445, 449 n. 8 9th cir. 1989,',
10945:'cert. denied, 493 u.s. 1070 1990. for additional background on the congressional “power of the purse,” see chapter 1, section',
10946:'b. page 1028 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements library association, 539 u.s. 194',
10947:'2003 requiring public libraries to use internet filters in order to receive federal subsidies; south dakota v. dole, 483 u.s.',
10948:'203, 207–08 1987 withholding a percentage of federal highway funds from states that do not adopt a minimum drinking age',
10949:'of 21; nevada v. skinner, 884 f.2d 445 9th cir. 1989, cert. denied, 493 u.s. 1070 1990 conditioning the receipt',
10950:'of federal highway funds on state adoption of the national speed limit. the following cases illustrate application of the criteria',
10951:'for grant conditions set forth in new york v. united states.24 1 conditions must be in pursuit of the general',
10952:'welfare and related to the purpose of the expenditure these two criteria tend to overlap. in hodges v. thompson, 311',
10953:'f.3d 316 4th cir. 2000, cert. denied sub nom., 540 u.s. 811 2003, the court found that both criteria were',
10954:'satisfied by a statutory provision requiring states develop and maintain automated child support enforcement data processing systems as a condition',
10955:'to receipt of funds under the temporary assistance to needy families tanf program. as to the “general welfare” criterion, the',
10956:'court agreed with the lower court that “congress made a considered judgment that the american people would benefit significantly from',
10957:'the enhanced enforcement of childsupport decrees and the diminution of the number of parents who are able to avoid their',
10958:'obligations simply by moving across local or state lines.” hodges, 311 f.3d at 316. as to the “reasonably related” criterion,',
10959:'the court recognized “a complementary relationship between efficient child support enforcement and the broader goals of providing assistance to needy',
10960:'families through the tanf program.” id. in sabri v. united states, 541 u.s. 600 2004, the supreme court sustained the',
10961:'constitutionality of a federal criminal statute that proscribed bribery of officials of state or local government agencies that received at',
10962:'least $10,000 annually in federal funds. in rejecting a challenge that the statute exceeded congress’s spending power because it did',
10963:'not require a nexus between the bribe and a use of federal funds, the court observed: “congress has authority under',
10964:'the spending clause to appropriate federal monies to promote the general 24 cases dealing with the validity of conditions attached',
10965:'to grants and other forms of federal spending also are discussed in chapter 1, section b, and the update of',
10966:'that section in gao, principles of federal appropriations law: annual update of the third edition, gao05354sp washington, d.c.: march 2005,',
10967:'available at www.gao.gov/legal.htm last visited september 15, 2005. page 1029 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and',
10968:'cooperative agreements welfare . . . and it has corresponding authority under the necessary and proper clause . . .',
10969:'to see to it that taxpayer dollars appropriated under that power are in fact spent for the general welfare, and',
10970:'not frittered away in graft or on projects undermined when funds are siphoned off or corrupt public officers are derelict',
10971:'about demanding value for dollars. . . . it is true, just as sabri says, that not every bribe or',
10972:'kickback offered or paid to agents of governments covered by [the statute] will be traceably skimmed from specific federal payments,',
10973:'or show up in the guise of a quid pro quo for some dereliction in spending a federal grant. .',
10974:'. . but this possibility portends no enforcement beyond the scope of federal interest, for the reason that corruption does',
10975:'not have to be that limited to affect the federal interest. money is fungible, bribed officials are untrustworthy stewards of',
10976:'federal funds, and corrupt contractors do not deliver dollarfordollar value.” sabri, 541 u.s. at 605–06. 2 conditions must be unambiguous',
10977:'as discussed before in section b.1, the supreme court has characterized conditions congress attaches to federal grants as “much in',
10978:'the nature of a contract.” pennhurst state school & hospital v. halderman, 451 u.s. 1, 17 1981. consistent with the',
10979:'contract analogy, it is particularly important that grant conditions be expressed with sufficiently clarity to establish knowing acceptance on the',
10980:'part of the grantees. as the court stated in pennhurst: “the legitimacy of congress’ power to legislate under the spending',
10981:'power . . . rests on whether the [recipient] voluntarily and knowingly accepts the terms of the ‘contract.’ . .',
10982:'. there can, of course, be no knowing acceptance if a [recipient] is unaware of the conditions or is unable',
10983:'to ascertain what is expected of it. accordingly, if congress intends to impose a condition on the grant of federal',
10984:'moneys, it must do so unambiguously.” id. at 17. page 1030 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants',
10985:'and cooperative agreements one recent case on this point is jackson v. birmingham board of education, 544 u.s. , 125',
10986:'s. ct. 1497 2005. the plaintiff in jackson, a male and former coach of a high school girls’ basketball team,',
10987:'sued the school board under a federal statute prohibiting “sex discrimination” by recipients of education grant funds. he alleged that',
10988:'his firing was in retaliation for complaining that the girls’ team was not receiving equal access to athletic equipment and',
10989:'facilities. the school board countered that it lacked adequate notice that it could be held liable under the statute, which',
10990:'did not explicitly prohibit retaliation against persons who complained about discrimination. the court rejected the school board’s argument on the',
10991:'basis that the board should have been on notice of a series of prior supreme court decisions that consistently construed',
10992:'the statute broadly to encompass diverse forms of intentional discrimination, and that retaliation was clearly a form of intentional discrimination.',
10993:'jackson, 125 s. ct. at 1509–10. see also garrett v. university of alabama at birmingham board of trustees, 344 f.3d',
10994:'1288 11th cir. 2003, holding that a statutory provision unambiguously conditioned the receipt by states of federal grant funds on',
10995:'a waiver of their eleventh amendment immunity to certain claims and that, by continuing to accept federal funds, the state',
10996:'agencies waived their immunity. by contrast, an en banc decision in commonwealth of virginia department of education v. riley, 106',
10997:'f.3d 559 4th cir. 1997, held that a statutory provision was not sufficiently clear to impose a binding condition on',
10998:'the use of grant funds. riley involved a provision of the individuals with disabilities in education act that required recipients',
10999:'of grant funds under the act to ensure all children with disabilities the right to a free appropriate public education.',
11000:'20 u.s.c. § 14121 supp. 1996. the federal department of education determined that the state of virginia’s policy of discontinuing',
11001:'free public education for students both disabled and nondisabled who were expelled or suspended for a lengthy period violated this',
11002:'provision of the act. when the state appealed, a fourth circuit panel agreed with the education department. however, the court,',
11003:'en banc, held that the statute was insufficiently unambiguous to require that the state, as a condition of receiving the',
11004:'grant funds, continue to provide education for expelled or suspended students. which interpretation of the statute was better in the',
11005:'abstract was not the question, said the court. rather, citing south dakota v. dole and pennhurst, the court held: page',
11006:'1031 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements “the question is whether, in unmistakably clear',
11007:'terms, congress has conditioned the states’ receipt of federal funds upon the provision of educational services to those handicapped students',
11008:'expelled for misconduct unrelated to their handicap: ‘[i]f congress desires to condition the states’ receipt of federal funds, it ‘must',
11009:'do so unambiguously . . . .’” riley, 106 f.3d at 566 emphasis in original.25 3 conditions must be otherwise',
11010:'constitutional grant conditions obviously may not violate other federal constitutional provisions. while courts rarely strike down grant conditions on constitutional',
11011:'grounds, they have done so in two recent cases. in legal services corp. v. velasquez, 531 u.s. 533 2001, the',
11012:'supreme court held that a statutory provision prohibiting legal service corporation grantees from representing clients in efforts to amend or',
11013:'otherwise challenge existing welfare law violated the first amendment by interfering with the free speech rights of the clients. the',
11014:'court in american civil liberties union v. mineta, 319 f. supp. 2d 69 d.d.c. 2004, declared unconstitutional a statutory provision',
11015:'that prohibited the use of federal mass transit grant funds for any activity that promoted the legalization or medical use',
11016:'of marijuana. relying on legal services corp. v. velasquez, the court held that the provision constituted “viewpoint discrimination” in violation',
11017:'of the first amendment. mineta, 319 f. supp. 2d at 83–87. even if a grant condition satisfies all of the',
11018:'new york v. united states criteria as discussed above, could it still be unconstitutionally coercive? although it appears that no',
11019:'court has ever invalidated a federal grant condition on grounds of pure “coerciveness,” this possibility is frequently discussed in the',
11020:'case law. a leading example is west virginia v. united states department of health & human services, 289 f.3d 281',
11021:'4th cir. 2002. in that case, west virginia challenged on tenth amendment grounds a statutory provision requiring that as a',
11022:'condition to participating in the medicaid program, states implement a program to recover certain expenditures from the estates of deceased',
11023:'medicaid beneficiaries. failure 25 subsequent to the decision in riley, congress amended the statute to explicitly require continuation for children',
11024:'with disabilities “who have been suspended or expelled from school.” 20 u.s.c. § 1412a1a. page 1032 gao06382sp appropriations law—vol. ii',
11025:'chapter 10 federal assistance: grants and cooperative agreements to comply could result in a loss of all or part of',
11026:'the state’s federal medicaid reimbursement.26 the state did not contend that the condition violated any of the criteria in new',
11027:'york v. united states. rather, west virginia viewed the estate recovery program as “bad public policy” but maintained that it',
11028:'had no practical option to reject it. the state had participated in medicaid for almost 30 years before “congress changed',
11029:'the rules of the game” and mandated the estate recovery program. withdrawal of its federal medicaid funds at this stage',
11030:'would cause its health care system to “effectively collapse.” the court struggled with this argument. it cited several supreme court',
11031:'decisions in suggesting that compliance with the new york v. united states criteria might not be enough to immunize a',
11032:'grant condition from constitutional jeopardy: “[t]he supreme court has cautioned that ‘in some circumstances the financial inducement [to comply with',
11033:'a condition imposed upon the receipt of federal funds] offered by congress might be so coercive as to pass the',
11034:'point at which pressure turns into compulsion.’ . . . thus, while congress may use its spending powers to encourage',
11035:'the states to act, it may not coerce the states into action. if the congressional action amounts to coercion rather',
11036:'than encouragement, then that action is not a proper exercise of the spending powers but is instead a violation of',
11037:'the tenth amendment.” west virginia, 289 f.3d at 286–87. the opinion then discussed at length decisions from the fourth circuit',
11038:'and other circuits that differed, largely on a conceptual level, as to whether there was a viable “coercion theory” applicable',
11039:'to federal grant conditions. it concluded in this regard: “[w]e are aware of no decision from any court finding a',
11040:'conditional grant to be impermissibly coercive. although the supreme court has more than once referred to the existence of the',
11041:'coercion theory . . . its cases have provided little guidance for determining when the line between encouragement and coercion',
11042:'is crossed.” 26 these provisions are found at 42 u.s.c. §§ 1396pb1 requirement and 1396c penalty for noncompliance. page 1033',
11043:'gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements id. at 289. in fact, it noted that',
11044:'“most courts faced with the question have effectively abandoned any real effort to apply the coercion theory.” id. at 290.',
11045:'ultimately, the court rejected west virginia’s coercion argument on the basis that the federal government was unlikely to take drastic',
11046:'action against the state: “if the government in fact withheld the entirety of west virginia’s [medicaid funding] because of the',
11047:'state’s failure to implement an estate recovery program, then serious tenth amendment questions would be raised. . . . in',
11048:'reality, however, the government threatened to withhold ‘all or part of [west virginia’s] federal financial participation in the state’s medicaid',
11049:'program.’ . . . this small difference in language makes all the difference in our analysis.” id. at 291–92 emphasis',
11050:'added. b. effect of grant conditions a valid grant condition imposed by or pursuant to a federal statute is binding',
11051:'on the recipient and will prevail over inconsistent state law: “there is of course no question that the federal government,',
11052:'unless barred by some controlling constitutional prohibition, may impose the terms and conditions upon which its money allotments to the',
11053:'states shall be disbursed, and that any state law or regulation inconsistent with such federal terms and conditions is to',
11054:'that extent invalid.” king v. smith, 392 u.s. 309, 333 n.34 1968; see also townsend v. swank, 404 u.s. 282',
11055:'1971 state statute inconsistent with eligibility criteria of aid to families with dependent children legislation held invalid; united states v.',
11056:'miami university, 294 f.3d 797, 808 6th cir. 2002 federal government has inherent power to sue to enforce conditions imposed',
11057:'on the recipients of federal grants; state of kansas v. united states, 214 f.3d 1196 10th cir., cert. denied, 531',
11058:'u.s. 1035 2000 rejecting a state challenge to restrictions imposed on child support enforcement program under federal law; s.j. groves',
11059:'& sons v. fulton county, 920 f.2d 752, 763– 64 11th cir., cert. denied, 501 u.s. 1252 and 500 u.s.',
11060:'959 1991 valid grantor agency regulations may preempt state law. page 1034 gao06382sp appropriations law—vol. ii chapter 10 federal assistance:',
11061:'grants and cooperative agreements when congress has imposed a valid condition on the receipt of grant funds, the condition is,',
11062:'in effect, a “condition precedent” to the recipient’s participation in the program.27 unless permitted under the program legislation, the condition',
11063:'may not be waived or omitted even though a given state may not be able to participate because state law',
11064:'or the state constitution precludes compliance. north carolina ex rel. morrow v. califano, 445 f. supp. 532 e.d.n.c. 1977, aff’d',
11065:'mem., 435 u.s. 962 1978. see also hodges v. thompson, 311 f.3d 316 4th cir. 2002, cert. denied sub nom.,',
11066:'540 u.s. 811 2003program requirement that state approved plan include automated data processing and information retrieval system was not coercive',
11067:'and agency has no discretion to deviate from the statutory noncompliance penalty provisions; 43 comp. gen. 174 1963. once federal',
11068:'conditions attach, there are limits to what a grantee can do to “defederalize” the funded project or activity in order',
11069:'to free itself of the condition. in ross v. federal highway administration, 162 f.3d 1046 10th cir. 1998, the state',
11070:'of kansas had been working on a federally funded highway project for many years. however, one segment of the project',
11071:'had been stalled for 3 years because of environmental concerns and the ability of the parties to finalize a supplemental',
11072:'environmental impact statement. to resolve the impasse, state and local officials decided to proceed with this segment using only nonfederal',
11073:'funds. the federal highway administration agreed and initiated action to terminate the environmental impact statement process on the basis that',
11074:'this segment of the project was no longer a “major federal action.” this strategy failed, however, when environmentalists sued and',
11075:'the court in ross held that completion of the segment continued to be a major federal action even if locally',
11076:'funded: “at the advanced stage of the trafficway project, it was simply too late for the state of kansas to',
11077:'convert the eastern segment into a local project. since 1986, local, state and federal authorities scheduled, programmed and worked on',
11078:'the trafficway as a joint federalstate project. the federal nature of the trafficway was so pervasive that the kansas authorities',
11079:'could not rid the project of federal involvement simply by withdrawing the last segment of the project from federal funding.”',
11080:'27 of course, it is also within the power of congress to authorize the making of unconditional grants. see b80351,',
11081:'sept. 30, 1948. page 1035 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements 162 f.3d at',
11082:'1052–53. the court acknowledged that the state had the right to select which of its highway projects would receive federal',
11083:'assistance, but said that this option could not be used to circumvent federal environmental laws. id. at 1053. ross cited',
11084:'and followed two very similar decisions: scottsdale mall v. state of indiana, 549 f.2d 484 7th cir. 1977, cert. denied,',
11085:'434 u.s. 1008 1978, and san antonio conservation society v. texas highway dept., 446 f.2d 1013 5th cir. 1971, cert.',
11086:'denied, 406 u.s. 933 1972. 2. availability of appropriations as with obligations and expenditures in general, a federal agency may',
11087:'provide financial assistance only to the extent authorized by law and available appropriations. thus, the three elements of legal availability—',
11088:'purpose, time, and amount—apply equally to assistance funds. a. purpose as stated in 31 u.s.c. § 1301a, appropriations may be',
11089:'used only for the purposes for which they were made.28 one of the ways in which this fundamental proposition manifests',
11090:'itself in the grant context is the principle that grant funds may be obligated and expended only for authorized grant',
11091:'purposes. what is an “authorized grant purpose” is determined by examining the relevant program legislation, legislative history, and appropriation acts.',
11092:'gao considered this issue in a recent decision, b303927, june 7, 2005. congress appropriated funds to the department of labor',
11093:'to assist in response and recovery following the september 11, 2001, terrorist attacks on the united states. the appropriation earmarked',
11094:'$125 million for the purpose of payment to the new york workers’ compensation board for “processing of claims related to',
11095:'the terrorist attacks.” the labor department distributed the funds to the board through a grant. the board did not use',
11096:'the funds to process claims, but gave them to other new york state entities to reimburse those entities for claims',
11097:'they had paid on behalf of victims. gao held that use of the funds for this purpose was inconsistent with',
11098:'the language of the appropriation. by contrast, gao held in another “purpose” case, b248111, sept. 9, 1992, that grant funds',
11099:'were available for the activities in question based on the language of the authorizing statute and its legislative history. 28',
11100:'we discuss the concept of the availability of appropriations as to purpose in detail in chapter 4. page 1036 gao06382sp',
11101:'appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements disaster relief assistance legislation, found at 42 u.s.c. §§',
11102:'5122–5206, authorizes, among other things, federal financial contributions to state and local governments for the repair or replacement of public',
11103:'facilities damaged by a major disaster. decisions under a prior version of this legislation had construed public facilities as including',
11104:'municipal airports 42 comp. gen. 6 1962, including airport facilities that had been leased to private parties for the purpose',
11105:'of generating income for airport maintenance 49 comp. gen. 104 1969. assistance could also extend to a sewage treatment plant,',
11106:'but not one which was not completed, and thus not in operation, at the time of the damage. 45 comp.',
11107:'gen. 409 1966. unlike the earlier legislation, the current statute defines “public facility,” 42 u.s.c. § 51228, and specifically includes',
11108:'airport and sewage treatment facilities. the following are additional examples of decisions dealing with the purpose availability of grant funds:',
11109:'airport development grants under federal airport act may include runway sealing projects which are shown to be part of reconstruction',
11110:'or repair rather than normal maintenance. 35 comp. gen. 588 1956. see also b60032, sept. 9, 1946 grants under same',
11111:'legislation may be made for acquisition of land or existing privately owned airports, to be used as public airports, regardless',
11112:'of whether construction or repair work is immediately contemplated. mining enforcement and safety administration is authorized to make grants to',
11113:'a labor union to fund emergency medical technician training program for coal miners since the proposal bears a sufficiently close',
11114:'relationship to coal mine safety to come within the scope of the governing program legislation, 30 u.s.c. § 951 1970.',
11115:'b170686, nov. 8, 1977. public health service grants for support of research training were found authorized under the public health',
11116:'service act, as amended.29 b161769, june 30, 1967. grant funds provided by lumpsum appropriation are subject to the usual rule',
11117:'that an agency may reallocate discretionary funds within that appropriation as long as it uses those funds for purposes authorized',
11118:'under 29 pub. l. no. 86798, 74 stat. 1053 sept. 15, 1960. page 1037 gao06382sp appropriations law—vol. ii chapter 10',
11119:'federal assistance: grants and cooperative agreements the applicable appropriation and program statute.30 the court’s decision in illinois environmental protection agency',
11120:'v. epa, 947 f.2d 283 7th cir. 1991, illustrates this point. under the clean air act, the environmental protection agency',
11121:'epa could prescribe plans to implement air quality standards for states that failed to submit adequate plans. the act also',
11122:'authorized air pollution control grants to states, funded under epa’s lumpsum abatement, control, and compliance appropriation. under its regulations, epa',
11123:'divided available funds into nonmandatory annual allotments for each state. the regulations also authorized epa to set aside a portion',
11124:'of the unawarded allotments to support federal implementation programs where required because of the absence of adequate state programs. one',
11125:'state argued that the setaside policy amounted to a diversion of funds from their intended purpose and, therefore, violated 31',
11126:'u.s.c. § 1301a. the court first upheld the regulation as a permissible interpretation of epa’s authority under the clean air',
11127:'act. the court then found that there was no purpose violation because a the relevant appropriation act did not earmark',
11128:'any specific amount for grants to states, and b epa was still using the setaside funds for air pollution abatement',
11129:'programs, which was their intended purpose. the comptroller general has applied essentially the same reasoning in several decisions dealing with',
11130:'grant funds. for example, in b157356, aug. 17, 1978, the then department of health, education, and welfare’s office of human',
11131:'development services ohd received a lumpsum appropriation covering a number of grant programs administered by various ohd components. the department',
11132:'wanted to make what it termed “crosscutting” grants to fund research or demonstration projects that would benefit more than one',
11133:'target population e.g., aged, children, native americans. to do this, each ohd component receiving grant funds under the lumpsum appropriation',
11134:'was asked to contribute a portion of its grant funds to a pool that would be used for approved crosscutting',
11135:'grants. since the lumpsum appropriation did not restrict the department’s internal allocation of funds for any given program, gao approved',
11136:'the concept, provided that the grants were limited to projects within the scope of grant programs funded by the lumpsum',
11137:'appropriation, a condition necessary to assure compliance with 31 u.s.c. § 1301a. see also b258000, aug. 31, 1994, in which',
11138:'gao held that a lumpsum forest service appropriation could be used to make a congressionally earmarked grant in a specific',
11139:'30 see chapter 6, section f for a more detailed discussion of agency discretion under lumpsum appropriations. page 1038 gao06382sp',
11140:'appropriations law—vol. ii b. time chapter 10 federal assistance: grants and cooperative agreements amount to the texas reforestation foundation where',
11141:'the proviso containing the earmark did not identify who should make the grant or the source of funds to be',
11142:'used. funds provided for specific grants in the form of earmarked lineitem appropriations cannot be diverted to other purposes. in',
11143:'72 comp. gen. 317 1993, gao held that the general services administration lacked authority to establish a “reserve account” for',
11144:'the expenses of administering a grant program through a percentage set aside from lineitem appropriations of grant funds that had',
11145:'been awarded to various grantees. since congress provided specific amounts for specific purposes, the agency could not reduce the amount',
11146:'of the lineitemed grants in order to cover the cost of administration, notwithstanding postenactment “approval” by a congressional subcommittee. funds',
11147:'must be obligated by the grantor agency within their period of availability.31 the period of availability of appropriated funds is',
11148:'the period of time provided by law in which the administering agency has to obligate the funds. b271607, june 3,',
11149:'1996. the statutory requirement for recording obligations extends to all actions necessary to constitute a valid obligation, and includes, of',
11150:'course, grant obligations 31 u.s.c. § 1501a5.32 proper recording of grant obligations facilitates compliance with the “time of obligation” requirement',
11151:'by ensuring that agencies have adequate budget authority to cover their obligations. see b300480, apr. 9, 2003, aff’d in b300480.2,',
11152:'june 6, 2003. in the context of discretionary grants, the obligation generally occurs at the time of award. see, e.g.,',
11153:'b289801, dec. 30, 2002; 31 comp. gen. 608 1952.33 thus, in b300480, apr. 9, 2003, aff’d in b300480.2, june 6,',
11154:'2003, gao held that an obligation arises when the corporation for national and 31 see the discussion of the availability',
11155:'of appropriations as to time in chapter 5. 32 see chapter 7 for a general discussion of recording obligations and',
11156:'chapter 7, section b.5 for a specific discussion of recording requirements for grant obligations. 33 the particular obligating document varies',
11157:'and can include an agency’s approval of a grant application or a letter of commitment. see 39 comp. gen. 317',
11158:'1959; 37 comp. gen. 861, 863 1958. section 1501a5 of title 31, united states code, lists three forms of documentary',
11159:'evidence for grant obligations: a an appropriation providing for payment in a specific amount fixed by law or under a',
11160:'formula prescribed by law i.e., a mandatory or formula grant; b an agreement authorized by law; or c plans approved',
11161:'consistent with law. page 1039 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements community service awards',
11162:'grants authorizing the grantees to enroll a specified number of participants into the education programs it funds. at that time,',
11163:'the corporation incurs a recordable obligation in the amount of its maximum liability for those benefits since, at that point,',
11164:'the grantee rather than the corporation controls the actual level of participant enrollment. id. an obligation under a discretionary grant',
11165:'program generally does not exist absent a binding grant award. thus, gao concluded that a valid grant never came into',
11166:'existence when an “offer of grant” made by the economic development administration to a connecticut municipality was accepted by a',
11167:'town official who did not have authority to accept the grant, and the funds expired for obligation purposes before the',
11168:'town was able to ratify the unauthorized acceptance. b220527, dec. 16, 1985. the town later submitted a claim for reimbursement',
11169:'of its expenses, based on an “equitable estoppel” argument. since the nonexistence of the grant was attributable to the town’s',
11170:'actions and not those of the federal agency, the claim could not be allowed. b220527, aug. 11, 1987. see also',
11171:'b206244, june 8, 1982. the “bona fide needs rule,” which is a basic principle of time availability, holds that an',
11172:'appropriation is available for obligation only to fulfill a genuine or bona fide need of the period of availability for',
11173:'which the appropriation was made.34 this rule applies to grants and cooperative agreements as well as to other types of',
11174:'obligations or expenditures. see, e.g., 73 comp. gen 77 1994; 64 comp. gen. 359 1985; b229873, nov. 29, 1988. however,',
11175:'as discussed hereafter, the manner in which the rule applies differs somewhat in the context of grants and other assistance',
11176:'transactions, as opposed to transactions in which the federal government is obtaining goods and services by contract. the specific issue',
11177:'that arises in the grant decisions is whether the principle of “severability,” a key element in applying the bona fide',
11178:'needs rule to contracts, has any relevance to assistance transactions. the principle of severability requires determining whether services that an',
11179:'agency seeks to obtain usually by contract are part of a single undertaking that fulfills an agency need of the',
11180:'fiscal year charged, or whether the services are severable in nature and fulfill a recurring need of the agency from',
11181:'fiscal year to fiscal year. if the services are severable, the bona fide needs rule 34 see chapter 5, section',
11182:'b, for a comprehensive discussion of the bona fide needs rule. page 1040 gao06382sp appropriations law—vol. ii chapter 10 federal',
11183:'assistance: grants and cooperative agreements restricts use of the appropriation to obtaining that portion of the services needed during its',
11184:'period of availability. in a 1985 decision, 64 comp. gen. 359, gao applied the severability principle to national institutes of',
11185:'health nih research grants. the decision concluded that the grants in question were severable, and therefore, nih violated the bona',
11186:'fide needs rule by awarding them for 3 years using 1year appropriations. the decision did express some reservations about this',
11187:'result: “[w]e recognize that there are fundamental differences between a contract for materials or services and a research grant. the',
11188:'severability concept is not altogether analogous to the nih research grants, which resemble subsidies rather than contracts for services.” 64',
11189:'comp. gen. at 365. another decision, 73 comp. gen. 77 1994, applied the severability principle to cooperative agreements. this decision',
11190:'held that certain cooperative agreements providing for the periodic issuance of projectspecific research work orders were nonseverable and, therefore, could',
11191:'not be funded incrementally from 1year appropriations. in b229873, nov. 29, 1988, however, gao held that the small business administration',
11192:'sba did not violate the bona fide needs rule when it used a 1year appropriation on the last day of',
11193:'the fiscal year to award cooperative agreements to small business development centers, even though the centers would not use the',
11194:'money until the next fiscal year. contrasting these cooperative agreements to service contracts that were subject to the severability principle,',
11195:'the decision observed: “[t]he purpose of the small business development centers appropriation is to fund an assistance program for nonfederal',
11196:'entities which, in turn, are expected to use the funds, together with some of their own, to fulfill a public',
11197:'purpose. although the purpose of the program is to provide assistance to centers for a 1year period, it really does',
11198:'not matter when the center begins or completes its tasks. the statutory purpose was fulfilled once a grant or cooperative',
11199:'agreement was awarded during the period of availability of the appropriation for obligation; in other words, the award constitutes the',
11200:'obligation, and upon award, the funds belong to the awardee.” page 1041 gao06382sp appropriations law—vol. ii chapter 10 federal assistance:',
11201:'grants and cooperative agreements the decision in b229873 distinguished 64 comp. gen. 359 rather than overruling it. a more recent',
11202:'decision, b289801, dec. 30, 2002, seems to lay to rest any vestiges of the severability principle as applied to grants',
11203:'or cooperative agreements. in approving the education department’s practice of awarding certain education grants for 5 years using 1year appropriations,',
11204:'this decision stated flatly that “for grants, the principle of severability is irrelevant to a bona fide need determination.” elaborating',
11205:'upon this conclusion, the decision explained: “we believe the application of the bona fide need rule found in the sba',
11206:'case [b229873] is the correct approach. it expressly recognizes the fundamental difference between a contract and a grant or cooperative',
11207:'agreement and the significance this difference has on a bona fide need analysis. contracts and grants are transactions that fulfill',
11208:'significantly different needs of an agency, the former to acquire goods and services and the latter to provide financial assistance.',
11209:'b222665, july 2, 1986 principal purpose of a grant is to transfer something of value to the recipient to carry',
11210:'out a legislatively established public policy instead of acquiring goods or services for the direct benefit or use of the',
11211:'united states. . . . “the sba decision is also more in keeping with past decisions, where we have routinely',
11212:'permitted agencies to award grants using fiscal year funds irrespective of the fact that the funds would not be expended',
11213:'until some time after the end of the fiscal year.” the decision observed that the relevant consideration was not the',
11214:'principle of severability but the applicable program legislation, and concluded in this regard: “in our opinion, education’s award of 5year',
11215:'grants is both consistent with program objectives and within its discretion under the program legislation. under the program legislation, education',
11216:'is not merely required to provide financial assistance, it is to ensure through various ways that students who have received',
11217:'services under the . . . program continue to receive those services from yearto page 1042 gao06382sp appropriations law—vol. ii',
11218:'c. amount chapter 10 federal assistance: grants and cooperative agreements year until completion of high school. awarding grants 5 years',
11219:'in duration will aid in ensuring the continuity of grantee services to . . . students which the programs legislation',
11220:'seeks to provide. therefore, education is fulfilling its bona fide need under this program when it awards these 5year grants.”',
11221:'appropriations for grant programs are generally subject to the same time availability rules as other appropriations. thus, for example, when',
11222:'congress expressly provides that a grant appropriation “shall remain available until expended” noyear appropriation, the funds remain available until they',
11223:'are obligated and expended by the grantor agency subject to the account closing statute, 31 u.s.c § 1555. it should',
11224:'be emphasized that the time availability of grant appropriations governs the grantor agency’s obligation and expenditure of the funds; it',
11225:'does not limit the time in which the grantee must use the funds once it has received them. id. of',
11226:'course, the grant statute or the grantor agency may impose time limits on a grantee’s use of funds. see city',
11227:'of new york v shalala, 34 f.3d 1161 2nd cir. 1994; mayor and city council of baltimore v. browner, 866',
11228:'f. supp. 249 d. md. 1994. the antideficiency act, 31 u.s.c. § 1341a, among other things, requires that federal agencies',
11229:'avoid incurring obligations in excess of the amount available in their appropriations.35 of course, grant obligations and expenditures are subject',
11230:'to the act. restrictions on the availability of a lumpsum appropriation are not legally binding unless incorporated expressly or by',
11231:'reference in the appropriation act itself. thus, a plan to award fewer national institutes of health biomedical research grants, funded',
11232:'under a lumpsum appropriation, than the number of grants provided for in congressional committee reports was not unlawful, as long',
11233:'as all the funds were properly obligated for authorized grant purposes. 64 comp. gen. 359 1985. see also b157356, aug.',
11234:'17, 1978. 35 for a general discussion of the antideficiency act, see chapter 6, section c, and for amount availability,',
11235:'see chapter 6, section c.2.e. page 1043 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements minimum',
11236:'earmarks e.g., “not less than” or “shall be available only” in an authorization act were found controlling where a laterenacted',
11237:'appropriation act provided a lump sum considerably less than the amount authorized but nevertheless sufficient to meet the earmark requirements.',
11238:'64 comp. gen. 388 1985.36 the grantor agency will have more discretion where the earmark is a maximum “not to',
11239:'exceed” or where it is expressed only in legislative history. b171019, mar. 2, 1977. see also 72 comp. gen. 317',
11240:'1993 general services administration may not divert a portion of earmarked grants to cover administrative costs; compare association of metropolitan',
11241:'water agencies v. browner, 24 f. supp. 2d 83 d.d.c. 1998 agency was not obligated to set aside funds for',
11242:'health effects research earmarked in an authorization act where congress never clearly made an appropriation pursuant to the specific authorization',
11243:'containing the earmark. in the absence of a contrary provision in the applicable program statute, regulations, or grant agreement, there',
11244:'is no basis to object to a grantee’s allocation of grant funds as long as the funds were spent for',
11245:'eligible grant activities. b260990, june 13, 1996; 69 comp. gen. 600 1990. see also 71 comp. gen. 310 1992 allowing',
11246:'grantees to retain reasonable profit or fees under small business administration policy directive. as the cases cited below illustrate, a',
11247:'federal institution is generally not eligible to receive grant funds from another federal source unless the program legislation so provides.',
11248:'the reason is that the grant funds would improperly augment the appropriations of the receiving institution. for example: federal grant',
11249:'funds for nurse training programs could not be allotted to st. elizabeths hospital since it was already receiving appropriations to',
11250:'maintain and operate its nursing school. 23 comp. gen. 694 1944. haskell indian junior college, fully funded by the bureau',
11251:'of indian affairs, was not eligible to receive grant funds from federal agencies other than the bureau of indian affairs',
11252:'since congress had already provided for its needs by direct appropriations. b114868, apr. 11, 1975. 36 see chapter 2, section',
11253:'c, for a general discussion of the interplay between authorization and appropriation acts. page 1044 gao06382sp appropriations law—vol. ii chapter',
11254:'10 federal assistance: grants and cooperative agreements the office of education could not make a library support grant to the',
11255:'national commission on libraries and information science as it would be an improper augmentation of the commission’s appropriations. 57 comp.',
11256:'gen. 662, 664 1978. 3. agency regulations a. general principles37 legislation establishing an assistance program frequently will define the program',
11257:'objectives and leave it to the administering agency to fill in the details by regulation. thus, agency regulations are of',
11258:'paramount importance in assessing the parameters of grant authority. these regulations, if properly promulgated and within the bounds of the',
11259:'agency’s statutory authority, have the force and effect of law and may not be waived on a retroactive or ad',
11260:'hoc basis. see generally b300912, feb. 6, 2004. see also 57 comp. gen. 662 1978 eligibility standards; b163922, feb. 10,',
11261:'1978 grantee’s liability for improper expenditures; b130515, july 17, 1974; b130515, july 20, 1973 matching share requirements. however, the prohibition',
11262:'against waiver does not necessarily apply to regulations that are merely “internal administrative guidelines” as long as the government’s interests',
11263:'are adequately protected. see 60 comp. gen. 208, 210 1981. the operation of several of these principles is illustrated in',
11264:'b203452, dec. 31, 1981. the federal aviation administration faa revised its regulations to permit indirect costs to be charged to',
11265:'airport development aid program grants. a grantee filed a claim for reimbursement of indirect costs incurred prior to the change',
11266:'in the faa regulations, arguing that the charging of indirect costs was required by a federal management circular superseded by',
11267:'omb circulars even before faa recognized it in its own regulations. gao first pointed out that federal management circulars are',
11268:'internal management tools. they do not have the binding effect of law so as to permit a third party to',
11269:'assert them against a noncomplying agency. this being the case, there was no impediment to faa’s revising its regulations without',
11270:'making the revision retroactive as long as both the old and the new regulations were within the scope of faa’s',
11271:'legal authority. see also pueblo neighborhood health centers, inc. v. united states department of health & human services, 720 f.2d',
11272:'622, 625–26 10th cir. 37 see chapter 3, section c for a general discussion of agency regulations and administrative law',
11273:'principles applicable to them. page 1045 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements 1983 department’s',
11274:'grant application manual is an internal agency publication rather than a regulation with force and effect of law, so that',
11275:'deviations from it, in this case use of an ineligible member on a funding review panel, did not require reversal',
11276:'of agency action. regulations of the grantor agency will generally be upheld as long as they are within the agency’s',
11277:'statutory authority, issued in compliance with applicable procedural requirements, and not arbitrary or capricious. the courts have sustained grant regulations',
11278:'in many contexts. see, e.g., southeast kansas community action program, inc. v. secretary of agriculture, 967 f.2d 1452 10th cir.',
11279:'1992 upholding a regulatory amendment to eliminate appeal procedures for nonrenewal of a grant program administrator’s contract; gallegos v. lyng,',
11280:'891 f.2d 788 10th cir. 1989 upholding the authority of the department of agriculture to impose by regulation strict liability',
11281:'on states for lost or stolen food stamp coupons. similarly, it was within the discretion of the environmental protection agency',
11282:'under the clean water act to prescribe regulations making wastewater treatment grants available only for the construction of new facilities',
11283:'and not for the acquisition of preexisting facilities. cole county regional sewer district v. united states, 22 cl. ct. 551',
11284:'1991. see also mayor & city council of baltimore v. browner, 866 f. supp. 249 d. md. 1994 upholding agency’s',
11285:'enforcement of cutoff dates for completion of city’s federally funded sewerage facilities. another illustration is american hospital association v. schweiker,',
11286:'721 f.2d 170 7th cir. 1983, cert. denied, 466 u.s. 958 1984, upholding regulations imposing community service and uncompensated care',
11287:'requirements on recipients of hillburton hospital construction grants. the informal rulemaking requirements notice and comment of the administrative procedure act',
11288:'apa do not apply to grant regulations. 5 u.s.c. § 553a2 the rulemaking requirements do not apply to “a matter',
11289:'relating to . . . grants. . .”. several agencies, however, have published statements committing themselves to comply with the',
11290:'apa in developing grant regulations and have thereby effectively waived the exemption. see, e.g., thomas jefferson university v. shalala, 512',
11291:'u.s. 504, 512 1994; flagstaff medical center, inc. v. sullivan, 962 f.2d 879, 885 9th cir. 1992. even if an',
11292:'agency has voluntarily waived the apa exemption for grants, other apa exemptions may still apply. see, e.g., chief probation officers',
11293:'of california v. shalala, 118 f.3d 1327 9th cir. 1997 agency rule was page 1046 gao06382sp appropriations law—vol. ii chapter',
11294:'10 federal assistance: grants and cooperative agreements b. office of management and budget circulars and the “common rules” interpretive, not',
11295:'legislative and, thus, not invalid for failure to follow apa rulemaking requirements.38 wholly apart from what the courts might or',
11296:'might not do, an agency’s discretion in funding matters is subject to congressional oversight as well. congress, if it disfavors',
11297:'an agency’s actual or proposed exercise of otherwise legitimate discretion, can statutorily restrict that discretion, at least prospectively, either by',
11298:'amending the program legislation or by inserting the desired restrictions in appropriation acts. for an example of the latter, see',
11299:'b300912, feb. 6, 2004 finding that federally granted rightsof way for construction of highways constituted a final rule prohibited from',
11300:'taking effect by appropriations act provision. see also b238997.4, dec. 12, 1990. also, agency grant regulations may be subject to',
11301:'review by gao and congress under the congressional review act, pub. l. no. 104121, title ii, subtitle e, § 251,',
11302:'110 stat. 847, 868 mar. 29, 1996, codified at 5 u.s.c. §§ 801–808.39 federal grants and cooperative agreements are typically',
11303:'subject to a wide range of substantive and other requirements under the particular program statutes as well as implementing agency',
11304:'regulations and other guidance that applies to them. however, they are governed as well by many additional crosscutting requirements that',
11305:'are common to most assistance programs. these include federal statutory provisions made applicable to recipients of federal funds, such as',
11306:'the prohibitions against lobbying with grant funds under the socalled “byrd amendment” codified at 31 u.s.c. § 1352.40 they also',
11307:'include a number of administrative requirements dealing with such subjects as audit and recordkeeping and the allowability of costs. the',
11308:'importance of the crosscutting agency regulations and centralized management guidance from the office of management and budget omb is apparent',
11309:'throughout this chapter. the current structure for these requirements developed in the late 1980s. prior to 1988, each agency issued',
11310:'grant management regulations to govern grants and cooperative agreements it made, although omb circular 38 see chapter 3, section a,',
11311:'for additional discussion of the apa and the informal rulemaking process. 39 for a more detailed discussion of the congressional',
11312:'review act, see chapter 3, section a.1.c. 40 for more on the byrd amendment, see chapter 4, section c.11.d. page',
11313:'1047 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements no. a102 did provide some governmentwide guidance',
11314:'for grants to state and local governments. another circular, no. a110, provided some guidance for grants to other types of',
11315:'grantees. in 1987, a memorandum from the president directed the office of management and budget omb to revise circular no.',
11316:'a102 to specify uniform, governmentwide terms and conditions for grants to state and local governments, and directed executive branch departments',
11317:'and agencies to propose and issue common regulations adopting these terms and conditions verbatim, modified where necessary to reflect inconsistent',
11318:'statutory requirements. 23 weekly comp. pres. doc. 254 mar. 12, 1987. the presidential memorandum observed in part: “circular a102 was',
11319:'a significant step toward the simplification of grants management at the time. however, after 16 years, some of the provisions',
11320:'are out of date, there are gaps where the standards do not cover important areas, and agencies have interpreted the',
11321:'circular in numerous different ways in their regulations.” id. at 255. pursuant to this direction, the first iteration of what',
11322:'has come to be known as the “common rule” system was published for comment on june 9, 1987 52 fed.',
11323:'reg. 21820–21862, issued in final on march 11, 1988 53 fed. reg. 8033–8103, and generally made effective as of october',
11324:'1, 1988. later that year, omb proposed a similar revision to circular no. a110, dealing with grants to institutions of',
11325:'higher education, hospitals, and other nonprofit organizations. 53 fed. reg. 44710 nov. 4, 1988. the structure of each circular was',
11326:'similar, featuring a brief introduction followed by attachments with detailed guidance on specific topics. there are currently a total of',
11327:'six omb circulars on grants, but only three apply to any one type of grantee. their coverage breaks down as',
11328:'follows:41 states, local governments, and indian tribes: circular no. a87 may 10, 2004 for cost principles and circular no. a102',
11329:'aug. 29, 1997 for administrative requirements. 41 see www.whitehouse.gov/omb/grants/attach.html last visited september 15, 2005. page 1048 gao06382sp appropriations law—vol. ii',
11330:'chapter 10 federal assistance: grants and cooperative agreements educational institutions: circular no. a21 may 10, 2004 for cost principles and',
11331:'circular no. a110 sept. 30, 1999 for administrative requirements. nonprofit organizations: circular no. a122 may 10, 2004 for cost principles',
11332:'and circular no. a110 sept. 30, 1999 for administrative requirements. all grantees: circular no. a133 june 27, 2003 for audit',
11333:'requirements. the omb circulars provide guidance only to federal grantor agencies; they do not apply directly to grantees. therefore, each',
11334:'grantor agency has issued largely identical sets of regulations that prescribe requirements that are binding on their grantees. these are',
11335:'technically the socalled “common rules.” at present, each grantor agency has a set of four common rules. two of the',
11336:'common rules are based on omb’s grants management circulars covering cost principles, administrative requirements, audit, etc. a third common rule',
11337:'deals with the byrd antilobbying amendment, mentioned previously. the fourth common rule, discussed hereafter, deals with suspension and debarment and',
11338:'drugfree workplace requirements. a compilation showing where each agency’s common rule regulations are codified in the code of federal regulations',
11339:'may be found at www.whitehouse.gov/omb/grants/chart.htmllast visited september 15, 2005. since the common rule regulations are essentially the same for each',
11340:'federal grantor agency, we will use the department of agriculture version in the remainder of this chapter when citing to',
11341:'and illustrating the application of the common rules.42 the department of agriculture’s regulations are codified as follows: grants management common',
11342:'rule for states, local governments, and indian tribes, 7 c.f.r. pt. 3016 2005. grants management common rule for universities and',
11343:'nonprofit organizations, 7 c.f.r. pt. 3019. nonprocurement suspension and debarment and drugfree workplace act common rule, 7 c.f.r. pt. 3017.',
11344:'42 omb is in the process of consolidating and streamlining its circulars and the common rules in title 2 of',
11345:'the code of federal regulations. see 69 fed. reg. 26,276 may 11, 2004. page 1049 gao06382sp appropriations law—vol. ii chapter',
11346:'10 federal assistance: grants and cooperative agreements byrd antilobbying amendment common rule, 7 c.f.r. pt. 3018. as noted previously, the',
11347:'common rules establish consistency and uniformity among federal agencies in the management of grants and cooperative agreements. they were intended',
11348:'to supersede uncodified manuals and handbooks unless required by statute or approved by omb. thus, the department of agriculture’s regulations',
11349:'provide at 7 c.f.r. § 3016.5: “all other grants administration provisions of codified program regulations, program manuals, handbooks and other',
11350:'nonregulatory materials which are inconsistent with this part are superseded, except to the extent they are required by statute, or',
11351:'authorized in accordance with the [omb] exception provision in § 3016.6.” with respect to grants and grantees covered by the',
11352:'common rules, additional administrative requirements are to be in the form of codified regulations published in the federal register. 7',
11353:'c.f.r. § 3016.6a. as noted above, in addition to implementing omb’s grants management circulars, the common rule format has been',
11354:'used in two other grantrelated contexts. one implements the byrd antilobbying amendment, discussed previously. the common rule on this subject',
11355:'was issued by 28 grantor agencies on february 26, 1990. 55 fed. reg. 6736. the other common rule implements provisions',
11356:'relating to suspension and debarment and drugfree workplaces. on february 18, 1986, as part of the government’s effort to combat',
11357:'fraud, waste, and abuse, the president signed executive order no. 12549, which directed the establishment of a system for debarment',
11358:'and suspension in the assistance context.43 omb implemented the executive order by developing common rule language, entitled “governmentwide debarment and',
11359:'suspension nonprocurement,” that was adopted by over 25 grantor agencies and patterned generally on comparable provisions for procurement contracts in',
11360:'the federal acquisition regulation. this common rule was originally published at 53 fed. reg. 19160 may 26, 1988. it was',
11361:'revised and republished in 2003 in a version that incorporates provisions implementing 43 exec. order no. 12549, debarment and suspension,',
11362:'51 fed. reg. 6370 feb. 18, 1986. page 1050 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative',
11363:'agreements c. the federal financial assistance management improvement act the drugfree workplace act of 1988 41 u.s.c. §§ 701–707.44 68',
11364:'fed. reg. 66,534 nov. 26, 2003. with respect to suspension and debarment, a person including business entities and units of',
11365:'government who is debarred is excluded from federal assistance and benefits, financial and nonfinancial, under federal programs and activities for',
11366:'a period of up to 3 years, possibly longer. causes of debarment include certain criminal convictions, antitrust violations, a history',
11367:'of unsatisfactory performance, and failure to pay a single substantial debt or a number of outstanding debts owed to the',
11368:'federal government. see generally 7 c.f.r. pt. 3017, subpart h, for provisions relating to debarment. suspension is a temporary exclusion,',
11369:'usually pending the completion of an investigation involving one or more of the causes for debarment. see generally 7 c.f.r.',
11370:'pt. 3017, subpart g, for provisions relating to suspension. the general services administration gsa is responsible for compiling and distributing',
11371:'a list of debarred or suspended persons. the list, now called the excluded parties list system, is maintained by gsa’s',
11372:'office of acquisition policy and is available electronically. see generally 7 c.f.r. pt. 3017, subpart e. the federal financial assistance',
11373:'management improvement act of 1999, pub. l. no. 106107 nov. 20, 1999, 113 stat. 1486, 31 u.s.c. § 6101 note,',
11374:'was enacted to improve the management and performance of federal financial assistance programs. the act required federal agencies to develop',
11375:'and implement a plan that would, among other things, streamline and simplify application, administrative, and reporting procedures for financial assistance',
11376:'programs. pub. l. no. 106107, § 5a. it also required omb to direct, coordinate, and assist federal agencies in establishing',
11377:'a common application and reporting system that would include uniform administrative rules for assistance programs across different federal agencies. id.',
11378:'§ 6a1c. in furtherance of the act’s requirements, omb is working to consolidate all six of its grantsrelated circulars as',
11379:'well as the agency common rules into a new title 2 of the code of federal regulations. see 69 fed.',
11380:'reg. 26,276 may 11, 2004. under this approach, title 2 will include the full text of each circular. in their',
11381:'portions of title 2, the grantor agencies will simply adopt by reference the text of the omb circulars together with',
11382:'any agency 44 the provisions of the drugfree workplace act dealing specifically with federal grantees appear in 41 u.s.c. §',
11383:'702. page 1051 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements d. the “cognizant agency” concept',
11384:'specific additions, exceptions, or clarifications. this will avoid the need for each individual agency to repeat separately the content of',
11385:'the omb circulars as they now do in their common rules. 69 fed. reg. at 26,277. omb began this process',
11386:'by publishing circular no. a110 as 2 c.f.r. part 215 2005. it recently added three more circulars: numbers a21, a87,',
11387:'and a122. see 70 fed. reg. 51,880; 51,910; 51,927 aug. 31, 2005. apart from providing for regulatory consolidation and streamlining,',
11388:'the federal financial assistance management improvement act contained a number of other provisions designed to improve federal assistance processes and',
11389:'performance. it also imposed additional responsibilities on the agencies and omb. section 7 of public law 106107 mandated a gao',
11390:'evaluation of the effectiveness of the act. gao reported the results of its evaluation in grants management: additional actions needed',
11391:'to streamline and simplify processes, gao05335 washington, d.c.: apr. 18, 2005. see also gao, federal assistance: grant system continues to',
11392:'be highly fragmented, gao03718t washington, d.c.: apr. 29, 2003. finally, to simplify relations between federal grantees and awarding agencies, omb',
11393:'established the “cognizant agency” concept, under which a single agency represents all others in dealing with grantees in common areas.45',
11394:'in this case, the cognizant agency reviews and approves grantees’ indirect cost rates. approved rates must be accepted by other',
11395:'agencies, unless specific program regulations restrict the recovery of indirect costs. omb published a list of cognizant agency assignments for',
11396:'some state agencies, cities and counties on january 6, 1986 51 fed. reg. 552. the cognizant agency for governmental units',
11397:'not on that list is the one that provides the most grant funds to the entity. the department of health',
11398:'and human services hhs is the cognizant agency for all states and most cities. the cognizant agency for other organizations',
11399:'is determined by calculating which federal agency provides the most grant funding. for example, the department of the interior is',
11400:'the cognizant agency for all indian tribal governments, and for hospitals, hhs serves as the cognizant agency. 45 the information',
11401:'here is taken from omb’s web site at www.whitehouse.gov/omb/grants/attach.html last visited september 15, 2005. page 1052 gao06382sp appropriations law—vol. ii',
11402:'chapter 10 federal assistance: grants and cooperative agreements 4. contracting by grantees grantees commonly enter into contracts with third parties',
11403:'in the course of performing their grants. while the united states is not a party to the contracts, the grantee',
11404:'must nevertheless comply with any requirements imposed by statute, regulation, or the terms of the grant agreement, in awarding federally',
11405:'assisted contracts. 54 comp. gen. 6 1974. violation of applicable procurement standards may result in the loss of federal funding.',
11406:'see town of fallsburg v. united states, 22 cl. ct. 633 1991. for a period of nearly 10 years, gao',
11407:'undertook a limited review of the propriety of contract awards made by a grantee in furtherance of grant purposes, upon',
11408:'request of a prospective contractor. this limited review role was announced in 40 fed. reg. 42406 sept. 12, 1975. while',
11409:'these reviews were conducted in a manner similar to bid protests, mentioned previously in section b.4 of this chapter, gao',
11410:'called the requests for review “complaints” rather than “protests.” gao applied the same limited review to contracts awarded under cooperative',
11411:'agreements. 59 comp. gen. 758 1980. gao’s review was designed primarily to ensure that the “basic principles” of competitive bidding',
11412:'were applied. 55 comp. gen. 390, 393 1975. numerous decisions were rendered in this area. e.g., 57 comp. gen. 85',
11413:'1977 nonapplicability of buy american act; 55 comp. gen. 1254 1976 state law applicable when indicated in grant; 55 comp.',
11414:'gen. 413 1975 nonapplicability of federal procurement regulations. by 1985, many agencies had developed their own review procedures, and the',
11415:'number of complaints filed with gao steadily decreased. determining that its review of grantee contracting was no longer needed, gao',
11416:'discontinued its limited review in january 1985. 50 fed. reg. 3978 jan. 29, 1985; 64 comp. gen. 243 1985. the',
11417:'body of decisions issued during the 1975–1985 period should nevertheless remain useful as guidance in this area. in a 1980',
11418:'report, gao reviewed the procurement procedures of selected state and local government grantees and nonprofit organizations in five states. the',
11419:'report concluded that the state and local governments generally had in place and followed sound procurement procedures somewhat less so',
11420:'for the nonprofits, but also found a number of weak spots, many of which are now addressed in omb directives.',
11421:'see gao, spending grant funds more efficiently could save millions, psad8058 washington, d.c.: june 30, 1980. page 1053 gao06382sp appropriations',
11422:'law—vol. ii chapter 10 federal assistance: grants and cooperative agreements with respect to state and local governments, standards for grantee',
11423:'procurement are set forth in the common rules. using our department of agriculture example, its version of this rule is',
11424:'7 c.f.r. § 3016.36. these rules require, among other things, that grantees and subgrantees have protest procedures to resolve disputes',
11425:'over their procurements. id. § 3016.36b12. federal grantor agencies review protests against grantee and subgrantee awards that involve violations of',
11426:'federal law or regulations including the procurement standards in the common rules or of the grantee’s or subgrantee’s protest procedures.',
11427:'id. grantor agencies are authorized, but not required, to review grantee/subgrantee procurements on other grounds. see supplementary information statement, 53',
11428:'fed. reg. 8034, 8039 mar. 11, 1988. an agency that has a review procedure for grantee procurement will be held',
11429:'to established precepts of administrative law in applying those procedures. for example, in niro atomizer, inc. v. epa, 682 f.',
11430:'supp. 1212 s.d. fla. 1988, the court instructed the agency to either follow its established procedures or announce that it',
11431:'was changing them, giving the parties notice and an opportunity to rebut. however, the court in age corp. v. united',
11432:'states, 968 f.2d 650 8th cir. 1992, rejected a challenge that the common rules did not go far enough in',
11433:'regulating grantee procurements. the plaintiffs objected to a provision then in the common rules that permitted state grantees to apply',
11434:'resident preferences to their procurements.46 the court viewed the common rules as embodying internal executive branch management directives and held',
11435:'that the plaintiffs lacked standing to challenge them absent a showing that they were inconsistent with federal law. 5. liability',
11436:'for acts of grantees it is often said that the federal government is not liable for the unauthorized acts of',
11437:'its agents, “agents” in this context referring to the government’s own officers and employees. if this is true with respect',
11438:'to those who clearly are agents of the government, it logically must apply with even greater force to those who',
11439:'are not its agents. grantees, for purpose of imposing legal 46 the current version of the rule, 7 c.f.r. §',
11440:'3016.36c2, provides generally that: “grantees and subgrantees will conduct procurements in a manner that prohibits the use of statutorily or',
11441:'administratively imposed instate or local geographical preferences in the evaluation of bids or proposals, except in those cases where applicable',
11442:'federal statutes expressly mandate or encourage geographic preference.” page 1054 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and',
11443:'cooperative agreements a. liability to grantee’s contractors liability on the united states, are not “agents” of the government. while the',
11444:'demarcation is not perfect, we divide our discussion into two broad areas, contractual liability and liability for grantee misconduct. for',
11445:'the united states to be contractually liable to some other party, there must be “privity of contract,” that is, a',
11446:'direct contractual relationship between the parties. when a grantee under a federal grant enters into a contract with a third',
11447:'party contractor, there is privity between the united states and the grantee, and privity between the grantee and the contractor,',
11448:'but no privity between the united states and the contractor and hence, as a general proposition, no liability. perhaps the',
11449:'leading case in this area is d.r. smalley & sons, inc. v. united states, 372 f.2d 505 ct. cl., cert.',
11450:'denied, 389 u.s. 835 1967. the plaintiff contractor had entered into a highway construction contract with the state of ohio.',
11451:'the project was funded on a costsharing basis, with 90 percent of total costs to come from federalaid highway funds.',
11452:'the contractor lost nearly $3 million on the project, recovered part of its loss from the state of ohio, and',
11453:'then sued the united states to recover the unpaid balance. the contractor argued that ohio was really the agent of',
11454:'the united states for purposes of the project because, among other things, the contract had been drafted pursuant to federal',
11455:'regulations, the united states approved the contract and all changes, and the united states was funding 90 percent of the',
11456:'costs. the court disagreed. since there was no privity of contract between the united states and the contractor, the government',
11457:'was not liable. the involvement of the government in various aspects of the project did not make the state the',
11458:'agent of the federal government for purpose of creating contractual liability, express or implied. the court stated: “the national government',
11459:'makes many hundreds of grants each year to the various states, to municipalities, to schools and colleges and to other',
11460:'public organizations and agencies for many kinds of public works, including roads and highways. it requires the projects to be',
11461:'completed in accordance with certain standards before the proceeds of the grant will be paid. otherwise the will of congress',
11462:'would be thwarted and taxpayers’ money would be wasted. . . . it would be farfetched indeed to impose liability',
11463:'on the government for the acts and omissions of the parties who contract to build the projects, simply because it',
11464:'requires the page 1055 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements work to meet certain',
11465:'standards and upon approval thereof reimburses the public agency for the part of the costs.” id. at 507. some later',
11466:'cases applying the smalley concept are malone v. united states, 34 fed. cl. 257 1995; blaze construction, inc. v. united',
11467:'states, 27 fed. cl. 646 1993; somerville technical services, inc. v. united states, 640 f.2d 1276 ct. cl. 1981; housing',
11468:'corporation of america v. united states, 468 f.2d 922 ct. cl. 1972; cofan associates, inc. v. united states, 4 cl.',
11469:'ct. 85 1983; 68 comp. gen. 494 1989. the cofan case presented an interesting variation in that the claimant was',
11470:'a disappointed bidder rather than a contractor, trying to recover under the theory, wellestablished in the law of procurement contracts,',
11471:'that there is an implied promise on the part of the government to fairly consider all bids. this did not',
11472:'help the plaintiff, however, since again there was no privity with the government. in this regard, the court observed: “[i]t',
11473:'is now firmly established that a person who enters into a contract with [a grantee] to perform services on a',
11474:'project funded in part by loans or grantsinaid from the united states may not thereby be deemed to have entered',
11475:'into a contract with the united states. nor is the result any different because the united states has imposed guidelines',
11476:'or restrictions on the use of funds, including procurement procedures.” 4 cl. ct. at 86. see also pendleton v. united',
11477:'states, 47 fed. cl. 480 2000 federal participation in state reclamation project was not sufficient to support plaintiffs’ claim for',
11478:'compensable fifth amendment taking against the united states. another variation occurred in 47 comp. gen. 756 1968. a contractor had',
11479:'succeeded in recovering increased costs from a state grantee. under smalley, it was clear that the government could not be',
11480:'held legally liable for the proportionate share of the recovery. however, it was apparent that the increased costs were due',
11481:'to the fact that erroneous soil profile information furnished by the state had contributed to an unrealistically low bid by',
11482:'the contractor. under these circumstances, gao advised that the grantor agency and the state could enter into a voluntary modification',
11483:'of the grant agreement to recognize the damage recovery as a project cost. see also b167310, july 31, 1969. page',
11484:'1056 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements in limited circumstances, there is a device',
11485:'that may be available to a contractor to have its claim considered by the federal government, illustrated by b181332, dec.',
11486:'28, 1976.47 in that case, an agency had erroneously refused to fund a grant after it had been approved and',
11487:'the grantee’s contractor had incurred expenses in reliance on the approval. there clearly was no privity between the contractor and',
11488:'the united states. however, gao recognized a procedural device drawn from the law of procurement contracts, and accepted a claim',
11489:'filed by the grantee with whom the united states did have privity “for and on behalf of” the contractor, in',
11490:'which the grantee acknowledged liability to the contractor only if and to the extent that the government was liable to',
11491:'the grantee. in effect, the contractor was prosecuting the claim in the name of the grantee. this device is potentially',
11492:'useful only where the government’s liability to the grantee can be established. see also 68 comp. gen. 494, 495–96 1989;',
11493:'9 comp. gen. 175 1929. a different type of contract, an employment contract, was the subject of 66 comp. gen.',
11494:'604 1987, in which gao concluded, applying smalley, that the united states was not liable to a former employee of',
11495:'a grantee for unpaid salary. the grantor agency had funded all allowable costs under the grant, and the grantee’s transgression',
11496:'was not the liability of the united states. as if to provide the adage that anything that can happen will',
11497:'happen, a 1983 case combined all of the elements noted above. the agency for international development aid made a rural',
11498:'development planning grant to bolivia. bolivia contracted with a private american company to perform certain functions under the grant, and',
11499:'the company in turn entered into employment contacts with various individuals. the contract with the private company but not the',
11500:'grant itself was terminated, the company terminated the employment contracts, and the individuals then sought to recover benefits provided under',
11501:'bolivian law. clearly, aid was not legally liable to the individual claimants. however, some of the benefits to some of',
11502:'the claimants could qualify as allowable costs under the grant and could be paid, if approved by aid and the',
11503:'grantee, to the extent grant funds remained available. b209649, dec. 23, 1983. 47 this decision and others described here arose',
11504:'under gao’s former statutory authority to settle claims by or against the united states. this authority has been transferred from',
11505:'gao to executive branch agencies. see notes following 31 u.s.c. § 3702. however, the principles stated in the decisions remain',
11506:'relevant. page 1057 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements b. liability for grantee misconduct',
11507:'a number of cases have involved attempts to impose liability on the united states under the federal tort claims act.48',
11508:'the act makes the united states liable, with various exceptions, for the tortious conduct of its officers, employees, or agents',
11509:'acting within the scope of their employment. as a general proposition, a grantee is not an agent or agency of',
11510:'the government for purposes of tort liability. an important supreme court case is united states v. orleans, 425 u.s. 807',
11511:'1976, holding that a community action agency funded under a federal grant was not a “federal agency” for purposes of',
11512:'the federal tort claims act. the case arose from a motor vehicle accident involving plaintiff orleans and an individual acting',
11513:'on behalf of the grantee. the court first noted that the federal tort claims act “was never intended, and has',
11514:'not been construed by this court, to reach employees or agents of all federally funded programs that confer benefits on',
11515:'people.” orleans, 425 u.s. at 813. the court then stated, and answered, the controlling test: “[t]he question here is not',
11516:'whether the [grantee] receives federal money and must comply with federal standards and regulations, but whether its daytoday operations are',
11517:'supervised by the federal government. “the federal government in no sense controls ‘the detailed physical performance’ of all the programs',
11518:'and projects it finances by gifts, grants, contracts, or loans.” id. at 815–16. thus, the general rule is that the',
11519:'united states is not liable for torts committed by its grantees. neither the fact of federal funding nor the degree',
11520:'of federal involvement encountered in the typical grant approval, oversight, inspections, etc. is sufficient to make the grantee an agent',
11521:'of the united states of purposes of tort liability. liability could result, however, if the federal involvement reached the level',
11522:'of detailed supervision of daytoday operations noted in orleans. an example is martarano v. united states, 231 f. supp. 805',
11523:'d. nev. 1964 state employee under cooperative 48 the act’s principal provisions are found at 28 u.s.c. §§ 2671–2680. page',
11524:'1058 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements agreement working under direct control and supervision',
11525:'of federal agency. in another group of cases, attempts have been made to find the united states liable under the',
11526:'federal tort claims act for allegedly negligent performance of its oversight role under a grant. the courts have found these',
11527:'claims covered by the “discretionary function” exception to federal tort claims act liability.49 mahler v. united states, 306 f.2d 713',
11528:'3rd cir., cert. denied, 371 u.s. 923 1962, followed in daniel v. united states, 426 f.2d 281 5th cir. 1970,',
11529:'and rayford v. united states, 410 f. supp. 1051 m.d. tenn. 1976. see also rothrock v. united states, 883 f.',
11530:'supp. 333 s.d.ind. 1994, aff’d, 62 f.3d 196 7th cir. 1995. in areas not covered by the federal tort claims',
11531:'act, the potential for individual liability cannot be disregarded. one such area is the socalled “constitutional tort,” or an action',
11532:'for damages based on an alleged violation of federal constitutional rights perpetrated under color of law. for example, an official',
11533:'of the indian health service, acting jointly with a state official, told a nonprofit intermediary that further funding would be',
11534:'conditioned on the dismissal of an employee whom they thought was performing inadequately. the intermediary fired the employee, who then',
11535:'sued the state official and the federal official in their individual capacities. the suit against the federal defendant was based',
11536:'directly on the fifth amendment, for deprivation of a property interest the plaintiffs job without due process. the court first',
11537:'found that there had been a due process violation, and that the defendants were not entitled to qualified immunity because',
11538:'their conduct exceeded the scope of their authority. merritt v. mackey, 827 f.2d 1368 9th cir. 1987. the court noted',
11539:'that there was no basis for imposing liability on the united states. id. at 1373–74. in the second published appellate',
11540:'decision in the case, the court affirmed a monetary damage award and an award of attorney’s fees against the individual',
11541:'officials. the federal official was personally liable for the fee 49 the discretionary function exception excludes from the act’s coverage—',
11542:'“[a]ny claim based upon an act or omission of an employee of the government, exercising due care, in the execution',
11543:'of a statute or regulation, whether or not such statute or regulation be valid, or based upon the exercise or',
11544:'performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency',
11545:'or an employee of the government, whether or not the discretion involved be abused.” 28 u.s.c. § 2680a. page 1059',
11546:'gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements award under 42 u.s.c. § 1988 because he',
11547:'had acted in concert with a state official. merritt v. mackey, 932 f.2d 1317 9th cir. 1991. see also downey',
11548:'v. coalition against rape and abuse, inc., 143 f. supp. 2d 423 d.n.j.2001, applying reasoning similar to merritt in the',
11549:'context of a statefunded grant. however, the law concerning constitutional torts is unsettled. the concept of constitutional torts originated with',
11550:'bivens v. six unknown named agents of the federal bureau of narcotics, 403 u.s. 388 1971, and has been applied',
11551:'in many subsequent cases dealing with a range of constitutional rights. recently, however, the supreme court has taken a narrow',
11552:'view of this concept. of particular relevance here, the supreme court held in correctional services corp. v. malesko, 534 u.s.',
11553:'61 2001, that a prisoner could not maintain a constitutional tort action against a private organization that operated a detention',
11554:'facility under a federal contract. the court indicated that constitutional tort actions under bivens can be maintained only against individual',
11555:'federal officers or employees; thus, such actions do not lie against “private entities acting under color of federal law” nor',
11556:'do they lie against federal agencies. malesko, 534 u.s. at 66–74. in light of malesko, it is unclear whether cases',
11557:'like merritt v. mackey, supra, would be decided the same way today. malesko suggests that, as a general proposition, federal',
11558:'contractors and grantees and their employees would not be subject to liability for constitutional torts. likewise, federal agencies would not',
11559:'have constitutional tort liability. it is possible that individual federal employees like the one in merritt could still be held',
11560:'liable for inducing a grantee to violate someone’s constitutional rights. however, it is questionable whether a court would impose tort',
11561:'liability on a federal employee who induced a violation if the party who actually committed the violation could not be',
11562:'liable. for additional background on this subject, see michael b. hedrick, new life for a good idea: revitalizing efforts to',
11563:'replace the bivens action with a statutory waiver of the sovereign immunity of the united states for constitutional tort suits,',
11564:'71 geo. wash. l. rev. 1055 2003. 6. types of grants: a categorical grant is a grant to be used',
11565:'only for a specific program or for narrowly defined activities. a categorical grant may be allocated on the categorical versus',
11566:'basis of a distribution formula prescribed by statute or regulation “formula block grant”, or it may be made for a',
11567:'specific project “project grant”. a block page 1060 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements',
11568:'grant is a grant given to a governmental unit, usually a state, to be used for a variety of activities',
11569:'within a broad functional area.50 block grants are usually formula grants. under a block grant, the state is responsible for',
11570:'further distribution of the money. states naturally prefer block grants because they increase the states’ spending flexibility and at least',
11571:'in theory reduce federal control. see generally library of congress, congressional research service, federal grants to state and local governments:',
11572:'overview and characteristics, no. rs20669 nov. 27, 2002, at 3–5; gao, grant programs: design features shape flexibility, accountability, and performance',
11573:'information, gao/ggd98137 washington, d.c.: june 22, 1998, at 3 “in practice, the ‘categorical’ and ‘block’ grant labels and their underlying',
11574:'definitions represent the ends of a continuum and overlap considerably in its middle range.”. during the 1960s and 1970s, although',
11575:'some block grant programs were in existence, the emphasis was largely on categorical grants. the omnibus budget reconciliation act of',
11576:'1981 obra, pub. l. no. 9735, 95 stat. 357 aug. 13, 1981, attempted to put a halt to this trend.',
11577:'see library of congress, congressional research service, federal grants to state and local governments: a brief history, no. rl30705 feb.',
11578:'19, 2003, at 10. the act merged and consolidated several dozen categorical grant programs into block grants. gao, block grants:',
11579:'characteristics, experience, and lessons learned, gao/hehs9574 washington, d.c.: feb. 9, 1995, at 7–9, app. ii. in the mid1990s, gao cited',
11580:'the fiscal year 1996 budget resolution in reporting that congress had “shown a strong interest in consolidating narrowly defined categorical',
11581:'grant programs for specific purposes into broader purpose block grants.” gao, block grants: issues in designing accountability provisions, gao/aimd95226 washington,',
11582:'d.c.: sept. 1, 1995, at 1. in 2003, however, gao testified that, although congress had made further efforts to consolidate',
11583:'categorical grant programs over the years, “each period of consolidation was followed by a proliferation of new federal programs.” gao,',
11584:'federal assistance: grant system continues to be highly fragmented, gao03718t washington, d.c.: apr. 29, 2003, at 4. 50 these distinctions',
11585:'are discussed under the definition of “grant” in gao, a glossary of terms used in the federal budget process, gao05734sp',
11586:'washington, d.c.: september 2005, at 60–61. page 1061 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements',
11587:'although gao could still report in 2003 that block grants were “one way congress has chosen to consolidate related programs,”',
11588:'gao also reported on certain “hybrid” approaches, including “consolidated categorical” grants, that would consolidate a number of narrower categorical programs',
11589:'while retaining standards and accountability for discrete federal performance goals, and “performance partnership agreements,” in which states can shift federal',
11590:'funds across programs but are held accountable for discrete or negotiated measures of performance. gao03718t, at 15; gao, homeland security:',
11591:'reforming federal grants to better meet outstanding needs, gao031146t washington, d.c.: sept. 3, 2003, at 11–13.51 block grants reduce federal',
11592:'involvement in that they transfer much of the decisionmaking to the grantee and reduce the number of separate grants that',
11593:'must be administered by the federal government. it is a misconception, however, to think that block grants are “free money”',
11594:'in the sense of being totally free from federal “strings.” see, e.g., gao/hehs9574, at app. iii, “accountability requirements of 1981',
11595:'block grants.” restrictions on the use of block grant funds may derive from the organic legislation itself. for example, several',
11596:'of the obra programs include such items as limitations on allowable administrative expenses, prohibitions on the use of funds to',
11597:'purchase land or construct buildings, “maintenance of effort” provisions, and antidiscrimination provisions. other obra provisions of general applicability pub. l.',
11598:'no. 9735, §§ 1741–1745 impose reporting and auditing requirements, and require states to conduct public hearings as a prerequisite to',
11599:'receiving funds in any fiscal year. another more recent example is the temporary assistance for needy families tanf block grants,',
11600:'for which congress established time limits and work requirements for adults receiving aid. gao, welfare reform: with tanf 51 gao',
11601:'has issued a number of reports on block grants, including the following: early observations on block grant implementation, gao/ggd8279 washington,',
11602:'d.c.: aug. 24, 1982; lessons learned from past block grants: implications for congressional oversight, gao/ipe828 washington, d.c.: sept. 23, 1982;',
11603:'a summary and comparison of the legislative provisions of the block grants created by the 1981 omnibus budget reconciliation act,',
11604:'gao/ipe832 washington, d.c.: dec. 30, 1982; block grants: overview of experiences to date and emerging issues, gao/hrd8546 washington, d.c.: apr.',
11605:'3, 1985; and community development: oversight of block grant needs improvement, gao/rced9123 washington, d.c.: jan. 30, 1991. gao has also',
11606:'published a comprehensive catalog of formula grants, intended for use as a resource document: grant formulas: a catalog of federal',
11607:'aid to states and localities, gao/hrd8728 washington, d.c.: mar. 23, 1987. page 1062 gao06382sp appropriations law—vol. ii chapter 10 federal',
11608:'assistance: grants and cooperative agreements flexibility, states vary in how they implement work requirements and time limits, gao02770 washington, d.c.:',
11609:'july 5, 2002 at 3. applicable restrictions are not limited to those contained in the program statute itself. other federal',
11610:'statutes applicable to the use of grant funds must also be followed. see, e.g., ely v. velde, 451 f.2d 1130',
11611:'4th cir. 1971, holding that the national historic preservation act and the national environmental policy act applied to the then',
11612:'law enforcement assistance administration in making a block grant to virginia under the safe streets act. a later and related',
11613:'decision in the same case is 497 f.2d 252 4th cir. 1974. see also forum for academic & institutional rights',
11614:'v. rumsfeld, 390 f.3d 219 3rd cir. 2004, cert. granted, 125 s. ct. 1977 2005 reviewing statute withholding funding to',
11615:'educational institutions that deny u.s. military access to campus for recruiting purposes; barbour v. washington metropolitan area transit authority, 374',
11616:'f.3d 1161 d.c. cir. 2004, cert. denied, 125 s. ct. 1591 2005 public transit authority’s acceptance of federal grant funds',
11617:'resulted in a waiver of its immunity to a rehabilitation act claim; maryland department of human resources v. united states',
11618:'department of health & human services, 854 f.2d 40 4th cir. 1988 requirement for apportionment by office of management and',
11619:'budget applicable to funds under social services block grant; 6 op. off. legal counsel 605 1982 uniform relocation assistance act',
11620:'applicable to community development block grant; 6 op. off. legal counsel 83 1982 various antidiscrimination statutes applicable to elementary and',
11621:'secondary education and social services block grants. if applicable, these additional restrictions may impose legal responsibilities on grantees. see, e.g.,',
11622:'gao, native american housing: information on hud’s housing programs for native americans, gao/rced9764, washington, d.c.: mar. 28, 1997, at 14',
11623:'indian hiring preference and davisbacon act. thus the block grant mechanism does not totally remove federal involvement nor does it',
11624:'permit the circumvention of federal laws applicable to the use of grant funds. in this latter respect, a block grant',
11625:'is legally no different from a categorical grant. the common rule for uniform administrative requirements does not apply to the',
11626:'obra block grants. see, e.g., 7 c.f.r. § 3016.4a2. 7. the single audit act we noted in our introduction to',
11627:'this chapter that federal grants to state and local governments exceed $400 billion a year. with expenditures of this magnitude,',
11628:'it is essential that there be some way to assure accountability page 1063 gao06382sp appropriations law—vol. ii chapter 10 federal',
11629:'assistance: grants and cooperative agreements on the part of the grantees. the traditional means of assuring accountability has been the',
11630:'audit. prior to 1984, there were no statutory uniform audit requirements for state and local government grantees. audits were performed',
11631:'on a grant or program basis and requirements varied with the program legislation. under this system, gaps in audit coverage',
11632:'resulted because some entities were audited infrequently or not at all. also, overlapping requirements produced duplication and inefficiency with multiple',
11633:'audit teams visiting the same entity and reviewing the same financial records. congress addressed the problem by enacting the single',
11634:'audit act of 1984, pub. l. no. 98502, 98 stat. 2327 oct. 19, 1984, codified at 31 u.s.c. §§ 7501–',
11635:'7507.52 the 1984 act’s objectives were to improve the financial management of state and local governments receiving federal financial assistance;',
11636:'establish uniform requirements for audits of federal financial assistance provided to state and local governments; promote the efficient and effective',
11637:'use of audit resources; and ensure that federal departments and agencies, to the extent practicable, rely upon and use audit',
11638:'work done pursuant to the act. pub. l. no. 98502, § 1b. the 1984 act required each state and local',
11639:'entity that that received $100,000 or more in federal financial assistance either directly from a federal agency or indirectly through',
11640:'another state or local entity in any fiscal year to undergo a comprehensive, single audit of its financial operations. the',
11641:'1984 act also required entities receiving between $25,000 and $100,000 in federal financial assistance to have either a single audit',
11642:'or a financial audit required by the programs that provided the federal funds.53 an informative discussion of the need for',
11643:'the 1984 legislation, with references to several 52 for an early review of the implementation of the original act, see',
11644:'gao, single audit act: single audit quality has improved but some implementation problems remain, gao/afmd8972 washington, d.c.: july 27, 1989.',
11645:'53 state and local entities receiving less than $25,000 in federal funds in any fiscal year were not required to',
11646:'have a financial audit. page 1064 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements reports by',
11647:'gao and the joint financial management improvement program jfmip,54 may be found in h.r. rep. no. 98708 1984. in 1996,',
11648:'the single audit act of 1984 underwent a major overhaul. prior to 1996, state and local governments followed one set',
11649:'of audit requirements and indian tribes and nonprofit organizations, including educational institutions, followed another. the single audit act amendments of',
11650:'199655 established uniform requirements for audits of federal awards56 administered by all nonfederal entities, not just state and local governments.',
11651:'in addition, the 1996 amendments, in order to reduce any burdens on nonfederal entities and to promote the efficient and',
11652:'effective use of audit resources, increased the dollar threshold needed to trigger an audit and based the audit requirement on',
11653:'an amount expended rather than on an amount received. as a result, any nonfederal entity, defined as a state, local',
11654:'government, or nonprofit organization, that expends federal awards equal to or in excess of $500,00057 in any fiscal year shall',
11655:'have either a single audit or a programspecific audit for such fiscal year. audits are conducted annually. however, biennial audits',
11656:'are permissible for state and local governments that are required by their constitution or by a statute, in effect on',
11657:'january 1, 54 on december 1, 2004, the principals of the jfmip gao, department of treasury, office of management and',
11658:'budget omb, and office of personnel management signed an agreement that reassigned responsibility for financial management policy and oversight effectively',
11659:'eliminating jfmip as a standalone organization. omb issued a memorandum on december 2, 2004, that discusses in detail the changes',
11660:'to jfmip’s role, the transfer of jfmip’s project management office to the cfo council, the creation of a new financial',
11661:'systems integration committee of the cfo council, and other transition issues. omb, memorandum for chief financial officers council, realignment of',
11662:'responsibilities for federal financial management policy and oversight dec. 2, 2004, available at http://www.whitehouse.gov/omb last visited september 15, 2005. 55',
11663:'pub. l. no. 104156, 110 stat. 1396 july 5, 1996. 56 federal awards include federal costreimbursement contracts, grants, loans, loan',
11664:'guarantees, property, cooperative agreements, interest subsidies, insurance, food commodities, direct appropriations, or other assistance, but does not include amounts received',
11665:'as reimbursement for services rendered to individuals. 31 u.s.c. § 7501a4, 5. 57 every 2 years, the director of omb',
11666:'shall review the dollar threshold amount for requiring the audits and may adjust the dollar amount consistent with the purposes',
11667:'of the single audit act, as amended. 31 u.s.c. § 7502a3. in 2004, omb adjusted the dollar threshold to $500,000.',
11668:'for fiscal years ending on or before december 30, 2003, the threshold is $300,000. see omb web site at http://www.whitehouse.gov/omb/financial/finsingleaudit.html',
11669:'last visited september 15, 2005. page 1065 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements 1987,',
11670:'to undergo audits less frequently than annually. also any nonprofit organization that had biennial audits for all biennial periods ending',
11671:'between july 1, 1992, and january 1, 1995, is also permitted to undergo its audits biennially. the audit is to',
11672:'be conducted by an independent auditor in accordance with generally accepted government auditing standards. 31 u.s.c. § 7502c. these standards',
11673:'are found in gao’s publication government auditing standards,58 commonly known as the “yellow book.” the director of omb, after consultation',
11674:'with the comptroller general, and appropriate officials from federal, state, and local governments and nonprofit organizations, is required to prescribe',
11675:'guidance to implement the single audit act, as amended. 31 u.s.c. § 7505a. guidance for implementing the act can be',
11676:'found in omb circular no. a133, audits of states, local governments, and nonprofit organizations june 27, 2003.59 the annual audit',
11677:'shall either cover the operations of the entire nonfederal entity or include a series of audits that cover departments, agencies,',
11678:'and other organizational units as long as the audit encompasses the financial statements and schedule of expenditures of the federal',
11679:'awards for each unit. 31 u.s.c. § 7502d. if the nonfederal entity expends federal awards only under one program and',
11680:'is not required otherwise to receive a financial statement audit, it may elect to have a programspecific audit. 31 u.s.c.',
11681:'§ 7502a1c. performance audits60 are not required except as authorized by the director. 31 u.s.c. §7502c. the statute 31 u.s.c.',
11682:'§ 7502e requires the auditor to: determine whether the financial statements are presented fairly in all material respects in conformity',
11683:'with generally accepted accounting principles; 58 gao, government auditing standards, gao03673g washington, d.c.: june 2003. 59 in march 2004, omb',
11684:'issued a compliance supplement to circular no. a133. the supplement can be found at http://www.whitehouse.gov/omb/circulars/a133compliance/04/04toc.html last visited september 15, 2005.',
11685:'60 performance audits encompass a wide variety of objectives, including objectives related to assessing program effectiveness and results; economy and',
11686:'efficiency; internal control; and compliance with legal or other requirements and are described in more detail in chapter 2 of',
11687:'the government auditing standards, gao03673g. page 1066 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements determine',
11688:'whether the schedule of expenditures of federal awards is presented fairly in all material respects in relation to the financial',
11689:'statements taken as a whole; with respect to internal controls pertaining to the compliance requirements for each major program, obtain',
11690:'an understanding of such internal controls; assess control risk; and perform tests of controls unless the controls are deemed o',
11691:'be ineffective; and determine whether the nonfederal entity has complied with the provisions of laws, regulations, and contracts or grants',
11692:'pertaining to federal awards that have a direct and material effect on each major program. “major programs” are defined in',
11693:'31 u.s.c. § 7501a12. if the audit discloses any audit findings, the nonfederal entity needs to prepare a corrective action',
11694:'plan to eliminate the audit findings or a statement explaining why corrective action is not necessary. 31 u.s.c. § 7502i.',
11695:'the corrective action plan needs to be consistent with the audit resolution standard promulgated by the comptroller general as part',
11696:'of the standards for internal controls in the federal government61 pursuant to 31 u.s.c. § 3512c. the federal agency that',
11697:'provided the federal award needs to review the audit to determine whether prompt and corrective action has been taken regarding',
11698:'the audit findings. 31 u.s.c. § 7502f1b. gao has reported over the last few years that more action is needed',
11699:'at both the nonfederal and federal level to ensure that audit findings are responded to, corrected, and tracked. see, e.g.,',
11700:'gao, single audit: actions needed to ensure that findings are corrected, gao02705 washington, d.c.: june 26, 2002; single audit: single',
11701:'audit act effectiveness issues, gao02877t washington, d.c.: june 26, 2002; compact of free association: single audits demonstrate accountability problems over',
11702:'compact funds, gao047 washington, d.c.: oct. 7, 2003; 61 see gao, standards for internal control in the federal government, aimd0021.3.1',
11703:'washington, d.c.: november 1999. page 1067 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements american samoa:',
11704:'accountability for key federal grants needs improvement, gao0541 washington, d.c.: dec. 17, 2004. the nonfederal entity is required to transmit',
11705:'a reporting package, which shall include the financial statements, auditor opinion, and corrective action plan, if necessary, to a federal',
11706:'clearinghouse for public inspection. 31 u.s.c. § 7502h,i. report packages can be viewed by going to the federal audit clearinghouse',
11707:'home page at http://harvester.census.gov/sac last visited september 15, 2005. omb’s guidance in circular no. a133 includes criteria for determining the',
11708:'appropriate charges to federal awards for the cost of audits. section 230 of the circular provides that, unless prohibited by',
11709:'law, the costs of audits are allowable charges to the federal awards. the charges may be considered a direct cost',
11710:'or an allocated indirect cost, as determined in accordance with the provisions of applicable omb cost principles circulars, the federal',
11711:'acquisition regulation 48 c.f.r. pts. 30 and 31, or other applicable cost principles or regulations. audits conducted under the single',
11712:'audit act, as amended, are in lieu of any other financial audit required by the nonfederal entity by any other',
11713:'federal law or regulation. 31 u.s.c. § 7503a. however, that does not prohibit a federal agency from conducting or arranging',
11714:'for its own audit of the federal award if necessary to carry out the federal agency’s responsibilities under a federal',
11715:'law or regulation; it only requires that the federal agency pay for the cost of such an audit. 31 u.s.c.',
11716:'§ 7503b, e. the law also requires the comptroller general to monitor provisions in bills and resolutions reported by the',
11717:'committees of the senate and the house of representatives that require financial audits of nonfederal entities that receive federal awards,',
11718:'and report to the appropriate congressional committees any such provisions that are inconsistent with the single audit act, as amended.',
11719:'31 u.s.c. § 7506. expenditures by grantees for grant purposes are not subject to all the same d. funds in',
11720:'hands of restrictions and limitations imposed on direct expenditures by the federal grantee: status and government. for this reason, grant',
11721:'funds in the hands of a grantee haveapplication of been said to largely lose their character and identity as federal',
11722:'funds. the comptroller general stated the principle as follows: appropriation restrictions page 1068 gao06382sp appropriations law—vol. ii chapter 10 federal',
11723:'assistance: grants and cooperative agreements “it consistently has been held with reference to federal grant funds that, when such funds',
11724:'are granted to and accepted by the grantee, the expenditure of such funds by the grantee for the purposes and',
11725:'objects for which made [is] not subject to the various restrictions and limitations imposed by federal statute or our decisions',
11726:'with respect to the expenditure, by federal departments and establishments, of appropriated moneys in the absence of a condition of',
11727:'the grant specifically providing to the contrary.” 43 comp. gen. 697, 699 1964. thus, except as otherwise provided in the',
11728:'program statute, regulations,62 or the grant agreement, the expenditure of grant funds by a state government grantee is subject to',
11729:'the applicable laws of that state rather than federal laws applicable to direct expenditures by federal agencies. 16 comp. gen.',
11730:'948 1937. the rule applies “with equal if not greater force” when the grantee is another sovereign nation. b80351, sept.',
11731:'30, 1948. one group of cases63 involves restrictions on employee compensation and related payments. examples are: appropriation act provision prohibiting',
11732:'use of federal funds to pay salaries of persons engaging in a strike against the united states government, did not',
11733:'apply to funds granted to states to assist in enforcing fair labor standards act64 and walshhealey public contracts act.65 the',
11734:'funds were not “salaries” as such; they were grant funds to reimburse states for services of state employees, and therefore',
11735:'were state rather than federal funds. 28 comp. gen. 54 1948. see also 39 comp. gen. 873 1960. 62 these',
11736:'regulations include, of course, office of management and budget circulars and the common rules that implement them. as discussed in',
11737:'many other portions of this chapter, the circulars and the common rules impose a number of restrictions on a grantee’s',
11738:'use of funds. 63 some of the decisions cited may involve statutory restrictions on federal expenditures that have been changed',
11739:'or repealed since the decisions were issued. the cases are cited solely to illustrate the application of the grant rule',
11740:'and thus remain valid to that extent. 64 act of june 25, 1938, ch. 676, 52 stat. 1066. 65 act',
11741:'of june 30, 1936, ch. 881, 49 stat. 2038. page 1069 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants',
11742:'and cooperative agreements requirement for specific authorizing legislation to use public funds to pay employer contributions for federal employee’s health',
11743:'and life insurance benefits does not apply to use of federal grant funds to contribute to state group health and',
11744:'life insurance programs for state employees. 36 comp. gen. 221 1956. restrictions on retired pay not applicable to retired military',
11745:'officers working on grantfunded state project. 14 comp. gen. 916 1935, modified on other grounds, 36 comp. gen. 84 1956.',
11746:'federal restrictions on dual compensation for federal employees are inapplicable to grantee employees. b153417, feb. 17, 1964. the rule has',
11747:'been applied in a variety of other contexts as well. one example is the area of state and local taxes.',
11748:'thus, federal immunity from payment of certain sales taxes does not apply to a state grantee since the grantee is',
11749:'not a federal agent. the grant funds lose their federal character and become state funds. therefore, the state grantee may',
11750:'pay a state sales tax on purchases made with federal grant funds if the tax applies equally to purchases made',
11751:'from all nonfederal funds. 37 comp. gen. 85 1957. see also b177215, nov. 30, 1972, applying the same reasoning for',
11752:'purchases made by a contractor who was funded by a federal grantee. similarly, a state tax on the income of',
11753:'a person paid from federal grant funds involves no question of federal tax immunity. 14 comp. gen. 869 1935. the',
11754:'following is a sampling of other restrictions which have been found inapplicable to grantee expenditures: adequacy of appropriations act 41',
11755:'u.s.c. § 11 and prohibition on entering into contracts for construction or repair of public buildings, or other public improvements,',
11756:'in excess of amount specifically appropriated for that purpose 41 u.s.c. § 12. b173589, sept. 30, 1971. prohibition in 31',
11757:'u.s.c. § 1343 on purchasing aircraft without specific statutory authority. 43 comp. gen. 697 1964 permissible for grantee under national',
11758:'science foundation research grant. see also b196690, mar. 14, 1980 purchase of motor vehicle. however, an agency may not acquire',
11759:'excess aircraft or passenger vehicles by transfer for use by its grantees. 55 comp. gen. 348 1975. prohibition in 31',
11760:'u.s.c. § 1345 on payment of nonfederal person’s travel and lodging expenses to attend a meeting. 55 comp. gen. 750',
11761:'1976. page 1070 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements requirement for specific authority in',
11762:'order to establish a revolving fund. federal agency would need specific authority in view of 31 u.s.c. § 3302b. 44',
11763:'comp. gen. 871964. where assistance funds are provided to the district of columbia under a program of assistance to the',
11764:'states which defines “state” as including the district of columbia, statutory restrictions expressly applicable to the district of columbia remain',
11765:'applicable with respect to the assistance funds even though they would not necessarily apply to the assistance funds in the',
11766:'hands of the other states. 34 comp. gen. 593 1955; 17 comp. gen. 424 1937; a90515, dec. 23, 1937. when',
11767:'applying the general rule that grantee expenditures are not subject to the same restrictions as direct federal expenditures, it is',
11768:'important to keep in mind that grantees are, of course, obligated to spend grant funds for the purposes and objectives',
11769:'of the grant and consistent with any statutory or other conditions attached to the use of the grant funds. see,',
11770:'e.g., b303927, june 7, 2005; 42 comp. gen. 682 1963; 2 comp. gen. 684 1923. these conditions may include implied',
11771:'requirements, such as the implied requirement to adhere to “basic principles” of open and competitive bidding in the case of',
11772:'grantee contracts. 55 comp. gen. 390 1975. they also include statutorily authorized requirements, as in the case of the office',
11773:'of personnel management’s authority to establish merit standards for grantees under 42 u.s.c. § 4728b intergovernmental personnel act of 1970.',
11774:'statutory restrictions on lobbying with public funds may also apply to grantee expenditures. grant recipients, because they receive federal government',
11775:'assistance, must comply with several federal statutes that prohibit various types of discrimination. title vi of the civil rights act',
11776:'of 1964 42 u.s.c. § 2000d prohibits discrimination on the basis of race, color, or national origin under any program',
11777:'or activity receiving federal financial assistance. the rehabilitation act of 1973 29 u.s.c. § 794 similarly prohibits discrimination against individuals',
11778:'with disabilities. the age discrimination act of 1975 further extends prohibited discrimination 42 u.s.c. § 6102. title ix of the',
11779:'education amendments of 1972 20 u.s.c. § 1681 prohibits sex discrimination in education programs or activities receiving federal financial assistance.',
11780:'title vii of the civil rights act of 1964 42 u.s.c. § 2000e2 prohibits employment discrimination by grantees on the',
11781:'basis of sex as well as race, color, religion, or national origin for all employers who page 1071 gao06382sp appropriations',
11782:'law—vol. ii chapter 10 federal assistance: grants and cooperative agreements have 15 or more employees. in addition, several grant statutes',
11783:'contain their own antidiscrimination provisions and include sex discrimination. e.g., 42 u.s.c. § 5309 prohibiting discrimination in federally funded community',
11784:'development programs; 20 u.s.c. § 7231db2c magnet school grant applicants must provide assurances that they will not discriminate. statements in',
11785:'some of the cases to the effect that grant funds upon being paid over to the grantee are no longer',
11786:'federal funds should not be taken out of context. the fact that grant funds in the hands of a grantee',
11787:'are no longer viewed as federal funds for certain purposes does not mean that they lose their character as federal',
11788:'funds for all purposes. see in re universal security & protection service, inc., 223 b.r. 88, 92–93 bankr. e.d. la.',
11789:'1998. it has been held that the government retains a “property interest” in grant funds until they are actually spent',
11790:'by the grantee for authorized purposes.66 this property interest may take the form of an “equitable lien,” stemming from the',
11791:'government’s right to ensure that the funds are used only for authorized purposes, or a “reversionary interest” funds that can',
11792:'no longer be used for grant purposes revert to the government. in re alpha center, inc., 165 b.r. 881, 884–85',
11793:'bankr. s.d. ill. 1994. by virtue of this property interest, the funds, and property purchased with those funds to the',
11794:'extent unrestricted title has not vested in the grantee, are not subject to judicial process without the government’s consent. e.g.,',
11795:'henry v. first national bank of clarksdale, 595 f.2d 291, 308–09 5th cir. 1979, cert. denied, 444 u.s. 1074 1980.',
11796:'likewise, in department of housing and urban development v. k.capolino construction corp., no. 01 civ. 390 jgk s.d.n.y., may 7,',
11797:'2001, the court granted the agency’s request for an injunction to prevent the use of federal lowincome housing grant funds',
11798:'to satisfy a judgment in a defamation action against the grantee: “the supreme court held in buchanan v. alexander, 45',
11799:'u.s. 4 how. 20–21, 1846, that federal funds in the hands of a grantee remain the property of the federal',
11800:'government unless and until expended in accordance with the terms of the grant and are not subject to attachment or',
11801:'garnishment. that decision, despite its age, remains the law today. . . . 66 see section g.1.a. of this chapter',
11802:'for further discussion of this point in the context of grant costs and accountability. page 1072 gao06382sp appropriations law—vol. ii',
11803:'chapter 10 federal assistance: grants and cooperative agreements unless the federal government consents, sovereign immunity prevents federal funds from being',
11804:'subject to attachment or garnishment proceedings.” slip op. at 4. the concept is illustrated in two cases from the u.s.',
11805:'court of appeals for the seventh circuit. in palmiter v. action, inc., 733 f.2d 1244 7th cir. 1984, the court',
11806:'rejected the argument that grant funds lose their federal character when placed in the grantee’s bank account, and held that',
11807:'federal grant funds in the hands of a grantee are not subject to garnishment to satisfy a debt of the',
11808:'grantee. the holding would presumably not apply where the grantee had actually spent its own money and the federal funds',
11809:'were paid over as reimbursement. id. at 1249. the court considered a similar issue in the context of a bankruptcy',
11810:'petition filed by a grantee under chapter 7 of the bankruptcy code. in re jolietwill county community action agency, 847',
11811:'f.2d 430 7th cir. 1988. the issue was whether grant funds in the hands of the grantee, as well as',
11812:'personal property purchased with grant money, were assets of the bankrupt and therefore subject to the control of the trustee',
11813:'in bankruptcy. directing the trustee to abandon the assets, the court held that they remained the property of the federal',
11814:'government. in the course of reaching this result, the court noted that unpaid creditors of the bankrupt could, to the',
11815:'extent their claims were within the scope of the grant, be paid by the grantor agency out of the recovered',
11816:'funds. id. at 433–35. a case discussing both palmiter and jolietwill and reaching a similar result is in re southwest',
11817:'citizens’ organization for poverty elimination, 91 b.r. 278 bankr. d.n.j. 1988. a grantee, which had purchased a number of motor',
11818:'vehicles with head start grant funds, filed a chapter 11 bankruptcy petition. the department of health and human services sought',
11819:'return of the property, contending that the bankrupt’s title was subject to the government’s right to require transfer to another',
11820:'grantee under the program legislation and regulations. the trustee argued that the motor vehicles were property of the bankruptcy estate,',
11821:'and that the trustee’s interest superseded any interest of the government. after a detailed review of precedent, the court directed',
11822:'the trustee to return the page 1073 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements vehicles',
11823:'to the federal grantor, concluding that the government’s rights amounted to a reversionary interest.67 another theory occasionally encountered but which',
11824:'appears to have received little indepth discussion is the theory that a grantee holds grant funds, and property purchased with',
11825:'those funds, in the capacity of a trustee. for example, in jolietwill, 847 f.2d at 432, the court held that',
11826:'the grantee was essentially “a trustee, custodian, or other intermediary, who . . . is merely an agent for the',
11827:'disbursal of funds belonging to another,” and that the grantee’s “ownership” was nominal, like that of a trustee. the trust',
11828:'concept finds support in an early supreme court decision, stearns v. minnesota, 179 u.s. 223, 249 1900, a land grant',
11829:'case in which the court discussed the grant in trust terms. however, this trust theory cannot create a federal interest',
11830:'where one does not logically exist. in one case, transit express, inc. v. ettinger, 246 f.3d 1018 7th cir. 2001,',
11831:'a firm that offered to provide drivers to a grantee sued the federal transit administration because the grantee did not',
11832:'choose to contract with it to drive vans that were purchased with the grant funds. the federal grant had been',
11833:'used only to purchase the vans, not to fund the operations of the grantee. thus, the court ruled that the',
11834:'presence of federal grant funds as a source to finance purchase of the vans under the federal program was completely',
11835:'irrelevant to the grantee’s actions in obtaining drivers for the vans. specifically, the court stated that “federal funds lurking in',
11836:'the background of this case cannot serve as an independent basis for establishing jurisdiction.” id. at 1026. as a result,',
11837:'the contractor’s complaint was dismissed. another area in which grant funds in the hands of a grantee continue to be',
11838:'treated as federal funds is the application of federal criminal statutes dealing with theft of money or property belonging to',
11839:'the united states. there are numerous cases in which the courts have applied various provisions of the criminal code, such',
11840:'as 18 u.s.c. § 641, to the theft or 67 in a bankruptcy case that considered several of the personal',
11841:'property cases discussed above, the court held that with regard to real property, a trustee enjoys the rights of a',
11842:'bona fide purchaser and is, thus, entitled to notice of another’s claim to the real property. in re premier airways,',
11843:'inc. v. united states department of transportation, 303 b.r. 295 bankr. w.d.n.y. 2003. therefore, the court determined that a trustee’s',
11844:'interest in real property purchased with federal grant funds was superior to that of the federal grantor agency where the',
11845:'grantor agency failed to perfect its interest in the real property as a matter of record prior to the grantee’s',
11846:'commencement of the bankruptcy proceeding. page 1074 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements embezzlement',
11847:'of grant funds or grant property in the hands of grantees. examples involving a variety of grant programs are hayle',
11848:'v. united states, 815 f.2d 879 2nd cir. 1987 violation of 18 u.s.c. § 641; united states v. harris, 729',
11849:'f.2d 441 7th cir. 1984 violation of 18 u.s.c. § 657; united states v. hamilton, 726 f.2d 317 7th cir.',
11850:'1984 violation of 18 u.s.c. § 665a; united states v. montoya, 716 f.2d 1340 10th cir. 1983 violation of 18',
11851:'u.s.c. § 287; united states v. smith, 596 f.2d 662 5th cir. 1979 violation of 18 u.s.c. § 641; united',
11852:'states v. rowen, 594 f.2d 98 5th cir., cert. denied, 444 u.s. 834 1979 violation of 18 u.s.c. § 641.',
11853:'in each of these cases, the court rejected the argument that the statute did not apply because the funds or',
11854:'property were no longer federal funds or property. it makes no difference whether the funds are paid to the grantee',
11855:'in advance or by reimbursement montoya, 716 f.2d at 1344, or that the funds may have been commingled with nonfederal',
11856:'funds hayle, 815 f.2d at 882. the holdings are based on the continuing responsibility of the federal government to oversee',
11857:'the use of the funds. e.g., hayle, 815 f.2d at 882; hamilton, 726 f.2d at 321. the result would presumably',
11858:'be different in the case of grant funds paid over outright with no continuing federal oversight or supervision. e.g., smith,',
11859:'596 f.2d at 664. lastly, the presence of federal grant funds had an unusual impact on an age discrimination case',
11860:'brought against a federallyfunded private organization. the plaintiff in neukirchen v. wood county head start, inc., 53 f.3d 809 7th',
11861:'cir. 1995, had obtained a money judgment for age discrimination against a local head start organization. she attempted to collect',
11862:'the judgment by executing against personal property the organization owned, including items of property purchased with grants funds that had',
11863:'a unit acquisition cost of less than $1,000. the then applicable regulations provided that once such property was no longer',
11864:'needed for grant purposes, it could be retained or disposed of by the grantee with no further obligation to the',
11865:'federal government.68 the plaintiff argued that the federal government retained no interest in property subject to this provision. the argument',
11866:'proved unavailing. citing joliet will, supra, the court stated: 68 see neukirchen, 53 f.3d at 812. as the court noted,',
11867:'this rule is no longer in effect and has been replaced by more stringent accountability requirements. id. at 813, n.',
11868:'4. for the current common rules on this subject, see, for example, 7 c.f.r. §§ 3019.32–3019.37. page 1075 gao06382sp appropriations',
11869:'law—vol. ii chapter 10 federal assistance: grants and cooperative agreements “it is clear in this circuit that property purchased with',
11870:'federal grant funds constitutes federal property. . . . it is also axiomatic that the doctrine of sovereign immunity prevents',
11871:'a judgment creditor from attaching federal property, absent consent by the united states.” neukirchen, 53 f.3d at 811–12. the court',
11872:'was not persuaded that the rule for property costing less than $1,000 created an exception: “given the overwhelming control that',
11873:'the secretary [of health and human services] exercises over property purchased with federal funds and the corresponding lack of discretion',
11874:'on wood county’s part, we do not believe that the absence of specific regulations requiring wood county to reconvey to',
11875:'the united states property costing less than $1,000 commands a different result. we, therefore, conclude that jolietwill’s rationale requires that',
11876:'property purchased with federal grant funds, including property costing less than $1000, constitutes federal property.” id. at 813. the result',
11877:'would be different, the court noted, for property that was in fact no longer needed; however, that was not true',
11878:'of the property at issue. id. at n.4. thus, even though the grantee had violated federal law in discriminating against',
11879:'the plaintiff, the majority of the grantee’s assets were immune from execution since they had been purchased with federal funds,',
11880:'a result that the court described as “paradoxical, indeed.” id. at 814. trillions of dollars in cash move into and',
11881:'out of the united states treasury e. grant funding every year, and the federal government has a responsibility to the',
11882:'taxpayer to efficiently manage this cash flow in terms of collection, internal controls, investment, and disbursement. in the disbursement part',
11883:'of this process, good cash management practices include not paying the bills too late or too early. timely disbursement of',
11884:'funds to resolve current liabilities as they come due yields positive results for the federal government both by avoiding late',
11885:'payment penalties and maximizing the time during which the cash reserves earn a return for the government through shortterm investments.',
11886:'the need for sound cash management in the federal government plays an important role in the funding of grants and',
11887:'other assistance awards. page 1076 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements although grants are',
11888:'not subject to the general prohibition against advance payment of public funds, they are subject to laws and regulations intended',
11889:'to prevent grantees from earning interest on cash reserves at the expense of the federal government. the general rule is',
11890:'that interest earned on grant funds pending their use for program purposes belongs to the federal government. special rules apply',
11891:'to state governmental grantees under the intergovernmental cooperation act69 and the cash management improvement act,70 discussed in section e.2.b of',
11892:'this chapter. once the grant funds have been used for program purposes, however, cash generated by the grant funds is',
11893:'generally treated as program income that belongs to the grantee. in addition to cash management concerns, grant funding also involves',
11894:'consideration of whether the federal government should bear the entire cost of program activities or require the grantee to shoulder',
11895:'part of the financial burden. if the grant program does provide for cost sharing, this is usually accomplished through either',
11896:'a local/matching share provision or a maintenance of effort provision. 1. advances of grant/assistance funds the framework for managing cash',
11897:'flow in the federal government generally prohibits federal agencies from paying for goods or services before receiving them. however, the',
11898:'general statutory prohibition against the advance payment of public funds, 31 u.s.c. § 3324,71 does not apply to grants. this',
11899:'is because the primary purpose of assistance awards is to assist authorized recipients and not to obtain goods or services',
11900:'for the government. thus, the policy behind the advance payment prohibition has much less force in the case of assistance',
11901:'awards than in the case of procurement contracts. accordingly, the comptroller general has held that 31 u.s.c. § 3324 does',
11902:'not preclude advance funding in authorized grant relationships; unless restricted by the program legislation or the applicable appropriation, the authority',
11903:'to make grants is sufficient to satisfy the requirements of 31 u.s.c. § 3324. 60 comp. gen. 208 1981; 59',
11904:'comp. gen. 424 1980; 41 comp. gen. 394 1961. as stated in 60 comp. gen. at 209, “[t]he policy of',
11905:'payment upon receipt of goods or services is simply 69 pub. l. no. 90577, 82 stat. 1098 oct. 16, 1968.',
11906:'70 pub. l. no. 101453, 104 stat. 1058 oct. 24, 1990. 71 for an indepth discussion of advance payments, see',
11907:'chapter 5, section c. page 1077 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements inconsistent with',
11908:'assistance relationships where the government does not receive anything in the usual sense.” this does not mean that there can',
11909:'never be an advance payment problem in a grant case. because the authority to advance funds must, at least in',
11910:'a general sense, be founded on the program legislation, advance payments would probably not be authorized under an assistance program',
11911:'that provided for payment by reimbursement. also, the comptroller general found advance payment violations in two grantrelated cases from the',
11912:'1970s involving the college workstudy program: 56 comp. gen. 567 1977 and b159715, aug. 18, 1972. under the college workstudy',
11913:'program as it existed in the 1970s when these two cases were decided, a student was placed with an employer,',
11914:'which might have been a federal agency. the student’s salary was paid from two sources: 80 percent was paid by',
11915:'the college under a department of education grant, and the remaining 20 percent was paid by the employer. in the',
11916:'1972 case, an employing federal agency proposed to advance pay the college’s 80 percent share of the student’s salary and',
11917:'then seek reimbursement of this amount at a later date from the college. the comptroller general found this advance payment',
11918:'arrangement to violate 31 u.s.c. § 3324. five years later, in 56 comp. gen. 567 the comptroller general found a',
11919:'violation of the same statute when the agency/employer proposed to advance its 20 percent share to the college, which would',
11920:'in turn place the funds in an escrow account for payment to the student after the work was performed. 2.',
11921:'cash management of grants a. general rule on interest on grant advances one problem with the advance funding of assistance',
11922:'awards is that the recipient may draw down funds before the funds are actually needed. this is a matter of',
11923:'concern for several reasons. for one thing, advances under an assistance program are intended to accomplish the program purposes and',
11924:'not to profit the recipient other than in the manner and to the extent specified in the program. but there',
11925:'is another reason. when money is drawn from the treasury before it is needed, or in excess of current needs,',
11926:'the federal government loses the use of the money. the principle was expressed as follows: page 1078 gao06382sp appropriations law—vol.',
11927:'ii chapter 10 federal assistance: grants and cooperative agreements “when federal receipts are insufficient to meet expenditures, the difference is',
11928:'obtained through borrowing; when receipts exceed expenditures, outstanding debt can be reduced. thus, advancing funds to organizations outside the government',
11929:'before they are needed either unnecessarily increases borrowings or decreases the opportunity to reduce the debt level and thereby increases',
11930:'interest costs to the federal government.” b146285, oct. 2, 1973, at 3. thus, premature drawdown not only profits the grant',
11931:'recipient, but does so at the expense of the rest of the taxpayers. to reduce premature drawdowns and thus promote',
11932:'efficient cash management in the federal government in its grant funding, yet not discourage advance funding of grants in appropriate',
11933:'circumstances, a default rule has developed. the comptroller general has consistently held that, except as otherwise provided by law, interest',
11934:'earned by grantees on funds advanced by the united states under an assistance agreement pending their application to grant purposes',
11935:'belongs to the united states rather than to the grantee. such interest is to be accounted for as funds of',
11936:'the united states and must be deposited in the treasury as miscellaneous receipts under 31 u.s.c. § 3302b. for example,',
11937:'in b251863, aug. 27, 1993, the comptroller general applied this rationale in refusing to approve the proposal of the fish',
11938:'and wildlife service to provide $584,930 to a nonprofit grantee over a 5year period by advancing the grantee $500,000 and',
11939:'allowing the grantee to earn $84,930 in interest during that time to retain and use for grant purposes. see also',
11940:'71 comp. gen. 387 1992; 69 comp. gen. 660 1990; 42 comp. gen. 289 1962; 40 comp. gen. 81 1960;',
11941:'b203681, sept. 27, 1982; b192459, july 1, 1980; b149441, apr. 16, 1976; b173240, aug. 30, 1973.72 if the grantee is',
11942:'unable to document the actual amount of interest earned on the grant advances, the general rule is that the grantor',
11943:'agency should use the “treasury tax and loan account” rate prescribed by 31 u.s.c. § 3717 for debts owed to',
11944:'the united states. 69 comp. gen. 660 1990. if, 72 limitations on the use of interest earned on advance funds',
11945:'are also contained in the common rules. see, e.g., 7 c.f.r. § 3016.21i2005 state and local government grantees; 7 c.f.r.',
11946:'§ 3019.22l other grantees. for example, section 3016.21i requires nonexempt grantees and subgrantees to “promptly, but at least quarterly, remit',
11947:'interest earned on advances to the federal agency.” however, it does permit them to keep up to $100 per year',
11948:'in interest to pay administrative expenses. page 1079 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements',
11949:'however, the grantee is a state, then interest will be determined in accordance with 31 u.s.c. § 6503c1, discussed hereafter.',
11950:'except for states, discussed separately in the section immediately following, the general rule that the united states owns interest earned',
11951:'on grant advances applies whether the grantee is a public or private entity. the rationale for the rule is that',
11952:'unless expressly provided otherwise, funds are paid out to a grantee to accomplish the grant purposes, not for the grantee',
11953:'to invest the money and earn interest at the expense of the treasury. thus, grant funds are to be applied',
11954:'promptly to the grant purposes. 1 comp. gen. 652 1922. in 40 comp. gen. 81 1960, the comptroller general held',
11955:'that interest on foreign currencies advanced by the department of agriculture under cooperative agreements, earned between the time the funds',
11956:'were advanced and the time they were used, could not be retained for program purposes but had to be returned',
11957:'to the treasury for deposit in the general fund as miscellaneous receipts. in 42 comp. gen. 289 1962, the rule',
11958:'was applied with respect to state department grants to americansponsored schools and libraries overseas. the comptroller general stated, “[t]here can',
11959:'be no doubt that only the congress is legally empowered to give away the property or money of the united',
11960:'states.” id. at 293. the decision further concluded that the enabling legislation did not provide sufficient authority to use the',
11961:'grant funds to establish a permanent interestbearing endowment fund. in b149441, feb. 17, 1987, the comptroller general found that since',
11962:'the national endowment for the humanities had no authority in its program legislation to permit its grantees to establish an',
11963:'endowment fund with grant moneys, the endowment could not authorize its grantees to accomplish the same purpose with matching funds.',
11964:'citing both 42 comp. gen. 289 and b149441, discussed immediately above, the comptroller general held in 70 comp. gen. 413',
11965:'1991 that legislative authority would be required for a “debt for equity swaps” proposal whereby the united states information agency',
11966:'usia would purchase discounted foreign debt from commercial lenders and transfer the notes to grantees in the foreign country, who',
11967:'would in turn exchange the notes for local currency or local currency denominated bonds and use the income thus generated',
11968:'for program activities. however, since usia has statutory authority to accept conditional gifts, the comptroller general held that usia could',
11969:'accept a donation of foreign debt and use the principal and income for authorized activities in accordance with the conditions',
11970:'specified. page 1080 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements the rule does not apply,',
11971:'however, if earning interest is consistent with the grant purposes. thus, in b230735, july 20, 1988, where use of grant',
11972:'funds to establish an endowment trust was authorized by law, the comptroller general concluded that the grantee could use income',
11973:'from the endowment as nonfederal matching funds on other grants, as long as such use was consistent with the terms',
11974:'and conditions of the grant agreement. in b192459, july 1, 1980, a grantee transferred grant funds to a trustee under',
11975:'a complex construction financing arrangement. the trustee was independent, that is, not an agent of the grantee, and the grantee',
11976:'could not get the funds back upon demand. the comptroller general determined that the transfer to the trustee was in',
11977:'the nature of a disbursement for grant purposes. therefore, interest earned by the trustee after the transfer could be treated',
11978:'as grant income and retained under the terms of the grant agreement. however, interest on grant funds placed in bank',
11979:'accounts and certificates of deposit by the grantee prior to transfer to the trustee had to be returned to the',
11980:'treasury. the grantor agency lacked the authority to permit the grantee to retain interest earned on grant funds prior to',
11981:'their application to grant purposes. in 64 comp. gen. 103 1984, the agency for international development advanced grant funds to',
11982:'the government of egypt, which in turn advanced these funds to certain local and provincial elements of that government. since',
11983:'the purpose of the grant was to assist egypt in its efforts to decentralize certain governmental functions by developing experience',
11984:'at the local level in managing and financing selected projects, the comptroller general concluded that the advances of funds by',
11985:'the government of egypt to the local and provincial entities could legitimately be viewed as disbursements for grant purposes. thus,',
11986:'the subgrantees could retain interest earned on those advances. however, in another 1984 case also involving the agency for international',
11987:'development, the comptroller general found that subgrantees could not retain interest on funds advanced to them by the grant recipient',
11988:'under a cooperative agreement whose purpose was to help develop certain technologies because the grantor agency had advanced these funds',
11989:'to the grantee before the grantee had a legitimate program need for the funds. 64 comp. gen. 96 1984. both',
11990:'decisions followed the approach set forth in b192459, july 1, 1980, summarized above. in evaluating the disposition of interest income,',
11991:'an important determinant is whether the interest was earned before or after the grant funds were applied to authorized grant',
11992:'purposes. the key word here is “authorized.” page 1081 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative',
11993:'agreements b. state governments and interest on grant advances for example, under the community development block grant program, grantee cities',
11994:'and counties may use the funds to make loans for certain community projects. grantees may retain interest earned on those',
11995:'loans for grantrelated uses as a type of “program income,” that is, grantrelated income, which is discussed in more detail',
11996:'in section e.4 of this chapter. however, if a loan is later found to be ineligible under the program, the',
11997:'funds were never used for an authorized grant purpose, and interest earned by the grantee must be paid over to',
11998:'the united states for deposit as miscellaneous receipts. 71 comp. gen. 387 1992. congress can, of course, legislatively make exceptions',
11999:'to the rule by providing assistance in the form of an unconditional gift or by other appropriate statutory provisions. see,',
12000:'e.g., 44 comp. gen. 179 1964 provision in appropriation act exempting educational institutions from liability for interest under certain public',
12001:'health service act grants; b175155, june 11, 1975 interest rule not applicable with respect to “grants” to amtrak.73 1 intergovernmental',
12002:'cooperation act prior to 1968, the prohibition on retention of interest income applied to states as well as to other',
12003:'grantees. 20 comp. gen. 610 1941; 3 comp. gen. 956 1924; 26 comp. dec. 505 1919; 24 comp. dec. 403',
12004:'1918; a46031, jan. 16, 1933. there was no reason to draw a distinction. this, of course, was premised on the',
12005:'absence of any statutory guidance. the treatment of interest on grant advances to state governments is now governed by the',
12006:'intergovernmental cooperation act of 1968, pub. l. no. 90577, 82 stat. 1098 oct. 16, 1968, codified at 31 u.s.c. §§',
12007:'6501–6508. the law evolved in two stages. the original intergovernmental cooperation act created what was to be, for 22 years,',
12008:'the major exception to the rule that interest on grant advances belongs to the united states. the 1968 statute first',
12009:'codified the requirement for federal grantor agencies 73 a conceptually related case is 71 comp. gen. 310 1992, which upheld',
12010:'a small business administration regulation providing for a reasonable profit to grantees under the small business innovation development act. page',
12011:'1082 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements to schedule the transfer of grant funds',
12012:'so as to minimize the time elapsing between transfer and grantee disbursement.74 the statute then provided: “states shall not be',
12013:'held accountable for interest earned on grantinaid funds, pending their disbursement for program purposes.” pub. l. no. 90577, § 203.',
12014:'the theory behind the intergovernmental cooperation act was that federal grantor agencies could control the release of grant funds and',
12015:'thereby preclude situations from arising in which state grantees would be in a position to earn excessive interest on grant',
12016:'advances. if the timing of the release of funds was properly managed, interest the state might earn would be too',
12017:'small to be a matter of concern. the statutory exception was not intended to create a windfall for state grantees.',
12018:'see pennsylvania office of budget v. department of health & human services, 996 f.2d 1505 3rd cir., cert. denied, 510',
12019:'u.s. 1010 1993.75 the original statutory exception for interest on grant advances did not prove satisfactory, however. grantor agencies complained',
12020:'of premature drawdown of grant advances while grantee states complained of slow federal payment in reimbursement situations. congress responded by',
12021:'amending 31 u.s.c. § 6503 in section 5 of the cash management improvement act of 1990, pub. l. no. 101453,',
12022:'104 stat. 1058, 1059 oct. 24, 1990. the 1990 amendment was intended to address both the federal and state concerns.',
12023:'thus, the house report on the legislation, h.r. rep. no. 101696, at 3–4 1990, stated: “under current law, the states',
12024:'need not account to the federal government for interest earned on federal funds disbursed to the states prior to payment',
12025:'to program beneficiaries. however, when the federal government complains of undue profits made by the states as a result of',
12026:'early drawdown of federal funds, the states are quick to point out numerous instances where they lose interest 74 in',
12027:'b146285, apr. 10, 1978, the comptroller general concluded that the intergovernmental cooperation act did not repeal by implication a statute',
12028:'which prescribed both the timing schedule and the amount of payments under a particular assistance program, but rather was geared',
12029:'primarily to programs without statutory payment schedules. 75 the opinion in pennsylvania office of budget provides a useful discussion of',
12030:'the background, purposes, and legislative history of the interest exception in the original intergovernmental cooperation act. see 996 f.2d at',
12031:'1510–12. page 1083 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements opportunities because the federal government',
12032:'is slow to reimburse them for the monies the states advance to fund federal programs. this bill seeks to provide',
12033:'a fair and equitable resolution to these differences between the federal government and the states.” the cash management improvement act',
12034:'retained the general requirement of 31 u.s.c. § 6503 to minimize the time elapsing between transfer of funds from the',
12035:'treasury to the grantee and grantee disbursement of those funds for program purposes. it also provided sanctions to enforce this',
12036:'requirement. these provisions are discussed further in section e.2.c of this chapter. with respect to interest, the act amended 31',
12037:'u.s.c. § 6503c to provide that for advance payment programs, unless inconsistent with program purposes the state must pay interest',
12038:'to the united states from the time the funds are transferred to the state’s account to the time they are',
12039:'paid out by the state for program purposes. interest payments are to be deposited in the treasury as miscellaneous receipts.',
12040:'for reimbursement programs, the united states must pay interest to the state from the time of payout by the state',
12041:'to the time the federal funds are deposited in the state’s bank account. 31 u.s.c. § 6503d. interest in both',
12042:'directions i.e., from states to the federal government under 31 u.s.c. § 6503c and from the federal government to states',
12043:'under 31 u.s.c. § 6503d is to be paid annually, at a rate based on the yield of 13week treasury',
12044:'bills, using offset to the extent provided in treasury regulations. id. §§ 6503c, d, i.76 2 decisions under the intergovernmental',
12045:'cooperation act i state entities covered the original intergovernmental cooperation act applied only to states and their agencies or instrumentalities;',
12046:'it did not extend to “political subdivisions” of states, such as cities, towns, counties, or special districts created by state',
12047:'law. pub. l. no. 90577, § 102, 82 stat. 1098, 1099 oct. 16, 1968, codified at 31 u.s.c. §§ 6501–6508.',
12048:'the cash management improvement act, pub. l. no. 101453, 104 stat. 1058 oct. 24, 1990, expanded the relevant definition to',
12049:'apply to “an agency, instrumentality, or fiscal agent” of a state, including territories and the district of columbia, 76 the',
12050:'interest provisions of the cash management improvement act took effect during the second half of 1993. pub. l. no. 101453,',
12051:'§ 5e, as amended by the cash management improvement act of 1992, pub. l. no. 102589, § 2, 106 stat.',
12052:'5133 nov. 10, 1992. page 1084 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements but the',
12053:'definition retains the exclusion for “a local government of a state,” such as a city, county, or town. 31 u.s.c.',
12054:'§ 65019. thus, gao decisions under the original intergovernmental cooperation act should remain relevant in determining which entities are “states”',
12055:'in this context. what constitutes a covered state entity under the act is further refined in implementing treasury department regulations',
12056:'at 31 c.f.r. § 205.2 2005. in 56 comp. gen. 353 1977, the comptroller general addressed how to determine which',
12057:'state entities were covered by the intergovernmental cooperation act, concluding as follows: “[a] federal grantor agency is not required by',
12058:'the intergovernmental cooperation act of 1968 and its legislative history to accept the bureau of the census’ classification of an',
12059:'entity . . . in determining whether that entity is a state agency or instrumentality or a political subdivision of',
12060:'the state. it is bound by the classification of the entity in state law. only in the absence of a',
12061:'clear indication of the status of the entity in state law may it make its own determination based on reasonable',
12062:'standards, including resort to the bureau of the census’ classifications.” id. at 357. if the classification under state law is',
12063:'not clear and unambiguous, the grantee may be required to obtain a legal opinion from the state attorney general in',
12064:'order to assist in making the determination. id. in a more recent case dealing with the current statutory definition, the',
12065:'federal circuit found that the massachusetts bay transportation authority mbta was an instrumentality of the commonwealth of massachusetts and was',
12066:'therefore entitled under 31 u.s.c. § 6503d to interest on reimbursement payments from the federal government. massachusetts bay transportation authority',
12067:'v. united states, 129 f.3d 1226, 1236–37 fed. cir. 1997. in arriving at this conclusion, the court noted that the',
12068:'mbta was located within the state’s executive office of transportation and construction and that the members of mbta’s board of',
12069:'directors were appointed and removed by the state’s governor. the court also found it significant that the mbta had been',
12070:'defined as a state instrumentality in a comptroller general decision 56 comp. gen. 353 1977 and in an opinion of',
12071:'the massachusetts attorney general. page 1085 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements ii grants',
12072:'covered by the former interest exemption the exception to the prohibition against retention of interest income by state grantees in',
12073:'the original intergovernmental cooperation act was held to apply to passthrough situations where states are the primary recipients of grant',
12074:'funds, which are then passed on to subgrantees. in b171019, oct. 16, 1973, the comptroller general concluded that the exception',
12075:'applied to political subdivisions, which were subgrantees of states. the justice department reached the same conclusion in 6 op. off.',
12076:'legal counsel 127 1982. subsequent decisions applied the exception to nongovernmental subgrantees as well, recognizing that there was no basis',
12077:'to distinguish between governmental and nongovernmental subgrantees. 59 comp. gen. 218 1980, aff’d, b196794, feb. 24, 1981. other cases under',
12078:'the version of the intergovernmental cooperation act that predated the cash management improvement act may remain relevant as well. for',
12079:'example, the statute does not necessarily apply to funds in contexts other than those specified. thus, in 62 comp. gen.',
12080:'701 1983, the comptroller general concluded that a subgrantee under a labor department grant to a state was not entitled',
12081:'to retain interest it had earned by investing funds received from the internal revenue service as a refund of federal',
12082:'insurance contributions act social security taxes. in north carolina v. heckler, 584 f. supp. 179 e.d.n.c. 1984, the court found',
12083:'the statute inapplicable in a situation in which the state had wrongfully obtained federal funds and earned interest on them',
12084:'pending repayment to the government. in two recent judicial decisions, courts agreed with the federal government that the act’s exemption',
12085:'did not apply because the transactions at issue did not constitute grants covered by the act. in california state university',
12086:'v. riley, 74 f.3d 960, 964–65 9th cir. 1996, the ninth circuit held that, contrary to the state’s contention, “pell',
12087:'grants” were not “grants” under the act’s definition. paraphrasing the language of 31 u.s.c. § 65014, which remains the same',
12088:'today, the court stated: “the ‘grants’ that are the subject of the ica [intergovernmental cooperation act] are grants to states,',
12089:'local governments, or beneficiaries under a state plan or program administered by the state.” riley, 74 f.3d at 964 emphasis',
12090:'in original. under the pell grant program, the state university did not administer the grants but acted merely as a',
12091:'page 1086 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements c. other cash management requirements conduit',
12092:'for disbursing the pell grants, which were provided directly from the federal government to students meeting the eligibility requirements. similarly,',
12093:'the court in new york department of social services v. shalala, 876 f. supp. 29 s.d.n.y. 1994, aff’d, 50 f.3d',
12094:'179 2nd cir. 1995, determined that a state agency could not retain interest earned on payments received from the federal',
12095:'government as reimbursement for administering federal social security disability programs. the court held that the payments did not constitute a',
12096:'“grant” for purposes of the intergovernmental cooperation act since the statute specifically excludes from its definition of a grant “a',
12097:'payment to a state or local government as complete reimbursement for costs incurred in paying benefits or providing services to',
12098:'persons entitled to them under a law of the united states.” id. at 33. see 31 u.s.c. § 65014cvii. our',
12099:'discussion up to now has focused exclusively on the treatment of interest earned on federal grant funds. however, there are',
12100:'other important cash management considerations and additional relevant requirements in the cash management improvement act, pub. l. no. 101453, 104',
12101:'stat. 1058 oct. 24, 1990, and its implementing regulations.77 some of these are highlighted below. section 4 of the act',
12102:'added a new section 3335 to title 31, united states code, which imposes a general requirement for federal agencies to',
12103:'provide for the “timely disbursement” of federal funds to eligible recipients in accordance with regulations prescribed by the secretary of',
12104:'the treasury. 31 u.s.c. § 3335a.78 if an agency fails to comply with this requirement, the secretary may collect from',
12105:'the agency a charge in an amount the secretary determines to be the cost to the general fund of the',
12106:'treasury caused by the noncompliance. 31 u.s.c. § 3335b. the charge is to be deposited into the treasury as miscellaneous',
12107:'receipts and is to be derived, to the maximum extent possible, from funds available to the offending agency for administrative',
12108:'operations rather than from program accounts. id. §§ 3335c and d. the secretary’s authority to collect charges is permissive rather',
12109:'than mandatory and, according to the legislative history, is to be “restricted to cases of egregious or repeated noncompliance, and',
12110:'77 for a summary of the cash management improvement act and a review of its initial years in operation, see',
12111:'gao, financial management: implementation of the cash management improvement act, gao/aimd964 washington, d.c.: jan. 8, 1996. 78 disbursement is to',
12112:'be accomplished through cash, checks, electronic funds transfer, or any other means identified by the treasury secretary. page 1087 gao06382sp',
12113:'appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements [not to] be used in a routine manner to',
12114:'finance interest costs incurred by the federal government.” h.r. rep. no. 101696, at 7 1990. section 5 of the cash',
12115:'management improvement act also amended 31 u.s.c. § 6503 to provide more specific requirements that apply to assistance programs administered',
12116:'by the states. section 6503, as so amended, directs both federal grantor agencies and state grantees, consistent with treasury regulations,',
12117:'to “minimize the time elapsing between transfer of funds from the united states treasury and the issuance or redemption of',
12118:'checks, warrants, or payments by other means” by the state grantee for program purposes. 31 u.s.c. § 6503a. furthermore, it',
12119:'requires the secretary of the treasury to enter into an agreement with each state receiving grant funds that prescribes fund',
12120:'transfer methods and procedures, as chosen by the state and approved by the secretary. 31 u.s.c. § 6503b. if an',
12121:'agreement cannot be reached with a particular state, the secretary is authorized to establish default procedures for that state by',
12122:'regulation. 31 u.s.c. § 6503b3. the treasury department’s regulations implementing the cash management improvement act are codified at 31 c.f.r.',
12123:'parts 205 and 206 2005. part 205 contains those provisions most relevant to assistance programs. see, e.g., 31 c.f.r. §§',
12124:'205.8 default procedures in the absence of a treasurystate agreement; 205.11 and 205.33 requirements for fund transfers and drawdowns; 205.19',
12125:'calculation of interest; 205.34 federal oversight and compliance responsibilities. the crux of the government’s policy related to timeliness, as stated',
12126:'in 31 c.f.r. §§ 205.11 and 205.33, is that federal agencies must limit a funds transfer to a state to',
12127:'the minimum amounts needed by the state and must time the disbursement to be in accord with the actual, immediate',
12128:'cash requirements of the state in carrying out a federal assistance program. similarly, a state must minimize the time between',
12129:'the drawdown of federal funds from the federal government and their disbursement for federal program purposes. in b244617, dec. 24,',
12130:'1991 nondecision letter, gao concurred with a determination by the social security administration that a period of 15 months between',
12131:'a state’s drawdown and disbursement of federal funds for state employee retirement contributions did not meet the latter requirement. although',
12132:'the above discussion focuses on state grantees, the same cash management concerns apply, of course, with respect to other recipients',
12133:'of federal assistance. thus, similar requirements for other grantees can be page 1088 gao06382sp appropriations law—vol. ii chapter 10 federal',
12134:'assistance: grants and cooperative agreements found in office of management and budget circulars and agency regulations. see, for example, the',
12135:'cash management provisions of the department of agriculture’s common rules applicable to local government grantees as well as states 7',
12136:'c.f.r. § 3016.20 and those applicable to institutions of higher education and nonprofit organizations 7 c.f.r. §§ 3019.21 and 22.',
12137:'the authority of a state to require its own grantees to account to it for funds it makes available to',
12138:'them is generally a matter within the discretion of the state. see b196794, jan. 28, 1983 nondecision letter observing that',
12139:'each state “has the primary responsibility for employing whatever form of organization and management procedures it feels is necessary to',
12140:'assure proper and efficient administration of the funds advanced”. however, the common rules include some minimal internal control and accountability',
12141:'standards for state grantees in relation to their subgrantees. for example, the department of agriculture common rule in 7 c.f.r.',
12142:'§ 3016.20b7 provides, in part, with respect to cash management: “grantees must establish reasonable procedures to ensure the receipt of',
12143:'reports on subgrantees’ cash balances and cash disbursements in sufficient time to enable them to prepare complete and accurate cash',
12144:'transactions reports to the awarding agency. when advances are made by letterofcredit or electronic transfer of funds methods, the grantee',
12145:'must make drawdowns as close as possible to the time of making disbursements. grantees must monitor cash drawdowns by their',
12146:'subgrantees to assure that they conform substantially to the same standards of timing and amount as apply to advances to',
12147:'the grantees.” 3. program income once grant funds have been applied to their grant purposes, they still can generate income,',
12148:'directly or indirectly, in various ways. this, as distinguished from interest on grant advances, is called “program income.” program income',
12149:'is defined broadly under the common rules as “gross income received by the grantee or subgrantee directly generated by a',
12150:'grant supported activity, or earned only as a result of the grant agreement during the grant period.” see, e.g., 7',
12151:'c.f.r. § 3016.25b 2005. program income may include such things as income from the sale of commodities, fees for services',
12152:'performed, and usage or rental fees. see, e.g., 7 c.f.r. § 3016.25a. grantgenerated income may also include investment income, although',
12153:'this will be uncommon. see b192459, july 1, 1980. page 1089 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants',
12154:'and cooperative agreements although included in the broad common rule definition of program income, income from the sale of real',
12155:'property receives special treatment and is governed instead by the common rule on real property. see, e.g., 7 c.f.r. §§',
12156:'3016.25f, 3016.31, 3019.24g. this difference was important in b290744, sept. 13, 2002, in which the comptroller general found that the',
12157:'transportation equity act for the 21st century79 did not alter the common rule related to program income and the proceeds',
12158:'of the sale of real property that the grantee no longer needs for the originally authorized purpose. the decision thus',
12159:'concluded that the federal government had retained its percentage interest in the proceeds massachusetts had earned from the sale of',
12160:'excess property acquired with federal highway trust funds. the comptroller general determined that the 1998 statute did not remove the',
12161:'federal character of the federal interest in the real property that was sold. in contrast to income earned on grant',
12162:'advances, program income other than proceeds from real property sales does not automatically acquire a federal character and is not',
12163:'required to be deposited in the treasury as miscellaneous receipts. it may, unless the grant provides otherwise, be retained by',
12164:'the grantee for grantrelated use. 44 comp. gen. 87 1964; 41 comp. gen. 653 1962; b192459, july 1, 1980; b191420,',
12165:'aug. 24, 1978. in 44 comp. gen. 87, the comptroller general concluded that a grantee could establish a revolving fund',
12166:'with grant income in the absence of a contrary provision in the grant agreement. however, the initial amount of a',
12167:'revolving fund established from either the principal of a grant or the income generated under the grant, when returned to',
12168:'the grantor agency upon completion of the grant, may not be considered a return of grant funds for further use',
12169:'by the grantor but must be deposited in the treasury as miscellaneous receipts. b154996, nov. 5, 1969. under the common',
12170:'rules, there are three generally recognized methods for the treatment of program income: deduction. deduct program income from total allowable',
12171:'costs to determine net costs on which grantor and grantee shares will be based. this approach results in savings to',
12172:'the federal government because the income is used to reduce contributions rather than to increase program size. 79 pub. l.',
12173:'no. 105178, § 1303, 112 stat. 107, 227 june 9, 1998. page 1090 gao06382sp appropriations law—vol. ii chapter 10 federal',
12174:'assistance: grants and cooperative agreements addition. add income to the funds committed to the project, to be used for program',
12175:'purposes. this approach increases program size. costsharing or matching. use income to finance any applicable nonfederal matching requirements. under this',
12176:'approach, the federal contribution and program size remain the same. see, e.g., 7 c.f.r. §§ 3016.25g, 3019.24b. although the common',
12177:'rules provide for three alternative treatments of program income, the deduction method is the default rule with the methods or',
12178:'a combination of them being used only if specified by the applicable federal agency regulations or grant agreement. see, e.g.,',
12179:'7 c.f.r. § 3016.25g. the rule further provides: “in specifying alternatives, the federal agency may distinguish between income earned by',
12180:'the grantee and income earned by subgrantees and between the sources, kinds, or amounts of income. when federal agencies authorize',
12181:'the alternatives in paragraphs g2 and 3 of this section, program income in excess of any limits stipulated shall also',
12182:'be deducted from outlays.” id. the common rules provide that the deduction method is the default rule for program income',
12183:'earned by state and local government grantees as described above. the common rules likewise make deduction the default in the',
12184:'treatment of program income for most other grantees, the exception being research grants for which addition is the default. see,',
12185:'e.g., 7 c.f.r. §§ 3019.24b–d; 2 c.f.r. §§ 215.24b–d. an illustration of the application of the deduction method can be',
12186:'found in pennsylvania department of public services v. health & human services, 80 f.3d 796 3rd cir. 1996, which involved',
12187:'revenue the state earned from a fee charged for filing a child support case in the state. the court held',
12188:'that the fee revenue was program income, which the state had to deduct from the total allowable program costs in',
12189:'order to determine the net costs on which the federal and state shares were to be based. some types of',
12190:'program income are subject to special rules: page 1091 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative',
12191:'agreements proceeds from the sale of real and personal property provided by the federal government or purchased in whole or',
12192:'in part with federal funds. special rules are set forth in the common rules. see, e.g., 7 c.f.r. §§ 3016.25f,',
12193:'3016.31, 3016.32, 3019.24g, 3019.32, 3019.34. see also b290744, sept. 13, 2002. royalties received as a result of copyrights or patents',
12194:'produced under a grant. a special rule states that this income may be treated as other program income if specified',
12195:'in applicable agency regulations or the grant agreement. see 7 c.f.r. §§ 3016.25e, 3019.24h. see also b186284, june 23, 1977;',
12196:'gao, administration of the science education project “man: a course of study” macos, mwd7626 washington, d.c.: oct. 14, 1975. 4.',
12197:'costsharing federal grant funds constitute a significant portion of the total expenditures of state and local governments. in fiscal year',
12198:'2004, federal grants made up 25 percent of the total expenditures of state and local governments. analytical perspectives, budget of',
12199:'the united states government for fiscal year 2006 feb. 7, 2005, at 131. when the federal government chooses to provide',
12200:'financial assistance to some activity, it may also choose to fund the entire cost, but it is not required to',
12201:'do so. city of new york v. richardson, 473 f.2d 923, 928 2nd cir., cert. denied sub nom., 412 u.s.',
12202:'950 1973. “[t]he judgment whether to [provide assistance], and to what degree, rests with [congress].” id. thus, a program statute',
12203:'may provide for full funding, or it may provide for “costsharing,” that is, financing by a mix of federal and',
12204:'nonfederal funds. reasons for costsharing range from budgetary considerations to a desire to stimulate increased activity on the part of',
12205:'the recipient. the two primary costsharing devices are “matching share” provisions and “maintenance of effort” provisions. for a detailed analysis',
12206:'and critique of both devices, see gao, federal grants: design improvements could help federal resources go further, gao/aimd977 washington, d.c.:',
12207:'dec. 18, 1996. see also gao, block grants: issues in designing accountability provisions, gao/aimd95226 washington, d.c.: sept. 1, 1995. page',
12208:'1092 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements a. local or matching share 1 general',
12209:'principles a matching share provision is one under which the grantee is required to contribute a portion of the total',
12210:'project cost. the “match” may be 5050, or any other mix specified in the governing legislation. a matching share provision',
12211:'typically prescribes the percentages of required federal and nonfederal shares. however, the legislation need not provide explicitly for a nonfederal',
12212:'share. a statute authorizing assistance not in excess of a specified percentage of project costs will normally be interpreted as',
12213:'requiring a local share of nonfederal funds to make up the difference. the rest of the money has to come',
12214:'from someplace. as discussed in more detail in section e.5.a of this chapter, a grantee generally may not use funds',
12215:'received under one federal grant program to meet its nonfederal share under another federal grant program. see b270654, may 6,',
12216:'1996 private nonprofit corporation could not use general support funds it received from the state department as the nonfederal match',
12217:'for other federal grants it received from the agency for international development and the united states information agency; b214278, jan.',
12218:'25, 1985 funds from the farmers home administration’s water and waste disposal development grant program could not be used to',
12219:'satisfy the nonfederal match requirement of the environmental protection agency’s treatment works construction grant program. congress can, of course, enact',
12220:'a statutory exception that expressly permits this method of funding the nonfederal share. see, e.g., b239907, july 10, 1991 community',
12221:'development block grants cdbg can constitute the nonfederal share because one of the statutorily authorized activities for cdbg funds is',
12222:'providing the nonfederal share for other federal grant programs that are listed in the community’s annual cdbg application document. when',
12223:'a federal agency enters into an assistance agreement with an eligible recipient, an entire project or program is approved. where',
12224:'a local share is required, this agreement includes an estimate of the total costs, that is, a total that will',
12225:'exceed the amount to be borne by the federal government. the additional contribution that is needed to supply full support',
12226:'for the anticipated costs is the local, or nonfederal, matching share. once the agreement is accepted, the assistance recipient is',
12227:'committed to providing the nonfederal share if it wishes to continue with the grant. e.g., b130515, july 20, 1973. failure',
12228:'to meet this commitment may result in the disallowance of all or part of otherwise allowable federal share costs. page',
12229:'1093 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements matching share requirements are often intended to',
12230:'“assure local interest and involvement through financial participation.” 59 comp. gen. 668, 669 1980. such requirements may also serve to',
12231:'hold down federal costs. the theory behind the typical matching share requirement may be summarized as follows: “in theory, the',
12232:'fiscal lure of federal grants entices state and local governments into allocating new resources to satisfy the nonfederal match for',
12233:'programs they otherwise would not have funded on their own. while state and local jurisdictions may not be willing or',
12234:'able to fully fund a program from their own resources, they would most likely agree to spend new resources on',
12235:'the same project if most of the project costs were paid by the federal government.” gao, proposed changes in federal',
12236:'matching and maintenance of effort requirements for state and local governments, ggd817 washington, d.c.: dec. 23, 1980, at 9. this',
12237:'approach has been termed “cooperative federalism.” e.g., king v. smith, 392 u.s. 309, 316 1968. it is also known as',
12238:'the “federal carrot.” see city of new york v. richardson, 473 f.2d 923, 928 2nd cir., cert. denied sub nom.,',
12239:'412 u.s. 950 1973. matching requirements are most commonly found in the applicable program legislation. however, they may also be',
12240:'found in appropriation acts. e.g., 58 comp. gen. 524 1979; 31 comp. gen. 459 1952. a matching provision in an',
12241:'appropriation act, like any other provision in an appropriation act, will apply only to the fiscal years covered by the',
12242:'act or the appropriation to which it applies, unless otherwise specified. 58 comp. gen. at 527. if a program statute',
12243:'authorizes grants but neither provides for nor prohibits costsharing, the grantor agency may in some cases be able to impose',
12244:'a matching requirement administratively by regulation. the test is the underlying congressional intent. if legislative history indicates an intent for',
12245:'full federal funding, then the statute will generally be construed as requiring a 100 percent federal share. b226572, june 25,',
12246:'1987; b169491, june 16, 1980. however, costsharing regulations have been regarded as valid when the statute was silent and it',
12247:'could reasonably be concluded that congress left the matter to the judgment of the administering agency. b130515, july 17, 1974;',
12248:'b130515, july 20, 1973. such regulations may be waived uniformly and prospectively, but may not be waived on a retroactive',
12249:'and ad hoc basis. id. page 1094 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements matching',
12250:'funds, as with the federal assistance funds themselves, can be used only for authorized grant purposes. b230735, july 20, 1988;',
12251:'b149441, feb. 17, 1987. in the latter case, the comptroller general concluded that the national endowment for the humanities neh',
12252:'could not divert state matching funds to establish private endowments that, under existing authorities, could not have been created by',
12253:'a direct award of neh funds. see also 42 comp. gen. 289, 295 1962. also, unless otherwise specified in the',
12254:'governing legislation, a grantee may match only a portion of the funds potentially available to it, and thereby receive a',
12255:'correspondingly smaller grant. 16 comp. gen. 512 1936. under a costsharing assistance program funded by advance payments of the federal',
12256:'contribution, the comptroller general has held that the advances may be made prior to the disbursement of the nonfederal share',
12257:'as long as adequate assurances exist e.g., by contractual commitments that the local share will be forthcoming. 60 comp. gen.',
12258:'208 1981. see also 23 comp. gen. 652 1944 payment by federal agency of local share under cooperative agreement, subject',
12259:'to contractual agreement to reimburse. where the statute authorizing federal assistance specifies the federal share of an approved program as',
12260:'a specific percentage of the total cost, the grantor agency is required to make awards to the extent specified and',
12261:'has no discretion to provide a lesser or greater amount. manatee county, florida v. train, 583 f.2d 179, 183 5th',
12262:'cir. 1978; 53 comp. gen. 547 1974; b197256, nov. 19, 1980. however, where the federal share is defined by statutory',
12263:'language that specifies a maximum federal contribution but no minimum, the agency can provide a lesser amount. 50 comp. gen.',
12264:'553 1971. although most costsharing programs are in terms of a fixed federal share, some programs may provide for a',
12265:'declining federal share. under a declining share program in the regional rail reorganization act, the comptroller general concluded that the',
12266:'federal share could be determined in the year the grant was made, notwithstanding the fact that the grantee would not',
12267:'actually incur the costs until the following fiscal year. b175155, july 29, 1977. another costsharing variation is the “aggregate match,”',
12268:'in which the nonfederal share is determined by cumulating the grantee’s contributions from prior time periods. an example is discussed',
12269:'in 58 comp. gen. 524 1979. page 1095 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements',
12270:'2 hard and soft matches the program statute may define or limit the types of assets that may be applied',
12271:'to the nonfederal share. a provision limiting the nonfederal share to cash contributions is called a “hard match.” in 31',
12272:'comp. gen. 459 1952, the matching share was described in the appropriation act that required it as an “amount available.”',
12273:'in the absence of legislative history to support a broader meaning, the comptroller general concluded that the matching share must',
12274:'be in the form of money and that the value of other nonmonetary contributions could not be considered. a more',
12275:'explicit “hard match” requirement is discussed in 52 comp. gen. 558 1973, in which the comptroller general concluded that the',
12276:'matching share, while it must be in the form of money, could include donated funds as well as grantee funds.',
12277:'while the program discussed in 52 comp. gen. 558 no longer exists, the case remains useful for this point and',
12278:'for the detailed review of legislative history illuminating the purpose and intent of the “hard match” provision. congress continues to',
12279:'include hard match requirements in laws providing for cost sharing with federal grants. for example, the transportation equity act for',
12280:'the 21st century established job access and reverse commute grants, which require that the grantee provide at least 50 percent',
12281:'of the funding for each project and that the nonfederal share— “i shall be provided in cash from sources other',
12282:'than revenues from providing mass transportation, but may include amounts received under a service agreement; and “ii may be derived',
12283:'from amounts appropriated to or made available to a department or agency of the federal government other than the department',
12284:'of transportation that are eligible to be expended for transportation.” pub. l. no. 105178, § 3037h, 112 stat. 107, 390',
12285:'june 9, 1998 emphasis added. the program legislation may expressly authorize the inclusion of assets other than cash in the',
12286:'nonfederal contribution. see 56 comp. gen. 645 1977. an example is found in the klamath river basin fishery resources restoration',
12287:'act, pub. l. no. 99552, 110 stat. 3080 oct. 27, 1986, codified at 16 u.s.c. §§ 460ss–460ss6, which requires that',
12288:'at least 50 percent of the cost of developing and implementing the program come from nonfederal page 1096 gao06382sp appropriations',
12289:'law—vol. ii chapter 10 federal assistance: grants and cooperative agreements sources but explicitly states that noncash assets may count toward',
12290:'the nonfederal share. that statute specifically states: “in addition to cash outlays, the secretary [of the department of interior] shall',
12291:'consider as financial contributions by a nonfederal source the value of in kind contributions and real and personal property provided',
12292:'by the source for purposes of implementing the program.” 16 u.s.c. § 460ss5b2. if, however, the legislation is silent with',
12293:'respect to the types of assets that may be counted, the statute will generally be construed as permitting an “inkind”',
12294:'or “soft” match, that is, the matching share may include the reasonable value of property or services as well as',
12295:'cash. 52 comp. gen. 558, 560 1973; b81321, nov. 19, 1948. the valuation of inkind contributions can get complicated. an',
12296:'example is 31 comp. gen. 672 1952 value of land could not include the cost or value of otherwise unallowable',
12297:'improvements to the land previously added by the grantee. current valuation standards for state and local governments are found in',
12298:'the common rule captioned “matching or cost sharing.” see, e.g., 7 c.f.r. § 3016.24. for institutions of higher education, hospitals,',
12299:'and other nonprofit organizations, such standards can be found in 7 c.f.r. § 3019.23, also captioned “cost sharing or matching.”',
12300:'3 matching one grant with funds from another as noted in the preceding section, an important and logical principle is',
12301:'that neither the federal nor the nonfederal share of a particular grant program may be used by a grantee to',
12302:'match funds provided under another federal grant program unless specifically authorized by law. in other words, a grantee may not',
12303:'1 use funds received under one federal grant as the matching share under a separate grant, nor may it 2',
12304:'use the same grantee dollars to meet two separate matching requirements. b270654, may 6, 1996; 56 comp. gen. 645 1977;',
12305:'47 comp. gen. 81 1967; 32 comp. gen. 561 1953; 32 comp. gen. 141 1952; b214278, jan. 25, 1985; b212177,',
12306:'may 10, 1984; b130515, july 20, 1973; b229004o.m., feb. 18, page 1097 gao06382sp appropriations law—vol. ii chapter 10 federal assistance:',
12307:'grants and cooperative agreements 1988; b162001o.m., aug. 17, 1967. see also the common rule at 7 c.f.r. § 3016.24b. a',
12308:'contrary rule would largely nullify the costsharing objective of stimulating new grantee expenditures.80 normally, exceptions to the rule are in',
12309:'the form of express statutory authority. a prominent example is section 105a9 of the housing and community development act of',
12310:'1974, as amended, 42 u.s.c. § 5305a9, which authorizes community development block grant funds to be used as the nonfederal',
12311:'share under any other grant undertaken as part of a community development program. see 59 comp. gen. 668 1980; 56',
12312:'comp. gen. 645 1977; b239907, july 10, 1991. the 1991 opinion concluded that community development block grant regulations no longer',
12313:'apply once the funds have been applied as a match under another grant program, at least where applying the regulations',
12314:'would substantially interfere with use of the funds under the receiving grant. see also 52 comp. gen. 558, 564 1973;',
12315:'32 comp. gen. 184 1952. in 59 comp. gen. 668, gao considered a conflict between two statutes, the housing and',
12316:'community development act, 42 u.s.c. §§ 5301–5321, which, as noted, permits federal grant funds to fill a nonfederal matching requirement,',
12317:'and the coastal zone management act of 1972, as amended, which provides for costsharing grants but expressly prohibits the use',
12318:'of federal funds received from other sources to pay a grantee’s matching share. 16 u.s.c. §§ 1454, 1455, and 1464c.',
12319:'finding that the statutory language could not be reconciled, and noting further that there was no helpful legislative history under',
12320:'either statute, the comptroller general concluded, as the most reasonable result consistent with the purposes of both statutes, that community',
12321:'development block grant funds were available to pay the nonfederal share of coastal zone management act grants for projects properly',
12322:'incorporated as part of a grantee’s community development program. see also b229004o.m., feb. 18, 1988, which essentially followed 59 comp.',
12323:'gen. 668 and concluded that community development block grant funds could be used for the matching share of certain grants',
12324:'under the stewart b. mckinney homeless assistance act, pub. l. no. 10077, 101 stat. 482 july 22, 1987. 80 by',
12325:'way of contrast, this general rule does not apply to federal loans. the reason is that loans, unlike grants, are',
12326:'expected to be repaid and the recipient is thus, at least ultimately, using its own funds. of course, the proposed',
12327:'use of the funds must be authorized under the loan program legislation. b207211o.m., july 9, 1982. see also b214278, jan.',
12328:'25, 1985. page 1098 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements a somewhat less explicit',
12329:'exception is discussed in 57 comp. gen. 710 1978, holding that funds distributed to states under title ii of the',
12330:'public works employment act of 1976, as amended, 42 u.s.c. §§ 6721–6736 called the “countercyclical revenue sharing program”, may be',
12331:'applied to the states’ matching share under the medicaid program. gao agreed with the treasury department that title ii payments',
12332:'amounted to “general budget support as opposed to categorical or block grants or contracts” 57 comp. gen. at 711, a',
12333:'form of revenue sharing, and thus should be construed in the context of the since repealed general revenue sharing program.',
12334:'general revenue sharing was characterized by a “no strings on local expenditures” policy, evidenced by the fact that a provision',
12335:'in the original legislation barring the use of funds as the nonfederal share in other federal programs had been repealed.',
12336:'stressing the strong analogy between title ii and general revenue sharing, the decision concluded that implicit in the “no strings”',
12337:'policy was the authority to apply title ii funds to a state’s matching share under medicaid. for a description of',
12338:'the former general revenue sharing program, see, for example, gao, federal assistance: temporary state fiscal relief, gao04736r washington, d.c.: may',
12339:'7, 2004 and federal grants: design improvements could help federal resources go further, gao/aimd977 washington, d.c.: dec. 18, 1996. it',
12340:'should also be noted that where any federal assistance funds are used as nonfederal matching funds for another grant, such',
12341:'use must be consistent with the grant under which they were originally awarded as well as the grant they are',
12342:'intended to implement. 59 comp. gen. 668; 57 comp. gen. at 715; b230735, july 20, 1988. funds received by a',
12343:'property owner from a federal agency as just compensation for property taken by eminent domain belong to the owner outright',
12344:'and do not constitute a “grant.” therefore, they may be used as the nonfederal share of a grant from another',
12345:'federal agency, even where the taking and the grant relate to the same project. b197256, nov. 19, 1980. 4 relocation',
12346:'allowances federally assisted programs which result in the displacement of individuals and business entities may, apart from eminent domain payments,',
12347:'result in the payment of relocation allowances under the uniform relocation assistance and real property acquisition policies act of 1970,',
12348:'as amended 42 u.s.c. §§ 4601–4655. under the statute, authorized relocation payments provided by a state incident to a federally',
12349:'assisted project which results in relocations are to be treated in the same manner as other project costs. page 1099',
12350:'gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements thus, under a program statute which provides for',
12351:'a 90 percent federal contribution, 90 percent of authorized relocation payments will be reimbursable as an allowable program cost. in',
12352:'other words, any applicable matching share requirement will apply equally to the relocation payments. b215646, aug. 7, 1984. 5 payments',
12353:'by other than grantor agency of course there is nothing wrong with grantees receiving funds from more than one federal',
12354:'source, including other federal grants for which they are eligible. if the grants are administered by different agencies, each agency',
12355:'is making payments under its own program. occasionally, an agency is asked to make payments not associated with any of',
12356:'its own assistance programs, to a grantee or grant beneficiary under some other agency’s program. the cases fall into two',
12357:'groups. the first situation involves services performed by an assistance beneficiary to an agency other than the grantor agency. under',
12358:'the college workstudy program, not to exceed 75, or 90 in certain cases, percent of the student’s salary is paid',
12359:'by the college under a department of education grant, with the remainder paid by the employer. 42 u.s.c. § 2753b5.',
12360:'the “employer” may be another federal agency. 46 comp. gen. 115 1966. in addition to the salary contribution, the employing',
12361:'agency may pay unreimbursed administrative costs such as social security taxes and compensation insurance. 50 comp. gen. 553 1971; 46',
12362:'comp. gen. 115. however, an agency may not, without statutory authority, participate in a workstudy program authorized by state law',
12363:'and not coordinated with the federal program. b159715, dec. 18, 1978. the authority to pay administrative costs under the workstudy',
12364:'program is based on the costsharing nature of that program. absent comparable costsharing provisions, there is no authority to pay',
12365:'administrative costs. 61 comp. gen. 242 1982 agency to which employee had been assigned under former comprehensive employment and training',
12366:'act lacked authority to reimburse grantee for retirement contributions. the second group of cases involves projects which benefit other federal',
12367:'facilities. under program legislation which does not give the grantor agency discretion to reduce the federal share, the grantor agency',
12368:'is not authorized to exclude from total cost a portion of an otherwise eligible project solely because that portion would',
12369:'provide service to another federal facility. 59 comp. gen. 1 1979. where the grantor agency has page 10100 gao06382sp appropriations',
12370:'law—vol. ii chapter 10 federal assistance: grants and cooperative agreements reduced its contribution because a portion of the project would',
12371:'serve another federal facility, the “benefited agency” normally would not be authorized to make up the shortfall without receiving additional',
12372:'consideration above and beyond the improved service it would have received anyway. b189395, apr. 27, 1978. however, if congress chooses',
12373:'to appropriate funds to the benefited agency to make up the shortfall, the benefited agency may make otherwise proper contributions',
12374:'without requiring additional legal consideration as long as its contribution, when added to the amount contributed by the grantor agency,',
12375:'does not exceed the statutorily specified federal share. 59 comp. gen. 1; b198450, oct. 2, 1980; b199534, b200086, oct. 2,',
12376:'1980. the illustration given in 59 comp. gen. 1 may help to clarify these principles. suppose the statutory federal share',
12377:'is 75 percent and the total project cost is $10 million. the federal share is 75 percent of $10 million,',
12378:'or $7.5 million. now suppose the grantor agency determines that 20 percent of the project will serve another federal facility.',
12379:'under 59 comp. gen. 1, it is improper for the grantor agency to reduce total cost by 20 percent i.e.,',
12380:'from $10 million to $8 million and to then contribute only 75 percent of the $8 million, for a federal',
12381:'share of $6 million. the correct federal share should have remained 75 percent of $10 million. suppose further that the',
12382:'grantor agency has made the reduction and congress appropriates money to the benefited agency to make up the shortfall. using',
12383:'the same hypothetical figures, the benefited agency may contribute $1.5 million 20 percent of the federal share of $7.5 million',
12384:'as the federal share of that portion of the project attributable to its use, without further legal consideration. however, as',
12385:'mentioned above, its contribution, when added to the contribution of the grantor agency, may not exceed the specified statutory share',
12386:'unless further legal consideration is received by the government. the decision at 59 comp. gen. 1 and the two october',
12387:'1980 decisions resulted from a disagreement between gao and the environmental protection agency over grant funding policy under the federal',
12388:'water pollution control act, commonly known as the clean water act, codified at 33 u.s.c. §§ 1251–1387. the act authorized',
12389:'epa to make 75 percent81 construction grants for wastewater treatment systems. epa construed the 81 subsequent legislation reduced the percentage',
12390:'of the federal share under this program. pub. l. no. 97117, § 7, 95 stat. 1623, 1625 dec. 29, 1981.',
12391:'see b207211o.m., july 9, 1982. page 10101 gao06382sp appropriations law—vol. ii b. maintenance of effort chapter 10 federal assistance: grants',
12392:'and cooperative agreements statute as permitting it to proportionately reduce its contribution to the extent a project benefits other federal',
12393:'facilities. as noted, gao concluded that epa lacked authority to reduce its contribution below 75 percent, and that the benefited',
12394:'agencies could not make up the shortfall. epa disagreed, and to resolve the funding impasse, congress, apparently as a temporary',
12395:'expedient, provided funds to certain agencies, specifically the army and the navy. however, congress did not provide funds for the',
12396:'air force to offset the reduced grants, and the issue arose again in b194912, aug. 24, 1981. the comptroller general',
12397:'reaffirmed gao’s position and concluded that, absent specific congressional approval, the appropriations of the air force were not available to',
12398:'make up for the reduced grant amounts. suppose the state of new euphoria spends around a million dollars a year',
12399:'for the control of noxious pests. after several years, the continued proliferation of noxious pests leads congress to conclude that',
12400:'the program is not going as well as everyone might like, and that federal financial assistance is in order. congress',
12401:'therefore enacts legislation and appropriates funds to provide annual pestcontrol grants of half a million dollars to each affected state.',
12402:'new euphoria applies for and receives its grant. like most other states, however, new euphoria is strapped for money and',
12403:'faced with various forms of taxpayer revolt. while the state government certainly believes that noxious pests merit control, it would,',
12404:'if it had free choice in the matter, rather use the money on what it regards as higher priority programs.',
12405:'the state uses the $500,000 federal grant for its pest control program; it has no choice because it has contractually',
12406:'committed itself with the federal government to do so as a condition of receiving the grant. however, it then takes',
12407:'$500,000 of its own money away from pest control and applies it to other programs. if the purpose of the',
12408:'federal grant legislation is simply to provide general financial support to new euphoria, that purpose has been accomplished and the',
12409:'state has clearly benefited. but if the federal purpose is to fund an increased level of pest control activity, the',
12410:'objective has just as clearly been frustrated. when congress wants to avoid this result, a device it commonly uses is',
12411:'the “maintenance of effort” requirement. under a maintenance of effort provision, the grantee is required, as a condition of eligibility',
12412:'for federal funding, to maintain its financial contribution to the program at not less than a stated percentage which may',
12413:'be 100 percent or less of its contribution for a prior time period, usually the previous fiscal year. the purpose',
12414:'of maintenance of effort is to ensure that the federal assistance page 10102 gao06382sp appropriations law—vol. ii chapter 10 federal',
12415:'assistance: grants and cooperative agreements results in an increased level of program activity, and that the grantee, as did new',
12416:'euphoria, does not simply replace grantee dollars with federal dollars. gao has observed that maintenance of effort, since it requires',
12417:'a specified level of grantee spending, “effectively serves as a matching requirement.” gao, proposed changes in federal matching and maintenance',
12418:'of effort requirements for state and local governments, gao/ggd817 washington, dc: dec. 23, 1980, at 2. gao has also observed',
12419:'that a grant for something the grantee is already spending its own money on is, without maintenance of effort, little',
12420:'more than another form of revenue sharing. “when federal grant money is used to substitute for ongoing or planned state',
12421:'and local expenditures, the ultimate effect of the federal program funds is to provide fiscal relief for recipient states and',
12422:'localities rather than to increase service levels in the program area. when fiscal substitution occurs, narrowpurpose categorical federal programs enacted',
12423:'to augment service levels are transformed, in effect, into broad purpose fiscal assistance like revenue sharing. maintenance of effort provisions,',
12424:'if effective, can prevent substitution and ensure that the federal grant is used by the grantee for the specific purpose',
12425:'intended by the congress.” gao/ggd817, at 48–49. see also gao, block grants: issues in designing accountability provisions, gao/aimd95226, washington, d.c.:',
12426:'sept. 1, 1995, at 17–18. one type of maintenance of effort requirement is illustrated by the following provision from the',
12427:'clean air act, 42 u.s.c. § 7405c1: “no [air pollution control] agency shall receive any grant under this section during',
12428:'any fiscal year when its expenditures of nonfederal funds for recurrent expenditures for air pollution control programs will be less',
12429:'than its expenditures were for such programs during the preceding fiscal year. . . .” a variation is found in',
12430:'20 u.s.c. § 7901, which is applicable to certain education grants. the basic requirement is in section 7901a: page 10103',
12431:'gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements “a local educational agency may receive funds under',
12432:'a covered program for any fiscal year only if the state educational agency finds that either the combined fiscal effort',
12433:'per student or the aggregate expenditures of the agency and the state with respect to the provision of free public',
12434:'education by the agency for the preceding fiscal year was not less than 90 percent of the combined fiscal effort',
12435:'or aggregate expenditures for the second preceding fiscal year.” maintenance of effort statutes will invariably provide fiscal sanctions if the',
12436:'grantee does not meet its commitment. sanction provisions are of two types. under one version, the grantee’s allocation of federal',
12437:'funds is reduced in the same proportion as its contribution fell below the required level. for example, 20 u.s.c. §',
12438:'7901b1 provides: “the state educational agency shall reduce the amount of the allocation of funds under a covered program in',
12439:'any fiscal year in the exact proportion by which a local educational agency fails to meet the requirement of subsection',
12440:'a of this section by falling below 90 percent of both the combined fiscal effort per student and aggregate expenditures',
12441:'using the measure most favorable to the local agency.” the second and more severe version is illustrated by the clean',
12442:'air act provision quoted above and discussed in b209872o.m., mar. 23, 1984, an internal gao memorandum. under this version, the',
12443:'grantee, falling short of its maintenance of effort commitment, loses all grant funds under the program for that fiscal year.',
12444:'gao has endorsed the enactment of legislation making proportionate reduction the standard rather than total withdrawal. gao/ggd817, at 71. some',
12445:'maintenance of effort statutes authorize the administering agency to waive the requirement for a specified time period if some natural',
12446:'disaster or other unforeseen event caused the funding shortfall. an illustration is 20 u.s.c. § 7901c: “the secretary may waive',
12447:'the requirements of this section if the secretary determines that a waiver would be equitable due to— page 10104 gao06382sp',
12448:'appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements 1exceptional or uncontrollable circumstances, such as a natural disaster;',
12449:'or 2a precipitous decline in the financial resources of the local educational agency.” if a grantee fails to meet its',
12450:'commitment and the noncompliance cannot be waived, any disbursement of federal funds in excess of the amount permitted by the',
12451:'program statute must generally be recovered. 51 comp. gen. 162 1971. failure to require repayment of such funds “would, in',
12452:'effect, constitute the giving away of united states funds without authority of law.” id. at 165.82 a variation of the',
12453:'maintenance of effort provision is the socalled “nonsupplant” provision, which requires that federal funds be used to supplement, and not',
12454:'supplant, nonfederal funds which would otherwise have been made available. nonsupplant is sometimes used in conjunction with maintenance of effort.',
12455:'for example, in addition to coverage under the maintenance of effort provision at 20 u.s.c. § 7901, quoted above, certain',
12456:'education grant programs are also covered under 20 u.s.c. § 6321b1: “a state educational agency or local educational agency shall',
12457:'use federal funds received under this part only to supplement the funds that would, in the absence of such federal',
12458:'funds, be made available from nonfederal sources for the education of pupils participating in programs assisted under this part, and',
12459:'not to supplant such funds.” gao has reported on the difficulty with monitoring and enforcing nonsupplant provisions. see gao, disadvantaged',
12460:'students: fiscal oversight of title i could be improved, gao03377 washington, d.c.: feb. 28, 2003; welfare reform: challenges in maintaining',
12461:'a federal state fiscal partnership, gao01828 washington, d.c.: aug. 10, 2001; 82 see chapter 10, section h for a general',
12462:'discussion of recovery of grantee indebtedness. page 10105 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements',
12463:'gao/ggd817, at 71.83 these reports noted that in flexible grant environments, a strong maintenance of effort provision may prove more',
12464:'useful than a traditional nonsupplant requirement. while a nonsupplant provision might limit the intended breadth of a block grant by',
12465:'locking states into a preestablished funding priorities, a strong maintenance of effort provision might both limit substituting federal funds for',
12466:'state and local funds while providing greater state discretion. gao03377, at 25; gao01828, at 47. f. obligation of appropriations for',
12467:'grants 1. requirement for obligation as with any other type of expenditure, the expenditure of federal assistance program funds requires',
12468:'an obligation that is proper in terms of purpose, time, and amount, and the obligation must be properly recorded.84 with',
12469:'respect to recording of the obligation in the grant or subsidy context, 31 u.s.c. § 1501a5 requires that the obligation',
12470:'be supported by documentary evidence of a grant payable— “a from appropriations made for payment of, or contributions to, amounts',
12471:'required to be paid in specific amounts fixed by law or under formulas prescribed by law; 83 the 1980 report',
12472:'also noted: “most federal program officials we contacted agreed that nonsupplant is difficult, if not impossible, to enforce because it',
12473:'calls for an external judgment on what grantees would have done if federal funds were not available. basically, this calls',
12474:'for a federal agency to assess the motives behind particular changes in state and local plans or budgets and to',
12475:'judge whether the presence of federal grant funds drove the particular state or local action.” gao/ggd817, at 54. 84 the',
12476:'purpose, time, and amount requirements are essentially the same for grants as for other expenditures. what constitutes an obligation in',
12477:'the grant context, and what will or will not satisfy 31 u.s.c. § 1501a5, are discussed in more detail in',
12478:'section c.2 of this chapter and in chapter 7, section b.5. page 10106 gao06382sp appropriations law—vol. ii chapter 10 federal',
12479:'assistance: grants and cooperative agreements “b under an agreement authorized by law; or “c under plans approved consistent with and',
12480:'authorized by law.” briefly stated, the “obligational event” for a grant generally occurs at the time of grant award. therefore,',
12481:'this is when the grantor agency must record an obligation under 31 u.s.c. § 1501a5, not when the grantee draws',
12482:'down the funds or when the grantee incurs its own obligations. see b300480, apr. 9, 2003, aff’d, b300480.2, june 6,',
12483:'2003. 2. changes in grants changes in grants may come about for a variety of reasons: the original grantee may',
12484:'be unable to perform, the grant amount may be increased, there may be a redefinition of objectives, etc. if the',
12485:'change occurs in the same fiscal year or longer period if a multiple year appropriation is involved in which the',
12486:'original grant was made, there is no obligation problem as long as the amount of the appropriation available for obligation',
12487:'is not exceeded. if, however, the change occurs in a later fiscal year, the question becomes whether the amended grant',
12488:'remains chargeable to the appropriation initially obligated or whether it constitutes a new obligation chargeable to appropriations current at the',
12489:'time the change is made. as pointed out in 58 comp. gen. 676, 680 1979, the cases have identified three',
12490:'closely related areas of concern that must be satisfied before a change may be viewed as a socalled “replacement grant,”',
12491:'that is, not as creating a new obligation that must be charged to the current appropriation: the bona fide need',
12492:'for the grant project must continue; the purpose of the grant from the government’s standpoint must remain the same; and',
12493:'the revised grant must have the same scope. the “scope” of a grant, as stated in 58 comp. gen. at',
12494:'681— “grows out of the grant purposes. these purposes must be referred to in order to identify those aspects of',
12495:'a grant that make up the substantial and material features of a particular page 10107 gao06382sp appropriations law—vol. ii chapter',
12496:'10 federal assistance: grants and cooperative agreements grant which in turn fix the scope of the government’s obligation.” as a',
12497:'general proposition, a grant amendment which changes the scope of the grant or which makes the award to an entirely',
12498:'different grantee not a successor to the original grantee, and which is executed after the appropriation under which the original',
12499:'grant was made has ceased to be available for obligation, may not be charged to the original appropriation. 58 comp.',
12500:'gen. 676 1979. if the amendment amounts to a substitute grant, it extinguishes the old obligation and creates a new',
12501:'one. id. at 678. the new obligation is chargeable to the appropriation available at the time the new obligation is',
12502:'created. id. there are also situations where a grant amendment creates a new obligation chargeable to the later appropriation without',
12503:'extinguishing the original obligation. id. in either event, if the grantor agency does not recognize that the change creates a',
12504:'new obligation when the change is made, there is a potential antideficiency act violation. on the other hand, a change',
12505:'which qualifies as a “replacement grant” remains chargeable to the original appropriation. 57 comp. gen. 205, 208–09 1978. of course,',
12506:'an agency with the requisite program authority can change the scope of a grant if current appropriations are used. 60',
12507:'comp. gen. 540, 543 1981. the clearest example of a change that creates a new obligation is where the amount',
12508:'of the award is increased. if the grantee has no legal right stemming from the original grant agreement to compel',
12509:'execution of the amendment, the increase in amount is a new obligation chargeable to appropriations current when the change is',
12510:'made. 41 comp. gen. 134 1961; 39 comp. gen. 296 1959; 37 comp. gen. 861 1958. however, an upward adjustment',
12511:'in a “provisional indirect cost rate” contained in a grant award, which contemplated a possible increase in the indirect cost',
12512:'rate at a later date, does not constitute an additional or new award. 48 comp. gen. 186 1968. payments resulting',
12513:'from such an adjustment are chargeable to the appropriation originally obligated by the grant. id. similarly, the increase in a',
12514:'grant award to cover the cost of audits that were required under the original grant agreement was within the scope',
12515:'of the grant awards. 72 comp. gen. 175 1993. payments necessary to cover the audit costs can be made out',
12516:'of the expired appropriations that were originally obligated for the grants. id. as a general rule, when a recipient of',
12517:'a grant is unable to implement the grant as originally contemplated, and an alternative grantee is designated subsequent to the',
12518:'expiration of the period of availability for obligation of page 10108 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants',
12519:'and cooperative agreements the grant funds, the award to the alternative grantee must be treated as a new obligation and',
12520:'is not properly chargeable to the appropriation current at the time the original grant was made. b1640315, june 25, 1976;',
12521:'b114876, a44014, jan. 21, 1960. however, it is possible in certain situations to make an award to an alternative grantee',
12522:'after expiration of the period of availability for obligation where the alternative award amounts to a “replacement grant” and is',
12523:'substantially identical in scope and purpose to the original grant. 57 comp. gen. 205 1978; b157179, sept. 30, 1970. in',
12524:'the latter decision, the comptroller general did not object to the use of unexpended grant funds originally awarded to the',
12525:'university of wisconsin to engage northwestern university in a new fiscal year to complete the unfinished project. approval was granted',
12526:'because the project director had transferred from the university of wisconsin to northwestern university and he was viewed by all',
12527:'the parties as the only person capable of completing the work. the decision also noted that the original grant was',
12528:'made in response to a bona fide need then existing, and that the need for completing the project continued to',
12529:'exist.85 gao has also indicated that it might be possible in certain situations to develop procedures to designate an alternate',
12530:'grantee at the time an award is made to the principal grantee, provided that all of the criteria for selection',
12531:'of the principal and required administrative action are also met concerning the alternate, with the sole exception that the award',
12532:'to the alternate is not mailed to it pending a determination as to whether the principal actually complies with the',
12533:'terms of the award. the validity of any such procedure would have to be assessed on a casebycase basis. b114876,',
12534:'july 29, 1960; b114876, mar. 15, 1960. a shift in the community to be served by the grant may constitute',
12535:'a new obligation depending on the circumstances. thus, in b1640315, june 25, 1976, the original grantee ran into financial difficulties',
12536:'and was unable to utilize a hospital modernization award under the hillburton program. the comptroller general found that a proposal',
12537:'to shift the award to another hospital would constitute a new undertaking rather than a replacement grant since the hospitals',
12538:'were over 100 miles apart and served essentially different communities. 85 see section c.2.b of this chapter for a discussion',
12539:'of the applicability of the bona fide needs rule to grants. page 10109 gao06382sp appropriations law—vol. ii chapter 10 federal',
12540:'assistance: grants and cooperative agreements an enlargement of the community to be served will not necessarily constitute a new obligation.',
12541:'the grant in 58 comp. gen. 676 1979 was to set up a demonstration community service volunteer program. the grant',
12542:'defined the number of participants deemed necessary to generate the desired test results. the geographic site for which the grant',
12543:'was awarded was expected to produce the necessary number of volunteers, but did not. it was held that the geographical',
12544:'area could be expanded to produce the desired number of volunteers. the modification in these circumstances would not constitute a',
12545:'new and separate undertaking and could be funded from the appropriation originally obligated. a change in the research objectives of',
12546:'a grant will constitute a new obligation notwithstanding that some aspects of the original grant and the modification may be',
12547:'related. 57 comp. gen. 459 1978. see also 39 comp. gen. 296 1959. a 1969 decision involved amendments by the',
12548:'national institute of mental health which would change the use of grant funds from construction to renovation and viceversa beyond',
12549:'the period of obligational availability. since the amendments met the statutory eligibility criteria, since they would still accomplish the original',
12550:'grant objectives, and since they involved neither a change in grantees nor an increase in amount, they were held permissible',
12551:'under the original obligations. b74254, sept. 3, 1969. page 10110 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and',
12552:'cooperative agreements g. grant costs 1. allowable versus unallowable costs a. the concept of allowable costs recipients of assistance awards',
12553:'are expected to use the assistance funds for the purposes for which they were awarded, subject to any conditions that',
12554:'may attach to the award. expenditures or costs that meet the grant purposes and conditions are termed “allowable costs.” an',
12555:'expenditure which is not for grant purposes or is contrary to a condition of the grant is not an allowable',
12556:'cost and may not be properly charged to the grant. allowable costs are determined on the basis of the relevant',
12557:'program legislation, regulations, including omb circulars and the common rules, and the terms of the grant agreement. first and foremost,',
12558:'of course, is the program statute. thus, where the legislation and legislative history of a program clearly limited the purposes',
12559:'for which grant funds could be used, grantees could not use grant funds for nonspecified purposes, including one for which',
12560:'congress had provided funds under a separate appropriation. 35 comp. gen. 198 1955. in 55 comp. gen. 652 1976, however,',
12561:'a statute prohibiting certain costs was held to apply only to direct costs and, absent legislative history to the contrary,',
12562:'did not preclude use of standard indirect cost rates even though technically a percentage of the indirect cost rates could',
12563:'be attributed to the prohibited items. the role of agency regulations is illustrated by california v. united states, 547 f.2d',
12564:'1388 9th cir., cert. denied, 434 u.s. 824 1977. under the federalaid highway act, 23 u.s.c. § 120, the united',
12565:'states pays 90 percent of the “total cost” of certain highway construction, with “cost” being defined to include the cost',
12566:'of rightofway acquisition. the federal highway administration had issued a policy memorandum stating that program funds would not be used',
12567:'to pay interest on any portion of a condemnation award or settlement for more than 30 days after the money',
12568:'is deposited with the court. california challenged the restriction. the court said: “certainly, congress must have intended that the statutory',
12569:'obligation to pay 90 percent of the total cost must include some corresponding right to impose reasonable limitations page 10111',
12570:'gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements upon such costs, rather than to leave the',
12571:'federal treasury at the mercy of unfettered discretion by the state as to what expenditures may be made and charged',
12572:'accordingly.” id. at 1390. the court saw no need to decide whether the policy memorandum rose to the level of',
12573:'a “regulation.” either way, it was a reasonable exercise of the agency’s authority to administer the program. see also louisiana',
12574:'department of highways v. united states, 604 f.2d 1339 ct. cl. 1979 federal highway administration regulation disallowing costs of grantee',
12575:'settlements of worthless claims. several gao decisions illustrate the significance of the grant agreement. for example, where a grant application',
12576:'specified that certain costs would be incurred and the program legislation was ambiguous as to whether those costs should be',
12577:'allowed, the grantor agency was held bound by the grant agreement, that is, by its acceptance of the application. b118638.101,',
12578:'oct. 29, 1979. as discussed previously, the office of management and budget omb prescribes guidance on federal assistance cost principles.',
12579:'this guidance is found in a series of omb circulars: no. a21, cost principles for educational institutions may 10, 2004;',
12580:'no. a87, cost principles for state, local, and indian tribal governments may 10, 2004; and no. a122, cost principles for',
12581:'nonprofit organizations may 10, 2004. these circulars are incorporated in the common rules issued by the individual grantor agencies. the',
12582:'department of agriculture common rules, for example, reference the omb cost principles at 7 c.f.r. § 3016.22b 2005.86 as explained',
12583:'in omb circular no. a87, attachment a general principles for determining allowable costs, allowable costs are of two types, direct',
12584:'and indirect.87 direct costs are items that are specifically identifiable and 86 see section c.3.b of this chapter for a',
12585:'discussion of the nature and evolution of the common rules. as in earlier sections, we will cite to the department',
12586:'of agriculture version of the common rules for ease of presentation. 87 section d of attachment a of the circular',
12587:'explains that there is no universal rule for classifying certain costs as either direct or indirect under every accounting system.',
12588:'“a cost may be direct with respect to some specific service or function, but indirect with respect to the federal',
12589:'award or other final cost objective.” id. § d.2. the most important requirement is to treat each cost item consistently',
12590:'in like circumstances as either direct or indirect. page 10112 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and',
12591:'cooperative agreements attributable to a particular final cost objective. id. § e.1. in other words, direct costs are obligations or',
12592:'expenditures of a recipient which can be tied to a particular award. for example, if a recipient purchases an item',
12593:'of equipment necessary to carry out a particular award, the purchase price is a direct cost under that award. id.',
12594:'§ e.2.c. indirect costs are costs incurred for common objectives which cannot be directly charged to any single cost objective.',
12595:'id. § f.1. a common example is depreciation. the concept of indirect costs is essentially an accounting device to permit',
12596:'the allocation of overhead in proportion to benefit. see b203681, sept. 27, 1982. the overallocation of indirect costs is unauthorized',
12597:'and therefore unallowable. the reason is that 31 u.s.c. § 1301a restricts the use of appropriated funds to the purposes',
12598:'for which they were appropriated, and payment of the overallocation would not serve the purposes of the appropriation. b203681, sept.',
12599:'27, 1982. a grantee may generally substitute other allowable costs for costs which have been disallowed, subject to any applicable',
12600:'cost ceiling. if additional funds become available as the result of a cost disallowance, those funds should be used to',
12601:'pay any “excess” allowable costs which could not be paid previously because of the ceiling. 68 comp. gen. 247, 248–49',
12602:'1989. the courts have also applied this concept in one form or another. in institute for technology development v. brown,',
12603:'63 f.3d 445, 450–52 5th cir. 1995, the court explicitly followed the gao approach and allowed costsubstitution. the court in',
12604:'new york v. riley, 53 f.3d 520 2nd cir. 1995, referred to a similar administrative practice by the department of',
12605:'education, which it called “equitable offset,” whereby the department could permit a grantee to substitute allowable costs for disallowed costs',
12606:'that could have been—but never were—charged to a grant. however, the court described this practice as embodying “concepts of equity,',
12607:'not entitlement as a matter of right.” id. at 522. in any event, its applicability was a moot point in',
12608:'this case since the grantee could not document any potential allowable costs to substitute for costs that had been disallowed.',
12609:'id. the familiar cost overrun is not the exclusive province of the government contractor. assistance recipients may also incur overruns.',
12610:'a claim resulting from an overrun under a cooperative agreement was denied in b206272.5, mar. 26, 1985, because, under the',
12611:'agreement, the agency was not obligated to fund overruns unless it chose to amend the agreement and, in its discretion,',
12612:'it had declined to do so. cf. b209649, dec. 23, 1983 labor benefits awarded by court to employees of grantee’s',
12613:'contractor could be page 10113 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements regarded as indirect',
12614:'costs under grant terms, as long as applicable ceiling on indirect costs was not exceeded. issues concerning allowable grant costs',
12615:'often involve technical disputes over accounting principles and practices that take place far from the public spotlight. however, a major',
12616:'and very public controversy arose in the early 1990s centering on questionable items that universities were claiming as indirect “overhead”',
12617:'costs under federal research grants. these problems are detailed in lynn mcguire, federal research grant funding at universities: legislative waves',
12618:'from auditors diving into overhead cost pools, 23 journal of college and university law 563 winter 1997. inquiries into alleged',
12619:'improper charges, which were spearheaded by the house committee on energy and commerce’s subcommittee on oversight and investigations, included a',
12620:'series of congressional hearings, gao reviews, audits by executive branch agencies, and a report on the abc television program 20/20.',
12621:'the allegations involved many of the nation’s leading academic institutions such as harvard medical school, stanford university, the university of',
12622:'california at berkeley, and the massachusetts institute of technology. alleged improper charges included depreciation for a 72foot yacht, a public',
12623:'relations trip to paris, a nile river cruise, a saint patrick’s day party, football tickets for potential university donors, and',
12624:'the purchase of an antique commode for the residence of a retired university chancellor. the problems resulted from what gao',
12625:'described as “breakdowns in several key areas of the system dealing with indirect costs.” gao, federally sponsored research: indirect costs',
12626:'charged by selected universities, gao/trced9220 washington, d.c.: jan. 29, 1992, at 9. in that testimony, gao identified the main areas',
12627:'of breakdown as follows: inadequate criteria in omb circular no. a21 for determining allowable costs and how to allocate them',
12628:'among university functions; inadequate university systems and controls to ensure that only allowable indirect costs were charged to the federal',
12629:'government; and page 10114 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements lax oversight on the',
12630:'part of cognizant federal agencies that were responsible for auditing particular universities.88 remedial actions at the federal level included major',
12631:'revisions to enhance the guidance contained in omb circular no. a21 and improved auditing procedures by the cognizant federal agencies.',
12632:'see mcguire, 23 j.c. & u.l. at 576–80. where a cost is not allowable, as far as the government is',
12633:'concerned, the recipient still has the funds. if the grant funds have already been paid over to the grantee and',
12634:'no allowable costs of an equal amount are subsequently incurred, the recipient is required to return the amount of the',
12635:'improper charge to the government. e.g., utah state board for vocational education v. united states, 287 f.2d 713 10th cir.',
12636:'1961. the united states “has a reversionary interest in the unencumbered balances of such grants, including any funds improperly applied.”',
12637:'42 comp. gen. 289, 294 1962. see also b198493, july 7, 1980. this requirement cannot be waived. b171019, june 3,',
12638:'1975. thus, the comptroller general has held that an agency cannot waive its statutory regulations to relieve a grantee of',
12639:'its liability for improper expenditures. b163922, feb. 10, 1978. similarly, an agency may not amend its regulations to relieve a',
12640:'grantee’s liability for expenditures for administrative costs in excess of a statutory limitation. b178564, july 19, 1977, aff’d, 57 comp.',
12641:'gen. 163 1977. the courts have endorsed the principle that the federal government has a reversionary interest in grant funds',
12642:'until they are properly applied and accounted for. citing buchanan v. alexander, 45 u.s. 4 how. 20 1846, one court',
12643:'observed that a federal agency “has a strong and surprisingly ancient claim for its right to require the repayment of',
12644:'all funds which cannot be proven to have been spent on legitimate, allowable costs.” city of new york v. sullivan,',
12645:'no. 91 civ. 2959 rws, s.d.n.y. jan. 4, 1993, slip op. at 11, rev’d on other grounds sub nom., 34',
12646:'f.3d 1161 2nd cir. 1994. the court elaborated on this point as follows: “since federal money belongs to the federal',
12647:'government until actually spent on allowable costs, the [agency’s] 88 two other gao products dealing with this subject are federal',
12648:'research: system for reimbursing universities’ indirect costs should be reevaluated, gao/rced92203 washington, d.c.: aug. 26, 1992, and federally sponsored research:',
12649:'indirect costs charged by stanford university, gao/trced9118 washington, d.c.: mar. 13, 1991. page 10115 gao06382sp appropriations law—vol. ii chapter 10',
12650:'federal assistance: grants and cooperative agreements decision—that the city must present source documentation which proves to [the agency’s] satisfaction that',
12651:'the money was drawn down to cover . . . [appropriate costs] or else return the money to the federal',
12652:'government—is not capricious or arbitrary.” city of new york v. sullivan, slip op. at 11. other recent decisions applying the',
12653:'reversionary interest concept in different contexts are in re universal security and protection service, inc., 223 b.r. 88, 91–92 bankr.',
12654:'e.d.la. 1998; in re alpha center, inc., 165 b.r. 881, 884 bankr. s.d. ill 1994; and department of housing and',
12655:'urban development v. k.capolino construction corp., no. 01 civ. 390 jgk, s.d.n.y. 2001, slip. op. at 4–6. while not directed',
12656:'specifically at the problems described above, congress enacted two laws during the 1990s to streamline, simplify, and thereby improve auditing',
12657:'and administration of federal assistance programs: the single audit act amendments of 1996, pub. l. no. 104156, 110 stat. 1396',
12658:'july 5, 1996, amending 31 u.s.c. §§ 7501–7507, and the federal financial assistance management improvement act of 1999, pub. l.',
12659:'no. 106107, 113 stat. 1486 nov. 20, 1999.89 gao has continued to review issues relating to the appropriateness of grant',
12660:'costs and the processes by which they are determined. examples include: grants management: epa actions taken against nonprofit grant recipients',
12661:'in 2002, gao04383r washington, d.c.: jan. 30, 2004; disadvantaged students: fiscal oversight of title i could be improved, gao03377 washington,',
12662:'d.c.: feb. 28, 2003; environmental protection: epa’s oversight of nonprofit grantees’ costs is limited, gao01366 washington, d.c.: apr. 6, 2001;',
12663:'federal research grants: compensation paid to graduate students at the university of california, gao/osi998 washington, d.c.: june 22, 1999; department',
12664:'of transportation: university research activities need greater oversight, gao/rced94175 washington, d.c.: may 13, 1994; and federal research: minor changes would',
12665:'further improve new nsf indirect cost guidance, gao/rced93140 washington, d.c.: june 3, 1993. 89 these statutes are discussed in section',
12666:'c of this chapter. public law 104156 was based in part on recommendations contained in gao, single audit: refinements can',
12667:'improve usefulness, gao/aimd94133 washington, d.c.: june 21, 1994. page 10116 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and',
12668:'cooperative agreements b. grant cost cases grant cost cases are extremely difficult to categorize because what is allowable under one',
12669:'assistance program may not be allowable under another. also, the cases frequently turn on complex accounting and factual issues that',
12670:'are unique to the particular case. accordingly, summaries of a number of cases are given below with little further attempt',
12671:'to generalize. however, it is first important to describe one recurring theme that runs through most of the cases and',
12672:'often appears to have a decisive effect on the outcome: the high degree of judicial deference accorded to agency findings',
12673:'of fact and interpretations of the applicable statutes and regulations. 1 scope of judicial review grant cost cases typically come',
12674:'to the courts in the form of appeals from an agency determination that often follows an administrative hearing by an',
12675:'agency appeals board.90 these court cases are generally governed by the judicial review provisions of the administrative procedure act apa,',
12676:'5 u.s.c. §§ 701–706. under the most relevant scope of review standards, an agency action will be sustained unless it',
12677:'is arbitrary, capricious, an abuse of discretion, not otherwise in accordance with law, procedurally flawed, or unsupported by substantial evidence.',
12678:'see 5 u.s.c. §§ 7062a, d, e. likewise, the courts will generally accord considerable deference to the agency’s interpretation of',
12679:'the applicable statutes and regulations, although the precise extent of deference varies.91 one recent grant cost case described the standards',
12680:'of review as follows: “under the apa, we may set aside agency action only if it was arbitrary, capricious, an',
12681:'abuse of discretion, or otherwise not in accordance with law. the standard is a narrow one, and the reviewing court',
12682:'may not substitute its judgment for that of the agency. however, the agency must articulate a rational connection between the',
12683:'facts found and the conclusions made. also, we must give substantial 90 for example, a number of the court cases',
12684:'discussed below are appeals from decisions of the department of health and human services departmental appeals board dab. according to',
12685:'the dab’s web site, it hears disputes that may involve as much as $1 billion in grant funds annually. see',
12686:'www.hhs.gov/dab/background.html last visited september 15, 2005. 91 see chapter 3, section b, for a general discussion of the extent of',
12687:'judicial deference to agency interpretations. page 10117 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements deference',
12688:'to an agency’s interpretation of its own regulations.” public utility district no. 1 of snohomish county, washington v. federal emergency',
12689:'management agency, 371 f.3d 701, 706 9th cir. 2004 citations and internal quotation marks omitted. concerning the deference due agency',
12690:'regulatory interpretations, the court in public utility district no. 1 cited thomas jefferson university v. shalala, 512 u.s. 504 1994.',
12691:'in thomas jefferson university, the supreme court sustained the agency’s interpretation of a regulation dealing with the reimbursement of costs',
12692:'under the medicare program, applying the following standards: “the apa . . . commands reviewing courts to hold unlawful and',
12693:'set aside agency action that is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 5',
12694:'u.s.c. § 7062a. we must give substantial deference to an agency’s interpretation of its own regulations. our task is not',
12695:'to decide which among several competing interpretations best serves the regulatory purpose. rather, the agency’s interpretation must be given controlling',
12696:'weight unless it is plainly erroneous or inconsistent with the regulation. in other words, we must defer to the secretary’s',
12697:'interpretation unless an alternative reading is compelled by the regulation’s plain language or by other indications of the secretary’s intent',
12698:'at the time of the regulation’s promulgation.” 512 u.s. at 512 citations and internal quotation marks omitted. another grant cost',
12699:'case that also cited thomas jefferson university illustrates the decisive role that deference to agency interpretations can play. in alabama',
12700:'v. shalala, 124 f. supp. 2d 1250 m.d. ala. 2000, the court acknowledged that both the grantee and the federal',
12701:'agency presented reasonable interpretations of the applicable cost criteria, but concluded that the agency’s interpretation must take precedence since it',
12702:'was “reasonable and not arbitrary or capricious.” id. at 1259. of course, even an agency determination that might otherwise be',
12703:'within its discretion will be overturned if it is procedurally defective. for example, the court in arizona v. thompson, 281',
12704:'f.3d 248 d.c. cir. 2002, did not page 10118 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative',
12705:'agreements question the authority of the department of health and human services hhs to direct the allocation of common administrative',
12706:'costs among the multiple grant programs that they benefited, in accordance with a general principle in the thencurrent omb circular',
12707:'no. a87 aug. 27, 1997, at attachment a, § c.3.a. however, the court rejected the department’s directive because it rested',
12708:'on the faulty premise that the temporary assistance for needy families tanf program statute mandated this cost allocation method: “[the]',
12709:'determination was made in reliance on hhs’ mistaken belief that the statute gave it no choice in the matter. although',
12710:'nothing we have said necessarily precludes hhs, in the exercise of its discretion, from relying on the principles of circular',
12711:'a87 to determine the most appropriate cost allocation rule to apply to tanf, that is not the course the department',
12712:'followed in this case.” 281 f.3d at 259. see also nebraska department of health & human services v. united states',
12713:'department of health & human services, 340 f. supp. 2d 1 d.d.c. 2004 rejecting a similar cost allocation directive on',
12714:'the basis that it constituted a substantive rule issued without the noticeand comment rulemaking required by the administrative procedure act.',
12715:'2 court case examples with the scope of review considerations in mind, we turn to some specific case examples. under',
12716:'the cost principles omb circular no. a87, contributions to a reserve for selfinsurance are an allowable grant cost if certain',
12717:'conditions are met. however, alabama violated omb circular no. a87 by transferring the federal share of excess selfinsurance reserves from',
12718:'its state insurance fund to its general treasury fund to be used for purposes unrelated to the federal grants that',
12719:'supplied the insurance contributions. alabama v. shalala, 124 f. supp. 2d 1250 m.d. ala. 2000, affirming a decision of the',
12720:'department of health and human services departmental appeals board dab.92 the court rejected alabama’s argument that appropriate costs 92 the',
12721:'version of omb circular no. a87 applicable to the transfers at issue was dated january 28, 1981. alabama, 124 f.',
12722:'supp. 2d at 1253, fn.2. the selfinsurance reserve provision in that version was in attachment b, § c.4c. id. at',
12723:'1254. page 10119 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements were incurred, and the transaction',
12724:'was in effect complete once the grant funds were initially paid into the state insurance fund. instead, the court held',
12725:'that the insurance contributions retained their character as federal funds and remained subject to omb circular no. a87 until they',
12726:'were disbursed by the state insurance fund. id. at 1257–60.93 the court also rejected alabama’s argument that a subsequent amendment',
12727:'to circular no. a87 which specifically prohibited the transfer of the federal share of insurance contributions to other state funds',
12728:'demonstrated that such transfers were appropriate before the amendment. id. at 1257, fn. 9 “the amendments may have made more',
12729:'explicit requirements that had always existed under the cost principles and other sources of federal appropriations law”.94 in a case',
12730:'very similar to alabama v. shalala, the court in oklahoma ex rel. office of state finance v. united states, 292',
12731:'f.3d 1261 10th cir. 2002, cert. denied, 537 u.s. 1188 2003, affirmed the dab’s disallowance of a portion of federal',
12732:'contributions for the health benefits of state employees who administered federal programs. the disallowance was triggered by the state’s transfer',
12733:'of the funds from an insurance reserve fund to a general fund to be used for state educational expenditures rather',
12734:'than state employee health benefits. the court held that the amended version of omb circular no. a87 was dispositive and',
12735:'“singularly fatal” to the state’s appeal: “omb [circular no.] a87’s definition of ‘cost’ excludes ‘transfers to a general or similar',
12736:'fund.’ . . . federal monies forwarded to oklahoma’s clearing fund represent unrecoverable ‘transfers to a general or similar fund.’',
12737:'thus, there is no need to ascertain when federal money loses its federal nature, or even if the monies oklahoma',
12738:'is attempting to be reimbursed for are necessary and reasonable expenditures. the money diverted to the clearing fund fails to',
12739:'qualify as a reimbursable cost in the first instance.” 93 in this regard, the court relied on pennsylvania department of',
12740:'the budget v. united states department of health & human services, 996 f.2d 1505 3rd cir., cert. denied, 510 u.s.',
12741:'1010 1993, discussed previously in section e of this chapter. 94 the current version of omb circular no. a87 may',
12742:'10, 2004 retains this prohibition at attachment b, § 22.d5 “whenever funds are transferred from a selfinsurance reserve to other',
12743:'accounts e.g., general fund, refunds shall be made to the federal government for its share of funds transferred, including earned',
12744:'or imputed interest from the date of transfer.”. page 10120 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and',
12745:'cooperative agreements oklahoma, 292 f.3d at 1264. the federal emergency management agency fema acted reasonably in reducing a grantee’s fringe',
12746:'benefit overhead reimbursement for overtime labor from a uniform rate of 36 percent to about 10 percent, which approximated the',
12747:'actual overtime labor costs to the grantee. public utility district no. 1 of snohomish county, washington v. federal emergency management',
12748:'agency, 371 f.3d 701 9th cir. 2004. the grantee utility district argued that fema was attempting to “rewrite” the grant',
12749:'conditions by reducing the reimbursement rate based on a postaward audit by the agency’s inspector general since use of the',
12750:'36 percent flat rate constituted a common accounting practice that was not prohibited by the grant terms. the court rejected',
12751:'this argument, holding that the language in omb circular no. a87 making fringe benefits allowable costs “to the extent that',
12752:'the benefits are reasonable and are required by law” provided a basis for reducing the costs via a postaward audit:',
12753:'“we need not ponder whether the district’s use of a uniform fringe benefit overhead rate is a ‘proper’ or commonlyaccepted',
12754:'method of accounting for such expenses. this fact remains: the district has never challenged fema’s contention that the district’s actual',
12755:'fringe benefit expenses for overtime labor for work attributable to the 1995 and 1996 storms was about ten percent, as',
12756:'opposed to the thirtysix percent billed by the district. “the district’s use of the thirtysix percent rate resulted in a',
12757:'sizable windfall—in excess of $600,000—for the district. that this windfall may have resulted from the district’s use of an accepted',
12758:'accounting practice is of no consequence. . . . fema did not act in an arbitrary and capricious manner by',
12759:'challenging the district’s use of the thirtysix percent fringe benefit rate, where the use of the rate resulted in fema',
12760:'paying district expenses having nothing to do with the disasters for which federal relief was given.” public utility, 371 f.3d',
12761:'at 710. the court also sustained fema’s reduction of other costs reimbursed to the grantee based on the results of',
12762:'the inspector general audit, concluding that the disallowances were not arbitrary or capricious. id. at 711–13. page 10121 gao06382sp appropriations',
12763:'law—vol. ii chapter 10 federal assistance: grants and cooperative agreements the court affirmed a department of health and human services',
12764:'dab decision upholding the denial of reimbursement for interest costs incurred by the state in acquiring computer equipment to be',
12765:'used to administer several social service programs partly funded by federal grants. new york v. shalala, 959 f. supp. 614',
12766:'s.d.n.y. 1997, aff’d, 143 f.3d 119 2nd cir. 1998. again, the court held that the disallowances constituted a valid application',
12767:'of the cost principles embodied in omb circular no. a87 and, in turn, incorporated into department of health and human',
12768:'services regulations. among other things,95 the state argued that 1 the applicable statutes provided for reimbursement of “necessary” expenses, 2',
12769:'interest was a necessary expense, and 3 therefore, the circular’s exclusion of interest violated the statutes. however, the court held',
12770:'that, since the relevant statutes did not specifically address reimbursement of interest, the federal agencies had discretion to determine whether',
12771:'and to what extent interest constituted a “necessary” expense: “[the state’s] . . . interpretation . . . may be',
12772:'as reasonable as the secretary’s; however, this is not the standard the court applies in reviewing an agency’s construction of',
12773:'a statute. even where the state offers a reasonable alternative interpretation of a statute, the decision of where to ‘draw',
12774:'the line’ with respect to reimbursing costs is left to the discretion of the agency. hhs’s interpretation of the statutes',
12775:'need only be reasonable—it need not be the only reasonable interpretation.” new york, 959 f. supp. at 620–21 emphasis in',
12776:'original; citations omitted. the court in delta foundation, inc. v. united states, 303 f.3d 551 5th cir. 2002, affirmed a',
12777:'dab decision that sustained a series of cost disallowances arising from an inspector general audit of community 95 the state',
12778:'also argued, to no avail, that omb lacked authority to prescribe governmentwide cost principles and that the department of health',
12779:'and human services violated the notice and comment provisions of the administrative procedure act in incorporating the circular into its',
12780:'own regulations. on the former point, the court stated: “omb has been deemed ‘the president’s principal arm for the exercise',
12781:'of his managerial functions.’ . . . one such managerial function is to provide federal agencies with consistent, governmentwide policy',
12782:'guidance.” new york, 959 f. supp. at 618. on the latter point, it observed that the state was on notice',
12783:'of the circular’s provisions and failed to object to them for at least 20 years. id. at 619. page 10122',
12784:'gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements development block grants. the case is quite factspecific,',
12785:'but it illustrates the principles of deference to agency findings and interpretations discussed previously. it also demonstrates the importance of',
12786:'grantee compliance with recordkeeping and costdocumentation requirements. for example, the court observed with reference to certain disallowed costs: “as the',
12787:'board correctly noted, the circular [omb circular no. a122] requires that delta supply time records reflecting ‘the distribution of activity',
12788:'of each employee’ and ‘account for the total activity for which employees are compensated.’ . . . the board’s refusal',
12789:'to accept delta’s ‘good word’ in place of the required documentation is certainly not arbitrary and capricious.” delta foundation, 303',
12790:'f.3d at 570. but see institute for technology development v. brown, 63 f.3d 445, 454–58 5th cir. 1995 decision is',
12791:'somewhat unusual since the court rejected the agency’s determination that depreciation did not constitute an allowable cost under the applicable',
12792:'regulations and grant agreements, prompting a dissent criticizing the majority for not deferring to the agency on this point. in',
12793:'missouri department of social services v. united states department of education, 953 f.2d 372 8th cir. 1992, the court affirmed',
12794:'the agency’s right to recover excess salary costs paid to the grantee. the court agreed that the grantee did not',
12795:'maintain adequate accounting procedures and records to apportion its employees’ salaries between time relating to the federal grants and time',
12796:'spent on nongrant activities, as required by federal regulations. the court also upheld the agency’s determination that the grantee’s circumstances',
12797:'did not meet the requirements of a regulation excusing the repayment of unallowable costs in the presence of “mitigating circumstances.”',
12798:'id. at 376. board of trustees of public employees’ retirement fund of indiana v. sullivan, 936 f.2d 988 7th cir.',
12799:'1991, cert denied, 502 u.s. 1072 1992, affirmed a decision by the dab that the grantee was reimbursed excess payments',
12800:'for the retirement benefits of state employees who administered federal grant programs. an audit had determined that the state made',
12801:'retirement contributions on behalf of state employees administering federal grants that were greater than its contributions for state employees who',
12802:'performed only nonfederal activities and were wholly state funded. the court agreed that this violated the federal cost principle that,',
12803:'in order page 10123 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements to be allowable, a',
12804:'cost must be consistent with policies, regulations, and procedures that apply uniformly to both federally assisted and other activities of',
12805:'the grantee: “whatever the state actually pays to state workers is the benchmark for measuring the federal government’s share. indiana',
12806:'pays its public workers partly in cash and partly in promises. indiana is free to make that choice for itself',
12807:'but may not claim 100% in cash up front from the federal government if it is unwilling to put the',
12808:'retirement program for other state employees on an equivalently wellfunded basis.” sullivan, 936 f.2d at 992. litigation costs incurred by',
12809:'grantees in suing the united states were found unallowable under the nuclear waste policy act of 1982, 42 u.s.c. §§',
12810:'10101–10226. nevada v. herrington, 827 f.2d 1394 9th cir. 1987. 3 gao case examples gao has also had occasion over',
12811:'the years to consider grant cost issues. the following are examples of gao decisions discussing various grant programs. gao held',
12812:'that the asia foundation may not use its general support grant funds from the department of state to match other',
12813:'federal grants from the agency for international development and the united states information agency. generally, funds derived from other federal',
12814:'grants do not qualify as matching funds unless statutorily authorized. the asia foundation does not have specific statutory authority to',
12815:'use grant funds to match other federal grants. b270654, may 6, 1996. under applicable omb circulars, the cost of grant',
12816:'audits is an allowable cost. therefore, the national endowment for the humanities could provide grant funds to nonprofit institutions to',
12817:'cover such audit costs, and could increase a grant award to accommodate such costs where the initial award was inadequate',
12818:'for this purpose. 72 comp. gen. 175, 177 1993. recovery of antitrust damages by a state grantee stemming from a',
12819:'grantfinanced project serves to reduce the actual costs of the grantee and must be accounted for to the government. this',
12820:'is true even where the united page 10124 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements',
12821:'states has declined to participate in the cost of the antitrust action. 57 comp. gen. 577 1978. however, the united',
12822:'states is not entitled to share in treble damages. id. ; 47 comp. gen. 309 1967. outofpocket expenses incurred by',
12823:'the state in effecting the recovery should be shared by the federal government in the same proportion as the recovered',
12824:'damages. b162539, oct. 11, 1967. where a grantee paid a nondiscriminatory sales tax on otherwise proper expenditures with grant funds,',
12825:'the taxes are not taxes imposed on the united states and are allowable. 37 comp. gen. 85 1957. however, property',
12826:'taxes were held not allowable under a construction grant because they represent operating costs rather than construction costs. b166506, feb.',
12827:'14, 1973. the payment of expert witness fees was found unrelated to the purposes of a research grant. 42 comp.',
12828:'gen. 682 1963. construction of a bridge could not be paid for out of federal aid highway funds where the',
12829:'construction was necessitated by a flood control project and not as a highway project. 41 comp. gen. 606 1962. buses',
12830:'acquired by a city under a “mass transportation” grant could be used for charter service, an unauthorized grant purpose, where',
12831:'such use was merely incidental to the primary use of the buses for authorized mass transit purposes. b160204, dec. 7,',
12832:'1966. the salary of an individual hired to evaluate the upward bound program at a grantee college was disallowed as',
12833:'a grant cost, because the grant document contained no provision for such an expenditure and the applicable program guidelines specified',
12834:'that evaluation was not an allowable expense. b161980, nov. 23, 1971. the cost of a luncheon for top officials of',
12835:'the department of human resources, district of columbia government, was disallowed as an improper administrative expense under a social services',
12836:'program grant under title xx of the social security act, 42 u.s.c. § 1397a. b187150, oct. 14, 1976. ordinarily, increased',
12837:'project costs resulting from grantee negligence giving rise to justified claims for damages would not be allowable. however, a damage',
12838:'award was viewed as a recognizable cost element where the grantee’s error had contributed to an unrealistically low initial cost,',
12839:'but an page 10125 gao06382sp appropriations law—vol. ii c. note on accounting chapter 10 federal assistance: grants and cooperative agreements',
12840:'amendment to the grant was required before the increased costs could be allowed. 47 comp. gen. 756 1968. under a',
12841:'federal airport act act of may 13, 1946, ch. 251, 60 stat. 170 program providing for federal payment of a',
12842:'specified percentage of allowable project costs, the fair value of land and equipment donated to the grantee could be treated',
12843:'as an allowable cost because failure to do so would, in effect, penalize the grantee for the contributions of “public',
12844:'spirited citizens.” b81321, nov. 19, 1948. cost principles on which a grant award is conditioned are binding on the grantee.',
12845:'b203681, sept. 27, 1982. it is the grantee’s responsibility to maintain adequate fiscal records to support the allowable costs claimed.',
12846:'with respect to the common rules applicable to state and local governments, see generally 7 c.f.r. § 3016.20. section 452a',
12847:'of the general education provisions act, as amended, 20 u.s.c. § 1234aa, illustrates the importance of compliance with recordkeeping requirements.',
12848:'it provides that the secretary of education’s burden of establishing a prima facie case for recovery of misspent grant funds',
12849:'is satisfied where the grantee fails to maintain records required by law or fails to afford the secretary access to',
12850:'such records. as a number of the cases discussed above demonstrate, the courts tend to require strict adherence to grantee',
12851:'cost documentation and recordkeeping requirements. thus, the court observed in montgomery county v. united states department of labor, 757 f.2d',
12852:'1510, 1512–13 4th cir. 1985: “[t]he county contends that it is inequitable to equate its recordkeeping failure with a misspending',
12853:'of federal monies and to require it to repay virtually all of the funds expended by its subgrantee . .',
12854:'. in support of its contention, the county asserts that the purposes of ceta [the comprehensive employment and training act]',
12855:'were met by [the subgrantee’s] performance and cites corrective steps which the county has since taken. . . . we',
12856:'are unpersuaded. “record keeping is at the heart of the federal oversight and evaluation provisions of ceta and its implementing',
12857:'regulations. only by requiring documentation to support page 10126 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative',
12858:'agreements expenditures is the [department of labor] able to verify that billions of federal grant dollars are spent for the',
12859:'purposes intended by congress. unless the burden of producing the required documentation is placed on recipients, federal grantees would be',
12860:'free to spend funds in whatever way they wished and obtain virtual immunity from wrongdoing by failing to keep required',
12861:'records. neither ceta nor the regulations permit such anomalous results.” the above passage was quoted with approval in louisiana department',
12862:'of labor v. united states department of labor, 108 f.3d 614, 618 5th cir., cert. denied, 522 u.s. 823 1997.',
12863:'the court in this case reached a similar result, adding: “we conclude that the final decision of the secretary is',
12864:'based on substantial evidence, and that the state and the [grantee] and its subgrantees cavalierly disregarded the accounting requirements and',
12865:'procurement procedures specified by the jtpa [job training partnership act] and the accompanying regulations. federal grant recipients who are entrusted',
12866:'with public funds are bound to fulfill that public trust by discharging their duties in strict compliance with the requirements',
12867:'established by congress. accordingly, we emphasize that the procedural requirements of the jtpa are not merely hortatory ideals; they are',
12868:'obligatory duties. grant recipients who . . . fail to honor these procedural requirements, dishonor and disserve the public trust.”',
12869:'108 f.3d at 620. see also city of newark v. united states department of labor, 2 f.3d 31, 34–35 3rd',
12870:'cir. 1993, to the same effect. in one case, gao did concur in a proposal by a grantor agency to',
12871:'adopt a method of calculation that disallowed less than the entire amount of a grant where the grantee had maintained',
12872:'inadequate records. b186166, aug. 26, 1976. in this case, a university had received a series of federal research grants spanning',
12873:'a number of years. the university had no records to document its disposition of grant funds for periods prior to',
12874:'fiscal year 1974. audits of available university records for grant expenditures in fiscal years 1974 and 1975 disclosed certain unallowable',
12875:'costs. the gao decision held that the grantor agency had discretion to disallow the same proportion of page 10127 gao06382sp',
12876:'appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements funds for the years for which no documentation was',
12877:'available as were disallowed for the periods for which records existed. in a variety of cases involving the medicare and',
12878:'medicaid programs, courts have approved cost reimbursement disallowances on the basis of error rate statistical data, such as errors imputed',
12879:'from a quality control system. in georgia v. califano, 446 f. supp. 404, 409–10 n.d. ga. 1977, the court upheld',
12880:'the determination of overpayments under the medicaid program on the basis of statistical sampling, in view of the “practical impossibility”',
12881:'of individual claimbyclaim audit. the court also noted that, under the pertinent federal regulations, the state was given the opportunity',
12882:'to present evidence before the disallowance became final. see also ratanasen v. california department of health services, 11 f.3d 1467,',
12883:'1469–71 9th cir. 1993; chaves county home health service, inc. v. sullivan, 931 f.2d 914 d.c.cir. 1991, cert. denied, 502',
12884:'u.s. 1091 1992; webb v. shalala, 49 f. supp. 2d 1114, 1123 w.d. ark. 1999 and cases cited. likewise, random',
12885:'sampling has been sustained as an audit technique to identify improper expenditures of vocational rehabilitation grant funds. michigan department of',
12886:'education v. united states department of education, 875 f.2d 1196, 1205 6th cir. 1989 “audit of the thousands of cases',
12887:'comprising the universe of cases would be impossible. . . . [and] . . . a final determination is not',
12888:'made until the state has had an opportunity to present its own evidence of an error in the audit”. in',
12889:'maryland v. mathews, 415 f. supp. 1206 d.d.c. 1976, a case involving the then aid to families with dependent children',
12890:'program, the court held that an agency can establish by regulation a withholding of federal financial participation in a specified',
12891:'amount set by a tolerance level, as long as the tolerance level is reasonable and supported by an adequate factual',
12892:'basis. the regulation involved in the specific case, however, did not meet the test and was found to be arbitrary',
12893:'and therefore invalid. it also has been held that, if setting a tolerance level is discretionary, the agency can set',
12894:'it at zero. maryland department of human resources v. united states department of health & human services, 762 f.2d 406',
12895:'4th cir. 1985; california v. settle, 708 f.2d 1380 9th cir. 1983. see also united states v. texas, 507 u.s.',
12896:'529 1993, which involved statutory and regulatory provisions that required states to reimburse the federal government for a portion of',
12897:'the replacement costs of lost or stolen food stamps exceeding specified tolerance levels. the validity of these requirements was not',
12898:'contested in this case. page 10128 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements 2. preaward',
12899:'costs retroactive funding “retroactive funding” means the funding of costs incurred by a grantee before the grant was awarded. three',
12900:'separate situations arise: 1 costs incurred prior to award but after the program authority has been enacted and the appropriation',
12901:'became available; 2 costs incurred prior to award and after program authority was enacted but before the appropriation became available;',
12902:'and 3 costs incurred prior to both program authority and appropriation availability. situation 1: in this situation, the grantee seeks',
12903:'to charge costs incurred before the grant was awarded in some cases even before the grantee submitted its application but',
12904:'after both the program legislation and the implementing appropriation were enacted. there is no rule or policy that generally restricts',
12905:'allowable costs to those incurred after the award of a grant. however, agencies may adopt such a policy by regulation.',
12906:'b197699, june 3, 1980. thus, in a number of cases, grantrelated costs incurred prior to award, but after the program',
12907:'was authorized and appropriated funds were available for obligation, have been allowed where a there was no contrary indication in',
12908:'the language or legislative history of the program statute or the appropriation, ballowance was not prohibited by the regulations of',
12909:'the grantor agency, and c the agency determined that allowance would be in the best interest of carrying out the',
12910:'statutory purpose. 32 comp. gen. 141 1952; 31 comp. gen. 308 1952; b197699, june 3, 1980; b133001, mar. 9, 1979;',
12911:'b75414, may 7, 1948. the above criteria are not specified as such in any of the cases cited but are',
12912:'derived from viewing all of the cases as a whole. situation 2: in this situation, preaward costs are incurred after',
12913:'program legislation has been enacted, but before an appropriation becomes available. prior to the comptroller general’s decision in 56 comp.',
12914:'gen. 31 1976, a “general rule” was commonly stated to the effect that absent some indication of contrary intent, an',
12915:'appropriation could not be used to pay grant costs where the grantee’s obligation arose before the appropriation implementing the enabling',
12916:'legislation became available. 45 comp. gen. 515 1966; 40 comp. gen. 615 1961; 31 comp. gen. 308 1952; a71315, feb.',
12917:'28, 1936. in 56 comp. gen. 31, the comptroller general reviewed the earlier decisions and concluded that there was no',
12918:'legal requirement for a general rule prohibiting the use of grant funds to pay for costs incurred prior to the',
12919:'page 10129 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements availability of the applicable appropriation. rather,',
12920:'the determination should be made on a casebycase basis. thus, the decision announced: “we would prefer to base each decision',
12921:'from now on on the statutory language, legislative history, and particular factors operative in the particular case in question, rather',
12922:'than on a general rule.” id. at 35. in reviewing the earlier decisions, the comptroller general found that each had',
12923:'been correctly decided on its own facts. thus, retroactive funding was prohibited in 40 comp. gen. 615 1961, 31 comp.',
12924:'gen. 308 1952, and a71315, feb. 28, 1936. however, in each of those cases, there was some manifestation of an',
12925:'affirmative intent that funds be used only for costs incurred subsequent to the appropriation. for example, 31 comp. gen. 308',
12926:'concerned grants to states under the federal civil defense act.96 the committee reports and debates on a supplemental appropriation to',
12927:'fund the program contained strong indications that congress did not intend that the money be used to retroactively fund expenses',
12928:'incurred by states prior to the appropriation. by way of contrast, there were no such indications in the situation considered',
12929:'in 56 comp. gen. 31 matching funds provided to states under the land and water conservation fund act of 196597.',
12930:'accordingly, 56 comp. gen. 31 did not overrule the earlier decisions, but merely modified them to the extent that gao',
12931:'would no longer purport to apply a “general rule” in this area. in determining whether retroactive funding is authorized, relevant',
12932:'factors are evidence and clarity of congressional intent, the degree of discretion given the grantor agency, and the proximity in',
12933:'time of the cost being incurred to the grant award. as in situation 1, significant factors also include the agency’s',
12934:'own regulations and the agency’s determination that funding the particular costs in question will further the statutory purpose. accordingly, the',
12935:'authority will be easier to find where an agency has broad discretion and favorable legislative history. with this approach, retroactive',
12936:'funding authority may be found to exist as in 56 comp. gen. 31, or not to exist as in 40',
12937:'comp. gen. 615. 96 pub. l. no. 81920, 64 stat. 1245 jan. 12, 1951. 97 pub. l. no. 88578, 78',
12938:'stat. 897 sept. 3, 1964. page 10130 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements if',
12939:'an agency wishes to recognize retroactive funding in limited situations in its regulations, it must, in order to avoid potential',
12940:'antideficiency act problems, make it clear that no obligation on the part of the government can arise prior to the',
12941:'availability of an appropriation. of course, the grant itself cannot be made until the appropriation becomes available. 56 comp. gen.',
12942:'at 36. situation 3: in this situation, the grantee seeks to charge costs incurred not only before the appropriation became',
12943:'available, but also before the program authority was enacted. costs incurred prior to both the program authorization and the availability',
12944:'of the appropriation may generally not be funded retroactively. see 56 comp. gen. 31 1976; 32 comp. gen. 141 1952;',
12945:'b11393, july 25, 1940. gao recognizes that there may possibly be exceptions even to this rule 56 comp. gen. at',
12946:'35, but thus far there are no decisions identifying any. one final situation deserves mention. in each of the retroactive',
12947:'funding cases cited above, the grant was in fact subsequently awarded. in b206244, june 8, 1982, a state had applied',
12948:'for an interior department grant under the youth conservation corps act, 16 u.s.c. §§ 1701–1706 1976, and later withdrew its',
12949:'application due to funding uncertainties. the state then filed a claim for various expenses it had incurred in anticipation of',
12950:'the grant. gao held that payment would violate both the program legislation and the purpose statute, 31 u.s.c. § 1301a.',
12951:'interior’s appropriation was intended to accomplish grant purposes, but the state’s expenses did not accomplish any grant purposes since the',
12952:'grant was never made. page 10131 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements h. recovery',
12953:'of grantee indebtedness 1. government’s duty to recover this section is intended to summarize the application of “debt collection law”',
12954:'in the context of assistance programs, and to highlight a few issues in which the fact that a grant is',
12955:'involved may be of special relevance.98 claims in favor of the united states against an assistance recipient may arise for',
12956:'a variety of reasons. as a general proposition, it has been the view of both gao and the executive branch',
12957:'that the united states has not only a right but a duty to recover amounts owed to it, and that',
12958:'this duty exists without the need for specific statutory authority. this applies to assistance recipients just as it would apply',
12959:'to other debtors. the federal claims collection standards require each agency to “aggressively collect all debts arising out of activities',
12960:'of, or referred or transferred for collection services to, that agency.” 31 c.f.r. § 901.1a 2005.99 see, e.g., 7 c.f.r.',
12961:'§ 3016.52a the department of agriculture’s common rule on collection of amounts due: “any funds paid to a grantee in',
12962:'excess of the amount to which the grantee is finally determined to be entitled under the terms of the award',
12963:'constitute a debt to the federal government. if not paid within a reasonable period after demand, the federal agency may',
12964:'reduce the debt by: “1 making an administrative offset against other requests for reimbursements, 98 the general accounting office act',
12965:'of 1996, pub. l. no. 104316, 110 stat. 3826 oct. 19, 1996, transferred the comptroller general’s claims settlement authority, and',
12966:'related authorities, to the executive branch. thus, executive branch agencies are now primarily responsible for prescribing guidance on claims collection',
12967:'matters. see b303906, dec. 7, 2004, at 2. 99 as part of the transfer of claimsrelated functions referenced in the',
12968:'preceding footnote, the attorney general and the secretary of the treasury now prescribe the federal claims collection standards. see 31',
12969:'u.s.c. § 3711d2; 31 c.f.r. § 900.1a. page 10132 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative',
12970:'agreements “2 withholding advance payments otherwise due to the grantee, or “3 other action permitted by law.” for example, grant',
12971:'funds erroneously awarded to an ineligible grantee must be recovered by the agency responsible for the error, including expenditures the',
12972:'grantee incurred before receiving notice that the agency’s initial determination had been made in error. 51 comp. gen. 162 1971;',
12973:'b146285, b164031, apr. 19, 1972. the cited decisions recognize that there might be exceptional circumstances in which full recovery might',
12974:'not be required, but exceptions would have to be considered on an individual basis. see also 18 op. off. legal',
12975:'counsel 74, 76 1994 “in the . . . context of federal grants to state and local agencies, courts have',
12976:'stated that the federal government may use principles of restitution to recover monies that were granted for specific purposes and',
12977:'then used in contravention of those purposes, even in the absence of statutory authority expressly permitting such recovery.”. in a',
12978:'recent case, federal grant funds given by the u.s. department of labor to the new york workers’ compensation board to',
12979:'meet its expenses related to the september 11, 2001, terrorist attack on the world trade center were improperly transferred by',
12980:'the board to other new york state entities. b303927, june 7, 2005. despite the fact that both the department and',
12981:'the board contributed to the misunderstandings that resulted in the payments to the other entities, gao concluded that the department',
12982:'should seek recovery of the funds improperly transferred unless the secretary of labor seeks and obtains congressional ratification of the',
12983:'grant expenditures to date. id. at 10. similarly, where an agency misapportions formula grant funds so that some states receive',
12984:'excess funds, the excess must be recovered. if the misapportionment resulted in other states receiving less than their formula amount,',
12985:'the apportionments of all of the states involved must be appropriately adjusted. b275490, dec. 5, 1996, at fn. 10; 41',
12986:'comp. gen. 16 1961. courts have upheld the authority of federal agencies to seek recovery of assistance payments where the',
12987:'grantee has not used those payments for authorized purposes within a prescribed period or where the grantee has not accounted',
12988:'for the funds within a reasonable period of time. in mayor and city council of baltimore v. browner, 866 f.',
12989:'supp. 249 d. md. 1994, page 10133 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements the',
12990:'court rejected the city’s challenge to the environmental protection agency’s authority to impose cutoff dates for use of grant funds',
12991:'for construction of sewage treatment facilities: “the city argues that the imposition of cutoff dates is inappropriate absent specific authority',
12992:'in the clean water act, the regulations pertaining to the administration of grants, or the terms of the grant offer',
12993:'or acceptance forms. however the presence of project period start and finish dates on each grant award and the repeated',
12994:'references throughout the regulations to time limits and schedules for grantfunded projects anticipate such actions. . . . “although the',
12995:'establishment of cutoff dates is not explicitly provided for in the relevant regulations, they are obviously implied and required to',
12996:'lend force to the provisions regulating the timing of grantfunded projects. otherwise, the establishment of time limits would be a',
12997:'meaningless exercise for grantor and grantee. epa must have a method to attain reimbursement of funds already disbursed when a',
12998:'project exceeds its time limit. cutoff dates are simply the enforcement of the limits specifically provided for in the regulations',
12999:'in the context of grant funds disbursed proactively. the regulations in question are not ‘arbitrary, capricious, or manifestly contrary’ to',
13000:'[the clean water act] and a policy of imposing cutoff dates for grant funding is not invalid.” 866 f. supp.',
13001:'at 251–52 footnotes omitted. city of new york v. shalala, 34 f.3d 1161 2nd cir. 1994, concerned head start grant',
13002:'funds paid to the city and distributed by the city to its constituent agencies over a period of years but',
13003:'which the constituent agencies had not yet disbursed for valid program purposes. the department of health and human services eventually',
13004:'disallowed these accumulated balances. the departmental appeals board sustained the department’s disallowances. the head start statute did not specifically empower',
13005:'the department to disallow accumulated balances on the basis of their age and lack of documentation that the funds had',
13006:'been properly disbursed. city of new york, 34 f.3d at 1166–67. nevertheless, the court held that the department “acted reasonably',
13007:'in deciding that, after a certain period of time, the city was no longer entitled to postpone its accounting page',
13008:'10134 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements obligations.” id. at 1168. the court also',
13009:'rejected the city’s argument that the department could not apply a rule treating accounts receivable as bad debt once they',
13010:'became more than two years old. id. at 1170. where, under an assistance program, the government is authorized or required',
13011:'to recover funds for whatever reason, the federal claims collection act of 1966, as amended, 31 u.s.c. §§ 3711–3720e,100 and',
13012:'the joint treasury departmentjustice department implementing regulations federal claims collection standards, 31 c.f.r. parts 900–904 apply unless the program legislation',
13013:'under which the claim arises or some other statute provides otherwise. see 31 c.f.r. § 900.1a. indebtedness to the united',
13014:'states may also result from the misuse of grant funds. e.g., utah state board for vocational education v. united states,',
13015:'287 f.2d 713 10th cir. 1961; mass transit grants: noncompliance and misspent funds by two grantees in umta’s new york',
13016:'region, gao/rced9238 washington, d.c.: jan. 23, 1992. the cases usually arise when the grantor agency disallows certain costs. here again',
13017:'the government’s position has been that the right to recover exists independent of statute, supplemented or circumscribed by any statutory',
13018:'provisions that may apply. see, e.g., b198493, july 7, 1980; b163922, feb. 10, 1978. as discussed hereafter, the government’s right',
13019:'to recover has come under attack by recipients, particularly during the 1980s, but such attacks rarely succeed. what we present',
13020:'here is by no means an exhaustive cataloguing of the cases. our selection is designed to serve three purposes: 1',
13021:'summarize what the law appears to be as of the date of this publication; 2 reflect any discernible trends; and',
13022:'3 point out some issues that may be of more general relevance. as a general proposition, the courts have looked',
13023:'first to the program legislation and usually have concluded that adequate authority to support the government’s right of recovery can',
13024:'be found in, or deduced from, the enabling statute. the cases we selected for purposes of illustration are drawn largely',
13025:'from two massive grant programs perhaps more accurately described as collections of programs that have operated in various forms and',
13026:'under 100 major amendments to the original 1966 act were made by the debt collection act of 1982, pub. l.',
13027:'no. 97365, 96 stat. 1749 oct. 25, 1982, and the debt collection improvement act of 1996, pub. l. no. 104134,',
13028:'110 stat. 1321, 1321358 apr. 26, 1996. page 10135 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative',
13029:'agreements many statutory iterations for decades: title i of the elementary and secondary education act esea, and the comprehensive employment',
13030:'and training act ceta.101 both of these programs have undergone extensive legislative changes over the years. the most recent major',
13031:'amendments to esea were enacted by the no child left behind act of 2001, pub. l. no. 107110, 115 stat.',
13032:'1425 jan. 8, 2002. ceta was replaced in 1982 by the job training partnership act, pub. l. no. 97300, 96',
13033:'stat. 1322 oct. 13, 1982. the most recent major amendments to this program were enacted by the workforce investment act',
13034:'of 1998, pub. l. no. 105220, 112 stat. 936 aug. 7, 1998. we chose these programs because they both generated',
13035:'a large volume of litigation on a variety of relevant topics. apart from whatever value specific cases may have by',
13036:'analogy to other programs, the material illustrates the kinds of issues that have arisen and the approach the courts, including',
13037:'the supreme court, have taken in resolving them. esea included a provision, very common in grant program legislation, requiring the',
13038:'states to provide adequate assurances to the department of education that grant funds would be used only on qualifying programs.',
13039:'in addition, the law was amended in 1978 to give the secretary of education explicit authority to direct the repayment',
13040:'of misspent grant funds from nonesea sources. 20 u.s.c. § 2835b 1982.102 prior to this amendment, the statute had provided',
13041:'simply that payments under title i shall take into account the extent to which any previous payment to the same',
13042:'state was greater or less than it should have been. two states argued that the 1978 amendments did not apply',
13043:'to misspent funds prior to 1978, and that the government’s sole remedy with respect to pre1978 funds was to withhold',
13044:'future grant funds, in which event the state would simply undertake a smaller title i program. the government argued that',
13045:'the right to recover existed both under the pre1978 law and under the common law. the supreme court held that',
13046:'the pre1978 version of the law clearly gave the government the right to recover misspent funds. bell v. 101 the',
13047:'original source of title i of esea was the elementary and secondary education act of 1965, pub. l. no. 8910,',
13048:'79 stat. 27 apr. 11, 1965. ceta was originally enacted as the comprehensive employment and training act of 1973, pub.',
13049:'l. no. 93203, 87 stat. 839 dec. 28, 1973. 102 see 20 u.s.c. § 7844 for current provisions governing grantee',
13050:'assurances, and 20 u.s.c. §§ 1234a–1234b for provisions dealing with recovery of misused grant funds. page 10136 gao06382sp appropriations law—vol.',
13051:'ii chapter 10 federal assistance: grants and cooperative agreements new jersey, 461 u.s. 773 1983. the pre1978 language in question',
13052:'provided that esea payments— “shall take into account the extent if any to which any previous payment to such state',
13053:'educational agency under this title whether or not in the same fiscal year was greater or less than the amount',
13054:'which should have been paid to it.” pub. l. no. 8910, § 207a1. the court held that the plain terms',
13055:'of this language as well as its legislative history recognized the federal government’s right to recover misused funds. it rejected',
13056:'as “no more than remotely plausible” the state’s alternative interpretation that this language merely authorized the government to reduce future',
13057:'grants. the court described the consequences of the state’s interpretation, which it clearly considered untenable, as follows: “[t]he federal government',
13058:'recovers nothing: it pays less, but it receives correspondingly less in the way of title i programs. under that reading,',
13059:'the state would have no liability to the federal government for misspent funds.” bell, 461 u.s. at 783, fn. 8.',
13060:'apart from the holding itself and its significance with respect to any program statutes with similar language,103 two other points',
13061:'from this decision are noteworthy: the existence and amount of the state’s debt are to be determined administratively by the',
13062:'agency in the first instance, subject to judicial review. id. at 791–92. this is the same approach used in the',
13063:'federal claims collection standards for debt collection generally. because the court found adequate authority in the statute, it declined to',
13064:'rule on the existence of a commonlaw right. id. at 782 n.7. in a 1981 case, a lower court had',
13065:'found a commonlaw right of recovery along with the esea statutory right. west virginia v. secretary of education, 667 f.2d',
13066:'417 4th cir. 1981. a 1987 case also upheld the 103 the court in ledbetter v. shalala, 986 f.2d 428,',
13067:'433–34 11th cir., cert. denied, 510 u.s. 1010 1993, followed bell, holding that substantively identical language in the older americans',
13068:'act 42 u.s.c. § 3029a likewise conferred a right to recover misspent grant funds. page 10137 gao06382sp appropriations law—vol. ii',
13069:'chapter 10 federal assistance: grants and cooperative agreements government’s commonlaw right of recovery, at least to the extent of overallocations',
13070:'or other erroneous payments. california department of education v. bennett, 829 f.2d 795, 798 9th cir. 1987. two years after',
13071:'bell, the supreme court considered another issue arising from the same litigation and held that the 1978 amendments to esea',
13072:'were not retroactive for purposes of determining whether funds had been misspent. bennett v. new jersey, 470 u.s. 632 1985.',
13073:'what is important here is the more general rule the court announced, namely, that substantive rights and obligations under federal',
13074:'grant programs are to be determined by reference to the law in effect when the grants were made. id. at',
13075:'638–41. the court also rejected an argument that recovery would be inequitable because the state acted in good faith. the',
13076:'role of the reviewing court is to determine if the proper legal standards are applied. if they are, a court',
13077:'has “no independent authority to excuse repayment based on its view of what would be the most equitable outcome.” id.',
13078:'at 646. in any event, said the court, “we find no inequity in requiring repayment of funds that were spent',
13079:'contrary to assurances provided by the state in obtaining the grants.” id. at 645. in bennett v. kentucky department of',
13080:'education, 470 u.s. 656 1985, decided on the same day as bennett v. new jersey, the court reaffirmed the government’s',
13081:'right of recovery under esea title i: “the state gave certain assurances as a condition for receiving the federal funds,',
13082:'and if those assurances were not complied with, the federal government is entitled to recover amounts spent contrary to the',
13083:'terms of the grant agreement.” 470 u.s. at 663. the court further concluded that neither “substantial compliance” by the state',
13084:'nor the absence of bad faith would absolve the state from its liability. id. at 663–65. see also b229068o.m., dec.',
13085:'23, 1987, applying kentucky to grants under title v of the surface mining control and reclamation act of 1977.104 other',
13086:'cases likewise hold that general equitable considerations cannot override specific agreements and 104 pub. l. no. 9587, 91 stat. 445,',
13087:'467 aug. 3, 1977. page 10138 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements regulations governing',
13088:'grant transactions. e.g., missouri department of social services v. united states department of education, 953 f.2d 372, 375–76 8th cir.',
13089:'1992; maine v. shalala, 81 f. supp. 2d 91 d. me. 1999. in the latter case, the court observed: “boiled',
13090:'down, plaintiff contends that to allow the federal government to recover its overpayments in fiscal years 1993 and 1994, while',
13091:'denying the state its proposed offset for federal contributions that should have been made relative to the state’s supplemental contributions',
13092:'from 1982 through 1993, is simply unfair. . . . “principles of equity and fairness must, and do, play a',
13093:'fundamental role in our system of justice. . . . but the principle of fairness cannot be the beginning, middle,',
13094:'and end of a legal analysis, especially in a case such as this where the transactions at issue are specifically',
13095:'and intricately governed by regulations and statutes. this is not a contract dispute between two lay people. this is a',
13096:'highlyregulated, complex legal transaction between a state and the federal government. in that light, [the state’s] reliance on ‘broad, nontechnical',
13097:'principles of substantive fairness and equity’ rings hollow.” 81 f. supp. 2d at 95. see also maryland department of human',
13098:'resources v. united states department of agriculture, 976 f.2d 1462, 1480–81 4th cir. 1992. one point in bell seems to',
13099:'have generated some uncertainty. the court noted that the secretary “has not asked us to decide what means of collection',
13100:'are available to him, but only whether he is a creditor. since the case does not present the issue of',
13101:'available remedies, we do not address it.” bell, 461 u.s. at 779 n.4. thus, the court did not approve or',
13102:'disapprove of any particular remedy. this led one court to conclude that the bell analysis requires two separate questions: whether',
13103:'the federal government has a right of recovery and, if so, what remedies are available to it. maryland department of',
13104:'human resources v. united states department of health & human services, 763 f.2d 1441, 1455 d.c. cir. 1985 holding that',
13105:'government has statutory right of recovery under title xx of social page 10139 gao06382sp appropriations law—vol. ii chapter 10 federal',
13106:'assistance: grants and cooperative agreements security act105. however, another court expressed doubt over the existence of such a dichotomy, construing',
13107:'the supreme court’s silence in bennett v. kentucky department of education as approval of the means of recovery employed in',
13108:'that case, a direct repayment order. st. regis mohawk tribe v. brock, 769 f.2d 37, 49 n.16 2nd cir. 1985,',
13109:'cert. denied, 476 u.s. 1140 1986 right of recovery under comprehensive employment and training act. the st. regis court went',
13110:'on to conclude that “congress left it to the secretary to establish additional remedial procedures, consistent with the purposes of',
13111:'the legislation, to insure compliance by prime sponsors.” 769 f.2d at 50. another group of cases involves the former ceta',
13112:'program. there is a strong parallel to the esea cases in that the original ceta included general authority to adjust',
13113:'payments to reflect prior overpayments or underpayments, and was amended in 1978 to explicitly authorize the secretary of labor to',
13114:'recover misspent funds by ordering repayment from nonceta funds.106 essentially following bell, a rather long line of cases upheld the',
13115:'labor department’s right, under the pre1978 ceta, to recover misspent funds and to do so by directing repayment from nonceta',
13116:'funds. city of gary v. united states department of labor, 793 f.2d 873 7th cir. 1986; st. regis mohawk tribe,',
13117:'supra; mobile consortium v. united states department of labor, 745 f.2d 1416 11th cir. 1984; california tribal chairman’s association v.',
13118:'united states department of labor, 730 f.2d 1289 9th cir. 1984; north carolina commission of indian affairs v. united states',
13119:'department of labor, 725 f.2d 238 4th cir., cert. denied, 469 u.s. 828 1984; texarcana metropolitan area manpower consortium v.',
13120:'donovan, 721 f.2d 1162 8th cir. 1983; lehigh valley manpower program v. donovan, 718 f.2d 99 3rd cir. 1983; atlantic',
13121:'county v. united states department of labor, 715 f.2d 834 3rd cir. 1983. the st. regis 769 f.2d at 47,',
13122:'california tribal 730 f.2d at 1292, and north carolina 725 f.2d at 240 courts, as had the supreme court in',
13123:'bell, declined to comment on the existence of a commonlaw right of recovery. the texarcana court noted that its decision',
13124:'was consistent with prior decisions recognizing the commonlaw right. 721 f.2d at 1164. none of the cases purported to deny',
13125:'that right. more recently, the court in harrod v. 105 42 u.s.c. §§ 1397–1397f. 106 see 29 u.s.c. § 2934c–d',
13126:'for the current version of this authority. page 10140 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative',
13127:'agreements glickman, 206 f.3d 783, 789 8th cir. 2000, similarly endorsed the federal government’s broad authority to recover improper payments:',
13128:'“the appellants also contend that the agency’s attempt to seek reimbursement of their disaster relief payments in 1994 was untimely,',
13129:'because the agency action was final when the government paid the benefits in 1989, and the agency had no authority',
13130:'to seek reimbursement years after a final agency action. we disagree. “we have long held that the common law permits',
13131:'the government to recover funds that its agents wrongfully or erroneously paid, even absent specific legislation authorizing the recovery. see',
13132:'collins v. donovan, 661 f.2d 705, 708 8th cir.1981; see also texarkana metro. area manpower consortium v. donovan, 721 f.2d',
13133:'1162, 1164 8th cir. 1983. the supreme court has stated, ‘ordinarily, recovery of government funds, paid by mistake to one',
13134:'having no just right to keep the funds, is not barred by the passage of time.’ united states v. wurts,',
13135:'303 u.s. 414, 416, 58 s. ct. 637, 82 l. ed. 932 1938. the government’s right to recover funds paid',
13136:'out erroneously ‘is not barred unless congress has clearly manifested its intention to raise a statutory barrier.’ id.” the court',
13137:'also held that estoppel ordinarily will not apply against the federal government in the absence of affirmative evidence of misconduct.',
13138:'harrod, 206 f.3d at 789. another group of ceta cases concerned a provision which required the secretary of labor to',
13139:'investigate any complaint alleging improprieties and to issue a final determination not later than 120 days after receiving the complaint.',
13140:'the consequences of failing to meet the 120day deadline became a hotly litigated issue. the lower courts split, some holding',
13141:'that failure to meet the deadline barred the labor department from attempting to recover misused funds, while others held that',
13142:'the failure did not bar further action. using an analysis which should be useful in a variety of situations, the',
13143:'supreme court resolved the conflict in brock v. pierce county, 476 u.s. 253 1986, holding that the mere use of',
13144:'the word “shall” in the statute did not remove the power to act after 120 days. page 10141 gao06382sp appropriations',
13145:'law—vol. ii chapter 10 federal assistance: grants and cooperative agreements an additional ceta case that deserves mention is board of',
13146:'county commissioners v. united states department of labor, 805 f.2d 366 10th cir. 1986. in that case, the court held',
13147:'that funds embezzled by an employee of a ceta grantee are “misspent” for purposes of the government’s right of recovery.',
13148:'the grantee had argued that the funds were not “misspent” because it had never spent them. “no ceta regulation lists',
13149:'embezzlement as an allowable cost,” rejoined the court. id. at 368. finally, three cases dealing with the transition between ceta',
13150:'and the statute that immediately followed it—the job training partnership act jtpa—further illustrate judicial support for the federal government’s right',
13151:'to recover misspent funds. the jtpa contained language stating that its provisions “shall not affect administrative or judicial proceedings .',
13152:'. . begun between october 13, 1982 and september 30, 1984,” under ceta. 29 u.s.c. § 1591e 1988. several ceta',
13153:'grantees argued that this language barred recovery of misspent ceta grant funds unless administrative or judicial proceedings were begun prior',
13154:'to september 30, 1984. this argument drew a decidedly chilly response from the courts. the opinion in city of newark',
13155:'v. united states department of labor, 2 f.3d 31, 34 3rd cir. 1993 was typical: “we can identify no basis',
13156:'for adopting this convoluted construction of the statute. in particular, newark has called our attention to no provision in the',
13157:'jtpa that would, indeed, bar the secretary from recovering misspent funds, and which would thereby ‘affect’ administrative proceedings commenced after',
13158:'september 30, 1984 in the manner newark suggests. in the absence of any such jtpa provision, we cannot merely presume',
13159:'that congress used the word ‘affect’ to mean ‘bar’ or ‘preclude.’ “indeed, it would appear, to the contrary, that congress',
13160:'in no way intended the passage of the jtpa to hinder the secretary’s efforts to recoup misspent or mismanaged funds',
13161:'granted under ceta.” the court went on to cite congressional committee reports expressing concern over the abuse of ceta funds',
13162:'and the need to recover them. the courts reached the same result in inland manpower association v. department of labor,',
13163:'882 f.2d 343 9th cir. 1989, and st. clair county page 10142 gao06382sp appropriations law—vol. ii chapter 10 federal assistance:',
13164:'grants and cooperative agreements ceta, michigan v. united states department of labor, no. 893829 6th cir. 1990.107 where does all',
13165:'this leave us? certainly the government’s right to recover under programs with statutory provisions similar to the former esea title',
13166:'i and ceta programs would seem to be settled. in more general terms, several lower courts have recognized the government’s',
13167:'basic right to recover under the common law.108 while the supreme court declined to address the common law issue in',
13168:'bell, its later decision in west virginia v. united states, 479 u.s. 305 1987 seems instructive. the issue in west',
13169:'virginia was whether the united states could recover “prejudgment interest on a debt arising from a contractual obligation to reimburse',
13170:'the united states for services rendered by the army corps of engineers.” 479 u.s. at 306. applying federal common law,',
13171:'a unanimous supreme court held that it could.109 while this was not a grant case nor was the government’s right',
13172:'to collect the underlying debt in dispute, it would not seem to require a huge leap in logic to infer',
13173:'a recognition of an inherent right in the government to recover amounts owed to it. in sum, the government’s assertion',
13174:'of an inherent i.e., common law right to recover sums owed to it under assistance programs thus far has withstood',
13175:'assault. the issue may be largely moot at this juncture, however, since the courts invariably find a right to recover',
13176:'in the provisions of the applicable statutes, regulations, and/or grant agreements. 107 these courts also noted that, in any event,',
13177:'audits had commenced before september 30, 1984, and held that administrative proceedings were “begun” for purposes of the statute once',
13178:'audits were initiated. 108 see, in addition to the cases cited in the text, tennessee v. dole, 749 f.2d 331,',
13179:'336 6th cir. 1984, cert. denied, 472 u.s. 1018 1985 federalaid highway act; woods v. united states, 724 f.2d 1444',
13180:'9th cir. 1984 food stamp act; mount sinai hospital v. weinberger, 517 f.2d 329 5th cir. 1975, cert. denied, 425',
13181:'u.s. 935 1976 medicare; pennsylvania department of transportation v. united states, 643 f.2d 758, 764 ct. cl., cert. denied, 454',
13182:'u.s. 826 1981 federalaid highway act. 109 in a subsequent case, united states v. texas, 507 u.s. 529 1993, the',
13183:'court addressed an issue left open in west virginia and held that the debt collection act did not limit the',
13184:'government’s common law right to seek prejudgment interest. page 10143 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and',
13185:'cooperative agreements 2. offset and withholding of claims under grants offset and withholding are two closely related remedies. while the',
13186:'terms are sometimes used interchangeably, they are not the same. offset, in the context of grantee indebtedness, refers to a',
13187:'reduction in grant payments to a grantee who is indebted to the united states where the debt arises under a',
13188:'separate assistance program or is owed to an agency other than the grantor agency. withholding is the act of holding',
13189:'back funds from the same grant or program in which the violation or other basis for creating the government’s claim',
13190:'occurred. in a sense, withholding may be viewed as a type of offset. gao has adopted a “policy rule” that',
13191:'offset or withholding should not be used where it would have the effect of defeating or frustrating the purposes of',
13192:'the grant. e.g., b171019, dec. 14, 1976; b186166, aug. 26, 1976. the application of this rule depends upon the nature',
13193:'and purpose of the assistance program. “individual consideration must be given to each instance.” b182423, nov. 25, 1974. naturally, this',
13194:'consideration must include any relevant provisions of the program legislation, agency regulations, or the grant agreement. in 43 comp. gen.',
13195:'183 1963, for example, a farmer who was receiving payments under the soil bank act,110 administered by the department of',
13196:'agriculture, was indebted to the united states for unpaid taxes. since the basic purpose of the soil bank act was',
13197:'to protect and increase farm income, gao decided that whether those payments should be applied to the recovery of an',
13198:'independently arising debt was a matter within agriculture’s discretion, based on agriculture’s determination “as to the extent to which such',
13199:'withholding would tend to effectuate or defeat the purposes of the [soil bank act].” id. at 185. similarly, relying heavily',
13200:'on the treasury department’s interpretation of the state and local fiscal assistance act of 1972111 general revenue sharing, since repealed,',
13201:'gao concluded in b176781o.m., dec. 6, 1974, that offset against revenue sharing funds payable to a city was inappropriate to',
13202:'recover an overpayment to that city under a federal aviation administration grant. thus, agencies have some discretion in the matter.',
13203:'110 pub. l. no. 540, ch. 327, 70 stat. 188 may 28, 1956, repealed by pub. l. no. 89321, §',
13204:'601, 79 stat. 1187, 1206 nov. 3, 1965. 111 pub. l. no. 92512, 86 stat. 919 oct. 20, 1972. page',
13205:'10144 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements it has been somewhat easier to conclude',
13206:'that offset will frustrate grant objectives where grant payments are made in advance of grantee performance. e.g., 55 comp. gen.',
13207:'1329 1976; b171019, dec. 14, 1976. this is true to the extent the grantee is able to reduce its level',
13208:'of performance. take, for example, a grant to construct a hospital. if a debt is offset against grant advances and',
13209:'the grantee can simply forgo the project and not build the hospital, there is no meaningful recovery. the federal government',
13210:'ends up keeping its own money, the grantee pays nothing, and the losers are the intended beneficiaries of the assistance,',
13211:'the patients who would have used the hospital. to this extent, an offset would accomplish nothing. this was the same',
13212:'analysis used for rejecting offset, for example, in b171019, dec. 14, 1976. as noted previously, the supreme court invoked essentially',
13213:'the same rationale in bell v. new jersey, 461 u.s. 773 1983, in rejecting the state’s argument that future grant',
13214:'payments could be reduced to satisfy its past indebtedness. the problem was highlighted in a 1982 gao report, federal agencies',
13215:'negligent in collecting debts arising from audits, afmd8232 washington, d.c.: jan. 22, 1982. the report first noted gao’s policy and',
13216:'its rationale: “[i]t is normally inappropriate for the government to offset debts against an advance of funds to a grantee',
13217:'unless there is assurance that the same level of grant performance will be maintained. “. . . when the offset',
13218:'is not replaced with nonfederal funds, there has, in effect, been no repayment. the scope of the program has simply',
13219:'been reduced and the intended recipient of the benefits loses by the amount of the audit disallowance.” id. at 26.',
13220:'the report then recommended that grantor agencies “require grantee debtors to certify that their payment of auditrelated debts has not',
13221:'reduced the level of performance of any federal program,” and monitor those assurances through grant management and audit followup. id.',
13222:'at 28. the concept also appeared in b186166, aug. 26, 1976, in which the department of agriculture was exploring options',
13223:'to recover misapplied and unaccountedfor funds advanced to a university under research grants. agriculture proposed crediting the indebtedness against allowable',
13224:'indirect grant costs. this would be done by requiring the university to document page 10145 gao06382sp appropriations law—vol. ii chapter',
13225:'10 federal assistance: grants and cooperative agreements that it was expending the amount of earned indirect costs on approved program',
13226:'grants, thus maintaining the agreedupon performance level. gao concurred cautiously, on the condition that the grantee voluntarily agree to this',
13227:'approach. should this method fail to satisfy the indebtedness, gao further noted that the grantee was a state university and',
13228:'advised agriculture to seek offset against other amounts owed to the state by the federal government. whatever impediments may exist',
13229:'in the case of grant advances, offset will be more readily available under reimbursementtype grants. e.g., 55 comp. gen. 1329,',
13230:'1332 1976. nevertheless, the general policy rule still applies. thus, in b163922.53, apr. 30, 1979, the comptroller general advised the',
13231:'departments of labor and transportation that disallowed costs under a labor department grant could be offset against reimbursements due under',
13232:'a federal highway administration grant, but that transportation still “must make the determination on a casebycase basis as to whether',
13233:'offset will impair the program objectives.” when the gao decisions cited in the preceding paragraphs were issued, the offset referred',
13234:'to was essentially nonstatutory. administrative offset received a statutory basis with the enactment of section 10 of the debt collection',
13235:'act of 1982, 31 u.s.c. § 3716. the corresponding portion of the federal claims collection standards, revised at that time',
13236:'to reflect the 1982 legislation, was 4 c.f.r. § 102.3. as originally enacted in 1982, the administrative offset provided by',
13237:'31 u.s.c. § 3716 did not apply to debts owed by state and local governments. see 31 u.s.c. § 3701c',
13238:'1982. however, the debt collection improvement act of 1996, pub. l. no. 104134, § 31001d1, 110 stat. 1321, 1321358–59 apr.',
13239:'26, 1996, amended 31 u.s.c. § 3701c to eliminate the offset exemption for state and local governments. the 1996 act',
13240:'also added language to 31 u.s.c. § 3716d providing that nothing in section 3716 prohibits the use of any other',
13241:'administrative offset under another statute or the common law. pub. l. no. 104134, § 31001d2d. see also the current federal',
13242:'claims collection standards at 31 c.f.r. § 901.3a3 “unless otherwise provided for by contract or law, debts or payments that',
13243:'are not subject to administrative offset under 31 u.s.c. 3716 may be collected by administrative offset under the common law',
13244:'or other applicable statutory authority.”. as noted above, offset and withholding are technically different. many program statutes include withholding provisions.',
13245:'e.g., perales v. heckler, page 10146 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative agreements 762 f.2d',
13246:'226 2nd cir. 1985 withholding provision in medicaid legislation may be used to recoup overpayments from state even though state',
13247:'has not yet recovered from provider. the theory behind withholding is that where a grantee has misapplied grant funds, or',
13248:'in other words, where a grantee’s costs are disallowed, the grantee has, in effect, spent its own money and not',
13249:'funds from the grant. since the issue frequently comes to light in a subsequent budget period, withholding may be viewed',
13250:'as the determination that an amount equal to the disallowed cost remains available for expenditure by the grantee and is',
13251:'therefore carried over into the new budget period. accordingly, the amount of new money that must be awarded to the',
13252:'grantee to carry on the grant program is reduced by the amount of the disallowance. this may not be strictly',
13253:'applicable where the statutory program authority establishes an entitlement to the funds on the part of the grantee or provides',
13254:'other specific limitations on the use of withholding. under the federal claims collection standards, an agency to which a debt',
13255:'is owed is required in most cases to explore the possibility of collecting by offset from other sources. see generally',
13256:'31 c.f.r. § 901.3.112 if offset is not available, a withholding provision may provide the basis to accomplish a similar',
13257:'result, at least in part. in 55 comp. gen. 1329 1976, for example, the then community services administration csa was',
13258:'statutorily authorized to suspend withhold grant payments to satisfy certain grantee tax delinquencies. under this authority, the csa could pay',
13259:'the suspended amounts over to the internal revenue service irs to satisfy a grantee’s tax liability to the extent that',
13260:'it was incurred by the grantee in carrying out csa grants. since funds previously advanced under the grant should have',
13261:'been used to pay the required taxes in the first place, transfer of the suspended funds to the irs amounted',
13262:'to payment of an authorized grant purpose. see also b171019, dec. 14, 1976 withholding authority of former law enforcement assistance',
13263:'administration. in any event, withholding under a limited statutory withholding provision does not satisfy the requirement for the agency to',
13264:'seek offset from other 112 31 c.f.r. § 901.3a incorporates a number of statutory exceptions to offset, but few of',
13265:'these apply to federal assistance payments. offset is usually accomplished through the centralized treasury department offset program, although individual agencies',
13266:'may also effect offsets. see 31 c.f.r. §§ 901.3b–c. page 10147 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants',
13267:'and cooperative agreements sources to the extent of any remaining liability for which withholding is not available. b163922, feb. 10,',
13268:'1978. statutory withholding provisions may include procedural safeguards, most typically notice and opportunity for hearing. any such procedural requirements must,',
13269:'of course, be satisfied. see b226544, mar. 24, 1987; 7 c.f.r. § 3016.43b. the common rules authorize withholding against advances.',
13270:'see, e.g., 7 c.f.r. § 3016.52a2. as with offset, it should be kept in mind that nothing is accomplished by',
13271:'withholding unless the grantee carries out its program at the same level as would otherwise have been the case. the',
13272:'supreme court made this point in bell v. new jersey, 461 u.s. 773 1983, discussed previously. the court rejected the',
13273:'state’s suggestion that the federal government was free to reduce future grant advances, with the state then undertaking a smaller',
13274:'program. the court recognized that, under this approach, the government would recover nothing and the states would effectively have no',
13275:'liability for misspent funds. congress, said the court, must have contemplated that the government would receive a net recovery by',
13276:'paying less for the same program level. id. at 781 n.5 and 783 n.8. a 1985 decision of the court',
13277:'of appeals for the district of columbia circuit took the analysis one step further. the case is maryland department of',
13278:'human resources v. united states department of health & human services, 763 f.2d 1441 d.c. cir. 1985. after discussing the',
13279:'bell analysis, the court went on to conclude: “[w]here a statute gives the federal government a right of recovery and',
13280:'also authorizes prospective withholding [withholding funds for services not yet rendered] as a remedy, the state remains obligated to provide',
13281:'all the services that it promised to supply in return for the funds that were then prospectively withheld in satisfaction',
13282:'of the state’s debt to the federal government. if a state then proceeds to reduce the size of its federally',
13283:'funded program, the state has committed a new and independent breach of the funding conditions, which gives rise to a',
13284:'new debt to the federal government.” maryland, 763 f.2d at 1455–56. under this approach, the remedy is clearly a meaningful',
13285:'one. how far the courts will go in applying it remains to be seen. issues still to be resolved are',
13286:'the extent to which the principle may page 10148 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and cooperative',
13287:'agreements apply to an offset as opposed to a withholding, or to a nonstatutory offset or withholding. in housing authority',
13288:'of the county of king v. pierce, 701 f. supp. 844 d.d.c.1988, modified on other grounds, 711 f. supp. 19',
13289:'d.d.c. 1989, the court considered the recoupment of overpayments under advancefunded department of housing and urban development hud housing subsidies.',
13290:'hud regulations but not the program statute authorized recoupment by reducing future subsidy payments. the court upheld hud’s commonlaw right',
13291:'to recover in the manner specified in the regulations. the court further commented that the teachings of bell and maryland',
13292:'department of human resources “might and perhaps should guide hud in the course of the recovery here,” but found those',
13293:'cases not dispositive because they dealt with statutory rather than commonlaw remedies. pierce, 701 f. supp. at 850 n.11. as',
13294:'the above discussion indicates, there is a direct relationship between the appropriateness of offset or withholding against grant advances and',
13295:'the grantee’s obligation to maintain the agreedupon program level. to date, however, the case law does not provide definitive guidance',
13296:'for sorting through the many legal and practical issues that this relationship presents. perhaps future litigation or legislation will help',
13297:'to flesh out the details of this relationship. page 10149 gao06382sp appropriations law—vol. ii chapter 10 federal assistance: grants and',
13298:'cooperative agreements page 10150 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans a. introduction . .',
13299:'. . . . . . . . . . . . . . . . . . . .',
13300:'. . . . . . . . . . . . .113 1. general description . . . .',
13301:'. . . . . . . . . . . . . . . . . . . .',
13302:'. . . . . . . . . . . . . 113 2. sources of guarantee authority .',
13303:'. . . . . . . . . . . . . . . . . . . .',
13304:'. . . . . . 118 b. budgetary and obligational treatment . . . . . . . .',
13305:'. . . .1112 1. prior to federal credit reform act . . . . . . . . .',
13306:'. . . . . . . . . . . . . . 1112 2. federal credit reform act',
13307:'of 1990 . . . . . . . . . . . . . . . . . .',
13308:'. . . . . . 1115 a. post1991 guarantee commitments . . . . . . . . .',
13309:'. . . . . . . . . . . . 1116 b. pre1992 commitments . . . .',
13310:'. . . . . . . . . . . . . . . . . . . .',
13311:'. . . . . . . 1124 c. entitlement programs . . . . . . . . .',
13312:'. . . . . . . . . . . . . . . . . . . .',
13313:'. . . 1125 d. certain insurance programs . . . . . . . . . . . .',
13314:'. . . . . . . . . . . . . . . 1126 c. extension of guarantees',
13315:'. . . . . . . . . . . . . . . . . . . .',
13316:'. . . .1126 1. coverage of lenders initial and subsequent . . . . . . . . .',
13317:'. . . . . 1126 a. eligibility of lender/debt instrument . . . . . . . . .',
13318:'. . . . . . . . . . 1126 b. substitution of lender . . . . .',
13319:'. . . . . . . . . . . . . . . . . . . .',
13320:'. . . . . . . 1128 c. existence of valid guarantee . . . . . . .',
13321:'. . . . . . . . . . . . . . . . . . . 1129',
13322:'d. small business investment companies . . . . . . . . . . . . . . .',
13323:'. . . 1135 e. the federal financing bank . . . . . . . . . . .',
13324:'. . . . . . . . . . . . . . . . 1137 2. coverage of',
13325:'borrowers . . . . . . . . . . . . . . . . . . .',
13326:'. . . . . . . . . . . . . . 1141 a. eligibility of borrowers .',
13327:'. . . . . . . . . . . . . . . . . . . .',
13328:'. . . . . . . . . . 1141 b. substitution of borrowers . . . . .',
13329:'. . . . . . . . . . . . . . . . . . . .',
13330:'. . . . 1142 c. loan purpose . . . . . . . . . . . .',
13331:'. . . . . . . . . . . . . . . . . . . .',
13332:'. . . . . . . 1143 d. change in loan purpose . . . . . . .',
13333:'. . . . . . . . . . . . . . . . . . . .',
13334:'. . . 1145 3. terms and conditions of guarantees . . . . . . . . . .',
13335:'. . . . . . . . . . . . 1146 a. introduction . . . . .',
13336:'. . . . . . . . . . . . . . . . . . . .',
13337:'. . . . . . . . . . . . . . . 1146 b. property insurance programs',
13338:'under the national housing act . . . . . . . . . . . . . . .',
13339:'. . . . . . . . . . . . . . . . . . . .',
13340:'. . . . . . 1147 1 maximum amount of loan . . . . . . . .',
13341:'. . . . . . . . . . . . . . . . . 1147 2 maximum',
13342:'loan maturity . . . . . . . . . . . . . . . . . .',
13343:'. . . . . . . . 1149 3 owner/lessee requirement . . . . . . . .',
13344:'. . . . . . . . . . . . . . . . 1151 4 execution of',
13345:'the note . . . . . . . . . . . . . . . . . .',
13346:'. . . . . . . . . . 1153 5 reporting requirement . . . . . .',
13347:'. . . . . . . . . . . . . . . . . . . .',
13348:'. 1154 6 payment of premiums . . . . . . . . . . . . . .',
13349:'. . . . . . . . . . . . . . 1155 c. small business administration business',
13350:'loan program . . . 1156 1 payment of guarantee fee . . . . . . . . .',
13351:'. . . . . . . . . . . . . . . . 1156 2 notice of',
13352:'default . . . . . . . . . . . . . . . . . . .',
13353:'. . . . . . . . . . . . . 1158 d. rights and obligations of government',
13354:'upon default .1159 1. nature of the government’s obligation . . . . . . . . . . .',
13355:'. . . . . . . . . 1159 2. scope of the government’s guarantee . . . .',
13356:'. . . . . . . . . . . . . . . . 1162 3. amount of',
13357:'government’s liability . . . . . . . . . . . . . . . . . .',
13358:'. . . . . . 1164 4. liability of the borrower . . . . . . . .',
13359:'. . . . . . . . . . . . . . . . . . . .',
13360:'. . . . 1165 a. veterans’ home loan guarantee program . . . . . . . . .',
13361:'. . . . . . 1166 1 loans closed prior to 1990 . . . . . . .',
13362:'. . . . . . . . . . . . . . . . . 1166 page 111',
13363:'gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans 2 loans closed after december 31, 1989 .',
13364:'. . . . . . . . . . . . . 1170 b. debt collection procedures . .',
13365:'. . . . . . . . . . . . . . . . . . . .',
13366:'. . . . . 1171 5. collateral protection . . . . . . . . . . .',
13367:'. . . . . . . . . . . . . . . . . . . .',
13368:'. . . . 1173 page 112 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans a.',
13369:'introduction 1. general description the preceding chapter dealt with one of the major forms of federal financial assistance, the grant.',
13370:'another major form is credit assistance, which includes direct loans and, the subject of this chapter, guaranteed and insured loans.',
13371:'in essence, a guaranteed loan is a loan or other advance of credit made to a borrower by a participating',
13372:'lending institution, where the united states government, acting through the particular federal agency involved, “guarantees” payment of all or part',
13373:'of the principal amount of the loan, and often interest, in the event the borrower defaults. a statutory definition along',
13374:'these lines is found in 2 u.s.c. § 661a3 as follows: “the term ‘loan guarantee’ means any guarantee, insurance, or',
13375:'other pledge with respect to the payment of all or a part of the principal or interest on any debt',
13376:'obligation of a nonfederal borrower to a nonfederal lender, but does not include the insurance of deposits, shares, or other',
13377:'withdrawable accounts in financial institutions.”1 depending on the particular program, the borrower may be a private individual, business entity, educational',
13378:'institution, or a state, local, or foreign government. in some cases, the guarantee may be created when a loan originally',
13379:'made by a government agency is subsequently sold by the agency to a third party with the government’s assurance of',
13380:'repayment. strictly speaking, an insured loan and a guaranteed loan are two different things. an insured loan is one made',
13381:'initially by the federal agency and then sold, while a guaranteed loan is a loan made by a private lender.',
13382:'occasionally, the agency’s program legislation may draw the distinction. for example, the department of agriculture has authority both to make',
13383:'1 similar definitions are found in gao, a glossary of terms used in the federal budget process, gao05734sp washington, d.c.:',
13384:'september 2005, at 53, and in omb circular no. a11, preparation, submission, and execution of the budget, part v, “federal',
13385:'credit,” § 185.3m june 21, 2005. summary information on individual programs may be found in the catalog of federal domestic',
13386:'assistance, prepared annually by the general services administration and office of management and budget and available in electronic form at',
13387:'www.cfda.gov last visited september 15, 2005. page 113 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans',
13388:'insured loans and to guarantee loans made by other lenders. under 7 u.s.c. § 935, the department can make insured',
13389:'loans, defined in subsection 935b as loans that are “made, held, and serviced by the secretary [of agriculture], and sold',
13390:'and insured by the secretary hereunder.” under 7 u.s.c. § 936, the department can guarantee loans which are “initially made,',
13391:'held, and serviced by a legally organized lending agency.”2 another example is the department’s rural industrialization loan program established by',
13392:'7 u.s.c. § 1932, again authorizing both insured and guaranteed loans. for purposes of this chapter, we use the term',
13393:'“guarantee” to refer to both guaranteed and insured loans unless otherwise indicated. the objective of this chapter is to illustrate',
13394:'the kinds of issues and problems that arise in this area and the approaches used in resolving them. we have',
13395:'for the most part emphasized several of the betterknown guarantee programs. naturally, the extent to which any given case will',
13396:'have more general applicability will depend on the agency’s organic legislation, program regulations, and the particular circumstances. since program statutes',
13397:'and regulations are subject to change, the reader should view the discussion as merely illustrative of the particular issue involved.',
13398:'the primary purpose of loan guarantees is to induce private lenders to extend financial assistance to borrowers who otherwise would',
13399:'not be able to obtain the needed capital on reasonable terms, if at all. or, as a congressional subcommittee put',
13400:'it, loan guarantee programs are designed to redirect capital resources by intervening in the private market decision process, in order',
13401:'to further objectives deemed by congress to be in the national interest.3 these objectives may be social veterans’ home loan',
13402:'guarantees, economic small business programs, or technological guarantees designed to foster emerging energy technologies. 2 for a detailed discussion of',
13403:'some of these and similar credit assistance programs, see the following gao reports: rural utilities service: opportunities to better target',
13404:'assistance to rural areas and avoid unnecessary financial risk, gao04647 washington, d.c.: june 18, 2004; rural development: rural businesscooperative service',
13405:'business loan losses, gao/rced99249 washington, d.c.: aug. 25, 1999; and rural development: rural businesscooperative service’s lending and the financial condition',
13406:'of its loan portfolio, gao/rced9910 washington, d.c.: jan. 12, 1999. 3 subcommittee on economic stabilization, house committee on banking, finance',
13407:'and urban affairs, catalog of federal loan guarantee programs, 95th cong., 1st sess. comm. print 1977, at page x. page',
13408:'114 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans when the federal government guarantees a loan,',
13409:'the guarantee is extended to the original lender supplying the funds, generally either a private lender or the federal financing',
13410:'bank, described in detail in section c.1.e of this chapter, as well as to any subsequent assignees or purchasers of',
13411:'the guaranteed portion of the loan. the subsequent purchase of a guaranteed loan from the original lender is called the',
13412:'“secondary market.” see, e.g., 51 comp. gen. 474 1972. secondary market purchasers are frequently large investment entities such as mutual',
13413:'funds or pension funds. secondary market purchasers are not always waiting in the wings, checkbooks in hand. congress has on',
13414:'several occasions taken action to help create, stimulate, or facilitate secondary markets by establishing privately owned but federally chartered corporations',
13415:'known as “governmentsponsored enterprises” gses. since a gse is a creature of congress, the actions it may take are those',
13416:'authorized in its enabling legislation. 71 comp. gen. 49 1991 federal agricultural mortgage corporation, or “farmer mac”. for discussions from',
13417:'the programmatic perspective, see gao, farmer mac: greater attention to risk management, mission, public purpose, and corporate governance is needed,',
13418:'gao04827t washington, d.c.: june 2, 2004; farmer mac: some progress made, but greater attention to risk management, mission, and corporate',
13419:'governance is needed, gao04116 washington, d.c.: oct. 16, 2003; and farmer mac: revised charter enhances secondary market activity, but growth',
13420:'depends on various factors, gao/ggd9985 washington, d.c.: may 21, 1999.4 under a loan guarantee, the risk against which the guarantee',
13421:'is made is, for the most part, default by the borrower. in some cases, however, other risks may be covered',
13422:'as well, and a few examples will be noted later in this chapter. 4 we do not address gses further',
13423:'in this publication. readers needing more may consult several gao products such as governmentsponsored enterprises: a framework for strengthening gse',
13424:'governance and oversight, gao04269t washington, d.c.: feb. 10, 2004; gses: recent trends and policy, toce/ggd9776 washington, d.c.: july 16, 1997;',
13425:'governmentsponsored enterprises: a framework for limiting the government’s exposure to risks, gao/ggd9190 washington, d.c.: may 22, 1991; and budget issues:',
13426:'profiles of governmentsponsored enterprises, gao/afmd9117 washington, d.c.: feb. 1, 1991. page 115 gao06382sp appropriations law—vol. ii chapter 11 federal assistance:',
13427:'guaranteed and insured loans the analytical perspectives volume of the president’s budget submission for fiscal year 2006 provides extensive background',
13428:'on credit and insurance activities, including loan guarantee programs and the operations of gses.5 at the end of 2004, the',
13429:'face value of federal loan guarantees totaled over $1.2 trillion.6 this represents a dramatic expansion of loan guarantees in recent',
13430:'decades. in 1970, the total face value of outstanding loan guarantees was less than $2 billion and slightly higher than',
13431:'the outstanding value of direct loans. while the aggregate face value of direct loans has remained fairly consistent since 1970,',
13432:'loan guarantees have increased exponentially.7 the following are some examples of major loan guarantee and insured loan programs:8 in 2004,',
13433:'the department of agriculture provided $3.23 billion of homeownership loan guarantees through its rural housing programs to 34,800 households, of',
13434:'which 30 percent went to very low and lowincome families. in 2004, the department of housing and urban development’s federal',
13435:'housing administration insured $107 billion in mortgages for almost 900,000 households. in 2004, the department of veterans affairs provided $35',
13436:'billion in guarantees to assist 270,571 borrowers through its va housing program for veterans, active duty military personnel, and certain',
13437:'reservists. the fiscal year 2006 budget proposes more than $25 billion in small business administration loan guarantees for small businesses',
13438:'and disaster victims. in the typical loan guarantee program, the lender is charged a fee by the agency, prescribed in',
13439:'the program legislation. however, no fee is charged in some programs. for example, 7 u.s.c. § 936 provides that no',
13440:'fee shall be charged for rural electrification program loan guarantees. where a fee is 5 see generally analytical perspectives, budget',
13441:'of the united states government for fiscal year 2006, chapter 7, “credit and insurance” feb. 7, 2005, at 85–122, available',
13442:'at www.whitehouse.gov/omb/budget/fy2006/ last visited september 15, 2005. 6 id. at 85. 7 id. at 108. 8 id. at 90, 97.',
13443:'page 116 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans charged, its disposition is governed by',
13444:'1 the federal credit reform act of 1990, discussed later in this chapter, or 2 where the credit reform act',
13445:'does not apply, the applicable program legislation, or 3 in the absence of any guidance in the program legislation, the',
13446:'miscellaneous receipts statute 31 u.s.c. § 3302. a guarantee may extend to 100 percent of the amount of the underlying',
13447:'loan, or some lesser percentage as specified in the program legislation. e.g., 7 u.s.c. § 936 rural electrification and telephone',
13448:'service; 100 percent; 42 u.s.c. § 1472h2 doug bereuter single family housing loan guarantee program; 90 percent; 15 u.s.c. §',
13449:'636a2a small business plant acquisition, construction, conversion, or expansion; 75 or 85 percent, depending on the loan balance. unless otherwise',
13450:'provided, a maximum guarantee percentage applies only to restrict the amount the administering agency is authorized to guarantee. e.g., b137514,',
13451:'nov. 3, 1958 no objection to proposal for borrower to “guarantee” portion of loan not covered by government guarantee by',
13452:'making “irrevocable deposit” financed by separate loan, thereby providing lender with 100 percent guarantee. banks do not loan money without',
13453:'interest, and the typical loan guarantee therefore covers accrued but unpaid interest as well as unpaid principal. the program statute',
13454:'may set a maximum acceptable rate of interest or may authorize the administering agency to do so by regulation. assuming',
13455:'there is nothing to the contrary in the enabling legislation, an agency may, within its discretion, extend its guarantees to',
13456:'loans with variable interest rates rates which rise or fall with changes in prevailing rates as well as loans with',
13457:'fixed interest rates. b184857, june 11, 1976. credit assistance legislation frequently vests considerable discretion in the administering agency. e.g., b202568,',
13458:'sept. 11, 1981 imposition of “no credit elsewhere” eligibility test to meet funding shortfall within sba’s broad discretion under section',
13459:'7b of the small business act,15 u.s.c. § 636b; b134628, jan. 15, 1958 the then civil aeronautics board was authorized',
13460:'within its discretion to make payments to lender immediately upon debtor’s default rather than after completion of foreclosure proceedings. while',
13461:'gao will not, at the request of a rejected applicant, review the exercise of an agency’s discretion in rejecting an',
13462:'application for a loan guarantee, b178460, june 6, 1973 nondecision letter, gao may address an agency’s use of appropriations for',
13463:'particular purposes and may review page 117 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans an',
13464:'agency’s conduct of a program under its general audit authority. for example, the emergency loan guarantee act, pub. l. 9270,',
13465:'85 stat. 178 aug. 9, 1971, 15 u.s.c. §§ 1841–1852, specifically authorized gao to audit any borrower applying for a',
13466:'loan guarantee, but made no mention of auditing the emergency loan guarantee board which administered the program. 15 u.s.c. §',
13467:'1846b. an issue arose in connection with the lockheed aircraft corporation assistance program, carried out under this statute. gao took',
13468:'the position that it had the authority to audit the board’s conduct of the program to evaluate whether the board',
13469:'and borrower were complying with the statutory provisions and whether the government’s interests were being adequately protected. this authority derives',
13470:'from gao’s basic audit statutes, such as 31 u.s.c. §§ 712 and 717, and does not have to be repeated',
13471:'in every piece of legislation. b169300, sept. 6, 1972; b169300, sept. 21, 1971. occasionally, however, the program legislation will specifically',
13472:'authorize or require gao audits. see, e.g., launching our communities’ access to local television “local tv” act of 2000, pub.',
13473:'l. no. 106553, title x, § 1006, 114 stat. 2762, 2762a138 dec. 21, 2000, at 47 u.s.c. § 1105 requiring',
13474:'annual gao audits of loan guarantee operations under that act. 2. sources of guarantee authority the authority to guarantee the',
13475:'repayment of indebtedness must be derived from some statutory basis. in most cases, this takes the form of express statutory',
13476:'authorization. typically, the statute will authorize the administering agency to establish the terms and conditions under which the guarantee will',
13477:'be extended, but may also impose various limitations. an example is section 108 of the housing and community development act',
13478:'of 1974, as amended, 42 u.s.c. § 5308, which authorizes the secretary of housing and urban development to issue loan',
13479:'guarantees to support various community and economic development activities. subsection 108a provides in part: “the secretary is authorized, upon such',
13480:'terms and conditions as the secretary may prescribe, to guarantee and make commitments to guarantee, only to such extent or',
13481:'in such amounts as provided in appropriation acts, the notes or other obligations issued by eligible public entities, or by',
13482:'public agencies designated by such eligible public entities, for the purposes of financing 1 acquisition of real property or the',
13483:'rehabilitation of real property owned by the eligible public entity including such related expenses as the secretary may permit by',
13484:'regulation; 2 housing page 118 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans rehabilitation; 3 economic',
13485:'development activities . . . ; 4 construction of housing by nonprofit organizations for homeownership . . . ; 5',
13486:'the acquisition, construction, reconstruction, or installation of public facilities except for buildings for the general conduct of government; or 6',
13487:'. . . public works and site or other improvements. a guarantee under this section may be used to assist',
13488:'a grantee in obtaining financing only if the grantee has made efforts to obtain such financing without the use of',
13489:'such guarantee and cannot complete such financing consistent with the timely execution of the program plans without such guarantee. notes',
13490:'or other obligations guaranteed pursuant to this section shall be in such form and denominations, have such maturities, and be',
13491:'subject to such conditions as may be prescribed by regulations issued by the secretary.” subsection 108a and the remaining provisions',
13492:'of that section go on to specify additional authorizations, limitations, terms, and conditions applicable to the loan guarantees. program authority,',
13493:'as in the example cited, is most commonly in the form of permanent legislation authorizing an ongoing program. in addition,',
13494:'guarantee programs are occasionally enacted to deal with a specific crisis of limited duration. one example of this latter type',
13495:'is the chrysler corporation loan guarantee act of 1979.9 a more recent example is the air transportation safety and system',
13496:'stabilization act,10 which, among other things, authorized loan guarantees for airlines in the wake of the terrorist attacks of september',
13497:'11, 2001. guarantee programs may also be enacted as part of appropriation acts. an example is discussed in gao’s report',
13498:'israel: u.s. loan guaranties for immigrant absorption, gao/nsiad92119 washington, d.c.: feb. 12, 1992. it is also possible for loan guarantee',
13499:'authority to be derived by necessary implication from a statutory program of financial assistance, that is, under program legislation which',
13500:'does not explicitly use the term “guarantee” or “insure.” for example, the current version of section 7a of the small',
13501:'9 pub. l. no. 96185, 93 stat. 1324 jan. 7, 1980. 10 pub. l. no. 10742, 115 stat. 230 sept.',
13502:'22, 2001. page 119 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans business act, 15 u.s.c.',
13503:'§ 636a, authorizes the small business administration sba to make loans to small business concerns as follows: “the administration is',
13504:'empowered to the extent and in such amounts as provided in advance in appropriation acts to make loans for plant',
13505:'acquisition, construction, conversion, or expansion, including the acquisition of land, material, supplies, equipment, and working capital, and to make loans',
13506:'to any qualified small business concern . . . for purposes of this chapter. such financings may be made either',
13507:'directly or in cooperation with banks or other financial institutions through agreements to participate on an immediate or deferred guaranteed',
13508:'basis.” the statute then goes on to list a number of limitations. a 1981 amendment11 added the word “guaranteed.” even',
13509:'before the amendment, gao had concluded that a loan guarantee program was within the sba’s discretion under section 7. 51',
13510:'comp. gen. 474 1972. an earlier decision, b140673, oct. 12, 1959, had upheld a “deferred participation” program under section 7a,',
13511:'under which sba would purchase the agreed portion of the deferred participation loan immediately upon demand and reserve the right',
13512:'to recover from the lender if sba subsequently determined that the lender had not substantially complied with the participation agreement.',
13513:'in view of the broad discretion granted sba under the statute, sba was not required to make the “substantial compliance”',
13514:'determination before making payment to the lender.12 the evolution of sba’s authority to conduct its disaster loan program, 15 u.s.c.',
13515:'§ 636b, followed a similar pattern. in b121589, oct. 19, 1954, the comptroller general tentatively approved a deferred participation program,',
13516:'strongly urging that the statute be amended to include “immediate or deferred participation” language patterned after the pre1981 version of',
13517:'section 636a. this was done and, based on 51 comp. 11 the amendment was enacted by section 1902 of the',
13518:'omnibus budget reconciliation act of 1981, pub. l. no. 9735, 95 stat. 357, 767 aug. 13, 1981. 12 the primary',
13519:'difference between a loan guarantee program and a deferred participation loan program is that the lending institution can demand that',
13520:'sba pay the outstanding balance of a deferred participation loan at any time, but can demand sba’s purchase of the',
13521:'outstanding balance of a guaranteed loan only under the conditions prescribed in the regulations—generally only upon default of the borrower.',
13522:'page 1110 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans gen. 474, was found sufficient to',
13523:'authorize sba to guarantee disaster loans to eligible borrowers by participating lending institutions. 58 comp. gen. 138, 145 1978. to',
13524:'remove any doubt, the same amendment which added the word “guaranteed” to section 636a added it as well to section',
13525:'636b.13 in connection with credit assistance under the small business investment act of 1958,14 gao recognized the sba’s implied authority',
13526:'to establish a program in which sba would guarantee loans made by private lending institutions to small business investment companies,',
13527:'even though the statute authorized only a direct loan program. 42 comp. gen. 146 1962. the decision pointed out that',
13528:'the legislative history of a 1961 amendment to the act clearly demonstrated that congress intended to continue the nonstatutory “standby”',
13529:'guaranteed loan program that had existed for several years, and concluded therefore that the absence of specific language authorizing the',
13530:'program was due to the apparent belief by both congress and sba that such language was unnecessary and did not',
13531:'reflect an intent to deny sba the authority. see also b149685, mar. 20, 1968. the guarantee program is now expressly',
13532:'authorized in 15 u.s.c. § 683. authority by necessary implication cannot be derived solely from the purpose clause of a',
13533:'statute, which sets out the congressional objectives underlying the legislation, but must be supported by the operative provisions of the',
13534:'statute. 71 comp. gen. 49 1991. regardless of whether a loan guarantee program is established under an express statutory provision',
13535:'or by necessary implication, the basic responsibility for administering the program clearly rests with the agency involved. this includes the',
13536:'authority to determine whether or not to extend a guarantee in a particular case, and the manner in which the',
13537:'guarantees are to be handled. the agency has considerable discretion, subject of course to any applicable statutory requirements or restrictions.',
13538:'13 pub. l. no. 9735, § 1911. 14 pub. l. no. 85699, 72 stat. 689 aug. 21, 1958. page 1111',
13539:'gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans b. budgetary and obligational treatment when a federal',
13540:'agency guarantees a loan, there is no immediate cash outlay. the need for an actual cash disbursement, apart from administrative',
13541:'expenses, does not arise unless and until the borrower defaults on the loan and the government is called upon to',
13542:'honor the guarantee. depending on the terms of the loan, this may not happen until many years after the guarantee',
13543:'is made. it is thus apparent that loan guarantees require budgetary treatment different from ordinary government obligations and expenditures. this',
13544:'treatment is prescribed generally by the federal credit reform act of 1990 fcra. before describing the fcra, it is important',
13545:'to first describe the precredit reform situation because it illustrates the objectives of credit reform and because fcra does not',
13546:'cover all programs. 1. prior to federal credit prior to credit reform, the authority to guarantee or insure loans generally',
13547:'reform act was not regarded as budget authority. indeed, the original enactment of the congressional budget act of 1974 expressly',
13548:'excluded loan guarantees from the statutory definition of budget authority. 15 under this treatment, the extension of a loan guarantee',
13549:'was an offbudget transaction and was, at the extension stage, largely not addressed by the budget and appropriations process. if',
13550:'and when the government had to pay on the guarantee i.e., upon default, the administering agency would seek liquidating appropriations,',
13551:'and these liquidating appropriations counted as budget authority. of course, by the time a liquidating appropriation became necessary, the united',
13552:'states was contractually committed to honor the guarantee, and congress had little choice but to appropriate the funds. this is',
13553:'an example of socalled “backdoor spending.” by the time the budget and appropriations process became involved, there was no meaningful',
13554:'role for it to play. when a loan guarantee is committed or issued, it cannot be known with absolute certainty',
13555:'when or to what extent the government might be called upon to honor it. accordingly, and since budget authority was',
13556:'not provided in advance, the making of a loan guarantee, however binding on the government the commitment may have been,',
13557:'was treated only as a contingent liability and did not result in a recordable obligation for purposes of 31 u.s.c.',
13558:'§ 1501a. a recordable obligation did not arise until the contingency occurred default by the borrower or other event as',
13559:'15 pub. l. no. 93344, § 3a2, 88 stat. 297, 299 july 12, 1974. page 1112 gao06382sp appropriations law—vol. ii',
13560:'chapter 11 federal assistance: guaranteed and insured loans authorized in the program legislation, at which time it was recorded against',
13561:'the appropriation or fund available for liquidation. 65 comp. gen. 4 1985; 60 comp. gen. 700, 703 1981. under this',
13562:'approach, the obligation was viewed as “authorized by law” for purposes of the antideficiency act, and there was no violation',
13563:'if obligations resulting from authorized guarantees exceeded available budgetary resources. 65 comp. gen. 4 1985; b226718.2, aug. 19, 1987. there',
13564:'was a certain logic to this approach. many loans are repaid in whole or in part, with the result that',
13565:'the government is never called upon to pay under the guarantee, the only disbursements being the administrative expenses of running',
13566:'the program. to require budget authority in the full amount being guaranteed would artificially inflate the budget. the problem was',
13567:'that the precredit reform approach went to the opposite extreme, by reflecting the cost to the government in the year',
13568:'the guarantee was made as zero. since there was no longer any room for discretion by the time liquidating appropriations',
13569:'became necessary, loan guarantee programs were not forced to compete with other programs for increasingly scarce budgetary resources. no one',
13570:'involved in the budget process— congress, the office of management and budget, gao—particularly liked this system, and reform became inevitable.',
13571:'at an absolute minimum, gao strongly encouraged the imposition of limits, either in the enabling legislation or in appropriation acts,',
13572:'on the total amount of loans to be guaranteed. e.g., gao, legislation needed to establish specific loan guarantee limits for',
13573:'the economic development administration, fgmsd7862 washington, d.c.: jan. 5, 1979. ceilings of this type may limit the amount of guarantees',
13574:'that can be issued in a given fiscal year, or the total amount of guarantees that can be outstanding at',
13575:'any one time. an example of the former is discussed in 60 comp. gen. 700 1981. a device that became',
13576:'common in the 1980s was the granting of loan guarantee authority only to the extent provided in advance in appropriation',
13577:'acts. the device was reinforced in 1985 when congress 1 added to the congressional budget act a definition of “credit',
13578:'authority” “authority to incur direct loan obligations or to incur primary loan guarantee commitments”, and 2 subjected to a point',
13579:'of order any bill providing new credit authority unless it also limited that authority to the extent or amounts provided',
13580:'in appropriation acts. these provisions are now codified at 2 u.s.c. §§ 62210 and 651a3, respectively. page 1113 gao06382sp appropriations',
13581:'law—vol. ii chapter 11 federal assistance: guaranteed and insured loans while this device provided a measure of congressional control, it',
13582:'still did not require the advance provision of actual budget authority. for example, the chrysler corporation loan guarantee act, which',
13583:'predated the 1985 legislation noted above, limited the authority to guarantee loans to the amounts provided in advance in appropriation',
13584:'acts. the comptroller general and the attorney general both concluded that this provision did not require advance budget authority, but',
13585:'was satisfied by an appropriation act provision placing a ceiling on the total amount of loans that could be guaranteed,',
13586:'that is, on contingent liability. b197380, apr. 10, 1980; loan guarantees—authority of chrysler corporation loan guarantee board to issue guarantees,',
13587:'43 op. att’y gen. 219, 4a op. off. legal counsel 12 1980. both opinions also concluded that the appropriation act',
13588:'ceiling related only to outstanding loan principal, with contingent liability for loan interest being in addition to the stated amount.',
13589:'where loan guarantee authority is limited to amounts provided in appropriation acts—and we emphasize that we are addressing situations not',
13590:'governed by the federal credit reform act—those “amounts,” as noted, are not actual budget authority but ceilings on contingent liability.',
13591:'therefore, while exceeding the ceiling may be illegal for other reasons,16 it does not violate the antideficiency act. 64 comp.',
13592:'gen. 282, 288–90 1985. analogous to budget authority, loan guarantee authority must generally be used i.e., commitments made in the',
13593:'fiscal year or years for which it is provided unless the appropriation act provides otherwise. b212857, nov. 8, 1983. also,',
13594:'where advance authority in appropriation acts is statutorily required and congress does not provide it, the agency’s authority to carry',
13595:'out the program may be effectively suspended for the fiscal year in question. b230951, mar. 10, 1989.17 congress may set',
13596:'a minimum program level as well as a ceiling. again, for programs not governed by the credit reform act, failure',
13597:'to achieve the minimum commitment level would not constitute an impoundment since 16 an “unusual” case where exceeding a ceiling',
13598:'was not illegal, because of rather explicit legislative history, is 53 comp. gen. 560 1974. 17 standing alone, 2 u.s.c.',
13599:'§ 651a is not a statutory requirement for advance appropriation authority. a point of order may not be raised or',
13600:'may be defeated, in which event the validity of any ensuing legislation is not affected. as in the situation discussed',
13601:'in b230951, many program statutes independently impose the requirement. page 1114 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed',
13602:'and insured loans the commitment amount is not budget authority. b195437.2, sept. 17, 1986. however, under a loan insurance program',
13603:'where the loan itself is made by the agency, failure to achieve a mandated minimum program level would be an',
13604:'impoundment unless the failure results from programmatic factors. id. 2. federal credit reform act of 1990 consideration of various reform',
13605:'proposals during the 1980s centered on the recognition that there is a “subsidy element” to a government loan guarantee program.',
13606:'if all loans were repaid, there would be no cost to the government apart from administrative expenses. were this the',
13607:'case, however, there would probably have been no need for the program to begin with. since the objective of a',
13608:'loan guarantee program is to enhance the availability of credit which the private lending market alone cannot or will not',
13609:'provide, it is reasonable to expect that there will be defaults, most likely at a higher rate than the private',
13610:'lending market experiences. it became apparent that credit reform had to do two things. first, it had to devise a',
13611:'meaningful way of measuring the true cost to the government; and second, it had to bring those costs fully within',
13612:'the budget and appropriations process. see, e.g., gao, budget issues: budgetary treatment of federal credit programs, gao/afmd8942 washington, d.c.: apr.',
13613:'10, 1989. the culmination of these reform efforts was the federal credit reform act of 1990 fcra, enacted by section',
13614:'13201a of the omnibus budget reconciliation act of 1990, pub. l. no. 101508, 104 stat. 1388, 1388609 nov. 5, 1990,',
13615:'and codified as an amendment to title v of the congressional budget act at 2 u.s.c. §§ 661–661f. the approach',
13616:'of the fcra is to require budget authority to cover the subsidy portion of a loan guarantee program, with the',
13617:'nonsubsidy portion i.e., the portion expected to be repaid financed through borrowings from the treasury. see 2 u.s.c. § 661cb.',
13618:'the office of management and budget has issued detailed instructions for implementing the fcra. these instructions are now contained in',
13619:'omb circular no. a11, preparation, submission, and execution of the budget, part v, “federal credit” june 21, 2005, and omb',
13620:'circular no. a129, policies for federal credit programs and nontax receivables november 2000. the fcra applies to loan guarantee commitments',
13621:'made page 1115 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans a. post1991 guarantee commitments on',
13622:'or after october 1, 1991, with exceptions to be noted later. see 2 u.s.c. §§ 661ca and b. for accounting',
13623:'guidance concerning the fcra, see federal accounting standards advisory board, accounting for direct loans and loan guarantees, sffas no. 2',
13624:'aug. 23, 1993, as amended by sffas no. 18 may 2000.18 one of the major purposes of the federal credit',
13625:'reform act of 1990 fcra is to “measure more accurately the costs [i.e., the subsidy element, in essence] of federal',
13626:'credit programs.” 2 u.s.c. § 6611. before the budgetary and appropriations aspects of fcra can come into play, the administering',
13627:'agency, working with the office of management and budget omb, must determine the cost of its programs. the law defines',
13628:'“cost” as the “estimated longterm cost to the government . . . calculated on a net present value basis, excluding',
13629:'administrative costs and any incidental effects on governmental receipts or outlays.” id. § 661a5a. more specifically for purposes of this',
13630:'chapter, the cost of a loan guarantee is the— “net present value, at the time when the guaranteed loan is',
13631:'disbursed, of the following estimated cash flows: “i payments by the government to cover defaults and delinquencies, interest subsidies, or',
13632:'other payments; and “ii payments to the government including origination and other fees, penalties and recoveries; “including the effects of',
13633:'changes in loan terms resulting from the exercise by the guaranteed lender of an option included in the loan guarantee',
13634:'contract, or by the borrower of an option included in the guaranteed loan contract.” id. § 661a5c. 18 these documents',
13635:'are available at www.fasab.gov/codifica.html last visited september 15, 2005. page 1116 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed',
13636:'and insured loans historical experience is obviously a relevant factor in determining cost. risk assessment is also very important, and',
13637:'omb requires agencies to develop risk categories for their credit programs. omb circular no. a11, preparation, submission, and execution of',
13638:'the budget, pt. 5, “federal credit,” § 185.5a june 21, 2005. agencies should not blindly rely on historical experience when',
13639:'the risk factor has changed. see gao, sba disaster loan program: accounting anomalies resolved but additional steps would improve longterm',
13640:'reliability of cost estimates, gao05409 washington, d.c.: apr. 14, 2005; loan guarantees: export credit guarantee programs’ longrun costs are high,',
13641:'gao/nsiad91180 washington, d.c.: apr. 19, 1991, at 3. for example, it is not unreasonable to expect the default rate under',
13642:'a guaranteed student loan program to increase during a recession, resulting in a higher cost. established secondary market experience is',
13643:'also relevant in assessing risk. nsiad91180, at 15–16. developing reliable subsidy cost estimates for purposes of fcra has proven to',
13644:'be a challenging undertaking. in the 15 years since enactment of fcra, gao has issued numerous reports critiquing agency practices',
13645:'in this regard. the following are just a few of many examples: gao05409, above; credit reform: improving rural development’s credit',
13646:'program cost estimates, gao/aimd00286r washington, d.c.: aug. 22, 2000; credit reform: hud’s fiscal year 2000 credit subsidy budget estimates were',
13647:'reasonable, but could have been improved, gao/aimd0060r washington, d.c.: jan. 14, 2000; credit reform: key credit agencies had difficulty making',
13648:'reasonable loan program cost estimates, gao/aimd9931 washington, d.c.: jan. 29, 1999; and credit reform: greater effort needed to overcome persistent',
13649:'cost estimation problems, gao/aimd9814 washington, d.c.: mar. 30, 1998. while dealing primarily with one direct loan program, a recent report',
13650:'contains a useful general overview of the analytic requirements and methodologies for developing fcra cost estimates, as well as a',
13651:'glossary of relevant terms: gao, department of education: key aspects of the federal direct loan program’s cost estimates, gao01197 washington,',
13652:'d.c.: jan. 12, 2001, at 48–53 appendix i: estimating credit program costs and 60–62 glossary. the second major purpose of',
13653:'fcra is to “place the cost of credit programs on a budgetary basis equivalent to other federal spending.” 2 u.s.c.',
13654:'§ 6612. to accomplish this, 2 u.s.c. § 661cb, perhaps the key provision of fcra, provides: page 1117 gao06382sp appropriations',
13655:'law—vol. ii chapter 11 federal assistance: guaranteed and insured loans “notwithstanding any other provision of law, . . . new',
13656:'loan guarantee commitments may be made for fiscal year 1992 and thereafter only to the extent that— “1 new budget',
13657:'authority to cover their costs is provided in advance in an appropriations act; “2 a limitation on the use of',
13658:'funds otherwise available for the cost of a . . . loan guarantee program has been provided in advance in',
13659:'an appropriations act; or “3 authority is otherwise provided in appropriation acts.” thus, unless congress specifically provides otherwise, loan guarantees',
13660:'may be made only if budget authority to cover their cost has been provided in advance. the cost of a',
13661:'loan guarantee is regarded as new budget authority for the fiscal year “in which definite authority becomes available or indefinite',
13662:'authority is used.” 2 u.s.c. § 661cd1. to implement these concepts, the law defines two accounts for credit programs, a',
13663:'“program account” and a “financing account.” the program account is the budget account into which appropriations of budget authority are',
13664:'made. the financing account is a revolving, nonbudget account from which the guarantees are actually administered. it receives cost payments',
13665:'from the program account and includes all other cash flows resulting from the guarantee commitment. 2 u.s.c. §§ 661a6 and',
13666:'7. administrative expenses are required to be shown as a separate and distinct line item within the program account. id.',
13667:'§ 661cg. provisions contained in the consolidated appropriations act, 2005, pub. l. no. 108447, 118 stat. 2809 dec. 8, 2004,19',
13668:'illustrate how congress makes the appropriations contemplated by 2 u.s.c. § 661c. typically, the provisions include a specific amount for',
13669:'the loan subsidy costs and state that such costs “shall be as defined in section 502 of the congressional budget',
13670:'act,” that is, 2 u.s.c. § 661a5a, quoted previously. the 19 as its title suggests, this omnibus act incorporated the',
13671:'fiscal year 2005 appropriations acts for many federal departments and agencies. page 1118 gao06382sp appropriations law—vol. ii chapter 11 federal',
13672:'assistance: guaranteed and insured loans provisions also include a separate amount for administrative expense, as required by 2 u.s.c. §',
13673:'661cg.20 finally, the provisions frequently include a limit on the aggregate principal amount of loan guarantees. see, for example, the',
13674:'following provision: “minority business resource center program” “for the cost of guaranteed loans, $500,000, as authorized by 49 u.s.c. 332:',
13675:'provided, that such costs, including the cost of modifying such loans, shall be as defined in section 502 of the',
13676:'congressional budget act of 1974: provided further, that these funds are available to subsidize total loan principal, any part of',
13677:'which is to be guaranteed, not to exceed $18,367,000. in addition, for administrative expenses to carry out the guaranteed loan',
13678:'program, $400,000.” 118 stat. 3200. other examples of provisions taking this form appear at 118 stat. 3305 community development loan',
13679:'guarantees program account and 118 stat. 3309–10 federal housing administration’s general and special risk program account. frequently, the appropriation provisions',
13680:'include both loan guarantee programs and related direct loan programs, which are also subject to the fcra. some of these',
13681:'provisions impose separate limits for direct loans and loan guarantees. see, e.g., agricultural credit insurance fund program account 118 stat.',
13682:'2822; rural housing insurance fund program account 118 stat. 2828; small business administration’s business loans program account 118 stat. 2911.',
13683:'other provisions combine the direct and guaranteed loan programs, and occasionally other programs such as grants, under one overall subsidy',
13684:'cost cap. for example, the subsidy appropriation for export and investment assistance by the exportimport bank provides in part: “for',
13685:'the cost of direct loans, loan guarantees, insurance, and tiedaid grants as authorized by section 10 of the exportimport bank',
13686:'act of 1945, as amended, $59,800,000, 20 a very general definition of “administrative expenses” may be found in b24341, mar.',
13687:'12, 1942, at 5. for fcra purposes, see also omb cir. no. a11, § 185.3a; gao01197, at 60. page 1119',
13688:'gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans to remain available until september 30, 2008: provided,',
13689:'that such costs, including the cost of modifying such loans, shall be as defined in section 502 of the congressional',
13690:'budget act of 1974 . . .” 118 stat. 2968. in 72 comp. gen. 347, 349 1993, gao quoted from',
13691:'the legislative history of a predecessor version of this appropriation language to the effect that this language was intended to',
13692:'give the bank “the flexibility to determine, in response to demand, the appropriate mix of direct loans, guaranteed loans, tiedin',
13693:'grants, and mixed credits and insurance.” other examples of such flexible provisions can be found with respect to the renewable',
13694:'energy program 118 stat. 2831 and the development credit authority 118 stat. 2974. in addition to allowing agencies to determine',
13695:'the mix of direct and guaranteed loans, these provisions grant additional flexibility since they do not separately cap the overall',
13696:'principal amounts of direct or guaranteed loans. thus, agencies retain discretion to determine the total principal amounts assuming, of course,',
13697:'that the total amounts would not carry estimated subsidy costs exceeding the budget authority provided pursuant to section 502 of',
13698:'the congressional budget act. for loan guarantee programs, the president’s annual budget is to reflect the cost of the program',
13699:'in accordance with 2 u.s.c. § 661a5 and the planned level of new guarantee commitments. 2 u.s.c. § 661ca. congress',
13700:'then makes an appropriation to cover these costs and administrative expenses to the program account. the appropriation of costs “shall',
13701:'constitute an obligation of the credit program account to pay to the financing account.” id. § 661cd1. when a loan',
13702:'for which a guarantee commitment has been made is disbursed by the lender, the cost of the guarantee is obligated',
13703:'against the program account and transferred into the financing account. id. § 661cd2. omb circular no. a11, at §§ 185.9–185.31,',
13704:'contains detailed budget formulation, reporting, and execution instructions for federal credit programs, including loan guarantees. for example, like other forms',
13705:'of budget authority, credit program accounts and financing accounts are subject to apportionment unless exempted by statute or by omb.',
13706:'id. § 185.14. the law recognizes that estimating costs is not an exact science and that cost estimates are subject',
13707:'to change over time. accordingly, costs generally are to be reestimated annually as long as the loans are outstanding. omb',
13708:'cir. no. a11, §§ 185.3y, 185.6. see gao, sba disaster loan program: accounting anomalies resolved but additional steps page 1120',
13709:'gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans would improve longterm reliability of cost estimates, gao05409',
13710:'washington, d.c.: apr. 14, 2005, for a description of this process and issues related to the calculation of interest rates.',
13711:'if a reestimation results in an increase to the cost estimate, the law provides permanent indefinite budget authority for the',
13712:'program account. 2 u.s.c. § 661cf. the agency requests an apportionment of this indefinite authority from omb, and then records',
13713:'an obligation against the program account and pays the funds into the financing account. omb cir. no. a11, § 185.17.',
13714:'the law also provides for the treatment of “modifications.” for purposes of fcra, a modification is defined as follows: “the',
13715:'term ‘modification’ means any government action that alters the estimated cost of an outstanding direct loan or direct loan obligation',
13716:'or an outstanding loan guarantee or loan guarantee commitment from the current estimate of cash flows. this includes the sale',
13717:'of loan assets, with or without recourse, and the purchase of guaranteed loans. this also includes any action resulting from',
13718:'new legislation, or from the exercise of administrative discretion under existing law, that directly or indirectly alters the estimated cost',
13719:'of outstanding direct loans or direct loan obligations or loan guarantees or loan guarantee commitments such as a change in',
13720:'collection procedures.” 2 u.s.c. § 661a9. see also omb cir. no. a11, § 185.2. the law prohibits the modification of',
13721:'a loan guarantee commitment “in a manner that increases its costs unless budget authority for the additional cost has been',
13722:'provided in advance in an appropriations act.” 2 u.s.c. § 661ce. modifications include such things as forgiveness, forbearance, reductions in',
13723:'interest rate, prepayments without penalty, and extensions of maturity, except where permitted under an existing contract. omb cir. no. a11,',
13724:'§ 185.3r. they also include the sale of loan assets and actions resulting from new legislation, such as a statutory',
13725:'restriction on debt collection. id. as with reestimates, at the time a modification is made, the agency records an obligation',
13726:'of the estimated cost increase against the program account and pays the amount into the financing account. id. § 185.7.',
13727:'if an agency’s original cost estimates, reestimates, and modification estimates have been accurate, the balances of financing accounts for loan',
13728:'page 1121 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans guarantees should always be sufficient to',
13729:'make any required payments. however, if a balance is not sufficient, the “secretary of the treasury shall . . .',
13730:'lend to, or pay to the financing accounts such amounts as may be appropriate.” 2 u.s.c. § 661dc. the secretary',
13731:'is also authorized to borrow or receive amounts from the financing accounts. id. all of these transactions between the treasury',
13732:'and financing accounts are subject to the apportionment requirements of the antideficiency act. id. under the fcra structure as outlined',
13733:'above, there are two separate sets of “obligations”—obligations against the program account when budget authority is transferred to the financing',
13734:'account, and obligations against the financing account when claims are made for payment under a guarantee. omb circular no. a11,',
13735:'§ 145.3, identifies five actions specific to credit programs that will result in antideficiency act violations: overobligation or overexpenditure of',
13736:'the amounts appropriated or apportioned for subsidy costs. this includes a modification resulting in such an overobligation or overexpenditure. overobligation',
13737:'or overexpenditure of the credit level supported by the enacted subsidy cost appropriation. overobligation or overexpenditure of the amount appropriated',
13738:'for administrative expenses. obligation or expenditure of the expired unobligated balance of the cost appropriation, except to correct mathematical or',
13739:'data input errors in calculating subsidy amounts. however, error correction will be considered a violation if it exceeds the amount',
13740:'of the expired unobligated balance. overobligation or overexpenditure of the apportioned borrowing authority in a financing account. finally, the law',
13741:'emphasizes that the provisions of the fcra are not to be construed as changing or overriding the administering agency’s authority',
13742:'to determine the terms and conditions of eligibility for, or amount of, a loan or loan guarantee. 2 u.s.c. §',
13743:'661dg. page 1122 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans as a result of fcra,',
13744:'guarantee programs are no longer unrestricted. even if the applicable appropriation act does not explicitly set a maximum program level,',
13745:'the program level that can be supported by the enacted cost appropriation, reinforced by the antideficiency act, constitutes an effective',
13746:'ceiling. programs not governed by fcra may have their own ceilings. although a loan or guarantee may not exceed a',
13747:'statutory ceiling, it may nevertheless be possible to extend assistance if the borrower qualifies under another program. for example, in',
13748:'35 comp. gen. 219 1955, the small business administration could not make a disaster loan to a small business concern',
13749:'which had suffered damage in a flood because sba had already used up the applicable ceiling on disaster loans. however,',
13750:'it could make a business loan to the same borrower if the transaction otherwise met the criteria under sba’s business',
13751:'loan program. in addition to providing a new system for setting loan guarantee program levels, the fcra also affected other',
13752:'statutory provisions whose application is tied to such program levels. the decision in 72 comp. gen. 347 1993 provides an',
13753:'example. that decision concerned a statutory provision, 12 u.s.c. § 635b1ev, requiring the exportimport bank to “make available, from the',
13754:'aggregate loan, guarantee, and insurance authority available to it, an amount to finance exports directly by small business concerns .',
13755:'. . which shall be not less than” a specified percentage of “such authority for each fiscal year.” at the',
13756:'time of the decision the percentage was 10 percent; it is now 20 percent. prior to enactment of the fcra,',
13757:'congress had included in appropriation acts a total principal amount for annual loans and guarantees and the bank used that',
13758:'figure to determine the amount to reserve for small business concerns under the statute. however, in implementing fcra for this',
13759:'program, congress decided to include only an annual amount for the program’s subsidy cost and not to attach an overall',
13760:'limit to the principal amount of loans. under these circumstances, gao agreed with the bank’s general counsel that the bank',
13761:'could develop an estimate of the total loan amounts for a given year starting from the subsidy cost figure in',
13762:'order to apply the small business reserve: “although it is only an extrapolation from cost, the bank’s proposal to estimate',
13763:'the total projected authorizations for the year based upon the amount of subsidy appropriated appears to represent a reasonable starting',
13764:'point. as the general counsel points out, projections based on the estimated cost of loan, guarantee and insurance commitments under',
13765:'credit reform do not directly yield a figure for the bank’s available aggregate loan, guarantee, page 1123 gao06382sp appropriations law—vol.',
13766:'ii chapter 11 federal assistance: guaranteed and insured loans and insurance authority. furthermore, we have no objection to the bank,',
13767:'in addition to estimating total authorizations for the ensuing fiscal year starting with the amount of subsidy appropriated, using such',
13768:'other reasonable factors . . . as are consistent with the bank’s statutory objectives and authority.” 72 comp. gen. at',
13769:'349–50 footnote omitted. the decision went on to hold that the bank could not divert any of the small business',
13770:'reserve to other purposes if it appeared that small businesses were unlikely to use the full reserve for a given',
13771:'fiscal year. id. at 350–51. b. pre1992 commitments the treatment described above applies to loan guarantee commitments made on or',
13772:'after october 1, 1991. commitments made prior to fiscal year 1992 were made under the rules summarized in section b.1',
13773:'of this chapter. since pre1992 guarantees were not subject to any requirement to determine subsidy costs or to obtain advance',
13774:'appropriations of budget authority, they required different treatment and were addressed in separate provisions of the federal credit reform act',
13775:'of 1990 fcra. three provisions, which remain in the fcra, are particularly relevant to pre1992 commitments. first, the law establishes',
13776:'“liquidating accounts,” defined as budget accounts which include all cash flows to and from the government resulting from pre1992 commitments.',
13777:'2 u.s.c. § 661a8. second, all collections resulting from pre1992 guarantee commitments are to be credited to the liquidating account',
13778:'and are available to liquidate obligations to the same extent they were under the applicable program legislation prior to enactment',
13779:'of fcra. id. § 661fb. at least once a year, unobligated balances in the liquidating account which are in excess',
13780:'of current needs are to be transferred to the general fund of the treasury. id. third, 2 u.s.c. § 661dd1',
13781:'specifies the types of payments resulting from pre1992 commitments that can be made from liquidating accounts. paragraph 3 of subsection',
13782:'661dd provides: “if funds in liquidating accounts are insufficient to satisfy obligations and commitments of such accounts, there is hereby',
13783:'provided permanent, indefinite authority to make any payments required to be made on such obligations and commitments.” page 1124 gao06382sp',
13784:'appropriations law—vol. ii c. entitlement programs chapter 11 federal assistance: guaranteed and insured loans thus, for pre1992 guarantees which are',
13785:'liquidated in accordance with the terms of the original commitment, payment will still be made from liquidating appropriations. the main',
13786:'change under fcra is the provision of these liquidating appropriations on a permanent, indefinite basis. a “modification” to a pre1992',
13787:'loan guarantee—the term having the same meaning as described in section b.2.a of this chapter for post1991 guarantees—is treated differently.',
13788:'see omb circular no. a11, preparation, submission, and execution of the budget, pt. 5, “federal credit,” § 185.7c june 21,',
13789:'2005. a partial exemption from the federal credit reform act of 1990 fcra is found in 2 u.s.c. § 661cc,',
13790:'which provides that the requirement for the advance appropriation of budget authority to cover estimated costs does not apply to',
13791:'1 a loan guarantee program which constitutes an entitlement, or 2 programs of the commodity credit corporation existing on fcra’s',
13792:'date of enactment november 5, 1990. an entitlement program is one in which the provision of assistance is mandatory with',
13793:'respect to borrowers and lenders who meet applicable statutory and regulatory eligibility requirements. the statute gives two examples—the guaranteed student',
13794:'loan program and the veterans’ home loan guarantee program. since the exemption is from the appropriation requirement of 2 u.s.c.',
13795:'§ 661cb and not the entire act, other provisions of fcra and omb circular no. a11 presumably apply to the',
13796:'extent not inconsistent with the exemption. the prefcra rules summarized in section b.1 of this chapter form the starting point',
13797:'with respect to obligational treatment and the application of the antideficiency act. a 1985 decision, 65 comp. gen. 4, reiterated',
13798:'these rules in the context of the guaranteed student loan program. gao advised the department of education that 1 a',
13799:'guarantee itself is only a contingent liability and is not recordable as an obligation; 2 an obligation must be recorded',
13800:'upon occurrence of one of the contingencies specified in the program legislation which will require the government to honor the',
13801:'guarantee in this case, loan default or the death, disability, or bankruptcy of the borrower; and 3 the antideficiency act',
13802:'does not require that sufficient budget authority be available at the time the obligation is recorded because, by virtue of',
13803:'the requirements of the program legislation, incurring the obligation is “authorized by law” for antideficiency act purposes. for fiscal year',
13804:'2005, congress appropriated to the program account for the veterans’ home loan program, for costs as defined in fcra, “such',
13805:'sums as page 1125 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans may be necessary to',
13806:'carry out the program,” together with a definite specific dollar amount appropriation for administrative expenses.21 d. certain insurance programs another',
13807:'provision of the federal credit reform act of 1990 fcra, 2 u.s.c. § 661ea1, exempts from the entire act— “the',
13808:'credit or insurance activities of the federal deposit insurance corporation, national credit union administration, resolution trust corporation, pension benefit guaranty',
13809:'corporation, national flood insurance, national insurance development fund, crop insurance, or tennessee valley authority.” thus, to the extent the rules',
13810:'discussed in section b.1 of this chapter would apply to any of the programs conducted by these entities to begin',
13811:'with, they continue to apply unaffected by fcra. c. extension of guarantees 1. coverage of lenders initial and subsequent a.',
13812:'eligibility of lender/debt instrument program legislation may prescribe eligibility criteria for lending institutions, or may otherwise limit the types of',
13813:'lending institutions to which guarantees may be extended, either as the initial lender or as a subsequent transferee, or may',
13814:'address the manner in which the debt instrument covered by the guarantee may be treated. the safest generalization in this',
13815:'area, and the common strain throughout the cases, is that any proposed action must be consistent with the terms and',
13816:'intent of the agency’s statutory authority. 21 pub. l. no. 108447, 118 stat. 2809, 3286 dec. 8, 2004 veterans housing',
13817:'benefit program fund. the fiscal year 2005 appropriation language does include a cap on gross obligations for certain direct loans.',
13818:'page 1126 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans for example, in b194153, sept. 6,',
13819:'1979, gao considered a proposed pilot program in which the economic development administration eda, an agency within the department of',
13820:'commerce, would guarantee loans made to private borrowers by participating lending institutions, with the guaranteed portion of the loan to',
13821:'be subsequently assigned to the city of chicago and financed through the issuance of bonds. the statutory basis for the',
13822:'proposal, since repealed, authorized the secretary of commerce to guarantee up to 90 percent of the outstanding balance of loans',
13823:'for certain specified purposes “made to private borrowers by private lending institutions.” gao concluded that allowing the guarantee to be',
13824:'assigned to an entity that was neither private nor a lending institution and could not have qualified for a guarantee',
13825:'initially, would exceed eda’s statutory authority since eda would be doing something indirectly—guaranteeing a loan by a nonprivate lender—that the',
13826:'statute would not permit it to do directly. gao revisited the issue a few years later and reaffirmed the ineligibility',
13827:'of public lenders to participate as secondary market purchasers under the “private lending institution” requirement. since a secondary market purchaser',
13828:'effectively becomes the lender, it makes no difference whether sale to the public lender is contemplated from the loan’s inception',
13829:'or merely occurs in the ordinary course of secondary market operations. 61 comp. gen. 517 1982. another issue in b194153',
13830:'was whether eda could legally allow a guaranteed loan to be evidenced by two notes, one to be fully guaranteed',
13831:'and the second with no guarantee. the comptroller general found the proposed arrangement within eda’s administrative discretion under the statute',
13832:'since the twonote arrangement would still conform to the statutory requirement that no more than 90 percent of a loan',
13833:'be guaranteed and furthermore was apparently intended to effectuate the basic legislative purpose. the decision pointed out, however, that since',
13834:'the two notes represented one loan, their substantive terms such as maturity dates and interest rates must be the same,',
13835:'and the twonote mechanism must not increase the government’s potential liability. this portion of the decision was later modified in',
13836:'60 comp. gen. 464 1981, to the extent that gao approved use of a “split interest rate” in which the',
13837:'interest on the edaguaranteed note was lower than the interest rate on the nonguaranteed note. the splitinterest scheme was consistent',
13838:'with programs by other agencies under similar legislation and would be more favorable to the government. page 1127 gao06382sp appropriations',
13839:'law—vol. ii b. substitution of lender chapter 11 federal assistance: guaranteed and insured loans a related type of question arose',
13840:'under the now defunct new community development program authorized by the urban growth and new community development act of 1970.22',
13841:'the legislation authorized various forms of financial assistance to stimulate the development of new communities, including the guarantee of obligations',
13842:'of private new community developers and state development agencies. a question arose as to whether the department of housing and',
13843:'urban development was authorized or required to guarantee the indebtedness of a private developer to contractors and subcontractors who had',
13844:'supplied goods and services to the developer. finding that the intent of the program legislation was that the department guarantee',
13845:'only obligations issued to private investors, the comptroller general concluded that the department was neither required nor authorized to issue',
13846:'guarantees that would run to a developer’s contractors and subcontractors. b170971, aug. 22, 1975; b170971, july 22, 1975. as a',
13847:'general proposition, substitution of lenders is permissible as long as it is not prohibited by the program legislation or regulations',
13848:'and the “replacement lender” meets any applicable eligibility requirements. in 60 comp. gen. 700 1981, gao considered the effect of',
13849:'a change in lenders in the rural development loan guarantee program administered at that time by the then farmers home',
13850:'administration fmha.23 the program operated under an annual ceiling, and the specific question was whether a guarantee could continue to',
13851:'be charged against the ceiling for the fiscal year in which it was initially approved, when a change in lenders',
13852:'took place in a subsequent fiscal year. as to the programmatic significance of the change, the decision stated: “[t]he basic',
13853:'purpose of the fmha rural development loan guarantee program is to provide assistance to eligible borrowers to enable them to',
13854:'accomplish one or more of the statutory objectives. in other words, although the guarantee is extended to the lender, it',
13855:'is clear that the purpose of doing so is not to provide a federal benefit to the lending 22 pub.',
13856:'l. no. 91609, title vii, 84 stat. 1770, 1791 dec. 31, 1970. 23 the department of agriculture’s farm service agency',
13857:'now has administrative responsibility for the programs formerly carried out by the farmers home administration. see 7 u.s.c. §§ 6932a',
13858:'and b3. page 1128 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans c. existence of valid',
13859:'guarantee institution but to induce the lender to make the loan to the borrower. in this sense, the lender is',
13860:'just a conduit or funding mechanism through which fmha provides assistance to an eligible borrower so that the statutory objectives',
13861:'can be realized. thus, the particular lender involved is of relatively little consequence.” id. at 708–09. therefore, the decision held',
13862:'that where a guarantee is charged against the ceiling for a particular fiscal year, it can continue to be charged',
13863:'against the same ceiling notwithstanding a substitution of lenders in a subsequent fiscal year, provided that the other relevant terms',
13864:'of the agreement borrower, loan purpose, and loan terms remain substantially the same. id. at 709. the statement that the',
13865:'particular lender is of little consequence presumes, as was in fact the case, that the program legislation does not contain',
13866:'any specific eligibility requirements for lenders. any such requirements for example, the “private lender” requirement in the economic development administration',
13867:'cases discussed in section c.1.a of this chapter would of course have to be followed. in order for a loan',
13868:'guarantee commitment to be valid and hence binding on the government, the government official making the commitment must be authorized',
13869:'to do so, and the guarantee must be made to an eligible lender extending credit to an eligible borrower for',
13870:'an authorized purpose. questions as to whether a valid guarantee was ever created often do not arise until the lender',
13871:'calls upon the government to pay under the guarantee. the answer depends on the program statute and regulations, the terms',
13872:'of the guarantee instrument, and the conduct of the parties. in 54 comp. gen. 219 1974, gao considered the authority',
13873:'of the small business administration sba to reimburse three different lenders. in each case, the borrower had applied to sba',
13874:'for financial assistance, the lender at the request or with the approval of an sba official had provided interim funds',
13875:'to the borrower, but, for various reasons, the financial assistance was ultimately not extended. in the first case, an sba',
13876:'official who was authorized to approve loan guarantees advised the bank in writing that the guarantee had been approved. sba',
13877:'subsequently issued a formal loan authorization, but later canceled it because the bank did not comply with all of the',
13878:'terms and conditions of the guarantee agreement, one of which was that the bank disburse the loan within 3 months.',
13879:'although the initial written approval created a valid guarantee, the bank’s noncompliance caused it to lapse. page 1129 gao06382sp appropriations',
13880:'law—vol. ii chapter 11 federal assistance: guaranteed and insured loans therefore, sba was not obligated to purchase the interim note,',
13881:'that is, to reimburse the bank for the advance. in the second case, an authorized sba official had similarly advised',
13882:'the bank in writing that the guarantee had been approved. here, however, sba subsequently determined that the borrower was not',
13883:'eligible for the guarantee, and therefore never issued a formal loan authorization. since the bank relied on the prior approval',
13884:'and was not legally required to comply with the conditions of the guarantee agreement such as payment of the guarantee',
13885:'fee until sba issued the formal authorization, the bank was entitled to reimbursement for the interim loan. in the third',
13886:'case, sba had formally approved a direct loan to a borrower and had issued a written loan authorization. because of',
13887:'its inability to immediately disburse the funds, sba requested a private lender to disburse the funds on an interim basis,',
13888:'with sba’s assurance of repayment. sba later refused to disburse the loan funds because the borrower had disappeared and his',
13889:'business had become defunct. under the circumstances, sba’s written commitment to reimburse the lender did constitute sba’s “guarantee” of any',
13890:'advances the lender made in reasonable and justified reliance on it. therefore, even though the direct loan by sba was',
13891:'never disbursed, sba was authorized to reimburse the lender. the decision discussed two earlier cases—b178250, aug. 6, 1973, and b164162,',
13892:'sept. 20, 1968—involving direct rather than guaranteed loans. gao had concluded in these cases that, under the specific circumstances involved,',
13893:'sba could not reimburse a lender for losses suffered on interim disbursements made after sba had authorized loans to the',
13894:'borrower. in both cases, the claimant bank was unable to adequately establish that any sba official had made a promise',
13895:'or commitment on which the bank could justifiably rely. essentially, the primary theory of recovery in all of these cases,',
13896:'although not specifically identified as such, was estoppel—conduct by the government sufficient to later preclude it from denying the existence',
13897:'of a valid guarantee.24 several similar cases specifically raised the estoppel 24 as discussed later in this section, the continued',
13898:'viability of these cases is questionable in light of subsequent judicial decisions—particularly office of personnel management v. richmond, 496 u.s.',
13899:'414 1990. page 1130 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans theory. for example, the',
13900:'issue in b187445, jan. 27, 1977, was whether sba was legally obligated for a $10,000 loss suffered by a bank',
13901:'on a loan made to a small business contractor under section 8a of the small business act, 15 u.s.c. §',
13902:'637a. the bank alleged that the loan was made on the basis of assurances from an sba official that the',
13903:'loan would be guaranteed. gao found, however, that the loan was not in fact guaranteed since it was never approved',
13904:'in writing as required by the applicable provision in the guarantee agreement between sba and the bank. also, sba had',
13905:'no liability to the bank under an estoppel theory since the bank was aware that the sba official involved lacked',
13906:'authority to approve a loan guarantee or otherwise assure the bank of repayment. further, the bank could not demonstrate that',
13907:'it had made the loan primarily in reliance on the alleged misrepresentations. in another 1977 case, a bank argued that',
13908:'sba was liable under an estoppel theory to reimburse the bank for a loss suffered as a result of sba’s',
13909:'approval of a direct disaster loan to the borrower. however, the facts did not support an estoppel since sba made',
13910:'no misrepresentations to the bank, and the bank did not make the loan in reliance on the representations that sba',
13911:'did make. b181432, feb. 4, 1977. a somewhat similar case involving the former farmers home administration denied the claim of',
13912:'a creditor who alleged that he had advanced supplies and services to a borrower on the basis of assurances from',
13913:'a farmers home employee that the borrower’s obligation would be guaranteed by the government. since the regulations then expressly prohibited',
13914:'employees from guaranteeing repayment of nonfarmers home administration loans, either personally or on behalf of the government, the creditor was',
13915:'necessarily on notice of the employee’s lack of authority to make such assurances. b168300, dec. 4, 1969; b168300, dec. 3,',
13916:'1969. another estoppel case is b198310, apr. 23, 1981. sba had sent a letter to a borrower confirming approval of',
13917:'a direct handicapped assistance loan. allegedly in reliance on this letter, the claimant bank advanced funds to the borrower. sba',
13918:'then issued its formal loan authorization, but canceled it shortly thereafter based on the borrower’s failure to disclose all pertinent',
13919:'information on its loan application. the bank sought reimbursement on a theory of “promissory estoppel.” the comptroller general held that',
13920:'sba was under no obligation to reimburse the bank for two reasons. first, sba’s letter had been to the borrower,',
13921:'not to the bank. thus, sba had made no representations to the bank. second, the bank’s reliance on the letter',
13922:'was not reasonable because the letter contained no mention of the possibility that the loan might be used to obtain',
13923:'interim financing nor did page 1131 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans the bank',
13924:'attempt to obtain any assurance from sba that the borrower would be required to use the proceeds of the sba',
13925:'loan to repay the interim loan. the existence of a valid guarantee also was an issue in 60 comp. gen.',
13926:'700 1981 in a different context. the then farmers home administration regulations required written notification to the lender of the',
13927:'approval or disapproval of a guarantee application. based on these regulations, and citing b187445, jan. 27, 1977, discussed above, gao',
13928:'concluded that oral notification of a loan guarantee approval was not sufficient to create a valid guarantee for purposes of',
13929:'charging that guarantee against the annual ceiling. 60 comp. gen. at 709–10. as the more recent decisions described above indicate,',
13930:'estoppel claims against the government can rarely succeed. even those few earlier cases in which gao has sanctioned them would',
13931:'have to be reassessed before being used as precedent in light of the supreme court’s decision in office of personnel',
13932:'management v. richmond, 496 u.s. 414 1990, which held that estoppel against the government requires, in addition to the traditional',
13933:'elements such as reasonable and detrimental reliance, a showing of affirmative misconduct on the part of government officials.25 a fairly',
13934:'recent judicial decision involving an sba loan guarantee, frillz, inc. v. lader, 104 f.3d 515 1st cir., cert. denied, 522',
13935:'u.s. 813 1997, illustrates this point. the sba approved a loan guarantee authorization for frillz that contained a clause requiring',
13936:'receipt by the lender of “evidence satisfactory to it [the lender] in its sole discretion” that there had been no',
13937:'unremedied adverse change in condition subsequent to authorization that would warrant not disbursing the loan. frillz suffered temporary business losses',
13938:'between the time of the authorization and the scheduled loan disbursement. the lender determined that the problem had been sufficiently',
13939:'resolved and was prepared to go ahead with the loan. however, sba disagreed and declined to approve disbursement of the',
13940:'loan. frillz then sued sba for breach of contract on the basis that the guarantee authorization gave the lender—not sba—sole',
13941:'discretion to determine whether there was an unremedied adverse change. the court ruled in favor of sba, holding that, under',
13942:'the applicable program regulations, the sba official who signed the guarantee authorization could not delegate the 25 estoppel claims arise',
13943:'in many contexts and are discussed further in chapter 12 in volume iii of the second edition of principles of',
13944:'federal appropriations law. page 1132 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans determination regarding unremedied',
13945:'changes to the lender; thus, the clause was ineffective. frillz, inc., 104 f.3d at 517–18.26 the court also rejected frillz’s',
13946:'estoppel argument: “a party seeking to invoke equitable estoppel against the federal government at a minimum must have reasonably relied',
13947:'on some affirmative misconduct attributable to the sovereign. passing the point that even such reliance may be insufficient, there is',
13948:'absolutely no evidence of affirmative misconduct by the sba which might arguably be sufficient to support an estoppel claim against',
13949:'the government in this case.” id. at 518 citations and internal quotation marks omitted. wells fargo bank n.a. v. united',
13950:'states, 88 f.3d 1012 fed. cir. 1996, cert. denied, 520 u.s. 1116 1997 is also relevant to the issue of',
13951:'whether a valid guarantee exists. while not an estoppel case, wells fargo involves facts somewhat similar to those in the',
13952:'frillz case, discussed above. in wells fargo, officials of the then farmers home administration fmha issued a “conditional commitment” to',
13953:'guarantee a loan for construction of an ethanol plant under 7 u.s.c. § 1932 and another statute designed to promote',
13954:'biomass energy projects.27 among the conditions was a requirement that before the guarantee was issued— “the lender certif[y] that it',
13955:'has no knowledge of any adverse change, financial or otherwise, in the borrower, his business, or any parent, subsidiaries, or',
13956:'affiliates since it requested a loan note guarantee.” wells fargo, 88 f.3d at 1020. while wells fargo provided this certification,',
13957:'fmha determined that adverse changes had occurred and refused to issue the guarantee. the court ruled in favor of wells',
13958:'fargo in its breach of 26 the court noted that, pursuant to a statutory authorization, sba had delegated certain creditworthiness',
13959:'determinations to lenders in its “preferred lenders program”; however, the lender in this case was not in that program. the',
13960:'preferred lenders program is discussed in gao, small business administration: progress made but improvements needed in lender oversight, gao0390 washington,',
13961:'d.c.: dec. 9, 2002, and in b300248, jan. 15, 2004. 27 the biomass energy and alcohol fuels act of 1980,',
13962:'pub. l. no. 96294, title ii, 94 stat. 611, 683 june 30, 1980. page 1133 gao06382sp appropriations law—vol. ii chapter',
13963:'11 federal assistance: guaranteed and insured loans contract suit, holding that the conditional commitment constituted a unilateral contract on the',
13964:'part of the government contingent upon satisfaction of its conditions, and that all of the conditions were, in fact, satisfied.',
13965:'the court rejected several arguments advanced by fmha to the effect that the conditional commitment was not legally binding: “the',
13966:'government . . . argues that no contract was formed because ‘[u]nder [administration] regulations, no government official, not even one',
13967:'having authority to sign the guarantee at the proper time, had the authority to bind the united states to a',
13968:'loan note guarantee prior to compliance with all the regulatory requirements for issuance of a loan note guarantee.’ as the',
13969:'court of federal claims correctly stated, however, ‘the issue at this point is not whether these officials had the authority',
13970:'to grant a guarantee, but whether these officials had the authority to obligate the [administration] to a conditional commitment.’ .',
13971:'. . administration officials were authorized to execute conditional commitments under the regulations implementing the business and industrial loan guarantee',
13972:'program. . . . that the guarantee could not finally be executed until the conditions were fulfilled is irrelevant in',
13973:'determining the validity of the conditional commitment. “although administration regulations characterize the conditional commitment as mere ‘advice’ to the lender',
13974:'. . . the document itself shows that the government is making a binding promise: “[t]he united states of america',
13975:'acting through the farmers home administration fmha hereby agrees that . . . it will execute forms fmha 44934 ‘loan',
13976:'note guarantee’ subject to the conditions and requirements specified in said regulations and below.” wells fargo, 88 f.3d at 1018–19.',
13977:'further, the court concluded that the adverse changes asserted by the government were beyond the scope of those covered by',
13978:'the conditions set forth in the commitment. id. at 1020–21. page 1134 gao06382sp appropriations law—vol. ii chapter 11 federal assistance:',
13979:'guaranteed and insured loans d. small business investment companies a “small business investment company” sbic is a private company organized',
13980:'under the small business investment act of 1958, as amended 15 u.s.c. §§ 661–697g, and licensed by the small business',
13981:'administration sba. its purpose is to provide financial assistance to small business concerns. for background, see gao, small business: update',
13982:'of information on sba’s small business investment company programs, gao/rced9755 washington, d.c.: feb. 21, 1997. a series of decisions in',
13983:'the 1960s upheld sba’s authority to provide various forms of financial assistance to sbics. first, sba may guarantee loans made',
13984:'to sbics by private financial institutions. 42 comp. gen. 146 1962. while the guarantee authority was not explicit at the',
13985:'time of the 1962 decision, it was later added and is now found at 15 u.s.c. § 683. sba also',
13986:'has “secondary guarantee” authority, authority to sell to private investors, with recourse sba’s guarantee, debt instruments representing loans sba had',
13987:'made to sbics. 44 comp. gen. 549 1965. the proposal considered in 44 comp. gen. 549 involved loans with a',
13988:'maturity of 5 or 6 years. later that same year, sba proposed extending its program to loans with 15year maturities.',
13989:'gao again approved, noting that the difference in maturity did not affect the basic authority. 45 comp. gen. 253 1965.',
13990:'the 15year period also is now specified in 15 u.s.c. § 683g1. see also 45 comp. gen. 370 1965 same',
13991:'holding for similar program under different provision of small business investment act. the comptroller general concluded further in 45 comp.',
13992:'gen. 253 that sba could make the sales through an agent or broker with reasonable compensation if administratively determined to',
13993:'be necessary or more economical. however, the broker’s compensation may not be paid from the proceeds of the loan sales',
13994:'but must be charged to sba’s appropriation for administrative expenses. a small business investment company may be either a corporation',
13995:'or a limited partnership. 15 u.s.c. § 681a. the scope of authorized sba assistance includes nonrecourse loans to a limited',
13996:'partnership sbic by purchasing or guaranteeing its debentures. b149685, jan. 12, 1978. nonrecourse in this context means that sba would',
13997:'“waive” its right to recover, provided under the laws of most states, against the separate assets of the general partner.',
13998:'in b149685, mar. 25, 1971, gao considered sba’s authority to sell guaranteed sbic debentures to a group of underwriters for',
13999:'resale to private investors. under this program, sba would first purchase page 1135 gao06382sp appropriations law—vol. ii chapter 11 federal',
14000:'assistance: guaranteed and insured loans $30 million of newly issued debentures from sbics and then immediately sell them to private',
14001:'investors, with sba’s guarantee of payment of principal and interest according to the terms of the instrument. sba would act',
14002:'as servicing agent for the holders, receiving payment on the debentures from the sbics and then paying the holders in',
14003:'accordance with the terms of the debentures. the comptroller general concluded that the proposed sale and guarantee of debentures in',
14004:'this manner was within the scope of sba’s statutory authority, provided sba did not exceed any existing statutory program level',
14005:'limitations. see also b149685, june 3, 1969. another issue is whether a small business investment company is eligible to participate,',
14006:'as a lending institution, in a government guaranteed loan program. in 49 comp. gen. 32 1969, the comptroller general held',
14007:'that sbics were not eligible lenders for purposes of sba’s guaranteed loan program under section 7a of the small business',
14008:'act, 15 u.s.c. § 636a. the decision relied heavily on the legislative history of the small business investment act. some',
14009:'years later, gao again considered the eligibility of sbics to be guaranteed lenders in sba’s section 7a guaranteed loan program',
14010:'as well as the then farmers home administration’s business and industrial loan program 7 u.s.c. § 1932. sba’s new proposal',
14011:'was somewhat different from the arrangement considered in 49 comp. gen. 32, because after originating the loan, the sbic would',
14012:'then immediately sell the guaranteed portion to another lending institution and remain the servicing agent. gao’s conclusion remained the same,',
14013:'again based on the legislative history of the small business investment act which indicated that congress intended sbics to operate',
14014:'independently of other federal loan programs. with respect to the then farmers home administration program, nothing in either the small',
14015:'business investment act or the applicable program statute or their legislative histories supported a different conclusion. 56 comp. gen. 323',
14016:'1977. one type of small business investment company is the “minority enterprise small business investment company,” or “mesbic.” as the',
14017:'name implies, an mesbic is a small business investment company formed to aid minorityowned small businesses. in 59 comp. gen.',
14018:'635 1980, aff’d on reconsideration, b197439, nov. 26, 1980, gao considered sba’s authority to “leverage” against federal funds invested in',
14019:'mesbics. “leveraging” means investing on a partial matching basis through the purchase or guarantee of debentures or the purchase of',
14020:'preferred securities. the specific issue was whether sba could leverage against federal railroad page 1136 gao06382sp appropriations law—vol. ii chapter',
14021:'11 federal assistance: guaranteed and insured loans e. the federal financing bank administration investments in mesbics. since the small business',
14022:'investment act authorizes sba to leverage only against private money, the decision concluded that, absent specific statutory authority, sba could',
14023:'not leverage against federal funds invested in mesbics. the mesbics took the case to court, arguing that “private” meant simply',
14024:'“nonsba.” based on the plain meaning of the statutory language, the court agreed with gao. inner city broadcasting corp. v.',
14025:'sanders, 733 f.2d 154 d.c. cir. 1984. “[p]rivate means private and not governmental.” id. at 157. gao and the court',
14026:'had both recognized that leveraging against other federal funds would be permissible if authorized by the statute under which those',
14027:'other funds were provided. one such example is community development block grant funds provided under title i of the housing',
14028:'and community development act of 1974, as amended, 42 u.s.c. §§ 5301–5321. see 60 comp. gen. 210 1981. the federal',
14029:'financing bank was created by the federal financing bank act of 1973.28 its purpose is to coordinate federal credit programs',
14030:'with overall government economic and fiscal policies. it is a corporate instrumentality of the united states government, subject to the',
14031:'general direction and supervision of the secretary of the treasury. 12 u.s.c. § 2283. the bank acts essentially as an',
14032:'intermediary. its powers include purchasing agency debt securities and federally guaranteed borrowings. specifically, it is authorized by 12 u.s.c. §',
14033:'2285a to— “purchase and sell on terms and conditions determined by the bank, any obligation which is issued, sold, or',
14034:'guaranteed by a federal agency. any federal agency which is authorized to issue, sell, or guarantee any obligation is authorized',
14035:'to issue or sell such obligations directly to the bank.” the bank obtains funds by issuing its own securities, almost',
14036:'entirely to the treasury. id. §§ 2288b, c. the decisions summarized below illustrate the varying roles the bank plays in',
14037:'the credit financing arena. in 58 comp. gen. 138 1978, gao considered the small business administration’s sba authority to issue',
14038:'certificates to the federal 28 pub. l. no. 93224, 87 stat. 937 dec. 29, 1973, codified at 12 u.s.c. §§',
14039:'2281–2296. page 1137 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans financing bank evidencing transfer of',
14040:'title of a number of individual loans and setting forth sba’s guaranteed assurance of payment, either in cash or by',
14041:'loan substitution. even though this arrangement contemplated the sale of certificates evidencing ownership of a group of sba loans rather',
14042:'than individual loans, it was sufficiently similar to the arrangement upheld in b149685, mar. 25, 1971, discussed above in connection',
14043:'with small business investment companies sbics, and was therefore permissible. since the certificate did refer to specific loans and, when',
14044:'transferred to the bank, would represent a transfer of ownership of the loans to the bank, the plan would not',
14045:'constitute borrowing by sba, which would have required specific statutory authority.29 the same decision, while noting that sba’s authority to',
14046:'sell loans to the federal financing bank with its guarantee was “neither greater nor less” than its authority to sell',
14047:'loans to other purchasers 58 comp. gen. at 139, nevertheless concluded that sba lacked the authority to sell direct disaster',
14048:'loans 15 u.s.c. § 636b to the federal financing bank on a guaranteed basis. although sba does have authority to',
14049:'guarantee disaster loans made to eligible borrowers by participating lending institutions, it is not authorized, in the absence of specific',
14050:'statutory authority or a clear expression of congressional intent, to sell and guarantee disaster loans that it had originally made',
14051:'directly. since there was at the time no statutory ceiling on the type of loans in question, the proposal would',
14052:'enable sba to “replenish its disaster loan revolving fund so as to enable it to make new disaster loans and',
14053:'repeat the process indefinitely,” potentially resulting in an unlimited contingent liability against the united states with no congressional restraint. 58',
14054:'comp. gen. at 146. in addition, the proposal contemplated a 100 percent guarantee which would have violated the statutory 90',
14055:'percent maximum guarantee of disaster loans. another case involving the federal financing bank as “guaranteed lender” is b162373o.m., july 31,',
14056:'1979, finding that an agreement between the department of agriculture, acting through the then rural electrification administration,30 and the bank',
14057:'by which the bank made loans to borrowers that the department guaranteed under the authority of section 306 of the',
14058:'rural electrification act of 1936 7 u.s.c. § 936, was within the statutory 29 sba now has such borrowing authority',
14059:'in 15 u.s.c. § 633c5. 30 the department’s rural utilities service now performs the functions formerly carried out by the',
14060:'rural electrification administration. see 7 u.s.c. § 6942. page 1138 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and',
14061:'insured loans authority of both agencies. the legality of the arrangement was considered from the perspectives both of the department’s',
14062:'authority to guarantee loans made by a nonprivate entity such as the bank and of the bank’s authority to act',
14063:'as the initial lender, making loans directly to a private nongovernmental borrower with the department’s guarantee. since the department has',
14064:'authority to guarantee loans made by “any legally organized lending agency,” it could guarantee loans made by the federal financing',
14065:'bank. at the same time, the bank was acting within its statutory authority to purchase obligations guaranteed by a federal',
14066:'agency, since the transaction was in the form of its purchasing the borrower’s note from the borrower with payment being',
14067:'guaranteed by the department. although the arrangement was legal, gao was critical because it did not involve the private credit',
14068:'sector in the rea program as contemplated by the rural electrification act. see gao, financing rural electric generating facilities: a',
14069:'large and growing activity, ced8114 nov. 28, 1980, at 16–17. congress subsequently confirmed the above arrangement by amending 7 u.s.c.',
14070:'§ 936 to provide that the loans, upon request of the borrower, “shall be made by the federal financing bank.”',
14071:'under the statute, loan servicing is the responsibility of the lender. thus, the department’s funds are available to perform the',
14072:'loan servicing function as the bank’s agent only on a reimbursable basis. 62 comp. gen. 309 1983. two 1987 opinions',
14073:'discussed the federal financing bank’s role in the foreign military sales program. as described in these opinions, the bank finances',
14074:'credit sales under the arms export control act, 22 u.s.c. §§ 2751–2799aa2, with the loans being guaranteed by the defense',
14075:'security assistance agency dsaa. if the debtor nation defaults, dsaa pays the bank. one opinion concluded that the bank is',
14076:'not authorized to deliberately delay making demand on dsaa for payment upon default. b226718.2, aug. 19, 1987. the second advised',
14077:'that two refinancing options under consideration, one involving prepayment without penalty and one involving the partial capitalization of interest, would',
14078:'result in a financial loss to the united states or the substantial risk of one and should not be implemented',
14079:'without clear evidence of congressional approval. 66 comp. gen. 577 1987. congress subsequently approved a prepayment option. see gao, security',
14080:'assistance: foreign military sales debt refinancing, gao/nsiad89175 washington, d.c.: aug. 16, 1989; federal financing bank: the government incurred a cost',
14081:'of $2 billion on loan prepayments, gao/afmd8959 washington, d.c.: aug. 22, 1989. page 1139 gao06382sp appropriations law—vol. ii chapter 11',
14082:'federal assistance: guaranteed and insured loans in two later opinions, gao held that the federal financing bank was an appropriate',
14083:'source of financing for the federal triangle international cultural and trade centerfederal office building now known as the reagan building',
14084:'since this was fundamentally a project being constructed by the federal government. b248647, dec. 28, 1992, aff’d, b248647.2, apr. 24,',
14085:'1995. a 1985 transaction illustrates a very different role for the bank. in october 1985, the treasury department had reached',
14086:'its statutory public debt ceiling and was in danger of defaulting on its obligations pending congressional action to raise the',
14087:'ceiling. the bank effectively borrowed $5 billion from the civil service retirement and disability fund by issuing securities to the',
14088:'fund and accepting treasury obligations in payment. the bank then used these securities to prepay part of its outstanding debt',
14089:'to treasury. this in turn reduced treasury’s outstanding debt, enabling it to borrow an additional $5 billion from the public',
14090:'to meet its obligations. based on the bank’s statutory authority and the conclusion that its obligations do not count against',
14091:'the public debt limit set by 31 u.s.c. § 3101b, the comptroller general found the transaction legally unobjectionable. b138524, oct.',
14092:'30, 1985. the justice department’s office of legal counsel cited the above 1985 gao opinion in affirming the legality of',
14093:'similar transactions by the bank that were designed to free up room under the debt limit. memorandum for the general',
14094:'counsel, department of the treasury, transactions between the federal financing bank and the department of the treasury, olc opinion, feb.',
14095:'13, 1996. among the transactions this opinion approved was the bank’s sale of loan assets evidencing debts by the postal',
14096:'service and the tennessee valley authority to the civil service retirement and disability fund in exchange for united states debt',
14097:'obligations. for further information on these transactions, see gao, debt ceiling: analysis of actions during the 1995–1996 crisis, gao/aimd96130 washington,',
14098:'d.c.: aug. 30, 1996. for a description of more recent transactions along these lines, see gao, debt ceiling: analysis of',
14099:'actions taken during the 2003 debt issuance suspension period, gao04526 washington, d.c.: may 20, 2004, at 25–30. when the federal',
14100:'financing bank was first created, its transactions were entirely offbudget. 12 u.s.c. § 2290c “receipts and disbursements of the bank',
14101:'. . . shall not be included in the totals of the budget of the united states government”. with the',
14102:'budget reforms of the congressional budget act and subsequent legislation, this treatment came under page 1140 gao06382sp appropriations law—vol. ii',
14103:'chapter 11 federal assistance: guaranteed and insured loans increasing criticism and gao, among others, recommended that bank transactions involving other',
14104:'government entities be reflected in the budget. e.g., 58 comp. gen. 138, 142–44 1978; gao, government agency transactions with the',
14105:'federal financing bank should be included on the budget, pad7770 aug. 3, 1977. see also b178726, sept. 16, 1976 pointing',
14106:'out that purchase by the bank of a loan guaranteed by another agency amounts to a direct loan. while not',
14107:'amending the federal financing bank act itself, congress in 1985 added 2 u.s.c. § 655b to the congressional budget act:',
14108:'“all receipts and disbursements of the federal financing bank with respect to any obligations which are issued, sold, or guaranteed',
14109:'by a federal agency shall be treated as a means of financing such agency for purposes of section 1105 of',
14110:'title 31, united states code [submission of president’s budget] and for purposes of [the congressional budget] act.” under this provision,',
14111:'direct loans of the bank are accounted for as loans of the guaranteeing agency. see b226718.2, aug. 19, 1987. 2.',
14112:'coverage of borrowers a. eligibility of borrowers loan guarantee program legislation may or may not establish criteria for lender eligibility;',
14113:'it will almost invariably address borrower eligibility. this is because the primary purpose of a guarantee program is to enhance',
14114:'credit availability to a particular class of borrowers farmers, veterans, small businesses, etc.. the significance of any such eligibility requirements',
14115:'is that an agency is not authorized to issue a guarantee or reimburse a lender on behalf of an ineligible',
14116:'borrower. for example, one portion of the national housing act, 12 u.s.c. § 1703, authorizes the insurance of loans made',
14117:'to finance repairs or improvements to real property by owners or lessees. under this statute, it is the lending institution’s',
14118:'responsibility to determine borrower eligibility. thus, a lending institution making a loan to someone who is neither the owner nor',
14119:'the lessee of the property involved is not entitled to be reimbursed for losses resulting from borrower default. b180015, nov.',
14120:'28, 1973; b174739, jan. 19, 1972. page 1141 gao06382sp appropriations law—vol. ii b. substitution of borrowers chapter 11 federal assistance:',
14121:'guaranteed and insured loans while most eligibility requirements are found in the program statute itself, they may appear in other',
14122:'legislation. for example, the military selective service act provides that any person who is required to register for the draft',
14123:'and knowingly and willfully fails to do so shall be ineligible for guaranteed student loan assistance. 50 u.s.c. app. §',
14124:'462f. the department of education is authorized to issue implementing regulations, discussed in b210733, feb. 25, 1983. generally, the substitution',
14125:'of borrowers within the same fiscal year will not present problems. however, as with contracts and grants, the substitution may',
14126:'or may not be proper when made in a subsequent fiscal year. loan guarantee authority—whether it is an advance appropriation',
14127:'of budget authority under the federal credit reform act or a program level ceiling in a situation not governed by',
14128:'the credit reform act—is granted on an annual, multiple year, or noyear basis. it thus has a period of availability',
14129:'analogous to a regular appropriation. where the period of availability is a fixed time period, the authority ceases to be',
14130:'available when that period expires. the issue in b164031.5, june 25, 1976, was the transferability of a loan guarantee and',
14131:'interest subsidy originally approved under a program of federal assistance for the construction and modernization of hospitals. the question was',
14132:'whether the guarantee could be transferred from one hospital to another in the following fiscal year, when the original hospital',
14133:'became unable to take advantage of the guarantee due to apparent financial difficulties. the comptroller general found that, since the',
14134:'period of availability of the guarantee authority had expired, the transfer would be authorized only if it could be viewed',
14135:'as a “replacement.” since the second hospital did not serve the same community as the first, the transfer of the',
14136:'loan guarantee to the new “borrower” was not merely a “replacement” and therefore could not be approved. a few years',
14137:'later, the then farmers home administration asked whether it could continue to charge a guarantee to the annual ceiling for',
14138:'the fiscal year in which it was originally approved when a new borrower was substituted in a later fiscal year.',
14139:'as a general rule, the answer is no, and the substitution would have to be treated as a new undertaking.',
14140:'this is different from the substitution of lenders discussed previously in this chapter because the approval of a guaranteed loan',
14141:'to a particular borrower requires a specific eligibility determination. thus, while the identity of the particular lender may be of',
14142:'relatively little consequence, the identity and eligibility of the borrower are essential to the transaction. however, the page 1142 gao06382sp',
14143:'appropriations law—vol. ii c. loan purpose chapter 11 federal assistance: guaranteed and insured loans substitution may be treated as a',
14144:'continuation of the original guarantee where the substituted borrower bears a “close and genuine relationship” to the originally approved borrower',
14145:'for example, a corporation and partnership controlled by the same individuals, provided of course that the loan purpose remains substantially',
14146:'unchanged. 60 comp. gen. 700, 707 1981.31 the authority to make a loan guarantee commitment depends not only on the',
14147:'eligibility of the particular borrower, but also on whether the purpose for which the guaranteed loan is to be made',
14148:'is consistent with the applicable program statute and regulations. the analysis is essentially an application of the “necessary expense” doctrine',
14149:'used in other purpose availability contexts. a number of illustrative cases have arisen under section 301 of the defense production',
14150:'act of 1950, 50 u.s.c. app. § 2091, which authorizes loan guarantees to finance the performance of contracts where deemed',
14151:'“necessary to expedite or expand production and deliveries or services under government contracts for the procurement of industrial resources or',
14152:'critical technology items essential to the national defense . . . .” id. § 2091a1. for example, b115791o.m., sept. 3,',
14153:'1953, concluded that section 301, ordinarily used to provide shortterm working capital, could also be used to guarantee loans for',
14154:'the expansion of plant facilities if determined necessary to expedite production and deliveries or services under defense contracts. contracts to',
14155:'purchase equipment for civil defense stockpiling purposes may be regarded as contracts for the national defense and therefore eligible for',
14156:'loan guarantees under section 301. 37 comp. gen. 417 1957. the issue in that case was whether a 1953 amendment',
14157:'to the act, which narrowed the definition of “national defense,” had the effect of excluding civil defense which clearly would',
14158:'have been covered before the amendment. gao found no evidence of congressional intent to exclude civil defense, and concluded therefore',
14159:'that the loans could be guaranteed. while section 301 was intended primarily to assist small and mediumsize defense contractors, its',
14160:'language is not so limited and is sufficiently broad 31 both 60 comp. gen. 700 and b1640315 applied the basic',
14161:'principles of decisions on the substitution of grantees discussed in chapter 10. page 1143 gao06382sp appropriations law—vol. ii chapter 11',
14162:'federal assistance: guaranteed and insured loans to permit guarantees to largesize defense contractors as well. b170109, july 21, 1970 large',
14163:'railroad carrier. gao considered a different loan guarantee program in 38 comp. gen. 640 1959. the question in that case',
14164:'was whether the then civil aeronautics board, under a statute authorizing the guarantee of aircraft purchase loans, could guarantee the',
14165:'indebtedness of an air carrier for the conversion of an existing aircraft. the case involved the conversion of piston engine',
14166:'aircraft to turbopowered aircraft. gao found that the conversion was such an extensive modification as to amount to a new',
14167:'type of aircraft for all practical purposes. also, it was clear that if the manufacturer had performed the conversion and',
14168:'then sold the converted aircraft to the carrier, the purchase would have been eligible for the guarantee. the conversion was',
14169:'therefore within the statutory purpose and the guarantee was authorized. an analogous situation occurred in 34 comp. gen. 392 1955,',
14170:'involving the maritime administration’s ship mortgage insurance authority under the merchant marine act of 1936, as amended, 46 u.s.c. app.',
14171:'§§ 1271–1275. noting that purchase plus reconstruction was the equivalent of new construction for purposes of the program, the comptroller',
14172:'general held that the insurance could extend to the purchase money mortgage and reconstruction costs for a vessel acquired by',
14173:'purchase in this case from the government instead of under a construction contract. this decision was amplified in 35 comp.',
14174:'gen. 18 1955, which held that the maritime administration could insure a secondlien reconstruction mortgage to a private lending institution',
14175:'where the firstlien purchase money mortgage was held by the united states. there was nothing in the statute limiting the',
14176:'insurance authority to firstlien mortgages. the department of agriculture’s rural electrification financial assistance programs have generated a number of purposerelated',
14177:'cases. generally, the department may make direct loans and loan guarantees to finance rural electrification facilities for persons not already',
14178:'receiving central station service. see 7 u.s.c. §§ 901–950bb.32 32 the department of agriculture used to conduct these programs through',
14179:'the now defunct rural electrification administration; thus, the decisions discussed here refer to that entity. the department’s rural utility service',
14180:'now administers these programs. for recent background on the programs, see gao, rural utilities service: opportunities to better target assistance',
14181:'to rural areas and avoid unnecessary financial risk, gao04647 washington, d.c.: june 18, 2004. page 1144 gao06382sp appropriations law—vol. ii',
14182:'d. change in loan purpose chapter 11 federal assistance: guaranteed and insured loans several cases have established the proposition that',
14183:'the department can include elements in a project that are arguably beyond a literal reading of the statutory language, where',
14184:'those elements are merely incidental to accomplishing the statutory purpose. thus, early cases on the department’s direct loan program held',
14185:'that the department cannot make a loan where the only persons to be benefited are already receiving central service, but',
14186:'it can finance the acquisition of existing facilities which are to be incorporated into a larger system, where the acquisition',
14187:'is necessary for the effective operation of the overall system. b48590, apr. 3, 1945; b32920, mar. 12, 1943; b29463, dec.',
14188:'1, 1942. this principle applies whether the acquisition is by direct purchase or the purchase of securities to be exchanged',
14189:'for the physical property. b42486, july 25, 1944. rural electrification loans are not intended to parallel existing facilities. thus, where',
14190:'plant a and plant b are located less than 200 feet apart, and plant a is receiving central service from',
14191:'a power supplier who has offered to provide adequate service to plant b, plant b cannot properly be considered a',
14192:'person not receiving central service for purposes of qualifying for financial assistance. b134138, oct. 15, 1958. in b195437, feb. 15,',
14193:'1980, gao applied the principles of the above direct loan cases to the rural electrification loan guarantee program. the issue',
14194:'was the department of agriculture’s authority to approve a loan guarantee to finance certain expenditures associated with the construction of',
14195:'a coalfired electric generating plant, including cancellation charges if two contracts for components of the plant were terminated. the decision',
14196:'held that, since the contractors would not begin to build the components without a commitment that the cancellation costs would',
14197:'be paid, approval of a loan guarantee to assure funding to pay such charges was consistent with the basic statutory',
14198:'purpose of providing electricity to persons in rural areas and therefore authorized. finally, loans and loan guarantees to provide housing',
14199:'for the elderly may include the purchase of related necessary equipment such as refrigerators and laundry equipment. 42 comp. gen.',
14200:'528 1963. a decision previously cited in the section c.1.b discussion of changes in lenders and borrowers, 60 comp. gen.',
14201:'700 1981, also addressed changes in loan purpose under the farmers home administration rural development loan guarantee program. again, the',
14202:'issue was when changes could be deemed a continuation of the original transaction, so that the page 1145 gao06382sp appropriations',
14203:'law—vol. ii chapter 11 federal assistance: guaranteed and insured loans guarantee would remain chargeable to the annual ceiling for the',
14204:'fiscal year in which it was originally approved. similar questions had arisen frequently in the grant context, and the comptroller',
14205:'general applied the grant principles to loan guarantees, stating: “applying these grant decisions to the area of loan guarantees, when',
14206:'a major change to the ‘character’ of the project supported by the guarantee is made, the revised loan guarantee must',
14207:'be charged against the ceiling in effect when the revision is made. we believe that just as a significant change',
14208:'in the terms and conditions under which a grant was made would be viewed as creating a new grant, a',
14209:'significant change in the terms and conditions under which a loan guarantee was approved would create a new loan.” id.',
14210:'at 707. thus, major changes will result in the treatment of the transaction as a new guarantee. however, less substantial',
14211:'changes where the purpose and scope of the revised agreement are consistent with the purpose and scope of the original',
14212:'agreement may be treated as a continuation as long as the need for the project continues to exist. this test',
14213:'must be applied on a casebycase basis. 3. terms and conditions of guarantees a. introduction just as with any other',
14214:'contractual obligation, a loan guarantee has terms and conditions which the parties must follow. if a valid guarantee has been',
14215:'created, the borrower defaults, and the lender has complied with all applicable terms and conditions, the government is obligated to',
14216:'pay on the guarantee. conversely, if the lender does not comply with applicable requirements, it may find that it has',
14217:'lost the benefit of the guarantee. the applicable terms and conditions are found in the program statute, agency regulations, and',
14218:'the guarantee agreement. this section will discuss the effect of noncompliance, especially by the lender. the cases fall into two',
14219:'broad categories. in one group, the loan may not have been eligible for the guarantee from its inception based on',
14220:'a page 1146 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans b. property insurance programs under',
14221:'the national housing act failure to satisfy applicable requirements such as a statutory limitation on the maximum amount or maturity',
14222:'of the loan. the result will usually be that the guarantee itself was never valid. in the second group, the',
14223:'loan to be guaranteed complies with all pertinent statutory or regulatory requirements, but the guarantee never takes effect or is',
14224:'nullified as a result of the lender’s failure to comply with one or more of the terms and conditions upon',
14225:'which the government’s guarantee is contingent. to illustrate these concepts, we have selected two areas—property insurance programs under the national',
14226:'housing act and loan guarantee programs of the small business administration. the specific requirements discussed are the more common ones',
14227:'and apply of course only to the particular program. nevertheless, our selection is intended to illustrate types of issues, approaches',
14228:'to problemsolving, and the crucial role of agency regulations, and from this perspective is of more general relevance. also, program',
14229:'details such as maximum loan amount, whether prescribed by statute or regulation, are subject to change from time to time.',
14230:'accordingly, individual cases do not necessarily reflect current program requirements, but are intended to illustrate or support propositions of continuing',
14231:'validity with respect to requirements of that type. title i of the national housing act, pub. l. no. 73479, 48',
14232:'stat. 1246 june 27, 1934, as amended and codified at 12 u.s.c. §§ 1701–1706d, authorizes a number of housing assistance',
14233:'programs. several of the programs were formerly administered by the federal housing administration fha and were transferred to the department',
14234:'of housing and urban development hud upon its creation in 1965. the programs are still popularly known as “fha programs.”',
14235:'gao has issued numerous reports on these programs, some of the most recent being: singlefamily housing: progress made, but opportunities',
14236:'exist to improve hud’s oversight of fha lenders, gao0513 washington, d.c.: nov. 12, 2004; multifamily housing: improvements needed in hud’s',
14237:'oversight of lenders that underwrite fhainsured loans, gao02680 washington, d.c.: july 19, 2002; mortgage financing: changes in the performance of',
14238:'fhainsured loans, gao02773 washington, d.c.: july 10, 2002. 1 maximum amount of loan under 12 u.s.c. § 1703, the secretary',
14239:'of hud is authorized to insure lenders against losses sustained in extending loans to borrowers for various purposes, including home',
14240:'construction, repair, and improvement, and the purchase of manufactured mobile homes. the statute establishes page 1147 gao06382sp appropriations law—vol. ii',
14241:'chapter 11 federal assistance: guaranteed and insured loans the maximum amount of loans that may be insured for the various',
14242:'authorized purposes, for example, $25,000 for repairs and improvements to an existing singlefamily structure. id. § 1703b1ai. while the specific',
14243:'dollar amounts have changed over the years, the congress has imposed maximum loan limits in one form or another since',
14244:'the program was established in 1934. where a single loan is involved, its face amount cannot exceed the statutory limitation.',
14245:'if a loan which is reported by the lender to hud for insurance exceeds the statutory limitation in effect when',
14246:'the loan was made, the lender cannot be reimbursed for any of its losses since the loan was ineligible for',
14247:'insurance from its inception. e.g., b127167, july 15, 1970; b127243, may 21, 1956. in applying this limitation where more than',
14248:'one loan is involved, the approach of hud’s program regulations is to consider whether the total amount of all outstanding',
14249:'insured loans made to a borrower under title i of the housing act with respect to the same property or',
14250:'structure exceeds the maximum permissible amount. in this situation, for example, the ceiling for property improvement loans applies to the',
14251:'outstanding aggregate loan balance rather than the sum of the face amounts. 24 c.f.r. § 201.10a2 2005. thus, for a',
14252:'second loan, the ceiling is compared with the face amount of the second loan which represents the outstanding balance of',
14253:'that loan at the time the determination is made plus the outstanding balance of the first loan. b148894, june 29,',
14254:'1962; b137493, nov. 20, 1958. the method used to compute the outstanding balance is within hud’s discretion. in considering claims,',
14255:'gao will apply the method prescribed in the regulations. the fact that other reasonable methods may exist is irrelevant. b162961,',
14256:'jan. 19, 1968. the ceiling applies only to loans for the same property. in b148804, june 7, 1962, the comptroller',
14257:'general advised that a lender could be reimbursed for a loss it suffered when the borrower defaulted, even though the',
14258:'original loan of $4,000 exceeded the thenexisting $3,500 limitation. although only one application for a $4,000 loan had been made,',
14259:'the record revealed that two separate properties were involved, with $3,000 of the loan funds intended for the improvement of',
14260:'one property, and $1,000 for the other. therefore, the limitation which applied only to loans for the same property was',
14261:'not violated. this decision points out another important provision of 12 u.s.c. § 1703. the secretary of hud is authorized',
14262:'to waive a requirement in the page 1148 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans',
14263:'regulations if in the secretary’s judgment enforcement would impose an injustice on an insured lender, provided that the lender has',
14264:'substantially complied with the regulations in good faith and waiver would not increase the government’s obligation beyond what it would',
14265:'have been under full compliance. id. § 1703e. thus, in b148804, the regulations required separate applications for separate properties, but',
14266:'gao advised that the federal housing administration could waive the requirement. prior to enactment of the waiver authority, gao had',
14267:'applied the general rule that agencies have no authority to waive statutory regulations. 15 comp. gen. 869 1936. the waiver',
14268:'provision was enacted 3 weeks after the decision. the authority has been applied in a variety of contexts. e.g., b127026,',
14269:'mar. 27, 1956 bank disbursed loan after a change in regulations under which loan would have been ineligible, but had',
14270:'approved loan in good faith before receiving notice of the change. the secretary of hud may delegate the waiver authority',
14271:'to a “substantial compliance committee.” b127167, dec. 17, 1968. several decisions have emphasized that the waiver authority applies only to',
14272:'regulations. it does not apply to a requirement imposed by statute, such as the maximum loan amount. a purported waiver',
14273:'of a statutory requirement is ineffective. e.g., b127243, may 21, 1956. a waiver inconsistent with the statutory authority, for example,',
14274:'lack of good faith by the lender, is also unauthorized. b127167, dec. 5, 1957. exercise of the waiver authority is',
14275:'up to hud, not gao. while gao may find a waiver invalid if it violates one of the above principles,',
14276:'gao cannot positively exercise the authority where hud has chosen not to do so. as in b148804, june 7, 1962,',
14277:'gao can only advise hud that in its opinion waiver is authorized. 2 maximum loan maturity the housing act also',
14278:'prescribes, by category, the maximum maturity term of loans which may be insured under 12 u.s.c. § 1703. for example,',
14279:'the maturity of a loan for repairs and improvements to an existing singlefamily structure may not exceed 20 years and',
14280:'32 days. id. § 1703b3ai. as with the maximum loan amount, maturity limitations have existed since the program’s inception. the',
14281:'maturity date is computed based on the payment due date indicated on the note. if the period exceeds the statutory',
14282:'maximum, the loan is not insurable. it is the responsibility of the lender rather than the government page 1149 gao06382sp',
14283:'appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans to make certain that notes do not have maturities',
14284:'in excess of the statutory maximum. 55 comp. gen. 126 1975; b172121, apr. 12, 1971. thus, in 55 comp. gen.',
14285:'126, a bank’s claim for reimbursement was denied where a note submitted and accepted for insurance had a projected maturity',
14286:'date 17 days in excess of the maximum in effect when the loan was made. the decision at 55 comp.',
14287:'gen. 126 also held that, since the statutory limitation applies to the maturity of the obligation or note underlying the',
14288:'loan, the date on the note is controlling and not the date on which the note was assigned or the',
14289:'funds disbursed. however, this is not an absolute and there are certain circumstances in which the date on the note',
14290:'has been found not controlling. for example, in b162542, oct. 24, 1967, gao approved a lender’s claim even though the',
14291:'note stated a final payment due date after the existing statutory limitation. the holding was based on a letter from',
14292:'the lender to the borrower which agreed to move up the date of the first payment and, by implication, all',
14293:'of the others as well, including the final payment. as a result, the maturity date fell within the statutory period.',
14294:'somewhat similarly, b166521, apr. 25, 1969, involved a 60month note which, as written, would have exceeded the statutory maximum. the',
14295:'note was dated june 20, 1963, but provided that the first payment was not due until july 1, 1968. based',
14296:'on the borrower’s actual payment record, it was obvious that the maturity date had been inadvertently entered on the note',
14297:'as the first payment due date. thus, the maturity date was within the thenexisting statutory maximum and the lender could',
14298:'be paid. again in b191660, mar. 5, 1979, gao upheld a bank’s claim where the note had a projected maturity',
14299:'date 2 days in excess of the thenexisting statutory limitation. the borrower’s payment record and other evidence supported the bank’s',
14300:'allegation that, due to inadvertence, the note as written did not reflect the intention of the parties at the time',
14301:'the loan was made. the decision emphasized that, where extraneous evidence is to be used to correct an alleged error',
14302:'on a note, merely changing the due date after default and after hud has refused insurance is legally irrelevant. the',
14303:'extraneous evidence must establish that the allegedly correct due date is what the parties intended at the time the note',
14304:'was executed. problems may also arise when the term of the initial insured loan is within the statutory maximum but',
14305:'a subsequent extension agreement results in exceeding the maximum maturity period. for example, in b131963, july 17, 1957, the federal',
14306:'housing administration could not reimburse a page 1150 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans',
14307:'bank for a loss suffered on a defaulted loan where the bank had agreed in writing to extend the maturity',
14308:'date of the note beyond the statutory maximum. in that decision, gao held that while 12 u.s.c. § 1703b6 permits',
14309:'a loan to be refinanced, this authority does not include a mere extension of payment. thus, a lender may extend',
14310:'the time for paying a note beyond the maximum time limitation and still retain insurability only by actually refinancing the',
14311:'loan, that is, by executing a new note. short of an actual refinancing, a mere extension of payment beyond the',
14312:'maximum will result in the loss of insurability. see also b164118, nov. 19, 1969; b149800, sept. 28, 1962; b148816, may',
14313:'21, 1962. several cases have rejected arguments by the lender either that it had not intended to extend the final',
14314:'maturity date beyond the permissible maximum or that it should have been allowed to subsequently rescind or reform the extension',
14315:'agreement to conform to the statutory limitation. e.g., b188240, aug. 10, 1977; b164118, dec. 30, 1969; b164118, aug. 14, 1968.',
14316:'insurability may be retained if the extension is merely a temporary deferral of certain payments, with the deferred payments to',
14317:'be made up prior to the original maturity date. however, if this is the case, it must be spelled out',
14318:'in the extension agreement. b164118, dec. 30, 1969. in 51 comp. gen. 222 1971, the extension agreement was not merely',
14319:'an extension of time but also changed other terms such as the period of payment and the amount of the',
14320:'monthly installment. in these circumstances, the comptroller general found that the terms of the extension agreement differed so substantially from',
14321:'those of the original note that it was “tantamount to a new note” and could be considered as a refinancing.',
14322:'although the “refinancing” had not been accomplished in accordance with applicable regulations, gao advised hud that it could consider waiving',
14323:'those particular regulatory requirements under 12 u.s.c. § 1703e. 3 owner/lessee requirement another requirement of the housing act is that',
14324:'property improvement loans can be made only to borrowers who are owners of the property or who are lessees under',
14325:'a lease expiring not less than 6 months after the maturity of the loan or other advance of credit. 12',
14326:'u.s.c. § 1703a. a loan made to a borrower who is neither the owner nor the lessee of the property',
14327:'involved is not insurable. for example, where the property was owned by a page 1151 gao06382sp appropriations law—vol. ii chapter',
14328:'11 federal assistance: guaranteed and insured loans corporation and the loan application and note were signed by two individuals who',
14329:'were officers of the corporation, but with no indication that they were signing as representatives of the corporation, the loan',
14330:'was not made to the owner of the property and was ineligible for insurance. b180015, nov. 28, 1973. similarly, where',
14331:'the same person was president of two different corporations and signed the note as president of corporation “a” but had',
14332:'signed the lease on the property involved as president of corporation “b,” the loan was not made to the lessee',
14333:'and was not insurable. b174739, jan. 19, 1972. the lease must expire “not less than six months after the maturity',
14334:'of the loan.” 12 u.s.c. § 1703a. a loan to a lessee is not insurable where the lease expires before',
14335:'the maturity date b194145, dec. 12, 1980 or on the maturity date b172965, july 16, 1971. time “after” an event',
14336:'is traditionally computed by excluding the date of the happening. thus, a loan with a maturity date of july 1,',
14337:'1956, to a lessee whose lease was due to expire on december 31, 1956, was not insurable. “not less than',
14338:'six months after” the maturity date would have been on or after january 1, 1957. b129898, dec. 28, 1956. in',
14339:'b194145, dec. 12, 1980, a loan was refinanced after the borrower, under a lease with option to purchase, had exercised',
14340:'the option. the bank argued that the loan should be insurable since the refinancing note had been executed to the',
14341:'owner. however, the comptroller general held that a refinancing loan is insurable only where the prior loan being refinanced was',
14342:'itself validly insured. since the original loans in that case were ineligible, the refinancing loan was equally ineligible. also, the',
14343:'refinancing loan could not be considered an entirely new loan for purposes of insurability, since the statute authorizes insurance to',
14344:'finance improvements, not to repay outstanding uninsured loans. in b124410, july 25, 1955, gao allowed a bank’s claim on a',
14345:'loan to a borrower who was not the owner of the property. the decision was based on federal housing administration',
14346:'fha regulations which provided that a lender, acting in good faith, may in the absence of any information to the',
14347:'contrary rely on statements of fact in a credit application, and the credit application in that case had been misleading.',
14348:'compare, however, 17 comp. gen. 604 1938, in which a claim was denied for a loss suffered when a lender',
14349:'advanced funds to an individual other than the borrower upon a forged authorization, where a simple comparison with the signature',
14350:'on the note would have disclosed the forgery. page 1152 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and',
14351:'insured loans while a bank is generally entitled to rely on statements of fact in a credit application, it is',
14352:'nevertheless required to exercise good credit judgment. thus, payment was denied in a88143, aug. 21, 1937, where the borrower had',
14353:'previously defaulted on a different loan with the same bank. the result applies equally to a bank with several branches',
14354:'where the contract of insurance is with the home office. 19 comp. gen. 92 1939. an apparent exception occurred in',
14355:'b124438, july 26, 1955, where a borrower listed on his credit application a prior loan with a branch of the',
14356:'same bank located 110 miles away, but failed to note that it was in default. the bank checked several local',
14357:'credit references and received favorable reports, but did not check with its branch. since the bank had diligently checked the',
14358:'local references, the borrower cured the default on the prior loan, and the fha waived the bank’s violation of regulations',
14359:'which prohibited accepting a loan when a prior loan was in default, gao concluded that the bank could be reimbursed',
14360:'for its losses on the second note.33 for cases on the requirement to approve the credit statement, see 16 comp.',
14361:'gen. 958 1937 and a71945, june 16, 1937. 4 execution of the note another requirement, found in the regulations implementing',
14362:'the housing act, is that the note evidencing the indebtedness bear the genuine signature of the borrower, be valid and',
14363:'enforceable against the borrower, and be complete and regular on its face. 24 c.f.r. § 201.12 2005. in a number',
14364:'of cases where either signatures were forged or terms of the note were altered—potentially making the note ineligible for insurance',
14365:'under the regulations—gao has allowed claims by a lender for reimbursement based on the lender’s apparent good faith and the',
14366:'previously discussed authority to waive regulatory requirements. b127167, dec. 17, 1968 forged signature; b127167, dec. 5, 1957 false representation as',
14367:'to age; b130955, may 2, 1957 alteration of amount; b127167, apr. 10, 1956 forged signature. where hud declines to exercise',
14368:'its waiver authority, it may treat the note as ineligible for insurance. united states v. devallet, 152 f. supp. 313',
14369:'d. mass. 1957. “the government had the right to make such limitations on its insurance undertaking as it saw fit.”',
14370:'id. at 315. one court has held that the validity/regularity requirement applies “not at the point at which a bank',
14371:'submits its claim, but at the point at which the loan itself is being arranged.” guardian federal savings and loan',
14372:'33 the same facts in today’s computerized environment could well produce a different result. page 1153 gao06382sp appropriations law—vol. ii',
14373:'chapter 11 federal assistance: guaranteed and insured loans association v. harris, 441 f. supp. 789, 791 d.d.c. 1977. while this',
14374:'seems clear enough with respect to items such as the validity of the signature and the “regularity” of the note,',
14375:'subsequent events may affect the enforceability of a note, a situation implicitly recognized in the harris case. in b127483, apr.',
14376:'26, 1956, it was held that the enforceability requirement was not affected by a mistrial in a suit brought by',
14377:'the lender resulting in a dismissal without prejudice. in 37 comp. gen. 857 1958, gao held that a lender could',
14378:'be reimbursed where the note had become unenforceable due to the passage of time notwithstanding the lender’s diligent collection efforts.',
14379:'the result would at least arguably be different if a note became unenforceable through the fault or neglect of the',
14380:'lender. 5 reporting requirement the four requirements discussed thus far relate to the eligibility of a loan for insurance from',
14381:'its inception. this one is different because the loan itself is eligible but the lender’s failure to comply may result',
14382:'in the loss of insurability. program regulations require lenders to report loans to the department of housing and urban development',
14383:'hud on a prescribed form within 31 days from the date of the note or the date the note was',
14384:'purchased. 24 c.f.r. § 201.30a 2005. hud then accepts the loan for insurance or rejects it. the reporting requirement also',
14385:'applies to refinancing loans. id. under present regulations, hud has discretion to accept a late report as long as the',
14386:'loan is not in default. id. § 201.30b. once the loan has gone into default, that discretion no longer exists',
14387:'and it is too late to establish coverage. an illustrative case is b194822, sept. 24, 1980. a bank inadvertently failed',
14388:'to report a property improvement loan to hud. more than a year later, after the loan was in default, the',
14389:'bank submitted its report along with its claim for indemnification. concluding that the loan was never insured, hud denied the',
14390:'claim, and gao agreed. the fact that hud had inadvertently billed the bank for the required premiums, which the bank',
14391:'paid, was not enough to establish coverage. of course, refund of the premiums was appropriate. prior to 1968, the regulations',
14392:'did not limit hud’s discretion, and a late report could be accepted even after default. cases addressing the exercise of',
14393:'discretion under this version of the regulations are b165239, oct. 4, 1968, and b153971, june 17, 1964. page 1154 gao06382sp',
14394:'appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans 6 payment of premiums the statute requires that hud',
14395:'charge the financial institution a premium for the insurance. 12 u.s.c. § 1703f. the premium is a prerequisite to insurability.',
14396:'id. § 1703b5. this is closely related to the reporting requirement discussed above in that it is the report that',
14397:'triggers hud’s billing of the bank. the sequence is: 1 bank reports loan to hud on manifest form; 2 hud',
14398:'includes the loan on its monthly statement to the bank; 3 upon receipt of monthly statement, bank pays premium to',
14399:'hud; 4when hud receives the premium, loan achieves insured status. subsection 1703f further requires that the premium charge “shall be',
14400:'payable in advance by the financial institution.” thus, advance payment of the premium is necessary for the loan to be',
14401:'eligible for insurance, at least where nonpayment is solely the fault of the bank. b172965, july 16, 1971 loan not',
14402:'covered where bank failed to report the loan and was thus never billed by hud. see also b194822, sept. 24,',
14403:'1980 no authority to accept premiums after default. for loans with a maturity in excess of 25 months, the insurance',
14404:'charge is payable in annual installments. 24 c.f.r. § 201.31b2 2005. in 55 comp. gen. 891 1976, the bank claimed',
14405:'that it had reported the loan to hud. hud, however, had no record of the report and consequently had neither',
14406:'requested nor received any premium payments from the bank prior to default. apart from the fact that the advance payment',
14407:'requirement appears in a federal statute, the bank had actual notice that a loan is not insured until it appears',
14408:'on the monthly statement and the premium is paid. adequate review of the monthly statements would have revealed that the',
14409:'particular loan was not listed and that therefore either hud never received the report or failed to acknowledge it. since',
14410:'it is the bank’s responsibility to assure payment of premiums in advance, its claim was denied. the decision once again',
14411:'reiterated that hud’s waiver authority does not apply to statutory requirements. a related case, 55 comp. gen. 658 1976, reaffirmed',
14412:'the proposition that timely payment of the insurance premiums is a prerequisite to continued insurance coverage. the decision also held',
14413:'that claims by a lending institution which is currently delinquent in its premium payments may be allowed if the borrower’s',
14414:'default occurred prior to the delinquency. however, if the lending institution was delinquent before the default occurred or became imminent,',
14415:'its claim may not be allowed. page 1155 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans',
14416:'c. small business administration business loan program the decision in 55 comp. gen. 658 was expanded and modified with respect',
14417:'to matters not relevant here in 56 comp. gen. 279 1977, holding that timely payment of insurance premiums under 12',
14418:'u.s.c. § 1703 is a continuing obligation of the lender and cannot be voluntarily terminated by the lender before the',
14419:'end of the term of the underlying loan. unpaid insurance premiums constitute a debt presently due and payable by the',
14420:'lender to the united states. therefore, hud may offset delinquent premiums against insurance claims otherwise payable to the lender. however,',
14421:'estimated future premiums may not be offset against currently payable claims because they are not certain in amount. under the',
14422:'program regulations, the premium may be abated after an insurance claim has been filed or if the loan is paid',
14423:'in full prior to maturity. 24 c.f.r. § 201.31e. 1 payment of guarantee fee like the national housing act insurance',
14424:'programs, a loan guarantee under section 7a of the small business act is not free to the lender. the small',
14425:'business administration is required to charge a guarantee fee, based on a percentage of the amount guaranteed, on most loans',
14426:'guaranteed under 15 u.s.c. § 636a. id. § 636a18. the fee is payable by the participating lending institution, but may',
14427:'be passed through to the borrower. id. sba’s implementing regulations are found at 13 c.f.r. part 120 2005. for many',
14428:'years prior to the enactment of 15 u.s.c. § 636a18 in 1986,34 sba charged a guarantee fee under the authority',
14429:'of its program regulations and guarantee agreement. thus, pre1986 gao decisions dealing with section 7a fees must be regarded as',
14430:'modified to the extent they were addressing a nonstatutory requirement. they, however, along with elements of the program regulations which',
14431:'predate the 1986 legislation, establish the proposition that an agency may charge a guarantee fee without specific statutory authority as',
14432:'long as it is not prohibited and outline the general parameters of a nonstatutory fee requirement. as with the housing',
14433:'act fees, a fundamental issue is the effect of nonpayment or late payment. unlike the housing act, the sba provision',
14434:'does not require that the fees be paid in advance. thus, by itself, 15 u.s.c. § 636a18 neither makes payment',
14435:'of the fee an essential condition of guarantee eligibility, nor does it prohibit such treatment. under sba’s 34 pub. l.',
14436:'no. 99272, § 18007, 100 stat. 82, 366 apr. 7, 1986. page 1156 gao06382sp appropriations law—vol. ii chapter 11 federal',
14437:'assistance: guaranteed and insured loans regulations, the fee is payable when the lender applies for a guarantee for loans with',
14438:'maturities of 12 months or less, and within 90 days after sba’s approval for loans with maturities greater than 12',
14439:'months. 13 c.f.r. § 120.220b. absent statutory direction one way or the other, the effect of missing these deadlines is',
14440:'a matter within sba’s discretion to establish by regulation or terms of the guarantee agreement. at one time, sba’s guarantee',
14441:'agreement expressly provided that a loan is not guaranteed until the fee has been paid. under this provision, payment of',
14442:'the fee was a condition precedent to coverage. sba had the discretion to accept late payment provided the loan was',
14443:'not in default, but the loan was not protected by the guarantee until the fee was paid. b181432, nov. 12,',
14444:'1975; b181432, mar. 13, 1975. in cases where the fee remained unpaid at the time the borrower defaulted, claims by',
14445:'lenders were consistently denied in the face of arguments such as estoppel b181432, may 21, 1979, and b181432, oct. 20,',
14446:'1978, “constructive payment” b181432, july 7, 1978, or inexperience on the part of bank personnel b181432, aug. 15, 1977. since',
14447:'the requirement was explicitly stated in the guarantee agreement, virtually all of these cases reiterated the proposition that no government',
14448:'official may give away the government’s contractual rights without either statutory authority or adequate legal consideration. the courts reached the',
14449:'same result. see union national bank of chicago v. weaver, 604 f.2d 543 7th cir. 1979; union state bank v.',
14450:'weaver, 526 f. supp. 29 s.d.n.y. 1981. sba’s current regulations provide that the agency may terminate the guarantee if the',
14451:'fee is not paid. 13 c.f.r. § 120.220 introductory language and subsection e. implicit in this language is the premise',
14452:'that the guarantee will be regarded as in effect until sba terminates it. a 1983 decision considered similar issues under',
14453:'a different sba program, the surety bond guarantee program established by 15 u.s.c. §§ 694a–694c. since nothing in the legislation',
14454:'or implementing regulations made payment of the guarantee fee a condition precedent to the existence of the guarantee, and since',
14455:'the surety bond guarantee agreement contained no provision comparable to the provision then being used in the business loan guarantee',
14456:'agreement, the decision concluded that nonpayment of the fee prior to default would not void sba’s obligation to honor the',
14457:'guarantee, although sba should deduct the unpaid fee from the surety’s claim. b206893, mar. 18, 1983. page 1157 gao06382sp appropriations',
14458:'law—vol. ii chapter 11 federal assistance: guaranteed and insured loans a 1979 case considered the effect of another provision in',
14459:'the guarantee agreement. a bank, conceding that it had not paid the guarantee fee prior to default on the loan',
14460:'as originally written, argued that it had effectively modified the agreement by granting the borrower additional time to begin repayment.',
14461:'however, the guarantee agreement explicitly required sba’s prior written approval of any change in the terms of the loan, which',
14462:'the bank had neither requested nor received. the modification was therefore not legally effective as against sba. b193134, july 27,',
14463:'1979. the issue in 58 comp. gen. 693 1979 was the effect of a refinancing loan. in view of sba’s',
14464:'discretion to accept refinancing, gao concluded that the effect of a bank’s failure to timely pay the fee on the',
14465:'original loan was terminated when the original loan was repaid by the refinancing loan. thus, the fact that the guarantee',
14466:'on the original loan may have been extinguished will not necessarily defeat an otherwise valid guarantee on a subsequent refinancing',
14467:'loan. cases involving late payment or nonpayment of the guarantee fee may be useful in analyzing the treatment and consequences',
14468:'of other terms and conditions of the guarantee agreement, but should not be blindly applied. for example, the court in',
14469:'eastern illinois trust & savings bank v. sanders, 826 f.2d 615 7th cir. 1987, drew a distinction between provisions expressly',
14470:'declared to be conditions precedent to sba’s obligation, such as the fee provision, and those which are not so declared.',
14471:'if a lender violates a provision in the latter category, the issue becomes “whether the violation was a material breach',
14472:'of the agreement, or rather whether [the lender] substantially complied with the agreement.” id. at 616. the lender’s violation in',
14473:'the cited case, making “side loans” to a borrower, was found not to constitute a material breach and therefore did',
14474:'not justify repudiation of sba’s guarantee. by way of contrast, a lender who violates a provision in the “condition precedent”',
14475:'category cannot enforce the guarantee, and you never get to the material breach versus substantial compliance analysis. see, e.g., first',
14476:'national bank of louisa, kentucky v. united states, 6 cl. ct. 241 1984. 2 notice of default another type of',
14477:'provision an agency may include in its program regulations is a requirement that the lender notify the agency in writing',
14478:'within a specified time period after a default occurs. the small business administration’s sba regulations included such a requirement for',
14479:'many years. see, e.g., 13 c.f.r. § 122.10a 1980. the provision was dropped in page 1158 gao06382sp appropriations law—vol. ii',
14480:'chapter 11 federal assistance: guaranteed and insured loans a 1985 revision of the regulations. under current regulations, sba’s obligation under',
14481:'a guarantee is extinguished if the lender fails to demand purchase of the unpaid guaranteed portion within 120 days after',
14482:'maturity of the note. 13 c.f.r. § 120.524a8 2005. pre1985 decisions on the notice requirement are no longer applicable to',
14483:'sba under the current regulations. nevertheless, we briefly note a few of them because they illustrate the scope of an',
14484:'agency’s authority to implement a guarantee program by regulation and may have relevance by analogy to similar requirements in other',
14485:'programs. since the requirement itself is a creature of agency regulations, the agency has discretion to determine the consequences of',
14486:'noncompliance, ranging from an interest penalty b181432, sept. 4, 1979 to termination of the guarantee commitment b201388, sept. 23, 1981.',
14487:'the agency may also make the consequences contingent upon the extent to which noncompliance prejudices the interests of the government.',
14488:'see b187945, mar. 22, 1977. while the basic requirement may not be waived except to the extent permissible under the',
14489:'regulations see b181432, feb. 19, 1976, the particular form of notice, a matter of procedure, is subject to waiver. b188741,',
14490:'jan. 25, 1978 oral notice accepted and acknowledged by agency held to be substantial compliance. see also b181432o.m., feb. 19,',
14491:'1976 agency may waive requirement in guarantee agreement that lender provide it with a copy of the executed note and',
14492:'settlement sheet.35 d. rights and obligations of government upon default 1. nature of the government’s obligation when a government agency',
14493:'guarantees a loan, it is promising to indemnify someone in case of default. the “someone” includes both the lending institution',
14494:'that originated the loan and subsequent purchasers of the guaranteed portion of the loan. the default results from the borrower’s',
14495:'failure to make payment when due or other breach of a material covenant 35 for a detailed discussion of waiver',
14496:'of agency regulations in the context of commodity credit corporation export assistance guarantees, see b208610, sept. 1, 1983. page 1159',
14497:'gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans of the loan. in the simple situation, a',
14498:'borrower borrows money from a lender. the government guarantees the loan, with the commitments of the lender and the government',
14499:'usually reduced to writing in the form of a guarantee agreement. if the borrower defaults on his or her payments,',
14500:'the lender looks to the government to pay on the guarantee. in some instances, congress has explicitly provided in the',
14501:'program legislation that the guarantee will be backed by the “full faith and credit” of the united states. examples are',
14502:'12 u.s.c. § 635k guarantees and insurance issued by the exportimport bank, 15 u.s.c. § 683b guarantees of debentures or',
14503:'securities issued by small business investment companies, and 20 u.s.c. § 1075b4 federally insured student loans.36 language of this type',
14504:'has been held to be “the highest assurance the government can give, its plighted faith.” perry v. united states, 294',
14505:'u.s. 330, 351 1935. there is a long line of opinions of the attorney general addressing the effect of statutory',
14506:'language pledging the “faith” or “credit” of the united states, or the absence of such language. while the opinions are',
14507:'not limited to loan guarantee commitments, almost all of the cases arose under loan guarantee programs. this is understandable because',
14508:'1 lenders are being asked to extend credit to a somewhat riskier universe of borrowers which they most likely would',
14509:'not accommodate without the guarantee; and 2 at least prior to the federal credit reform act, the government’s commitment was',
14510:'not backed by enacted budget authority. to encourage lender participation in a variety of programs, the attorney general was asked,',
14511:'in effect, “does the government really mean it?” perhaps the leading case is 41 op. att’y gen. 363 1958, dealing',
14512:'with ship mortgage and loan insurance under provisions of the merchant marine act of 1936, subsequently amended and now codified',
14513:'at 46 u.s.c. app. §§ 1271– 1275. the opinion makes several important points. first, what does the language mean? it',
14514:'means that the government’s obligation is to be considered on the same footing as the interestbearing obligations of the united',
14515:'states such as treasury bills, notes, and bonds. 41 op. att’y gen. at 366 citing 41 op. att’y gen. 138',
14516:'1953. 36 this and similar language has, and is intended to have, connotations of constitutional significance, although the words “full',
14517:'faith and credit” appear in the u.s. constitution only once, in the requirement that each state recognize the laws, records,',
14518:'and judicial proceedings of other states art. iv, § 1. in addition, the u.s. constitution empowers the congress to borrow',
14519:'money “on the credit of the united states” art. i, § 8, cl. 2. page 1160 gao06382sp appropriations law—vol. ii',
14520:'chapter 11 federal assistance: guaranteed and insured loans second and more important, what is the language’s practical significance? none, answered',
14521:'the attorney general. although recognizing that congress can establish such distinctions, the attorney general stated that, in the absence of',
14522:'such congressional action, there is no “order of solemnity of valid general obligations of the united states,” nor does an',
14523:'obligation with the statutory faith and/or credit language have any legal priority over a valid general obligation of the united',
14524:'states without the language. 41 op. att’y gen. at 369. finally, the attorney general addressed the lack of advance budget',
14525:'authority: “if . . . the existence of an appropriation is not a condition of or limitation on the authority',
14526:'of an officer to contract on behalf of the united states, the need for appropriations to meet an obligation incurred',
14527:'under the contract does not affect the existence or validity of the obligation.” id. at 370. the opinion noted that',
14528:'congress expressly authorized the incurrence of obligations under the program in advance of appropriations. id. the following year, the attorney',
14529:'general made the same points with respect to interstate commerce commission loan guarantees to rail carriers. 41 op. att’y gen.',
14530:'403 1959. after emphasizing that the validity of the guarantee “is not affected by the absence from the act of',
14531:'any language expressly pledging the faith or credit of the united states,” the opinion states that “it is enough to',
14532:'create an obligation of the united states if an agency or officer is validly authorized to incur such an obligation',
14533:'on its behalf and validly exercises that power.” id. at 405.37 thus, reading all of the opinions together, we may',
14534:'state that a loan guarantee is a valid obligation of the united states the same as any other valid obligation,',
14535:'regardless of the presence or absence of full faith and credit language and regardless of the presence or absence of',
14536:'advance budget authority, provided 1 the program statute is constitutional; 37 other opinions in this family are 42 op. att’y',
14537:'gen. 327 1966; 42 op. att’y gen. 323 1966; 42 op. att’y gen. 21 1961; 41 op. att’y gen. 424',
14538:'1959; and 6 op. off. legal counsel 262 1982. since the opinions all said basically the same thing and seemed',
14539:'to arise under every program in sight, the attorney general stopped issuing formal opinions on routine full faith and credit',
14540:'questions in this context in 1973. 6 op. off. legal counsel 262, at n.2. page 1161 gao06382sp appropriations law—vol. ii',
14541:'chapter 11 federal assistance: guaranteed and insured loans 2congress has not disclaimed liability at the time or before the commitment',
14542:'is made; 3 the guarantee is made by a federal agency or official with the legal authority to do so;',
14543:'and 4 the guarantee complies with applicable statutory and regulatory requirements. in an opinion concerning guarantees issued by the former',
14544:'federal savings and loan insurance corporation incident to its resolution of failed or failing savings and loan institutions, the comptroller',
14545:'general expressly adopted the criteria and analysis of the attorney general opinions. 68 comp. gen. 14 1988. 2. scope of',
14546:'the government’s guarantee as noted earlier, a loan guarantee statute will typically specify the permissible purposes of the loans to',
14547:'be guaranteed, establish eligibility requirements, and give the administering agency considerable discretion to determine the terms and conditions of the',
14548:'guarantee. subject to the terms of the program legislation, there is also an element of discretion in determining the permissible',
14549:'scope of a guarantee, that is, the types and degree of risk to which the agency may expose itself. this',
14550:'section presents a few issues gao has considered regarding the limits of that discretion. as with any other payment situation,',
14551:'the government is not expected to close its eyes to indications of fraud or misrepresentation. for example, an agency should',
14552:'not make payment to a lender where it has knowledge of the possibility of fraud, negligence, or misrepresentation on the',
14553:'part of the lender. making payment in the face of such knowledge exposes the certifying officer to potential liability. 51',
14554:'comp. gen. 474 1972; b174861, feb. 23, 1972. in these two cases, however, gao advised that the small business administration',
14555:'sba could, upon default of the borrower, purchase the guaranteed portion of the loan from an innocent holder who had',
14556:'purchased it in the secondary market and who had no knowledge of the possible misconduct by the originating lender. payment',
14557:'to the innocent holder in these circumstances would not waive any of sba’s rights against the original lender, and, as',
14558:'a practical matter, would avoid a result adverse to the holder that could seriously jeopardize the secondary market. thus, paying',
14559:'the innocent holder is an acceptable level of risk whereas paying the suspected wrongdoer is not. it follows that there',
14560:'is no objection to honoring the claim of an innocent lender who is the victim of fraud by the borrower.',
14561:'b167329, oct. 6, 1969. page 1162 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans similarly, gao',
14562:'held in 17 comp. gen. 604 1938 that the federal housing administration was not liable to reimburse a lender bank',
14563:'for a loss sustained as a result of a payment made, on the basis of a forged authorization, to an',
14564:'individual other than a bona fide borrower. this situation was distinguished from a case where a lender bank, in the',
14565:'exercise of due care, suffered a loss as a result of a forged note. a94717o.m., aug. 12, 1938. the bank',
14566:'in 17 comp. gen. 604 already possessed a validly signed note but suffered the loss by accepting a forged authorization',
14567:'for payment. comparison of the authorization with the note would have disclosed the forgery. a 1974 decision expanded somewhat on',
14568:'51 comp. gen. 474. gao determined in b140673, dec. 3, 1974, that the sba has sufficiently broad statutory authority to',
14569:'repurchase the guaranteed portion of a loan from an innocent secondarymarket holder where the borrower is not in default but',
14570:'the primary lender negligently or unlawfully withholds payments. under the arrangement in question, the primary lender was to continue servicing',
14571:'the loan and remit payments, minus a servicing fee, to the holder. this decision clearly enlarged the scope of sba’s',
14572:'guarantee since the “triggering event” could be something other than a default by the borrower in repaying the loan. however,',
14573:'the holding in that case was for the relatively limited purpose of allowing sba to avoid the security registration requirements',
14574:'of the securities act of 1933, subsequently amended and now codified at 15 u.s.c. §§ 77a–77aa. the securities and exchange',
14575:'commission had determined that these requirements would apply to sbaguaranteed loans that were resold in the secondary market, unless sba’s',
14576:'guarantee was absolute and fully protected the purchaser of the guaranteed portion in all circumstances, including instances where the lender',
14577:'did not forward all payments received from the borrower. a few years later, b181432, aug. 11, 1978, explored what are',
14578:'perhaps the outer limits of the “risk discretion” recognized in b140673. sba proposed to contract with a private entity to',
14579:'serve as the centralized fiscal agent in the secondary market for sba guaranteed loans. the fiscal agent would have responsibility',
14580:'for receiving payments from borrowers, remitting these payments to the holders, and certifying the amount of the outstanding balance each',
14581:'time a guaranteed loan was transferred. sba further proposed to unconditionally guarantee all such actions and representations of the fiscal',
14582:'agent to the holder of the guaranteed portion of a loan. gao agreed that sba could contract with a fiscal',
14583:'agent and, consistent with b140673, guarantee a holder against the agent’s failure to properly forward the borrower’s loan payments. however,',
14584:'to unconditionally guarantee page 1163 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans holders against certification',
14585:'errors by the fiscal agent would significantly enlarge sba’s existing guarantee responsibility, would subject sba to substantially new risks, and',
14586:'would therefore require additional legislative authority. the increased risk would include new types of events that could trigger sba’s obligation',
14587:'to purchase a guaranteed loan, as well as the maximum amount of sba’s liability should the fiscal agent erroneously certify',
14588:'the outstanding balance of a loan to be larger than it actually was. 3. amount of government’s liability a program',
14589:'statute may or may not provide guidance on determining the amount the government is obligated to pay under a guarantee',
14590:'or the manner in which a loss is to be computed. if it does not, the agency’s discretion again comes',
14591:'into play. as long as they are consistent with whatever statutory guidance does exist, the agency’s regulations will generally be',
14592:'controlling. for example, the computation of claims under title i of the national housing act is prescribed by regulation. see',
14593:'24 c.f.r. § 201.55 2005. in very simplified form, the claim is a specified percentage of the sum of several',
14594:'elements: the unpaid amount of the loan subject to certain reductions, plus accrued interest, plus uncollected court costs, plus attorney’s',
14595:'fees actually paid, plus certain recording expenses. claims by lenders using unauthorized computations have been disallowed. e.g., b133924, dec. 4,',
14596:'1957. in another case involving the national housing act loan program, a lender claimed an amount representing partial reimbursement of',
14597:'attorney’s fees incurred in collecting on a defaulted note. although the borrower’s obligation on the note was discharged and the',
14598:'note did not contain a stipulation for attorney’s fees in the event of default which would have been ineffective under',
14599:'state law, payment of the claim was proper since it was specifically provided for in the regulations. b163029, feb. 16,',
14600:'1968. validly issued program regulations are controlling even though applying them in a particular case may produce an anomalous result',
14601:'to the lender’s advantage, at least where the lender has fully complied. for example, regulations governing defaulted mobile home loans',
14602:'provide that reimbursement is computed by deducting from the unpaid amount of the loan either the actual sales price upon',
14603:'repossession or the appraised value of the mobile home, whichever is greater. gao has found this formula to be within',
14604:'the department of housing and urban development’s hud statutory authority. 71 comp. gen. 449 1992. at one time, the regulations',
14605:'page 1164 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans also prohibited the filing of a',
14606:'claim until after default, repossession, and sale of the mobile home. these regulations occasionally produced a situation in which a',
14607:'particular model could not be found in current rating publications such as the socalled “blue book” and the mobile home',
14608:'was no longer available for appraisal by hud because, in compliance with the regulations, it had already been sold. since',
14609:'the impossibility of appraisal was due to the regulations and was through no fault of the lender, the comptroller general',
14610:'held that the actual sales price could be used in computing the reimbursement, as long as it was administratively determined',
14611:'to be reasonable. 55 comp. gen. 151 1975; b184016, sept. 16, 1975. the solution, of course, was to amend the',
14612:'regulations. several early decisions involved the language in 12 u.s.c. § 1703a which authorizes hud to insure lending institutions against',
14613:'“losses which they may sustain” in making home improvement loans or other advances of credit. if the loan does not',
14614:'either provide for the automatic acceleration of maturity upon default or give the lender the option to accelerate which the',
14615:'lender in fact exercises, the government cannot pay the lender the full unpaid balance of an unmatured loan because payments',
14616:'not yet due do not represent a loss actually sustained by the lending institution. a74701, may 22, 1936. while this',
14617:'result was consistent with the statutory language, it was not practical from an administrative standpoint. it meant that hud was',
14618:'limited to paying the lender the monthly installments as they became due. two later decisions effectively modified a74701 and established',
14619:'that, if there is no acceleration provision an event which would be unlikely today, or if exercising an acceleration option',
14620:'would be undesirable because of state law, hud can nevertheless reimburse a lending institution for the entire unpaid balance of',
14621:'the loan if it is clear that the entire unpaid balance will be a claim of the lending institution against',
14622:'the government and if the lender assigns the note or other evidence of indebtedness to the government. 16 comp. gen.',
14623:'723 1937; 16 comp. gen. 336 1936. 4. liability of the borrower when the government guarantees a loan and the',
14624:'borrower defaults, the lender is not required to make special efforts toward collection. rather, the lender may fall back on',
14625:'the government’s guarantee and leave the entire responsibility for collection to the government. see, e.g., 16 comp. gen. 336 1936;',
14626:'b134628, jan. 15, 1958. naturally, it is invariably to the lender’s advantage to do just that. payment by the government,',
14627:'however, does not mean that the borrower is off the hook. unless the program legislation provides otherwise, the government becomes',
14628:'subrogated to the rights of the lender, and the borrower is indebted to the government for the page 1165 gao06382sp',
14629:'appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans a. veterans’ home loan guarantee program amount it has',
14630:'paid out. the government is not required to collect more than the amount it has actually paid out to the',
14631:'lender, plus interest and collection costs to the extent authorized. see 15 comp. gen. 256 1935. a variety of issues',
14632:'relating to borrower liability can be illustrated by an examination of the veterans’ home loan guarantee program. title iii of',
14633:'the servicemen’s readjustment act of 1944, as amended and codified at 38 u.s.c. §§ 3701–3751, authorizes the department of veterans',
14634:'affairs va to guarantee loans to enable veterans to purchase or construct homes and for other specified purposes. this is',
14635:'the wellknown “g.i. loan.” the guarantee is an entitlement in the sense that a loan meeting the statutory requirements and',
14636:'made for one of the statutory purposes is “automatically guaranteed.” id. § 3710a. for certain loans closed after december 31,',
14637:'1989, the liability of the veteranborrower to the government was considerably restricted by the veterans home loan indemnity and restructuring',
14638:'act of 1989.38 a description of the “old” rules is nevertheless useful to understand what has and has not been',
14639:'changed, and because loans under the old and new programs will exist sidebyside for many years into the future.39 1',
14640:'loans closed prior to 1990 upon proper payment of a guarantee, the department of veterans affairs va acquires both the',
14641:'right of subrogation and an independent right of indemnity against the defaulting veteran. united states v. shimer, 367 u.s. 374',
14642:'1961; vail v. derwinski, 946 f.2d 589 8th cir. 1991; mcknight v. united states, 259 f.2d 540 9th cir. 1958.',
14643:'as the supreme court noted in shimer, a contrary result would convert the guarantee into a grant. 367 u.s. at',
14644:'387. the right of indemnity is reinforced by the guarantee agreement and by a regulation in effect since the early',
14645:'days of the program which provides that any amount paid out by the va under a guarantee by reason of',
14646:'default “shall constitute a debt owing to the united states by such veteran.” 38 c.f.r. § 36.4323e 2005. 38 pub.',
14647:'l. no. 101237, title iii, 103 stat. 2062, 2069 dec. 18, 1989. 39 for a comprehensive discussion of the program,',
14648:'see bernard p. ingold, the department of veterans affairs home loan guaranty program: friend or foe?, 132 mil. l. rev.',
14649:'231 1991. page 1166 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans in the simple situation,',
14650:'the veteran defaults, the bank forecloses, the va pays the bank under the guarantee and then proceeds to attempt recovery',
14651:'from the defaulting veteran. e.g., mcknight, 259 f.2d 540. sale of the property by the veteran does not automatically exonerate',
14652:'the veteran from liability. where a veteran who bought a home under a vaguaranteed loan sells the property to a',
14653:'purchaser who assumes the mortgage and subsequently defaults, the veteran may still be liable to the government for the amount',
14654:'va is required to pay under the guarantee. b155317, oct. 21, 1964; b131120, july 26, 1957; b131210, apr. 9, 1957.',
14655:'this result applies unless the transaction amounts to a novation, that is, unless the mortgagee releases the original mortgagor and',
14656:'extinguishes the old debt. b108528, dec. 3, 1952. breach by the lender of an agreement to notify the veteran original',
14657:'borrower if the subsequent purchaser defaults does not affect the veteran’s liability to the united states. b154496, july 9, 1964.',
14658:'the potential harshness of the result in many of these cases is largely mitigated through statutory release and waiver provisions.',
14659:'when a veteran disposes of residential property securing a guaranteed loan, the veteran may be released at the time of',
14660:'the sale from all further liability to the va resulting from the loan, including default by the transferee or subsequent',
14661:'purchaser, if 1 the loan is current, 2 the purchaser is obligated by contract to assume the full liability and',
14662:'responsibility of the veteran under the loan, and 3 the purchaser qualifies from a credit standpoint, that is, if the',
14663:'purchaser would qualify for a guarantee if he or she were an eligible veteran. 38 u.s.c. § 3714a1. issuance of',
14664:'the release is mandatory if the statutory conditions are met. upon receipt of written notification by the veteran and a',
14665:'determination that the conditions in 38 u.s.c. § 3714a are met, the release is issued by the holder of the',
14666:'loan. in some cases, the va is considered the loan holder. id. § 3714a2. the veteran has a right to',
14667:'appeal an adverse determination to the va. id. § 3714a4. even if the specified conditions are not met, the assumption',
14668:'may be approved in certain circumstances. id. § 3714a4bii. sale of the property without notifying the holder may result in',
14669:'acceleration of the loan. id. § 3714b. in addition, the va is required to waive a veteran’s indebtedness arising from',
14670:'a loan upon determining that collection would be against equity and good conscience, and that there is no indication of',
14671:'fraud, misrepresentation, or bad faith on the part of any interested person. 38 u.s.c. § 5302b. waiver must be requested',
14672:'within 1 year from receipt of the notification of indebtedness. id. this is a “mandatory” waiver statute, page 1167 gao06382sp',
14673:'appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans imposing upon the va a duty to actually exercise',
14674:'its discretion once waiver has been requested. see beauchesne v. nimmo, 562 f. supp. 250 d. conn. 1983 discussing mandatory',
14675:'nature of 38 u.s.c. § 5302 dealing with waiver of benefit overpayments. as with many waiver statutes, 38 u.s.c. §',
14676:'5302 eliminates the potential liability of certifying and disbursing officers with respect to any amounts waived. id. § 5302d. “certifying',
14677:'officer” in this context means the authorized certifying officer of the va who certified the payment in question, and has',
14678:'no reference to any official of any private institution involved in the transaction. colorado v. veterans administration, 430 f. supp.',
14679:'551, 561 d. colo. 1977, aff’d, 602 f.2d 926 10th cir. 1979, cert. denied, 444 u.s. 1014 1980. adverse waiver',
14680:'determinations may be appealed to the board of veterans appeals established by 38 u.s.c. § 7101. see 38 c.f.r. §§',
14681:'20.10118–19 2005; see also 38 c.f.r. § 1.958. waiver determinations and the board’s review of them are subject to further',
14682:'judicial review by the united states court of veterans appeals under an “arbitrary and capricious” standard. e.g., kaplan v. brown,',
14683:'9 vet. app. 116, 119 1996 and cases cited. if waiver is granted, amounts previously paid may be refunded. 38',
14684:'c.f.r. § 1.967. gao reviewed these regulations when they were first issued and agreed that they were within the va’s',
14685:'authority. b158337, mar. 11, 1966. absent either release or waiver, the va may pursue recovery against the veteran. see, e.g.,',
14686:'davis v. national homes acceptance corp., 523 f. supp. 477 n.d. ala. 1981; b188814, mar. 8, 1978; b172672, june 22,',
14687:'1971. in b188814, for example, the veteran had failed to obtain a release, would not have been eligible for it',
14688:'anyway, and va refused to waive the indebtedness. therefore, the veteran was held liable even though the purchaser who subsequently',
14689:'defaulted had assured him that he would no longer be liable to va. most of the cases cited thus far',
14690:'concern the liability of the original borrower where a subsequent purchaser defaults. the purchaser of property for which va has',
14691:'guaranteed a loan, whether or not the purchaser is a veteran, may also become liable to va for amounts va',
14692:'is required to pay out upon default. for example, in b141888, july 21, 1960, a veteran purchased a home, obtained',
14693:'a va guarantee, and later sold the home to a nonveteran who assumed the mortgage. the nonveteran purchaser defaulted. the',
14694:'lender foreclosed and obtained a deficiency judgment against both the veteran and the nonveteran, which va paid. va waived the',
14695:'page 1168 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans veteran’s indebtedness, but was still entitled',
14696:'to collect from the defaulting purchaser. see also b155932, feb. 23, 1971; b155932, oct. 13, 1970 same case. issues have',
14697:'arisen under the loan program concerning the availability of state law as a defense to a va claim. for example,',
14698:'it is not uncommon for states to prohibit, or impose various restrictions on, lenders’ obtaining deficiency judgments against defaulting purchasers',
14699:'after a foreclosure sale. since va’s rights under subrogation are limited to the rights of lenders, these statutes would limit',
14700:'va’s right to obtain deficiency judgments under a subrogation theory. however, va’s regulations have been held to “create a uniform',
14701:'system” for administering the guarantee program, a system which displaces state law. shimer, 367 u.s. at 377. these regulations, as',
14702:'noted earlier, include a provision giving the va an independent right of indemnity. thus, to avoid the possibility of being',
14703:'hampered by state law, va has generally proceeded under its independent right of indemnity rather than under a subrogation theory.',
14704:'e.g., b126500, feb. 3, 1956; b124724, dec. 21, 1955. consistent with shimer, the courts generally hold that the va’s right',
14705:'of indemnity prevails over state laws which flatly prohibit va from obtaining deficiency judgments through subrogation. jones v. turnage, 699',
14706:'f. supp. 795 n.d. cal. 1988, aff’d mem., 914 f.2d 1496 9th cir. 1990, cert. denied, 499 u.s. 920 1991;',
14707:'united states v. rossi, 342 f.2d 505 9th cir. 1965; b174343, nov. 17, 1971; b143844, nov. 15, 1960; b124724, oct.',
14708:'3, 1955. other cases applied the same approach to dismiss other aspects of state deficiency laws. e.g., b173007, june 29,',
14709:'1971; b162193, sept. 1, 1967; b122929, june 24, 1955. at one time, some courts viewed va’s right of indemnity as',
14710:'secondary to its subrogation rights, and, therefore, held that va could not invoke indemnification as a means of avoiding state',
14711:'law restrictions that would limit its recovery rights under a theory of subrogation. see, e.g., whitehead v. derwinski, 904 f.2d',
14712:'1362 9th cir. 1990. however, this view has been abandoned. in its en banc decision in carter v. derwinski, 987',
14713:'f.2d 611 9th cir. 1992, cert. denied sub nom., 510 u.s. 821 1993, the ninth circuit explicitly overruled whitehead. the',
14714:'court held in carter that the two remedies were equally available to va: “. . . the regulation at issue',
14715:'plainly says the va has a right of both subrogation and indemnity. there is no occasion for us to resolve',
14716:'any conflict between the page 1169 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans exercise of',
14717:'these two rights, because both can be fully enforced. indeed, not only are the rights of subrogation and indemnity not',
14718:'in conflict, they are complementary and mutually reinforcing. demoting the right of indemnity to secondclass status amounts to a judicial',
14719:'rewriting of the regulation.” 987 f.2d at 615. see also united states v. davis, 961 f.2d 603 7th cir. 1992;',
14720:'vail v. derwinski, 946 f.2d 589 8th cir. 1991; boley v. principi, 144 f.r.d. 305 e.d.n.c. 1992, aff’d, 10 f.3d',
14721:'218 4th cir. 1993; in re silveous, 174 b.r. 479 bankr. n.d. ohio 1994. the defense of minority has also',
14722:'been raised on occasion. state law generally provides that a contract entered into by a minor is voidable at the',
14723:'minor’s option. several states have statutes which expressly make the defense of infancy inapplicable to contracts under the servicemen’s readjustment',
14724:'act, and the few cases gao has considered have involved statutes of this type. see b126500, feb. 3, 1956; b124750,',
14725:'oct. 3, 1955; b105429, dec. 11, 1951. in addition, the united states has sovereign immunity from defenses arising under state',
14726:'statutes of limitations unless expressly waived. e.g., united states v. summerlin, 310 u.s. 414 1940 claim under national housing act;',
14727:'bresson v. commissioner of internal revenue, 213 f.3d 1173 9th cir. 2000 federal tax assessment; b134523, mar. 19, 1958 summerlin',
14728:'applied to va claim. see also, united states v. california, 507 u.s. 746, 757–58 1993 reaffirming the rule in summerlin',
14729:'where the government is proceeding in its sovereign capacity, but distinguishing summerlin on the facts of that case. another provision',
14730:'of the program legislation makes the “financial transactions” of the va “incident to, or arising out of” the guarantee program',
14731:'“final and conclusive upon all officers of the government.” 38 u.s.c. § 3720c. thus, gao will not review the amount',
14732:'of indebtedness determined by the va. b105551, sept. 25, 1951. similarly, apart from advising persons that the options exist, gao',
14733:'will not review the va’s exercise of its waiver and release authorities. b108528, oct. 6, 1952; b216270, sept. 25, 1984',
14734:'nondecision letter. 2 loans closed after december 31, 1989 under 38 u.s.c. § 3729, the department of veterans affairs will',
14735:'charge the veteran a loan fee based on a percentage of the loan amount. the fee may be included in',
14736:'the loan and paid from its proceeds. payment of the loan fee page 1170 gao06382sp appropriations law—vol. ii b. debt',
14737:'collection procedures chapter 11 federal assistance: guaranteed and insured loans is a prerequisite to the guarantee. disabled veterans receiving compensation',
14738:'or their surviving spouses are exempt. subsequent transferees assuming a loan are also charged a loan fee. a veteran who',
14739:'pays the loan fee or is exempt from paying it— “shall have no liability to the secretary with respect to',
14740:'the loan for any loss resulting from any default of such individual except in the case of fraud, misrepresentation, or',
14741:'bad faith by such individual in obtaining the loan or in connection with the loan default.” id. § 3703e1. this',
14742:'provision was added by section 304a of the veterans home loan indemnity and restructuring act of 1989.40 an explanatory statement',
14743:'on the final housesenate compromise there was no conference report emphasizes that “bad faith” is intended to include abandonment of',
14744:'a mortgage by one with the financial ability to make the payments. 135 cong. rec. 30292 1989. the limited liability',
14745:'of 38 u.s.c. § 3703e1 does not apply to persons assuming a loan or to veterans who receive mobile home',
14746:'loans. id. § 3703e2. apart from the limited liability of 38 u.s.c. § 3703e, the va’s right of subrogation is',
14747:'preserved. id. § 3732a1. debt collection is governed by the federal claims collection act of 1966,41 the debt collection act',
14748:'of 1982,42 and the debt collection improvement act of 1996,43 as well as the federal claims collection standards, 31 c.f.r.',
14749:'parts 900–904 2005. authorities available to federal agencies in varying degrees include assessment of interest and penalties, offset, collection in',
14750:'installments, compromise, use of commercial collection agencies, and, if none of this works, referral to the department of justice for',
14751:'suit. federal debt collection practices are explored in detail in chapter 13 of volume iii of the second edition of',
14752:'principles of federal appropriations law and, as a general proposition, are the same for a debt arising from a loan',
14753:'guarantee as for any other debt. the office of management and budget set out 40 pub. l. no. 101237, title',
14754:'iii, 103 stat. 2069, 2073 dec. 18, 1989. 41 pub. l. no. 89508, 80 stat. 308 july 19, 1966. 42',
14755:'pub. l. no. 97365, 96 stat. 1749 oct. 25, 1982. 43 pub. l. 104134, 110 stat. 1321, 1321358 apr. 26,',
14756:'1996. page 1171 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans general requirements for agencies to',
14757:'follow in managing receivables and collecting debts arising from federal credit activities, including guaranteed and insured loans in omb circular',
14758:'no. a129, policies for federal credit programs and nontax receivables, appendix a, §§ iv and v november 2000. among other',
14759:'things, these requirements deal with asset sales. in this regard, two recent gao reports address the asset sales program at',
14760:'the small business administration: small business administration: accounting anomalies and limited operational data make results of loan sales uncertain, gao0387',
14761:'washington, d.c.: jan. 3, 2003, and a followup report, sba disaster loan program: accounting anomalies resolved but additional steps would',
14762:'improve longterm reliability of cost estimates, gao05409 washington, d.c.: apr. 14, 2005. the governmentwide authorities described above do not apply',
14763:'to the extent an agency has its own debt collection authority, either agencyspecific or programspecific. this may be in the',
14764:'form of positive authority or restrictions. we turn again to the department of veterans affairs va for several illustrations. the',
14765:'va has the authority to compromise any claim arising from its guarantee or insurance programs, “[n]otwithstanding the provisions of any',
14766:'other law,” and, therefore, independent of the governmentwide compromise authority under the federal claims collection act and related statutes. see',
14767:'38 u.s.c. §§ 3720a3 and4. exercise of this authority is entirely up to the va. see b153726, may 4, 1964.',
14768:'see generally 71 comp. gen. 449 1992; 67 comp. gen. 271 1988. subject to its own implementing regulations and certain',
14769:'exceptions and procedures specified in the statute, the va is required to offset debts arising from veterans’ benefit programs for',
14770:'which recovery has not been waived against future payments under any law administered by the va. 38 u.s.c. § 5314a.',
14771:'however, offset against a veteran or his or her surviving spouse by any other agency to collect a debt owed',
14772:'to the va under a guarantee program is prohibited except with the written consent of the debtor or under a',
14773:'judicial determination. id. § 3726. under this legislation, for example, the defense department may not deduct the amount of indebtedness',
14774:'to va from the pay of active duty or retired military personnel absent either consent or a court determination. the',
14775:'statutory definition of veteran includes certain active duty personnel. b167880, jan. 28, 1970. this protection against setoff applies only where',
14776:'the veteran debtor has incurred the debt through use of his or her va loan entitlement. thus, setoff is not',
14777:'prohibited where a veteran, upon page 1172 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans purchasing',
14778:'a home, assumes a va loan in the ordinary course of the real estate transaction without involving his or her',
14779:'own loan entitlement. b167880, dec. 2, 1969. the va also has independent statutory authority and a general obligation to assess',
14780:'interest and reasonable administrative costs on debts arising from its benefit programs, including debts arising from guarantee programs to the',
14781:'extent not precluded by the terms of the loan instrument. 38 u.s.c. § 5315. for debts within the scope of',
14782:'the statute, 38 u.s.c. § 5315, rather than 31 u.s.c. § 3717 federal claims collection act, is the controlling provision.',
14783:'66 comp. gen. 512 1987. if reasonable administrative collection efforts fail, the va may use its own attorneys to sue',
14784:'the debtor, subject to the direction and supervision of the attorney general. 38 u.s.c. § 5316. the va legislation cited',
14785:'above deals with specific debt collection tools. an example of more general authority is 7 u.s.c. § 1981b4, which authorizes',
14786:'the farmers home administration to “compromise, adjust, reduce, or chargeoff debts or claims,” and, within certain limits, to release debtors,',
14787:'other than housing act debtors, “from personal liability with or without payment of any consideration at the time of the',
14788:'compromise, adjustment, reduction, or chargeoff.” under this law, for example, the farmers home administration is authorized to terminate the accrual',
14789:'of interest on the guaranteed portion of defaulted loans. 67 comp. gen. 471 1988 noting, however, that the agency had',
14790:'restricted its statutory discretion by its own regulations. 5. collateral protection in administering a loan guarantee program, it may become',
14791:'desirable for an agency to make expenditures other than merely paying out on the guarantee. from a program or even',
14792:'economical standpoint, it may be desirable, for example, to make expenditures to protect and preserve the government’s interest in the',
14793:'collateral, such as custodial care, insurance costs, or the purchase of prior liens. for purposes of this discussion, we use',
14794:'the term “collateral protection” to cover two types of expenditure— preservation of the collateral itself and protection of the government’s',
14795:'interest in the collateral. whether or not such expenditures are proper is essentially a question of “purpose availability.” the first',
14796:'step is to analyze the terms and intent of the agency’s program authority to determine whether the agency’s funds page',
14797:'1173 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans are available for the contemplated expenditure either',
14798:'expressly or by necessary implication. if this does not provide the answer, the next step is to apply the “necessary',
14799:'expense” doctrine.44 an example of specific authority is 38 u.s.c. § 3727, which authorizes the department of veterans affairs va',
14800:'to make expenditures to correct structural defects in certain homes encumbered by a vaguaranteed mortgage. the department of housing and',
14801:'urban development hud has similar authority to use funds available under title i of the national housing act to correct',
14802:'structural defects in housing insured by the federal housing administration fha. 12 u.s.c. § 1735b; b114860o.m., jan. 15, 1974. an',
14803:'example of somewhat less specific authority is another provision of the housing act, 12 u.s.c. § 1713k, which authorizes hud',
14804:'“to take such action and advance such sums as may be necessary to preserve or protect the lien of such',
14805:'mortgage.” in 54 comp. gen. 1061 1975, gao agreed that this provision authorizes hud to advance money from its insurance',
14806:'fund to make repairs to multifamily projects covered by insured mortgages assigned to hud upon default, until either the default',
14807:'is cured or hud acquires title to the property. absent specific authority, collateral protection expenditures may still be permissible under',
14808:'a “necessary expense” theory. as a general proposition, the authority to require collateral implies the authority to make reasonable expenditures',
14809:'to care for and preserve the collateral where administratively determined to be necessary. 54 comp. gen. 1093 1975. the limits',
14810:'of the necessary expense approach are illustrated by b170971, jan. 22, 1976, a case involving the nowdefunct new community development',
14811:'program. the department of housing and urban development hud questioned whether it could use the revolving fund established by the',
14812:'urban growth and new community development act of 1970 to make two types of collateral protection expenditures: 1expenditures to repair,',
14813:'maintain, and operate the security and 2payments to senior lienholders. the expenditures were intended to advance program objectives by preventing',
14814:'deterioration of the security pending possible acquisition by hud, or perhaps in some cases enable a developer to regain financial',
14815:'health and successfully continue with the project. 44 see section b of chapter 4 for a discussion of the necessary',
14816:'expense doctrine. page 1174 gao06382sp appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans the comptroller general reviewed',
14817:'the program legislation and legislative history and concluded that the proposed expenditures would constitute a new and major type of',
14818:'financial assistance entirely beyond the intended scope of the statute, and were not authorized except in cases where hud had',
14819:'made a bona fide determination to acquire the security. a later decision, b170971, july 9, 1976, discussed hud’s specific authority',
14820:'under the program legislation to make collateral protection expenditures after it had acquired the security. where an agency acquires property',
14821:'through a loan or loan guarantee program it administers, it may not transfer the management and disposition of that property',
14822:'to another federal agency without specific statutory authority nor may it effect such a transfer under the economy act, 31',
14823:'u.s.c. § 1535. b156010, mar. 16, 1965 concluding that va could not transfer the management and disposition of acquired property',
14824:'to hud without specific authority. a similar type of payment is one designed to protect the government’s interest in the',
14825:'transaction as opposed to maintaining the particular piece of property. again, the question is one of purpose availability in light',
14826:'of the agency’s statutory authority. thus, where fha had acquired a second mortgage on real property through payment of a',
14827:'loss to an insured financial institution under title i of the national housing act, it could use title i funds',
14828:'to redeem the property to protect its junior lien, under a right of redemption conferred by state law, if it',
14829:'determined that redemption was in the best interests of the government and necessary to carry out the provisions of title',
14830:'i. 36 comp. gen. 697 1957. see also 34 comp. gen. 47 1954. collateral protection may take forms other than',
14831:'direct expenditures. for example, the small business administration could subordinate a senior lien to enable a borrower to obtain necessary',
14832:'surety bonds upon an administrative determination that the action would be consistent with the statutory purposes and would improve the',
14833:'prospects for repayment of the loan. 42 comp. gen. 451 1963. under the governing legislation, sba had the discretion not',
14834:'to require security at all on loans sufficiently sound as to reasonably assure repayment. another 1963 case held that a',
14835:'statute authorizing the maritime administration to take necessary steps to protect or preserve collateral securing indebtedness authorized it to agree',
14836:'to reschedule payments under an insured ship mortgage to avert impending default. 43 comp. gen. 98 1963. page 1175 gao06382sp',
14837:'appropriations law—vol. ii chapter 11 federal assistance: guaranteed and insured loans in 63 comp. gen. 465 1984, a borrower defaulted',
14838:'on a loan guaranteed by the sba. sba purchased the guaranteed portion of the loan from the lending bank and',
14839:'proceeded to place the loan in liquidation. however, a prior lienholder scheduled a foreclosure sale. sba was unable to get',
14840:'a treasury check in time to submit a protective bid, and asked the lending bank to advance funds to purchase',
14841:'the property at the foreclosure sale, promising to reimburse the bank with interest. obviously, a government agency does not normally',
14842:'have the authority to borrow money from a commercial bank to carry out its programs. under the particular circumstances involved,',
14843:'however, gao found that the transaction, including the commitment to pay interest, could be justified under sba’s broad authority45 in',
14844:'15 u.s.c. § 634b7 to “take any and all actions” deemed necessary in liquidating or otherwise dealing with authorized loans',
14845:'or guarantees. the decision emphasized that it was nothing more than an interpretation of sba’s legal authority under the “unique',
14846:'circumstances of this case,” and should not be regarded as establishing a “broad legal precedent.” 63 comp. gen. at 469.',
14847:'45 the supreme court has noted in another context that congress has given the sba “extraordinarily broad powers” to accomplish',
14848:'the objectives of the small business act. small business administration v. mcclellan, 364 u.s. 446, 447 1960. page 1176 gao06382sp',
14849:'appropriations law—vol. ii the government accountability office, the audit, evaluation and gao’s mission investigative arm of congress, exists to support',
14850:'congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the',
14851:'american people. gao examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other',
14852:'assistance to help congress make informed oversight, policy, and funding decisions. gao’s commitment to good government is reflected in its',
14853:'core values of accountability, integrity, and reliability. the fastest and easiest way to obtain copies of gao documents at no',
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14855:'testimony, and correspondence on its web site. to have gao email you a list of newly posted products every afternoon,',
14856:'go to testimony www.gao.gov and select “subscribe to updates.” order by mail or phone the first copy of each printed',
14857:'report is free. additional copies are $2 each. a check or money order should be made out to the superintendent',
14858:'of documents. gao also accepts visa and mastercard. orders for 100 or more copies mailed to a single address are',
14859:'discounted 25 percent. orders should be sent to: u.s. government accountability office 441 g street nw, room lm washington, d.c.',
14860:'20548 to order by phone: voice: 202 5126000 tdd: 202 5122537 fax: 202 5126061 contact: to report fraud, web site:',
14861:'www.gao.gov/fraudnet/fraudnet.htm waste, and abuse in email: fraudnet@gao.gov federal programs automated answering system: 800 4245454 or 202 5127470 gloria jarmon, managing',
14862:'director, jarmong@gao.gov 202 5124400 congressional u.s.government accountability office, 441 g street nw, room 7125 relations washington, d.c. 20548 paul anderson,',
14863:'managing director, andersonp1@gao.gov 202 5124800 public affairs u.s. government accountability office, 441 g street nw, room 7149 washington, d.c. 20548',