Court Opinion

ID: 4119946
Source: CourtListenerOpinion
Date Created: 2017-01-27 22:44:00.159356+00
Date Added: 2024-06-11T09:21:00.153517
License: Public Domain

Funding of Grants
                       by the National Institutes of Health

The National Institutes o f Health may, consistent with 31 U.S.C. § 1502(a), fund an entire
  research grant out of a single fiscal year’s appropriations regardless of how long it takes to
  complete the work under the grant.

                                                                                   February 11, 1986

                M   em orandum        O p in io n   for th e    G eneral C o un sel,
                    D epa rtm en t     of   H ealth       and   H u m a n S e r v ic e s

   This responds to the request of your Office for the Department of Justice’s
opinion whether the National Institutes of Health (NIH) may use the appropria­
tion for one fiscal year to fund a grant when the work under the grant may take
two or three fiscal years to complete, or whether NIH must fund each year’s
work from a separate appropriation. You have asked this question because the
Comptroller General has concluded that:
          the executive branch plan to fund some 646 NIH research grants
          on a 3-year basis with fiscal year 1985 funds is unlawful,
          because in the absence of specific statutory authority, such
          actions violate 31 U.S.C. § 1502(a).1
For the reasons stated below, we believe GAO’s conclusion that NIH may not
lawfully fund grants on a multi-year basis is incorrect. We believe, based on the
pertinent statutes as well as the principles articulated in prior Comptroller
General opinions, that NIH may, under the circumstances outlined below, use
the appropriation for one fiscal year to fund the entire cost of a grant made
during that fiscal year, regardless of how long it takes to complete work under
that grant.
                                     I. Statutory Language

 The Comptroller General’s conclusion is based on 31 U.S.C. § 1502(a),
which provides:
  1 Letter to Hon. Lowell W eicker, Jr., C hairm an, Subcom m ittee on Labor, Health and H um an Services, and
Education o f the Senate Com m ittee on A ppropriations from M ilton J. Socolar, Office o f the C om ptroller
G eneral, G eneral A ccounting O ffice (GA O ) (M ar. 18, 1985) (GAO letter).

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           The balance of an appropriation or fund limited for obligation to
           a definite period is available only for payment of expenses
           properly incurred during the period of availability or to com­
           plete contracts properly made within that period of availability
           and obligated consistent with § 1501 of this title. However, the
           appropriation or fund is not available for expenditure for a
           period beyond the period otherwise authorized by law.
The plain language of this provision does not support GAO’s conclusion that
NIH may not use funds appropriated for one fiscal year to pay for work to be
done in subsequent years under a multi-year grant. Although 31 U.S.C. § 1502(a)
makes no reference to grants, the statute does refer to “contracts,” and NIH
research grants are a form of contract, as GAO itself has previously recog­
nized.2 Thus, under § 1502(a), the balance of an appropriation “limited for
obligation to a definite period” — such as a particular fiscal year — may be
used to “complete grants properly made” within that fiscal year and properly
obligated consistent with 31 U.S.C. § 1501.3 In other words, § 1502(a) contains
two requirements: first, that the grant be “properly made” within the fiscal year
being charged and, second, that the grant be “obligated” — i.e., recorded as an
obligation — consistent with § 1501.
   The second of these requirements — that a grant be properly obligated
consistent with 31 U.S.C. § 1501 — has no bearing on the general question of
NIH funding of multi-year grants, but rather concerns the handling of particular
obligations. Moreover, the papers we have reviewed contain no suggestion that
the particular NIH grants that gave rise to the NIH-GAO dispute were not
obligated consistent with § 1501. Absent facts to the contrary, we assume that
issuance of each NIH grant is supported by appropriate documentary evidence
and authorized by statute.
   We also do not believe that GAO’s position is supported by the first require­
ment, i.e., that each grant be “properly made” within the fiscal year charged.
The plain meaning of this statutory language is that it must be proper for NIH to
make the grant within the fiscal year charged. Applying this interpretation, we
see no reason why NIH may not make a multi- year grant during the first year
of the grant. Indeed, we do not understand GAO to argue that NIH may not

  2 See 50 C om p. G en. 4 7 0 ,4 7 2 (1970) (“th e acceptance o f a grant . . creates a valid contract"). See also 62
C om p. G en. 701, 702 (1983).
  3 Section 1501 states in pertinent part:
        (a) An am ount shall be recorded a s an obligation o f the United States G overnm ent only when
      supported by docum entary evidence o f —

                                                 *         *        *
         (5) a grant o r subsidy payable —
            (A ) from appropriations made fo r paym ent of, o r contributions to, amounts required to be
         p aid in specific am ounts fixed by law or under form ulas prescribed by law; [or]

                                                 *         *        *

           (C) un d er plans approved consistent with and authorized by law . . . . There is no dispute that
         the N IH grants at issue here were o bligated consistent with these requirem ents.

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make such grants at that time, but only that NIH must spread the cost over the
length of the grant. The plain meaning of the “properly made” language,
however, does not require such cost spreading.4

                             II. The GAO’s Traditional Analysis

   We also believe that the conclusion expressed in the GAO letter does not
follow from its own prior opinions. Over the years, GAO has added a gloss to
§ 1502, known as the bona fid e need rule. As stated in Principles o f Federal
Appropriations Law (GAO 1982) (Principles ), GAO has taken the position that
“[a] fiscal year appropriation may be obligated only to meet a legitimate, or
bona fid e need arising in the fiscal year for which the appropriation was made.”
Id. at 4-9. This principle would appear to require that a multi-year grant meet a
bona fid e need of the fiscal year whose appropriation is being charged.
   The GAO letter states that the NIH grants were improperly made because the
work done under them in subsequent years will not meet a bona fid e need of
fiscal year 1985. In arriving at this conclusion, GAO cites a series of cases
involving funding for “continuous and recurring services [that] are needed on a
year-to-year basis,” such as repairs of typewriters and delivery of supplies. Id.
at 6-7. However, as HHS points out:
          Without exception, th[e] decisions [cited by GAO] deal with the
          provision of materials and services of a routine and recurring
          nature that should appropriately be funded out of a current year
          appropriation. None of those decisions involved grants, and
          none dealt with a discrete project designed to meet a current
          need the accomplishment of which would take longer than a
          single fiscal year.
Id. at 6.
  While relying on this strained analogy between grants for scientific study
and routine office expenses,5 the GAO letter makes no mention of its extensive
body of opinions concerning the application of the bona fide need rule to
contracts and grants that cannot be completed in one year. This body of
opinions is summarized as follows in the GAO’s Principles, supra, at 4-9,4—10:
          Bona fid e need questions [frequently] arise where a given trans­
          action covers more than one fiscal year. In the typical situation,
          a contract is made (or attempted to be made) in one fiscal year,
          with performance and payment to extend at least in part into the

  4 G A O ’s position finds no support in case law. M oreover, form er A ttorneys General, in interpreting the
predecessor statutes to § 1S02, sim ilarly reached the conclusion that balances o f appropriations may be used
“to pay dues upon contracts properly made w ithin the form er [fiscal] year, even if the contracts be not
perform ed till w ithin the latter o r current year.” 13 Op. A tt’y Gen. 288, 291 (1870). See also 18 Op. A tt’y
Gen. 566, 5 6 9 (1 8 8 7 ).
  5The G A O letter itse lf recognizes the w eakness o f this analogy: “ [W]e recognize that there are fundam ental
differences betw een a contract for materials or services and a research grant.”

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          following fiscal year. The issue is which fiscal year should be
          charged with the obligation. In this context, the rule is that, in
          order to obligate a fiscal year appropriation for payments to be
          made in a succeeding fiscal year, the contract imposing the
          obligation'must have been made within the fiscal year sought to
          be charged, and the contract must have been made to meet a
          bona fid e need of the fiscal year to be charged.
                                 *        *       *
          It follows from the above statement of the rule that there are
          situations in which performance or delivery can extend into a
          subsequent fiscal year with payment to be charged to the prior
          fiscal year, as long as the need arose in the fiscal year to be
          charged. This principle applies even though the funds are not to
          be disbursed and the exact amount owed by the Government
          cannot be determined until the subsequent fiscal year.
In deciding whether a contract should be charged to the fiscal year in which it is
made, GAO has taken the following position:
          The fact that a contract covers a part of two fiscal years does not
          necessarily mean that payments thereunder are for splitting
          between the two fiscal years involved upon the basis of services
          actually performed during each fiscal year. In fact, the general
          rule is that the fiscal y e a r appropriation current at the time the
          contract is m ade is chargeable with paym ents under the con­
          tract, although performance thereunder may extend into the
          ensuing fis c a l year.

23 Comp. Gen. 370,371 (1943) (emphasis added) (quoted in Principles, supra,
at 4-13).
   GAO has issued many opinions reiterating this “general rule.” See, e.g., 56
Comp. Gen. 351, 352 (1977); 50 Comp. Gen. 589, 591 (1971); 21 Comp. Gen.
822, 823-24 (1951); 20 Comp. Gen. 436, 437 (1941); 16 Comp. Gen. 37, 38
(1936). It has likewise made clear “that the question of whether to charge the
appropriation current on the date the contract is made, or to charge the funds
current at the time services are rendered, depends on whether the services are
‘severable’ or ‘entire.’” Principles, at 4-13. Thus, the “determining factor” for
whether a contract (or grant) for a multi-year project is “properly made” is
whether the project “represent[s] a single undertaking” and should therefore be
viewed as a single project. Id. at 4—14.6 If it is, a bona fid e need for the project
arises in the first fiscal year, and that is the appropriation that should be
charged.
   The contract at issue in the 1943 opinion, quoted above, provides an example
of a contract that was viewed by GAO as a single project. Under that contract,
  6 The G A O le tte r agrees that the fundamental issue is w hether the grants are single research projects or are
severable annual projects.

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individuals were to prepare the ground, plant rubber-bearing plants, and bring
them to harvest. GAO concluded that this contract:
       involved one undertaking, which although extending over a part
       of two fiscal years, nevertheless was determinable both as to the
       services needed and the price to be paid therefor at the time the
       contract was entered into. Such being the case, the fiscal year
       appropriation current at the time the contract was made was
       obligated for payments to be made thereunder.
23 Comp. Gen. at 371. GAO therefore rejected a Department of Agriculture
voucher that would have divided the cost between the two fiscal years it took to
complete the contract.
   GAO opinions treating a variety of other contracts as single projects are also
illustrative. For example, when the Government contracted in 1938 to have
cattle inspected and slaughtered if infected with tuberculosis, GAO concluded
that the 1938 appropriation should be charged for recompense paid to farmers
for diseased animals found and slaughtered in later years. 18 Comp. Gen. 363
(1938). The need to test the animals arose in fiscal year 1938, and therefore any
liability under the contract, regardless of when discovered, had to be charged to
the 1938 appropriation. Id. at 365.
   More recently, in 1980, GAO insisted that a 1977 appropriation be charged
for the cost of printing a book for the Commission of Fine Arts even though the
printing took three years, from 1977 to 1979. 59 Comp. Gen. 386, 387-88
(1980). GAO explicitly rejected the Commission’s argument that the printing
costs should be charged against the 1977, 1978, and 1979 GAO appropriations
in proportion to the amount of work done each year. GAO said:
       [T]he fact that performance under a contract extends over more
       than one fiscal year does not mean that payments are to be split
       among the fiscal years on the basis of services actually per­
       formed. Rather, the general rule is that payments due under a
       Government contract are to be charged to the fiscal year appro­
       priation current at the time the legal obligation arose; that is, the
       fiscal year in which a bona fide need for the goods or services
       arose and in which a valid contract or agreement was entered
       into.
59 Comp. Gen. at 387-88. See also 50 Comp. Gen. 589, 591-92 (1971)
(lawyers hired for case must be GAO paid from the appropriation for the year
in which they were hired, no matter how protracted the litigation); GAO
Opinion B-141839-O.M. (May 2, 1960) (NIH contracts for cancer research
with Stanford University are “an entire job” and must be paid out of appropria­
tion for fiscal year in which contracts were signed, “even though the period of
performance may extend beyond the fiscal year until the object thereof is
accomplished.”); 31 Comp. Gen. 608, 610 (1952) (FY 1952 appropriation
reimbursing states for civil defense expenditures charged although states did
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not buy equipment until subsequent years); 23 Comp. Gen. 82, 83 (1943) (FY
1942 appropriation charged although printing of legal opinions not completed
until FY 1943); 21 Comp. Gen. 574, 577 (1941) (FY 1940 appropriation
charged although telescopes not shipped until FY 1941); 20 Comp. Gen. 436
(1941) (FY 1940 appropriation charged for cost of move although move not
completed until FY 1941).
   This general rule has also been applied by GAO to grants. For example,
GAO concluded in 1940 that all expenses incident to a fellowship granted to
South Americans for the study of public health in the United States could be
charged “to the fiscal-year appropriation current and available at the time the
fellowship is awarded” even though the fellowship extended into the succeed­
ing fiscal year and some expenses, such as travel and maintenance, would not
be incurred until the next year. 20 Comp. Gen. 185, 189 (1940). See also GAO
Opinion B-37609, 267 Manuscript Series 1039 (1943) (grants for cultural
programs with South America);7 GAO Opinion B-34477, 261 Manuscript
Series 1960 (1943) (grants to Chinese professors for study in the United
States);8 39 Comp. Gen. 317 (1959). In this last opinion, the National Science
Foundation sought GAO’s opinion on issues relating to the obligation of
certain appropriations. GAO stated:
           It is explained in the letter that the major portion of funds
           appropriated to the National Science Foundation is obligated
           and expended in the form of grants to educational institutions
           for the purpose of conducting basic scientific research activities.
           It is stated — and correctly so — that such grants are adminis­
           tratively recorded as obligations at the time the funds are for­
           mally granted to the grantee by letter, and that there is no
           deobligation of any unexpended portion of the grants as of June
           30 [the end of the fiscal year]. See 31 Comp. Gen. 608.
  7 The 1943 opinion states-
      By decision o f A p n l 3, 1942, B -2 4 2 7 ,. . . it was held, in substance, that a grant o f funds . . .
      constituted a legal obligation o f th e am ount granted, even though the final obligation and
      expenditure for definite projects in th e various American republics w as [sic] to be accom plished
      by the said corporation in the follow ing fiscal y e a r .. . In the said decision, it was stated:
           “H aving in view the authority given by the C ongress to the Coordinator to make
           grants . . . the conclusion appears ju stified that funds so granted . . . were not intended to
           rem ain subject to the fiscal y ear lim itation o f the appropriations from which the funds
           were derived, and that, insofar as concerns the C oordinator o f Inter-A m encan A ffairs,
           such funds are legally obligated w hen form ally granted to an authorized grantee. . . . Cf.
           21 C om p. Gen. 498 ”
                                                 *         *        *
      [YJour above-quoted letter appears to be so sim ilar . . as to warrant a sim ilar conclusion — that
      is, that funds form ally granted or form ally agreed to be furnished to an institution or facility . . .
      are legally obligated at the time o f th e said grant or agreem ent to grant and properly may be made
      available and expended thereafter by the grantee institution or facility without regard to the
      fisca l year limitation o f the appropriations from which the funds were derived.
267 M anuscript Series at 1041, 1042 (citations om itted; em phasis added).
   8 “It should seem obvious that all expenses connected with the second phase of the program — the bringing
o f C hinese professors to this country — a re chargeable to the funds in question [i.e., to funds from the fiscal
year in w hich the grant w as ma d e ] . . . 2 6 1 M anuscript S eries at 1963

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39 Comp. Gen. at 318 (1959) (emphasis added). See also 48 Comp. Gen. 186,
190 (1968) (FY 1968 appropriation “would be the only appropriation legally
available to pay amounts due the grantee as a result of any required upward
adjustment” in later years); 20 Comp. Gen. 370, 373 (1941) (grants may be
used to pay for courses extending over two fiscal years). GAO has embodied
this rule for grants in Principles, supra:
         In order to properly obligate an appropriation for an assistance
         program, some action creating a definite liability against the
         appropriation must occur during the period of the obligational
         availability of the appropriation. In the case of grants, the obli­
         gating action will usually be the execution of a grant agreement.
                                 *        *        *
         Once the appropriation has been properly obligated, perfor­
         mance and the actual disbursement of funds may carry over
         beyond the period of obligational availability.
Id. at 13-16, 13-17 (citations omitted).
   In sum, GAO’s opinions and Principles hold that § 1502 permits contracts
and grants to be charged against the appropriation for a single fiscal year even
though payments may extend over more than one year. They also hold that a
grant may meet the bona fid e need of an agency for a single fiscal year, even
though work under the grant extends over more than one year. Our review of
§ 1502 and of GAO’s opinions thus leads us to conclude that GAO’s recent
determination that NIH may not fund multi-year grants from a single appro­
priation is incorrect.
   You have also asked whether a certifying officer who does not follow the
Comptroller General’s opinion would be liable under 31 U.S.C. § 3528(a)(4).9
We believe that he would not be liable as, in our view, 31 U.S.C. § 1502
permits NIH lawfully to charge the entire cost of a grant against the appropria­
tion for the fiscal year in which the grant was made. Because payment of the
grant is not illegal, the provisions of § 3528(a)(4) are not applicable, and we
would so inform GAO if they referred the matter to this Department.
   Finally, you have asked whether charging the grant to the appropriation for
one fiscal year would violate.the Anti-Deficiency Act, 31 U.S.C. § 1341.10 As
 9 That section provides.
       (a) A certifying official certifying a voucher is responsible for
                                              *        *        *
       (4) repaying a paym ent
         (A ) illegal, improper, or incorrect because o f an inaccurate or m isleading certificate;
         (B) prohibited by law , or
         (C) that does not represent a legal obligation under the appropriation or fund involved
 1031 U.S.C. § 1341 provides in relevant part:
       (a) (1) An officer or em ployee o f the U nited Slates G overnm ent or of the District o f Columbia
     governm ent may not —
       (A) make o r authorize an expenditure o r obligation exceeding an amount available in an
     appropriation o r fund for the expenditure o r obligation; or
       (B) involve either governm ent in a contract o r obligation for the paym ent of money before an
     appropriation is made unless authorized by law.

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we have concluded that charging the grant to the appropriation for a single
fiscal year is lawful, we do not believe a grant official following our opinion
would violate this section.

                                 Conclusion

   For the reasons stated above, we believe that NIH may charge the appropria­
tion for a single fiscal year with the entire cost of a single grant.

                                               C harles   J.   Cooper
                                            Assistant Attorney General
                                             Office o f Legal Counsel

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