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Advanced Advanced Appropriations Appropriations Law SeminarLaw SeminarParticipant Guide, Version 5

FINC9100-M

Graduate SchoolWashington, DC 20024

(888) 744-GRADwww.graduateschool.edu

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This manuscript has been reprinted by the Graduate School for use in FINC9110 with permission of FedTrain, Inc. v 5

Introduction

TABLE OF CONTENTS

CASE STUDY 1COMPLYING WITH CONGRESSIONAL INTENT 7

CASE STUDY 2THE CONFERENCE 61

CASE STUDY 3The Mind Boggling Study 155

Graduate School 1 Advanced Appropriations Law Seminar

Introduction

INTRODUCTION

The Graduate School welcomes you to this important and relevant training on federal appropriations law. This advanced seminar, designed for participants who have successfully completed Federal Appropriations Law (FINC7100), builds upon your existing knowledge of Appropriations Law. It will provide you with the information and resources you need to approach the obligation and expenditure of funds with more confidence in the legality of the proposed action. As with most legal issues, the subject matter is constantly changing and we urge you to adopt practices that will help you stay current after you complete the seminar.

COURSE OBJECTIVES

By the end of this course, you will be able to:

Discuss Appropriations Law as it pertains to purpose, time, and amount

Use a standard format or approach for examining and discussing appropriations laws in depth

AGENDA

DAY 1

Welcome and Course Introduction

Case Study 1: Complying with Congressional Intent

Case Study 2: The Conference

DAY 2

Case Study 2: The Conference (continued)

DAY 3

Case Study 2: The Conference (conclusion)

Case Study 3: The Conference Contracts

Course Summary and Evaluations

Advanced Appropriations Law Seminar 2 Graduate School

Introduction

COURSE OVERVIEW

WHY IS THIS AN ADVANCED SEMINAR?

This seminar was prepared for students who completed the initial course as the next step enabling them to continue enhancing their knowledge, understanding, professional development and confidence in making decisions relating to appropriations law matters. It should be noted that, although it uses the word ‘Advanced’ in the title, one should not assume it is so complex that it would require the knowledge and experience of a seasoned federal attorney practicing in this area of the law. Indeed, such a person might find the seminar somewhat elementary. Instead, the seminar was designed to be most useful to the thousands of our former students who work in legal offices, financial management, administration, supervision and program or project management. It collects certain fundamental principles of law outlined in the Government Accountability Office (GAO) Red Books and places them in case studies that will permit the students to:

Review what they learned in the initial course.

Apply that knowledge in the context of the case studies.

Explore the issues of the case studies in much more depth and for greater amounts of time with their tablemates and the other students in the class.

Engage the instructor and fellow students on the issues outlined in the case study as they relate to specific situations in their own agency. The initial course covers a huge volume of materials and the pace of that course becomes, at times, rather hectic. Therefore, a deliberate goal was to devote more of the seminar time to face-to-face discussions between instructor-and-student and student-and-student than the initial course could permit.


Introduction

HOW CAN THIS COURSE HELP YOUR CAREER?

As each decade passes the involvement by the Legislative Branch of government becomes more significant. Congress routinely, especially in the appropriations process, increasingly imposes substantial rules and restrictions on federal managers at all levels. They do this to insure their Constitutional responsibilities to control the federal purse are met. While necessary, the legislative involvement in day-to-day matters often conflicts with a manager’s need for flexibility. The accelerating costs of providing vital goods and services to the nation compete with the objectives of holding down the growth of government spending.

Naturally, as federal agencies seek more innovative and efficient ways of doing business they look at creative ways to cut costs, improve efficiency and effectiveness or to just get the job done. Managers are frequently encouraged to ‘think outside the box’. For sure, ‘thinking outside the box’ is indeed a reasonable, innovative business approach to meet increasing productivity demands. But, the manager is often frustrated to learn that while he or she is outside the box trying to find better ways to get the job done, more often than not, the law is still in the box.

This seminar is intended to challenge the student to think beyond the basics they learned in Federal Appropriations Law (FINC7100D) and examine the complicated issues in a manner that will promote greater learning, understanding and interaction among their fellow students and with the instructor. Thus, attendance at the initial course is a prerequisite.

HOW WILL THIS COURSE BE CONDUCTED?

The seminar begins with a brief review of the key principles of law relating to purpose, time and amount. This reviews establishes the foundations for the remainder of the class—the explorations and discussion of three case studies. The case studies are self-contained in that they state the problem and then supply extracts of the appropriate pages from the GAO Red Book and other appropriate references.

Note: The references used for this seminar include the Government Accountability Office’s Volumes I and II of the Principles of Appropriations Law (Red Book) supplemented by selected other references to appropriations law, such as Comptroller General Decisions, the Code of Federal Regulations and the Federal Acquisition Regulation. As in the basic course, the focus will be on the Availability of Appropriations as to Purpose, Time and Amount.


Introduction

COURSE INSTRUCTIONAL PROCESS

The following is the instructional process for the course.

Brief lectures. First, the instructor will briefly review the pertinent principles of law relating to purpose, time, and amount. There will be opportunities throughout the presentation for the students to ask general questions to clarify a point or gain greater understanding of the law. The instructor may defer specific questions to a later period, preferring to answer the question in the context of the case study.

Case studies. Once the instructor completes the presentation of the principles and related exceptions, the students turn to the case studies and follow the procedures outlined by the instructor. The case studies are more complex than those used in Federal Appropriations Law (FINC7100D). The students will be seated in table team arrangements to permit substantial discussions on the subjects in their teams and then later as a class. The students will analyze the facts of the case, relate them to the text references and the principles of law, discuss the possible solutions and arrive at a decision.

Team and class interaction. Each table team will answer a series of questions at the end of the Case Study section. The research they will do to answer the questions should ultimately lead them to an answer to the overall problem posed in the case study. They will use a Decision Record format found in the back of the Specific Issues Handout booklet to record their answers. At a set time, the Instructor will begin a period of discussion on the solution to the case. A table team will be selected (probably at random) to present their analysis, findings, conclusions, and decision to the rest of the class. Then the ‘debate’ begins as other table teams concur or dissent voicing their reasons pro or con. At the conclusion of this period, the instructor will present the notional solution.


Introduction

CLASS PARTICIPATION GUIDELINES

Participate freely in discussions

Listen to other viewpoints

Avoid distracting sidebar conversations

Try to relate your own experience to the information presented

Ask questions when you need clarification

Turn off your cell phone and/or pager

Arrive on time

Have fun!

TEAM DYNAMIC GUIDELINES

As a team/team member you should:

Fully participate, and contribute without dominating

Assume the role; every case may not apply to you, but act like it does

Stay focused; avoid tangents on unrelated matters

Agree, disagree, and agree to disagree

Appoint different persons each day who will

- Keep track of time

- Keep a record of your decisions

- Prepare for the briefing

- Be spokesperson for the table for that day


Case Study 1Case Study 1

Complying With Congressional Intent

7

CASE STUDY 1 • Complying With Congressional Intent

CASE STUDY 1: COMPLYING WITH CONGRESSIONAL INTENT

OBJECTIVES

Within the context of the case study, you will learn how to analyze and apply:

Report language found in the Congressional Appropriations Committee reports

Earmarks, floors and ceilings, force and effect of law

Apportionment requirements

Antideficiency Act implications

PRINCIPLES OF LAW

A federal agency is a creature of law and can function only to the extent authorized by law (1-2)

No money may be drawn from the Treasury except as a consequence of law (1-3)

Congress exercises the power of the purse

The Enactment Process: (1-2)

- Congress both authorizes activities and appropriates funds to pay for them (2-40)

- It uses permanent legislation and annual appropriations bills (2-40)

The sequence: (1-3)

- Committee system produces a report and bill language

- Congress votes

- The President signs into law

- OMB apportions the authority

- Statutory construction may be necessary to resolve uncertainties (2-72)

Graduate School 9 Advanced Appropriations Law Seminar©2013 FedTrain, Inc


Where the language is ambiguous, apply the ‘plain meaning rule’ (2-74)

But, read the entire bill in context (2-86)

Where two laws are in irreconcilable conflict, use the ‘last in time’ rule (2-48)

Refer to legislative history if necessary

But, legislative history is not law

Congress enacts budget authority through (2-3)

- General and specific appropriations (2-21)

- Which cannot be commingled (2-21)

An earmark is the same as a specific appropriation (2-22)

Transfers require statutory authority (2-24)

Reprogramming, generally does not (2-29)

Antideficiency Act (6-9)

Overobligation of an appropriation is illegal (9-10)

Overobligation of an apportionment or other subsequent subdivision thereof is illegal (Excludes Allowances) (9-11)

FACTS OF THE CASE

An agency was audited by an external audit agency

Two findings when combined create a third finding

Finding 1: The agency exceeded a maximum ceiling on an earmark

Finding 2: The agency failed to award grants to specific grantees as directed by Congress

The agency therefore violated 31 U.S.C. 1341, an Antideficiency Act provision

The agency CFO disputes the findings

Refer to Agency Responses to Findings 1 and 2

Advanced Appropriations Law Seminar 10 Graduate School©2013 FedTrain, Inc.


SUMMARY OF SPECIFIC ISSUES

When congress directs specific spending levels for programs or activities, it typically uses the earmark technique.

What language is used to reflect desired minimums or maximums?

Is an earmark in a committee report, including the conference report, legally binding on the agency?

What are the rules regarding transfers and reprogramming?

Does failure to execute the terms of an earmark in the appropriation act trigger an Antideficiency Act violation report?

If an apportionment by OMB contains remarks that are not found in the appropriation act, is the failure to comply with the OMB remarks an Antideficiency Act violation?

Is it a violation of law not to properly record obligations? What law governs the obligation rules?



INDEX

Item Page

1. Summary of the Situation * 13

2. Audit Report 2013-BA-166 14

3. Detailed Finding Number 1 15

4. Agency Response to Detailed Finding Number 1 17

5. Specific Issues relating to Detailed Finding Number 1 Handout

6. Detailed Finding Number 2 18

7. Agency Response to Detailed Finding Number 2 19

8. Specific Issues relating to Detailed Finding Number 2 Handout

9. Tab 1 A – Legislative History documents; OMB Apportionment* 2013 President’s Budget - Appendix HR 112-492 House Committee Report, May 23, 2012 SR 112-169 Senate Committee Report, May 22, 2012 HR 112-331 Conference Committee Rep., December 17, 2012 P.L 112-16 Appropriation Act, 2013, December 28, 2012 Apportionment by OMB, January 23, 201310. Tab 1 B - Extracts of Related Research Documents

Red Book Volumes I and II (Selected portions)

OMB Circular A-11 (Selected portions)

* The three case studies used in the course are fictional. The contents were fabricated and produced for instructional purposes only. The documents in Tab 1 A are illustrations and have been formatted and, in some instances, changed to add or delete materials for instructional purposes only.



Summary of the Situation

Complying with Congressional Intent

Background Congress created the Intergovernmental Audit Agency (IGAA) with the specific responsibility for auditing certain federal agencies to ensure they were complying with statutory requirements contained in appropriations acts. They completed an audit of the National Center for Injury Prevention, Statistics and Reporting (NCIPSR), located in Byrdsville, West Virginia. The report alleges the agency committed several errors in obligating the appropriations resulting in a violation of federal law. The agency’s Chief Financial Officer has responded on behalf of the NCIPSR Director. His responses are found on the detailed finding sheets that follow. The findings have been approved by the Auditor-In-Charge of the IAGG. You are the accountable certifying officer. The report is on your desk. You were directed by the report to make the changes in obligations to correct the official accounting reports of the agency. You are uncertain the report is correct based on your initial review of the information contained therein.

Details The report alleges the agency committed two significant obligation errors. The combination of the two errors resulted in a finding that the agency had violated the Antideficiency Act, 31 U.S.C. 1341 and 31 U.S.C. 1517. The report alleges in Finding 1: (a) Congress, through an appropriation earmark, directed that a specific amount of money be obligated for a certain program. The agency in fact obligated more by not accounting for charges that should have been recorded against the appropriation; (b) Congress and OMB imposed specific limits on the amount the agency could charge for overhead and indirect costs in a specific program without prior approval. It further alleges in Finding 2: The agency failed to finance grants to grantees as specified by the Congress. The effect of correcting these errors will result in a reportable violation of the Anti-deficiency act.

Funding The NCIPSR receives annual appropriations each year. In fiscal year 2008 it received $1,867,240,000 in account 38 8 0100, Salaries and Expenses, Injury Prevention, Statistics and Reporting. They have an unobligated balance remaining from FY 08 of $ 368,221 and Unliquidated obligations of $ 686,220.

Assignment It is November 25, 2008. As the accountable certifying officer, you must determine the proper course of action with respect to the report and the prior year obligations. To assist you in your analysis, you must answer the “Specific Issues” questions in the Specific Issues Handout booklet.



Intergovernment Audit Agency

Report #: 2008-BA-166 (Final)

Agency Audited:National Center for Injury Prevention, Statistics and Reporting211 Main StreetByrdsville, WV 02201-1234

Report Date:November 3, 2008

Purpose: In accordance with P.L. 102-320, an audit of the obligation records of subject agency was conducted during the period August 1 – October 31, 2008. The purpose was to determine if the agency was complying with Congressional earmarks and other directives contained in the appropriations documents leading up to the appropriation bill being signed by the President on January 11, 2008.

Scope: The IGAA auditors examined the House and Senate appropriations committee reports, the House-Senate Conference Report and the appropriation act, PL 108-306. The auditors determined there were significant directives contained in these documents requiring the agency to obligate and expend funds in a precise, controlled manner both as to purpose and amount. They then selected records in the accounting reports of the agency and compared obligations with the directives and found significant variations from that which was directed by the Congress. These findings are summarized in the next section. In as much as the earmark itself and many of the Congressional specific directives appear in prior appropriations acts, the auditors recommend expanding the audit to examine the accounting records for the previous four years. A preliminary review of a sample of those records does indicate that the problems surfaced in this report are present in prior years 2007 and 2006.

Summary Findings: Finding 1: The agency overobligated a specific Congressional ceiling imposed in an Earmark. They also failed to observe an OMB ceiling on general operating costs.

Finding 2. Congress directed that a specific amount of money be provided to specific grantees. The grantees would use the money to conduct research on a high priority Congressional interest issue. The agency did not award grants to the grantees in the amounts specified in the legislative documents.

The effect of the above actions is the agency has violated 31 U.S.C. 1341 and/or 31 U.S.C. 1517 both reportable violations of the Antideficiency Act.

Submitted By:

I. M. Eversharpe, CPALead Auditor

Approved By:

U. R. Noteworthy, IIAuditor-in-Charge





Detailed Finding Number 1Summary

The agency overobligated a specific Congressional ceiling imposed in an Earmark. They also failed to observe an OMB ceiling on general operating costs.

DetailsFinding 1a: The agency overobligated the Congressional Earmark for the Adolescent Seat Belt Safety Study in that they failed to record all costs associated with the program, charging them instead to another program. This constitutes an illegal augmentation of the Earmark. The budget deficit caps were about to be exceeded when Congress was appropriating budget authority for the agency. As a result, the House and Senate Conference Committee recommended, and both houses of Congress approved, limits on the amount of money to be provided to the states in the form of grants. They were to be used to study the use of seatbelts and shoulder harnesses by pre-teen passengers in automobiles. As most states do not mandate the wear of the passenger restraints in rear seats, statistics show that smaller persons, especially pre-teens, have a very high rate of injury in vehicle collisions.

The agency decided to consolidate several previous ongoing state studies. Instead of making grants, they used their in-house professionals to conduct the study. They completed the FY 08 study program obligating, down to the penny, the full amount allowed by Congress. An examination shows that they accomplished this task by detailing 17 analysts from another program area. Unfortunately, they failed to change the time and attendance records for those personnel. For the 110 days they spent working on the seat belt study, their time cards showed they were working in other departments on other programs. Counting salaries, benefits and overhead charges attributable to the seat belt study, the Congressional earmark was exceeded by $673,200.00. By exceeding a Congressional ceiling imposed in an appropriation bill, they may have committed a violation of 31 U.S.C. 1341, the Antideficiency Act.

Finding 1b: The agency reported that one of the major considerations to do the study in-house was the savings in overhead that would be borne by the separate states. As a result of the change, overhead costs could be trimmed to no more than 7% of the total cost. But, several officials from the various states objected to the plan to conduct the study in-house. OMB agreed with the plan, but imposed a 7% limit in the apportionment document on the amount of the Earmark that could be charged for overhead costs. Not-with-standing this, the agency assessed the program a 9.5% “Tax” and thus violated the Apportionment.

Attachments: Extracts of the Committee Reports, the Conference ReportThe Appropriation BillCopy of the Apportionment





Agency Response to Detailed Finding Number 1Agency Response

The agency non-concurs with all audit findings.

Finding 1a : Congress did specify an amount of obligations that could be charged to the seat belt study. But that amount is a target in that Congress did not specify an upper or lower limit. Since we spent at least as much as was specified in the appropriation bill, there is no violation. Additionally, the finding fails to recognize that there was no over obligation of taxpayer dollars in the appropriation and the project was completed on time despite the late start caused by Congress’ tardy passage of the appropriation bill. The bill wasn’t passed until mid-January. The Department manger did not receive his actual funding authorization until late March. With only six months to accomplish the full-year study the manager needed to supplement his resources. Personnel working in other departments in lower priority work were simply detailed to ensure the work would be completed. Whether they were paid in their parent departments or in the study department is irrelevant. They were paid no more or no less than they would have received anyway. In the end, the project was completed and there was no over obligation of taxpayer funds. Finally, earmarks within an appropriation bill are guidelines. If Congress wanted to specifically limit the program to a precise amount they would have put it in a separate appropriation or program line item. This finding should be deleted.

Finding 1b. This finding is the product of a communication breakdown between the NCIPSR and OMB. It has absolutely no validity with respect to 31 U.S.C. 1341. In the negotiations with OMB regarding bringing the study in-house, we used the term overhead literally. We did not discuss the indirect charges that would be necessary to cover the costs of doing the work in-house. OMB would have allowed a Tax of 9 ½ percent to cover the charges for both overhead and indirect costs if they understood we needed it. Further, negotiations with the OMB analysts left us believing they only imposed the amount to mute protests from certain states. Besides all that, there is no statutory basis for a limit below 10% on the overhead anyway. Therefore, while this finding correctly states that we Taxed the program more than the 7% identified in the OMB apportionment, it is far from a violation of law. In fact, OMB does not have the authority to apportion an amount inconsistent with the appropriation bill. A violation would only occur if Congress had specified the requirement in the actual appropriation bill. This finding should be deleted.

Approved By: Donald Thrump, Jr., Chief Financial Officer, NCIPSR

Date: November 11, 2008





Detailed Finding Number 2Summary

By failing to obligate funds in the amount as required by the House of

Representatives in HR 108-188, July 10, 2007 and Senate Report 108-261, dated September 10, 2007 the agency violated federal law.

DetailsFinding 2: The House of Representatives in HR 108-188 specifically provided $3,017,000 to be granted to the Christopher and Dana Reeve Paralysis Research Center. Another earmark in the amount of $1,000,000 above the FY 2007 comparable level was to be directed to be granted to the Christopher Reeve Paralysis Foundation.

In SR 108-261, the Senate directed the agency to grant $1,000,000 to the Christopher and Dana Reeve Paralysis Research Center.

It is clear from those two earmarks that the NCIPSR was required by the Congress to provide the following amounts to the two grantees:

a. Christopher and Dana Reeve Paralysis Research Center: A minimum of $1,000,000 and a maximum of $3,017,000. The NCIPSR granted $750,000.

b. Christopher Reeve Paralysis Foundation: $1,000,000. The NCIPSR granted $250,000.

Under 31 U.S.C. 1341, the NCIPSR failed to obligate the amounts directed by the Congress. Accordingly, a report is required under 31 U.S.C. 1341, the Antideficiency Act.




Report #: 2008-BA-166 (Final)Agency Response to Detailed Finding Number 2

Agency Response

The agency non-concurs with all audit findings.

Finding 2: The Auditor’s premise that committee earmarks are legally binding on an agency is not completely accurate. Committee reports reflect the views and expectations of the committee and then the particular chamber upon passage. As such it does not reflect the intent of the Congress as a whole.

Accordingly, under the doctrine of “separate but equal powers” only those earmarks that are included in the appropriation bill and carried forward into the apportionment are binding on the agency. In-as-much as neither earmark emerged as a legal requirement there was no obligation to those amounts.

Having said that, we do not wish to imply that we are indifferent to the expectations of the Congress or the work being accomplished under the two Christopher and Dana Reeves entities. We applaud their work. However, when we examined the appropriation bill and the overall dollars provided, we found that there were not enough funds appropriated to accomplish all the articulated mission requirements. It therefore became a matter of priorities and needs.

a. Priorities. The first priority was to ensure we had sufficient funds to cover our fixed costs such as payroll, service contracts, communications and rent related costs. Unfortunately, the appropriation bill did not provide inflation dollars. Thus the 8.2 percent increase in GSA rents, the 29 percent increase in fuel costs and many others had to be absorbed. Second, Congress did not fully fund the civilian employee pay raise of 4.2%. In our budget we were directed by OMB to assume a 2.6% pay raise. The 1.6 percent difference had to be absorbed reducing our discretionary ability to fund more grants.

b. Needs. Then we turn to the backlog of unfunded grant applications, including those from the Reeve Foundation and Center. In evaluating the applications we found many organizations that were seriously in need of Federal assistance, due primarily because they had difficulty in fund raising efforts. Contrast that with some foundations and centers that, due to a high profile celebrity advocate, seem to have little difficulty raising private donations and contributions. We were inclined to give the majority of our resources in terms of Federal dollars to those organizations most in need. The fact they were not singled out by the Congress was not a dominant factor in our discretionary decisions. But, we did not want to ignore the Congressional sentiment either. Thus, it was determined that $1,000,000 spread between the two organizations would be appropriate given all factors.

This finding should be deleted.

Approved By:Donald Thrump, Jr., Chief Financial Officer, NCIPSR

Date:November 11, 2008



The following are the

Appropriation Documents

and the Apportionment by OMB



House of Representatives

Committee on Appropriations

HR 108-188

NATIONAL CENTER FOR INJURY PREVENTION, STATISTICS AND REPORTING

FY 2008



Fiscal Year 2008 Appropriations Reports

House of Representatives Report 108-188, July 10, 2007


Injury Prevention, Statistics and ReportingThe Committee provides $4,588,671,000 for the National Center for Injury Prevention, Statistics and Reporting (NCIPSR), which is $304,031,000 above the fiscal year 2007 comparable level and $321,341,000 above the request. In addition, the Committee provides $13,226,000 in funds made available under Section 241 of the Public Health Service. The net effect is to provide a program level for NCIPSR activities in fiscal year 2008 of $4,551,915,000. This is $56,876,000 above fiscal year 2007 and $232,603,000 above the request.

The Committee considers the table accompanying this report to be determinative of the NCIPSR budget. Funds should be apportioned and allocated consistent with the table, and any changes in funding are subject to the normal reprogramming and notification procedures. The NCIPSR assists State and local authorities and other injury prevention-related organizations to control and reduce disease problems. The activities of NCIPSR focus on several major priorities:

Injury prevention and control

The Committee provides $4,588,671 for the injury control program, which is $4,000,000 above the fiscal year 2007 comparable level and $7,618,000 above the request. The injury prevention and control program supports intramural research, injury control research centers, extramural research grants, and technical assistance to state and local safety departments.

Gun Control Advocacy.--The Committee recommendation maintains language carried in the fiscal year 2007 bill and prior years prohibiting federal funds from being used to lobby for or against the passage of specific federal, state or local legislation intended to advocate or promote gun control. The Committee understands that the NCIPSR's responsibility in this area is primarily data collection and the dissemination of that information and expects that research in this area to be objective and grants to be awarded through an impartial, scientific peer review process.

National Violent Death Reporting System.--The Committee is pleased with the progress that has been made towards implementation of a system of more timely, complete, objective and accurate information about violent deaths caused by injuries. The Committee encourages NCIPSR to continue its implementation of this model plan.



Traumatic Brain Injury.--Within the funds provided, $21,000,000 above the fiscal year 2007 comparable level is for expanding the activities of the Traumatic Brain Injury program.

Seat Belt Safety Research.-- ►The Committee applauds the work thus far in research on ways to prevent injuries related to seat belt usage, or the lack thereof. The Committee recommends $4,000,000 to complete the Adolescent Seat-belt Safety Study.

Occupational safety

Within the total above, the Committee provides $273,385,000 for occupational safety, which is the same as the fiscal year 2007 comparable level, after adjusting for evaluation funds, and $27,056,000 above the request.

National Center for Injury Control, Statistics and Reporting Research Agenda (NCIPSR-RA).--The Committee recommendation restores the reduction proposed in the request for research associated with NCIPSR's NCIPSR-RA program.

Personal Protective Equipment.--The Committee strongly supports NCIPSR's efforts for program activities in domestic terrorism preparedness and their work to carry out the NCIPSR CBRN respirator program. The Committee believes significant work must be done to continue to protect emergency responders from biological and chemical terrorism exposures, as well as industrial accidents. Fire fighters, emergency medical personnel, and other on-site workers need reliable personal protective equipment, principally protective masks and respirators, but also protective clothing and detection devices to be able to effectively help victims in case of exposure to biological or chemical terrorist agents.

Paralysis Resource Center.--More than 2 million Americans live with paralysis from a variety of sources, including spinal cord injury. Those living with paralysis have a desperate need for information and support to improve their safety and quality of life. Hospital and rehabilitation stays have sharply reduced over the last decade and those living with paralysis face astronomical medical costs, are often unemployed and have poor health outcomes, including skin breakdowns,

obesity, pneumonia, bladder and bowel infections and depression. ►In 2000, Congress established the Christopher and Dana Reeve Paralysis Resource Center to provide information and support to individuals living with paralysis, their caregivers and their families. To date, more than 160,000 people have received services and information from the Resource Center's web portal, from information specialists and from library and print materials. More than 90 organizations have benefited from promotion grants provided by the Center, such as wheelchair basketball programs, caregiver support services and the placing of canine companions in the home. To keep up with the exploding demand for information and support services, the

Committee has included in the amounts above ► $3,017,000 above the administration's request to expand the Paralysis Resource Center capacity; provide distance learning and training; support additional promotion grants; and enhance university-based research. This is $3,000,000 above the fiscal year 2007 level. Sufficient resources are included for NCIPSR to fund several model state demonstration programs on paralysis and physical disability. In addition, within the total



provided, ► $1,000,000 above the fiscal year 2007 comparable level is to continue and expand the partnership between the NCIPSR and the Christopher Reeve Paralysis Foundation.

Buildings and Facilities

The Committee recommendation includes $250,000,000 for the planning, design, and construction of new facilities, repair and renovation of existing NCIPSR facilities, and data security and storage. The fiscal year 2007 comparable level was $266,258,000 and the administration requested $114,000,000 for fiscal year 2008. The Committee has again provided bill language to allow NCIPSR to enter into a single contract or related contracts for the full scope of development and construction of facilities and instructs NCIPSR to utilize this authority when constructing the Byrdsville and Wheeling facilities.

Office of the Director

The Committee recommends $40,707,000 for the Office of the Director. The fiscal year 2007 comparable level was $49,426,000 and the administration requested $59,707,000 for fiscal year 2008. The Office of the Director [OD] manages and directs programs of the NCIPSR. OD provides leadership, advises on policy matters, and develops and evaluates progress of goals and objectives related to injury prevention and control. OD provides direction and coordination to the programmatic activities of NCIPSR and coordinates NCIPSR's response to injury-related accidents and emergencies.

Management and support. ►Routine agency services which encompass the full spectrum of administrative and logistical functions necessary to support the programs and activities discussed above are provided through a system of assessments referred to as the “Overhead Assessment” and referred to in the agency as the “Tax”. These assessments are for the sole purpose of funding such activities as, but not limited to, human resources, Training, contracting, finance, supply management, information technology, safety, EEO, legal, and administrative services. The various programs supported by this appropriation will pay its fair, prorated share of these costs.

The committee expects the Tax on any one program will not exceed ► 7% of the program’s funding as provided in this appropriation. The committee further expects that additional assessments for internal management and support, known as the “Indirect Assessment”, within a program or department, will not exceed 3% of the program’s funding as provided in this appropriation.

End of the House Report



Senate Committeeon

Appropriations

HR 108-261


FY 2008



Senate Report 108-261, September 10, 2007


Injury Prevention, Statistics and Reporting

Appropriations, 2007 $4,495,039,000Budget estimate, 2008 4,319,312,000Committee recommendation 4,644,630,000

The Committee provides a program level of $4,644,630,000 for the National Center for Injury Prevention, Statistics and Reporting. The Committee recommendation includes $4,432,496,000 in budget authority and an additional $212,134,000 via transfers available under section 241 of the Public Health Services Act. The fiscal year 2007 comparable program level was $4,495,039,000 and the administration request program level was $4,319,312,000.

The activities of the NCIPSR focus on several major priorities: provide core public safety functions. The NCIPSR assists State and local authorities and other injury prevention-related organizations to control and reduce injury related problems. The activities of NCIPSR focus on several major priorities:

Injury Prevention and Control

The Committee recommends $4,644,630,000 for injury prevention and control. The fiscal year 2007 comparable level was $4,495,039,000 and the administration requested $4,319,312,000.

NCIPSR is one of the prominent Federal agencies engaged in injury prevention and control. Programs are designed to prevent injury and death and reduce human suffering and medical costs caused by: fires and burns; poisoning; drowning; violence; lack of bicycle helmet use; lack of seatbelt and proper baby seat use; and other injuries. The national injury control program at NCIPSR includes occupational injury and applied research in acute care and rehabilitation of the injured. Funds are utilized for both intramural and extramural research as well as assisting State and local safety agencies in implementing injury prevention programs. The Committee recognizes the vital role NCIPSR serves as a focal point for all Federal injury control activities.

Sufficient funds have been included to continue support for all existing Injury Control Research Centers.



National Violent Death Reporting System.--In fiscal year 2007, Congress appropriated funds to continue implementation of a system of more timely, complete, objective and accurate information about violent deaths and injuries to inform and evaluate policy and program efforts. Working with private and public partners, the NCIPSR has entered cooperative agreements with public safety agencies in six States, Maryland, Massachusetts, New Jersey, Oregon, South Carolina, and Virginia, and is extending the system to as many as eight additional States. The Committee is pleased with the progress that has been made and has included $4,500,000 to continue to extend implementation of this model plan for the establishment of a national violent death reporting system [NVDRS]. NVDRS will enable each State to understand and more effectively address local and State violence problems.

Occupational Injury Prevention

The Committee recommends $282,385,000 for occupational injury prevention programs. The fiscal year 2007 comparable level was $273,385,000 and the administration requested $246,329,000 for fiscal year 2008.

The NCIPSR is the one of only two Federal agencies responsible for conducting research and making recommendations for the prevention of work-related injury. The NCIPSR mission spans the spectrum of activities necessary for the prevention of work-related injury, disability, and death by gathering information, conducting scientific research (both applied and basic), and translating the knowledge gained into products and services that impact workers in settings from corporate offices to construction sites to coal mines.

Sports related injuries. ►In fiscal year 2001, the NCIPSR began support of the Christopher and Dana Reeve Paralysis Resource Center to provide information and support to individuals living with paralysis, their caregivers and their families. In order to keep up with the increasing demand

for information and support services, the Committee has provided ► $1,000,000 to augment the NCIPSR's support of the Center. The Committee intends that the full amount of the increase be awarded to the resource center.

Our national injury prevention system is the first line of defense against preventable injuries. Virtually every injury-related problem in our country is first recognized by local public safety professionals, who must work in concert with State and national officials to control these events and save lives. Despite steady increases and shifts in the U.S. population there has been a decline in the number of public safety workers per capita in the past decade. Colleges and universities report that the majority of graduates do not seek employment in public safety and injury prevention fields.

Seat Belt Safety Research. ►The Committee recommends $6,000,000 to complete the Adolescent Seat-belt Safety Study. This reverses the virtual elimination of the program proposed in the President's request. The research program is in the second year of funding 15 research projects, in which teams of investigators from universities, private research firms, State and local safety departments, and community based organizations work together to conduct research to



prevent injuries and save lives of minors for failing to use seat belts in automobiles. The Committee supports this program strongly.


The Committee recommends $59,707,000 for the Office of the Director. The fiscal year 2007 comparable level was $49,426,000 and the administration requested $59,707,000 for fiscal year 2008.

The Office of the Director [OD] manages and directs programs of the NCIPSR. OD provides leadership, advises on policy matters, and develops and evaluates progress of goals and objectives related to injury prevention and control. OD provides direction and coordination to the programmatic activities of NCIPSR and coordinates NCIPSR's response to injury-related accidents and emergencies.

►Transfer and reprogramming. Included in this report is bill language limiting transfer authority to the following: Not more than 1 percent of any discretionary funds authorized in this Act may be transferred out of this appropriation and not more than 3 percent may be transferred into the appropriation. Provided, that an appropriation may be increased by up to an additional 2 percent subject to approval by the House and Senate Committees on Appropriations: Provided further, that the Appropriations Committees of both Houses of Congress are notified at least 15 days in advance of any transfer. Normal reprogramming guidelines apply, to wit: Up to 3 percent may be reprogrammed from any account to another account within this appropriation. Provided that the Appropriations Committees of both Houses of Congress are notified at least 15 days in advance of any such reprogramming; Provided further that thereafter the agency may execute said reprogramming at its discretion unless an objection is raised by any Member of said Committees and therefore said reprogramming shall be subject to the approval of both Committees on Appropriations.

►Management and support. Included in the amount shown above is $465,000,000 for the ordinary agency services that encompass the full spectrum of administrative and logistical functions necessary to support the programs and activities discussed above. These amounts are provided as an alternative to the system of assessments referred to as the “Overhead and Indirect Assessment” and referred to in the agency as the “Tax”. These assessments were used to fund such activities as, but not limited to, human resources, Training, contracting, finance, supply management, information technology, safety, EEO, legal, and administrative services. The various programs supported by prior appropriations paid a share of these costs. There is clear evidence the agency has not applied the “Tax” in any uniform or fair basis in the past. The committee therefore directs that the “Tax” be discontinued effective upon enactment of this appropriation. The Committee expects to make programmatic adjustments to the programs specified above in the Conference Report to account for this $465,000,000 increase in this account.

End of the Senate Report



Conference Report

House and Senate Conference

on Appropriations

HR 108-421


FY 2008



House Report 108-421


Injury Prevention, Statistics and Reporting

The conference agreement includes $4,545,472,000 for Injury Prevention, Statistics and Reporting at the National Center for Injury Prevention, Statistics and Reporting (NCIPSR), instead of $4,588,671,000 as proposed by the House and $4,494,496,000 as proposed by the Senate. In addition, $212,134,000 is made available under Section 241 of the Public Health Service Act, the same as proposed by the Senate. The House bill proposed that $13,226,000 be derived under Section 241 authority.

Injury Prevention and Control

The conference agreement includes $3,154,632,000 for injury control, instead of $3,152,414,000 as proposed by the House and $3,152,409,000 as proposed by the Senate. Within the total provided, $3,750,000 is to extend implementation of the National Violent Death Reporting System, $8,700,000 is for child maltreatment prevention activities, and $5,224,000 is for the Traumatic Brain Injury prevention program. In addition, sufficient funds are included to continue support for all existing Injury Control Research Centers. The conference agreement includes $127,634,000 for Injury Statistics.

Within the amounts provided, ►The Committee provides $6,000,000 to complete the Adolescent Seat-belt Safety Study.

►Within the amounts provided, the conferees continue to support strongly the partnership between NCIPSR and the Christopher and Dana Reeve Paralysis Resource Center and provides $2,500,000 to expand the work of the Paralysis Resource Center including: $500,000 be used to fund up to three applied research projects to translate clinical rehabilitation treadmill therapy to community based settings and to train health care professionals to deliver this intervention; and $2,000,000 be used to expand the work of the Resource Center.

Occupational Safety and Health

The conference agreement provides $236,985,000 for occupational safety and health, instead of $273,385,000 as proposed by the House and $240,485,000 as proposed by the Senate. In



addition, $41,900,000 is available to carry out Research Tools and Approaches activities within NCIPSR Research Agenda (NCIPSR-RA).

Also within the total provided, $3,500,000 above the fiscal year 2007 level is provided for the National Personal Protective Technologies Laboratory. The conferees intend that the funds be used in the manner outlined in the Senate report.


The conference agreement includes $59,707,000 for the activities of the Office of the Director, the same as proposed by the Senate. The House proposed $49,707,000 for the Office of the Director. The conferees understand that NCIPSR has elevated its Office of Childhood Injury Prevention to the Office of the NCIPSR Director and encourage it to continue its work to coordinate prevention measures with state and local public safety officials. The conferees encourage the NCIPSR to form partnerships with entities and organizations that have databases of childhood injury information.

►This report removes, without prejudice, the Senate’s comments regarding funding for support services. The imposition of Overhead and Indirect assessments, also known as the “Tax”, for such costs, will be continued. Accordingly, the committee provides $60,000,000 for operation of the Office of the Director and related activities. In lieu of the direct funding for support services, the 7% Overhead and the 3% Indirect ceilings stated in the House Report are carried forward in this report.



Public Law

108-164

Making Appropriations for FY 2008for the

Departments of Labor, Health and Human Services, and Education and Related Agencies

January 11, 2008



Public Law 108-164Passed by the House of Representatives on November 10, 2007

Passed by the Senate on January 4, 2008Signed into law by the President on January 11, 2008

NATIONAL CENTER FOR INJURY PREVENTION, STATISTICS AND REPORTING Injury Prevention, Statistics and Reporting

To carry out titles XVII, XIX and XXVI of the Public Safety Act of 2001, sections 301 and 211 of the Federal Mine Safety and Health Act of 1977, sections 20, 21, and 22 of the Occupational Safety and Health Act of 1979; including purchase and insurance of official motor vehicles in foreign countries; and purchase, hire, maintenance, and operation of aircraft, $4,545,472,000, of which $212,000,000 shall remain available until expended for equipment, and construction and

renovation of facilities; Provided further that ► $6,000,000 shall be available to complete the Adolescent Seat-Belt Safety Study; Provided further, that without regard to existing statutes, funds appropriated may be used to proceed, at the discretion of the National Center for Injury Prevention, Statistics and Reporting, with property acquisition, including a long-term ground lease for construction on non-Federal land, to support the construction of a laboratory in the Byrdsville, WV area: Provided further, That notwithstanding any other provision of law, a single contract or related contracts for development and construction of facilities may be employed which collectively include the full scope of the project: Provided further, That the solicitation and contract shall contain the clause `availability of funds' found at 48 CFR 52.232-18; Provided further, that the Director may assess the programs an amount not to exceed 10% for overhead and indirect costs for routine managerial, administrative, technical and logistical support provided in their behalf.

GENERAL PROVISIONS

SEC. 201. ►Funds appropriated in this title shall be available for not to exceed $10,000 for official reception and representation expenses when specifically approved by the Director.

SEC. 202. None of the funds appropriated in this Act may be expended pursuant to section 241 of the Public Safety Act, except for funds specifically provided for in this Act, or for other assessments made by any office located in the Center, prior to the Director’s preparation and submission of a report to the Committee on Appropriations of the Senate and of the House detailing the planned uses of such funds.



SEC. 203. Notwithstanding section 241(a) of the Public Safety Act, such portion as the Director shall determine, but not more than 2.2 percent, of any amounts appropriated for programs authorized under said Act shall be made available for the evaluation of grants administered under this act.

TRANSFER OF FUNDS

SEC. 204. ► Not to exceed 1 percent of any discretionary funds (pursuant to the Balanced Budget and Emergency Deficit Control Act of 1985, as amended) which are appropriated for the current fiscal year for the Center in this Act may be transferred between appropriations, but no such appropriation shall be increased by more than 3 percent by any such transfer: Provided, That an appropriation may be increased by up to an additional 2 percent subject to approval by the House and Senate Committees on Appropriations: Provided further, That the Appropriations Committees of both Houses of Congress are notified at least 15 days in advance of any transfer.

This Act may be cited as the `National Safety Appropriations Act, 2008'.



FY 2008 Appropriation ApportionmentIssued By:

Office of Management and Budget, Washington, D.C.

Issued to:

National Center for Injury Prevention, Statistics and Reporting

Appropriation:

38 8 0100Apportionment number: FY2008-38-0100-1 (Initial)

Type of Authority Apportioned Unapportioned1. Direct Authority $4,540,472,000 $ 5,000,0002. Reimbursable Authority $2,685,000,0003. Transfers 2,890,000,0004. Fees 865,0005. Total Budget Authority $10,116,337,000 $ 5,000,000Remarks: (Authority: PL 108-164, January 11, 2008)

1. Amounts on Line 1 (Category A) constitute a legal limitation under 31 U.S.C. 1341 and may not be exceeded. Further, pursuant to 31 U.S.C. 1553(b), not to exceed one percent of the Line 1 is apportioned for the purpose of paying legitimate obligations related to canceled appropriations.

2. Within Line 1 the following Category B remarks apply. Said amounts are subject to the provisions of 31 U.S.C. 1341(a) and/ or 31 U.S.C. 1517(a):

a. ►An amount not to exceed $10,000 shall be available for obligation for Reception and Representation Expenses.

b. An amount not to exceed $212,000,000 shall be obligated for facilities acquisition, construction, maintenance and installed equipment. Said amount shall remain available until expended.

c. ►An amount not to exceed $6,000,000 shall be obligated for completion of the Adolescent Seat Belt Safety Study. Costs, other than direct costs, to support the Study may not exceed 7 %.

d. ►An amount not to exceed 1 percent may be transferred to another appropriation. An amount not to exceed 3 percent may be transferred into this appropriation from another. An additional 2 percent may be transferred in with concurrence of this Office.

e. ►Overhead and Indirect Assessments of programs (other than for the Adolescent Seat Belt Study) may not exceed 10 percent.

Requested By:N. V. Peale, III, Ph.D.

Approved By:J.Q. Adams, IV

Date: January 18, 2008 Date: January 23, 2008Note: No attempt was made herein to replicate an actual SF 132. The foregoing merely illustrates the legal issues attached to apportionments.



Extracted portions of

Principles of Federal Appropriations Law

Congressional Intent



Red Book Reference Vol. I, Principles of Appropriations Law>Congressional Power of the Purse

Short Title Congressional Power

Principle of Law Monies may only be withdrawn from the treasury as a consequence of law.

Exceptions As authorized by law; As directed by a federal court

Red Book Pages RB Pages 1-2..12; 2-15..33; 6-3..8; 6-9..28; 6-72..

Congress has the power of the purse.

►

►

A federal agency is a creature of law and can function only to the extent authorized by law.1 The Supreme Court has expressed what is perhaps the quintessential axiom of “appropriations law” as follows:

“The established rule is that the expenditure of public funds is proper only when authorized by Congress, not that public funds may be expended unless prohibited by Congress.”

* * * * * *Next, the so-called Appropriations Clause, the first part of article I, section 9, clause 7, provides that—

“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law… .”

The Appropriations Clause has been described as “the most important single curb in the Constitution on Presidential power.”4 It means that “no money can be paid out of the Treasury unless it has been appropriated by an act of Congress.” Cincinnati Soap Co. v. United States, 301 U.S. 308, 321 (1937). See also B-300192, Nov. 13, 2002. Regardless of the nature of the payment—salaries, payments promised under a contract, payments ordered by a court, whatever—a federal agency may not make a payment from the United States Treasury unless Congress has made the funds available. As the Supreme Court stated more than 150 years ago:

“However much money may be in the Treasury at any one time, not a dollar of it can be used in the payment of any thing not… previously sanctioned [by a congressional appropriation].”

* * * * * *

As these statements by the Supreme Court make clear, the congressional power of the purse reflects the fundamental proposition that a federal agency is dependent on Congress for its funding.7 At its most basic level, this means that it is up to Congress to decide whether or not to provide funds for a particular program or activity and to fix the level of that funding.

* * * * * *



►

Reeside v. Walker, 52 U.S. (11 How.) 272, 291 (1850). This prescription remains as valid today as it was when it was written.5 In 1990, citing both Cincinnati Soap and Reeside, the Supreme Court reiterated that any exercise of power by a government agency “is limited by a valid reservation of congressional control over funds in the Treasury.” Office of Personnel Management v. Richmond, 496 U.S. 414, 425, 110 S. Ct. 2465, 2472 (1990).

As these statements by the Supreme Court make clear, the congressional power of the purse reflects the fundamental proposition that a federal agency is dependent on Congress for its funding.7 At its most basic level, this means that it is up to Congress to decide whether or not to provide funds for a particular program or activity and to fix the level of that funding.

In exercising its appropriations power, however, Congress is not limited to these elementary functions. It is also well established that Congress can, within constitutional limits, determine the terms and conditions under which an appropriation may be used. See, e.g., New York v. United States, 505 U.S. 144, 167 (1992); Cincinnati Soap Co., 301 U.S. at 321; Oklahoma v. Schweiker, 655 F.2d 401, 406 (D.C. Cir. 1981) (citing numerous cases); Spaulding v. Douglas Aircraft Co., 60 F. Supp. 985, 988 (S.D. Cal. 1945), aff’d, 154 F.2d 419 (9th Cir. 1946). Thus, Congress can decree, either in the appropriation itself or by separate statutory provisions, what will be required to make the appropriation “legally available” for any expenditure. It can, for example, describe the purposes for which the funds may be used, the length of time the funds may remain available for these uses, and the maximum amount an agency may spend on particular elements of a program. In this manner, Congress may, and often does, use its appropriation power to accomplish policy objectives and to establish priorities among federal programs.

It would appear safe to say that Congress can, as long as it does not violate the Constitution, appropriate money for any purpose it chooses, from paying the valid obligations of the United States to what the Supreme Court has termed “pure charity,”12 and can implement policy objectives by imposing conditions on the receipt or use of the money. The Constitution does not provide detailed instructions on how Congress is to implement its appropriation power, but leaves it to Congress to do so by statute. Congress has in fact done this, and continues to do it, in two ways: through the annual budget and appropriations process and through a series of permanent “funding statutes.” As one court has put it: “ [The Appropriations Clause] is not self-defining an Congress has plenary power to give meaning of the provision. The Congressionally chosen method of implementing the requirements of Article I, section 9, clause 7 is to be found in various statutory provisions.



►

The permanent funding statutes, found mostly in Title 31 of the United States Code, are designed to combat these and other abuses. They did not spring up overnight, but have evolved over the span of nearly more than two centuries. Nevertheless, when viewed as a whole, they form a logical pattern. We may regard them as pieces of a puzzle that fit together to form the larger picture of how Congress exercises its control “power of the purse.” Some of the key statutory directives in this scheme, each of which is discussed elsewhere in this publication, are:

• A statute will not be construed as making an appropriation unless it expressly so states. 31 U.S.C. § 1301(d).

• Agencies may not spend, or commit themselves to spend, in advance of or in excess of appropriations. 31 U.S.C. § 1341 (Antideficiency Act).

• Appropriations may be used only for their intended purposes. 31 U.S.C.§ 1301(a) (“purpose statute”).

• Appropriations made for a definite period of time may be used only for expenses properly incurred during that time. 31 U.S.C. § 1502(a) (“bona fide needs” statute).

• Unless authorized by law, an agency may not keep money it receives from sources other than congressional appropriations, but must deposit the money in the Treasury. 31 U.S.C. § 3302(b) (“miscellaneous receipts” statute).



Congressional Language:

Earmarking

Congress can impose preconditions on appropriations

►A statutory earmark is treated like a separate appropriation

An earmark for a specific purpose

Earmark is available for that purpose only

►

Congress also may use appropriation act provisions to impose preconditions on a program’s use of the funds being appropriated. The preconditions on use often effectuate congressional oversight of the program. In American Telephone & Telegraph v. United States, 307 F.3d 1374, 1376–79 (Fed. Cir. 2003), the court addressed just such a provision found in the Department of Defense Appropriation Act for Fiscal Year 1988. The provision specified that “[n]one of the funds provided… in this Act may be obligated or expended for fixed price-type contracts in excess of $10,000,000 for the development of a major system or subsystem unless the Under Secretary of Defense for Acquisition determines, in writing, that program risk has been reduced to the extent that realistic pricing can occur…: Provided further, That the Under Secretary report to the Committees on Appropriations of the Senate and House of Representatives in writing, on a quarterly basis, the contracts which have obligated funds under such a fixed price-type developmental contract.”

* * * * * *Further, the fact that an appropriation for a specific purpose is included as an earmark in a general appropriation does not deprive it of its character as an appropriation for the particular purpose designated, and where such specific appropriation is available for the expenses necessarily incident to its principal purpose, such incidental expenses may not be charged to the more general appropriation. 20 Comp. Gen. 739 (1941). In the cited decision, a general appropriation for the Geological Survey contained the provision “including not to exceed $45,000 for the purchase and exchange … of … passenger-carrying vehicles.” It was held that the costs of transportation incident to the delivery of the purchased vehicles were chargeable to the specific $45,000 appropriation and not to the more general portion of the appropriation. Similarly, a general appropriation for the Library of Congress contained the provision, “$9,619,000 is to remain available until expended for the acquisition of books, periodicals, newspapers and all other materials… .” The Comptroller General held that the $9,619,000 was an earmark requiring the Library to set aside that money to purchase books and other library materials. The earmark barred the Library from transferring or using those funds for another purpose. B-278121, supra. In deciding the proper appropriation to charge for administrative costs for Oil Pollution Act claims, the Comptroller General stated, “As a general rule, an appropriation for a specific object is available for that object to the exclusion of a more general appropriation which might otherwise be considered for the same object.” B-289209, supra (citing 65 Comp. Gen. 881 (1986)); B-290005, July 1, 2002.

* * * * * *

Types of Appropriations and the Concept of Earmarking:

Congress has been making appropriations since the beginning of the Republic. Over the course of this time, certain forms of appropriation language have become standard. This section will point out the more commonly used language with respect to amount.


The concept of earmarking.


Lump sum appropriations:

Earmarks and line item appropriations

►

►

A lump-sum appropriation is one that is made to cover a number of specific programs, projects, or items. (The number may be as small as two.) In contrast, a line-item appropriation is available only for the specific object described.

* * * * * * * * * *Congress may wish to specifically designate, or “earmark,” part of a more general lump-sum appropriation for a particular object, as either a maximum, a minimum, or both. An earmark refers to the portion of a lump-sum appropriation designated for a particular purpose.24

The term earmark often is used interchangeably with the term “line item.” In appropriations language, however, a line item is an appropriation that is dedicated for a specific purpose, rather than an amount within a lump-sum appropriation. The following example of earmarking language in a lump-sum appropriation can be found in the Consolidated Appropriations Act of 2008:

“For necessary administrative expenses of the domestic nutrition assistance programs funded under this Act, $138,304,000, of which $5,000,000 shall be available only for simplifying procedures, reducing overhead costs, . . . and prosecution of fraud and other violations of law . . .”26

In this example, the $5 million is an earmark.

Earmarks in a Lump Sum appropriation

GAO’s defining decision in 1975

►Often issues are raised when there are changes to or restrictions on a lump sum appropriation imposed during the legislative process but not in the legislation itself. The “leading case” in this area is 55 Comp. Gen. 307 (1975), the so-called “LTV case.” The Department of the Navy had selected the McDonnell Douglas Corporation to develop a new fighter aircraft. LTV Aerospace Corporation protested the selection, arguing that the aircraft McDonnell Douglas proposed violated the 1975 Defense Department Appropriation Act. The appropriation in question was a lump-sum appropriation of slightly over $3 billion under the heading “Research, Development, Test, and Evaluation, Navy.” This appropriation covered a large number of projects, including the fighter aircraft in question. The conference report on the appropriation act had stated that $20 million was being provided for a Navy combat fighter, but that “[a]daptation of the selected Air Force Air Combat Fighter to be capable of carrier operations is the prerequisite for use of the funds provided.” The Navy conceded that the McDonnell Douglas aircraft was not a derivative of the Air Force fighter and that its selection was not in accord with the instructions in the conference report. The issue, therefore, was whether the conference report was legally binding on the Navy. ►In other words, did the Navy act illegally by not choosing to follow the conference report? The ensuing decision is GAO’s most comprehensive statement on the legal availability of lump-sum appropriations. Pertinent excerpts are set forth below:



Agency may shift funds around

Legislative history

► “[C]ongress has recognized that in most instances it is desirable to maintain executive flexibility to shift around funds within a particular lump-sum appropriation account so that agencies can make necessary adjustments for ‘unforeseen developments, changing requirements and legislation enacted subsequent to appropriations.’ [Citation omitted.]

►This is not to say that Congress does not expect that funds will be spent in accordance with budget estimates or in accordance with restrictions detailed in Committee reports. However, in order to preserve spending flexibility, it may choose not to impose these particular restrictions as a matter of law, but rather to leave it to the agencies to ‘keep faith’ with the Congress. . . . “On the other hand, when Congress does not intend to permit agency flexibility, but intends to impose a legally binding restriction on an agency’s use of funds, it does so by means of explicit statutory language, . . .. .

“Accordingly, it is our view that when Congress merely appropriates lump-sum amounts without statutorily restricting what can be done with those funds, a clear inference arises that it does not intend to impose legally binding restrictions, and indicia in committee reports and other legislative history as to how the funds should or are expected to be spent do not establish any legal requirements on Federal agencies. “We further point out that Congress itself has often recognized the reprogramming flexibility of executive agencies, and we think it is at least implicit in such [recognition] that Congress is well aware that agencies are not legally bound to follow what is expressed in Committee reports when those expressions are not explicitly carried over into the statutory language. . . .

► “We think it follows from the above discussion that, as a general proposition, there is a distinction to be made between utilizing legislative history for the purpose of illuminating the intent underlying language used in a statute and resorting to that history for the purpose of writing into the law that which is not there ► “As observed above, this does not mean agencies are free to ignore clearly expressed legislative history applicable to the use of appropriated funds. They ignore such expressions of intent at the peril of strained relations with the Congress. The Executive branch . . . has a practical duty to abide by such expressions. This duty, however, must be understood to fall short of a statutory requirement giving rise to a legal infraction where there is a failure to carry out that duty.”

* * * * * * * * * * * *The treatment of lump-sum appropriations as described above has been considered by the courts as well as GAO, and they reached the same result.18 ►The United States Court of Appeals for the District of Columbia Circuit noted that lump-sum appropriations have a “well understood meaning” and stated the rule as follows:



“A lump-sum appropriation leaves it to the recipient agency (as a matter of law, at least) to distribute the funds among some or all of the permissible objects as it sees fit.”

* * * * * * * * * * * *

►The Supreme Court’s 1993 decision in Lincoln v. Vigil, 508 U.S. 182, put to rest any lingering uncertainty that might have existed on this point. Writing for a unanimous Court, Justice Souter quoted the rule stated in the LTV decision and described it as “a fundamental principle of appropriations law.” Id. at 192. Specifically, the Court held that reprogrammings under lump-sum appropriations fall within the Administrative Procedure Act’s exemption for actions “committed to agency discretion” (5 U.S.C. § 701(a)(2)) and, therefore, are not subject to judicial review. The Court said that the Administrative Procedure Act “makes clear that ‘review is not to be had’ in these rare circumstances where the relevant statute ‘is drawn so that a court would have no meaningful standard against which to judge the agency’s exercise of discretion.’” Lincoln, 508 U.S. at 191.

* * * * * * * * * * * *“[A]n agency’s allocation of funds from a lump-sum appropriation requires a complicated balancing of a number of factors which are peculiarly within its expertise: whether its resources are best spent on one program or another; whether it is likely to succeed in fulfilling its statutory mandate; whether a particular program best fits the agency’s overall policies; and , indeed, whether the agency has enough resources to fund a program at all. . . . [T]he agency is far better equipped than the courts to deal with the many variables involved in the proper ordering of its priorities. ►Of course, an agency is not free simply to disregard statutory responsibilities Congress may always circumscribe agency discretion to allocate resources by putting restrictions in the operative statutes (though not, as we have seen, just in the legislative history).

And, of course, we hardly need to note that ►an agency’s decision to ignore congressional expectations may expose it to grave political consequences. But as long as the agency allocates funds from a lump-sum appropriation to meet permissible statutory objectives, [5 U.S.C.] § 701(a)(2) gives the courts no leave to intrude.”



Executive Order on Earmarks

Executive Order 13457Protecting American Taxpayers from Government Spending on Wasteful Earmarks, February 1, 2008

By the authority vested in me as President by the Constitution and the laws of the United States of America, it is hereby ordered as follows:

Section 1. Policy.

►It is the policy of the Federal Government to be judicious in the expenditure of taxpayer dollars. To ensure the proper use of taxpayer funds that are appropriated for Government programs and purposes, it is necessary that the number and cost of earmarks be reduced, that their origin and purposes be transparent, and that they be included in the text of the bills voted upon by the Congress and presented to the President. ►For appropriations laws and other legislation enacted after the date of this order, executive agencies should ►not commit, obligate, or expend funds on the basis of earmarks included in any non-statutory source, including requests in reports of committees of the Congress or other congressional documents, or communications from or on behalf of Members of Congress, or any other non-statutory source, except when required by law ►or when an agency has itself determined a project, program, activity, grant, or other transaction to have merit under statutory criteria or other merit-based decision making.

Sec. 2. Duties of Agency Heads.

(a) With respect to all appropriations laws and other legislation enacted after the date of this order, the head of each agency shall take all necessary steps to ensure that: (i) agency decisions to commit, obligate, or expend funds for any earmark are based on the text of laws, and in particular, are not based on language in any report of a committee of Congress, joint explanatory statement of a committee of conference of the Congress, statement of managers concerning a bill in the Congress, or any other non-statutory statement or indication of views of the Congress, or a House, committee, Member, officer, or staff thereof; (ii) agency decisions to commit, obligate, or expend funds for any earmark are based on authorized, transparent, statutory criteria and merit-based decision making, in the manner set forth in section II of OMB Memorandum M-07-10, dated February 15, 2007, to the extent consistent with applicable law; and (iii) no oral or written communications concerning earmarks shall supersede statutory criteria, competitive awards, or merit-based decision making. (b) ►An agency shall not consider the views of a House, committee, Member, officer, or staff of the Congress with respect to commitments, obligations, or expenditures to carry out any earmark unless such views are in writing, to facilitate consideration in accordance with section 2(a)(ii) above. All written communications from the Congress, or a House, committee, Member, officer, or staff thereof, recommending that funds be committed, obligated, or expended on any earmark ►shall be made publicly available on the Internet by the receiving agency, not later than 30 days after receipt of such communication, unless otherwise specifically directed by the head of the agency, without delegation, after consultation with the Director of the Office of Management and Budget. confidentiality between the executive and legislative branches.



(c) Heads of agencies shall otherwise implement within their respective agencies the policy set forth in section 1 of this order, consistent with such instructions as the Director of the Office of Management and Budget may prescribe.

(d) The head of each agency shall upon request provide to the Director of the Office of Management and Budget information about earmarks and compliance with this order.

Sec. 3. Definitions.

For purposes of this order:

(a) The term "agency" means an executive agency as defined in section 105 of title 5, United States Code, and the United States Postal Service and the Postal Regulatory Commission, but shall exclude the Government Accountability Office; and,

(b) the term "earmark" ► means funds provided by the Congress for projects, programs, or grants where the purported congressional direction (whether in statutory text, report language, or other communication) circumvents otherwise applicable merit-based or competitive allocation processes, or specifies the location or recipient, or otherwise curtails the ability of the executive branch to manage its statutory and constitutional responsibilities pertaining to the funds allocation process.

Sec. 4. General Provisions.

(a) ►Nothing in this order shall be construed to impair or otherwise affect:(b)

(i) authority granted by law to an agency or the head thereof; or (ii) functions of the Director of the Office of Management and Budget relating to budget, administrative, or legislative proposals.

(b) This order shall be implemented in a manner consistent with applicable law and subject to the availability of appropriations.

(c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity, by any party against the United States, its agencies, instrumentalities, or entities, its officers, employees, or agents, or any other person.

GEORGE W. BUSHTHE WHITE HOUSE,

Author’s Note: While President Obama has written and spoken about earmark reform, he has not issued an amendment or repeal of this Executive Order 13457 as of this publication. For a current listing of all Presidential Executive Orders (President Roosevelt to date) visit: http://www.archives.gov/federal-register/executive-orders/disposition.html.


http://www.archives.gov/federal-register/executive-orders/disposition.html


You may be able to increase an earmark with transfer authority

►

“Not to exceed” means ceiling

“Not less than” means floor

Statutory transfer authority will permit the augmentation of a “not to exceed” earmark in many, but not all, cases. In 12 Comp. Gen. 168 (1932), it was held that general transfer authority could be used to increase maximum earmarks for personal services, subject to the percentage limitations specified in the transfer statute. The decision pointed out that if the personal services earmark had been a separate line-item appropriation, the transfer authority would clearly apply. Id. at 170. Also, the transfer authority was remedial legislation designed to mitigate the impact of reduced appropriations. Somewhat similarly, in 36 Comp. Gen. 607 (1957), funds transferred to an operating appropriation from a civil defense appropriation could be used to exceed an administrative expense limitation in the former that had been calculated without including the increased administrative expenses the added civil defense functions would entail. However, in 33 Comp. Gen.214 (1953), the Comptroller General held that general transfer authority could not be used to exceed a maximum earmark on an emergency assistance program where it was clear that Congress, aware of the emergency, intended that the program be funded only from the earmark. See also 18Comp.Gen.211 (1938].

Under a “not to exceed” earmark, the agency is not required to spend the entire amount on the object specified, See, ~, Brown v. Ruckelshaus, 364 F. Supp. 258,266 (C.D. Cal. 1973) (“the phrase ‘not to exceed’ connotes limitation, not disbursement”). If, in our hypothetical, the entire $100 is not used for Cuban cigars, unobligated balances may–within the time limits for obligation-be applied to other unrestricted objects of the appropriation. 31 Comp. Gen. 578,579 (1952); 15 Comp. Dec. 660 (1909); B-4568, June 27,1939.

* * * * * *If Congress wishes to specify a minimum for the particular object but not a maximum, the appropriation act may provide “Smoking materials, $1,000, of which not less than $100 shall be available for Cuban cigars.” B-137353, December 3, 1959. See also 64 Comp. Gen. 388 (1985); B-131935, March 17, 1986. If the phrase “not less than” is used, in contrast with the “not to exceed” language, portions of the $100 not obligated for Cuban cigars may not be applied to the other objects of the appropriation. 64 Comp. Gen. at 394–95; B-128943, September 27, 1956



“Shall be available”

Case law and CG decisions have interpreted this inconsistently

Both a maximum and a minimum

►

Another phrase Congress often uses to earmark a portion of a lump-sum appropriation is “shall be available.” There are variations. For example, our hypothetical $1,000 “smoking materials” appropriation may provide that, out of the $1,000, $100 “shall be available” or “shall be available only” or “shall be available exclusively” for Cuban cigars. Still another variation is”$ 1,000, including $100 for Cuban cigars.”

If the “shall be available” phrase is combined with the maximum or minimum language noted above (“not to exceed,” “not less than,” etc.), then the above rules apply and the phrase “shall be available” adds little. See, ~, B-137353, December 3, 1959. However, if the earmarking phrase “shall be available” is used without the “not to exceed” or “not less than” modifiers, the rules are not quite as firm.

Cases interpreting the “shall be available” and “shall be available only” earmarks are somewhat less than consistent. The earlier decisions proclaimed “shall be available” to constitute a maximum but not a minimum (B-5526, September 14, 1939), although it could be a minimum if Congress clearly expressed that intent (B-128943, September 27, 1956). Later cases held the earmark to constitute both a maximum and a minimum that could neither be augmented nor diverted to other objects within the appropriation. B-137353, December 3, 1959; B-137353 -O.M., October 14, 1958. Another early decision held summarily that “shall be available only” results in a maximum which cannot be augmented. 18 Comp. Gen. 1013 (1939). More recent decisions, however, have expressed the view that the effect of “shall be available only’’ —whether it is a maximum or a minimum-depends on the underlying congressional intent. 53 Comp. Gen. 695 (1974); B-142190, March 23, 1960. Applying this test, the earmark in 53 Comp. Gen. 695 was found to be a maximum; similar language was found to be a minimum which could be exceeded in B-142190 and in B-70933, March 1, 1948.

* * * * * * *

Similarly, the term “including” has been held to establish both a maximum and a minimum. A-99732, January 13, 1939. As such, it cannot be augmented from a more general appropriation (19 Comp. Gen, 892 (1940)), nor can it be diverted to other uses within the appropriation (67 Comp. Gen. 401 (1988)).

To sum up, the most effective way to establish a maximum (but not minimum) earmark is by the words “not to exceed” or “not more than.” The words “not less than” most effectively establish a minimum (but not maximum). These are all phrases with well-settled plain meanings. The “shall be available” family of earmarking language presumptively “fences in” the earmarked sum (both maximum and minimum), but is more subject to variation based upon underlying congressional intent

* * * * * *

End of the Earmarking Section



Transfers and Reprogramming

Require statutory authority

►

Unauthorized transfers violate two laws:

31 U.S.C. 1532 &

31 U.S.C. 1301(a) Violations

Transfers:

For a variety of reasons, agencies have a legitimate need for a certain amount of flexibility to deviate from their budget estimates. Two ways to shift money are transfer and reprogramming. While the two concepts are related in this broad sense, they are nevertheless different.

Transfer is the shifting of funds between appropriations.39 For example, if an agency receives one appropriation for Operations and Maintenance and another for Capital Expenditures, a shifting of funds from either one to the other is a transfer.

The basic rule with respect to transfer is simple: Transfer is prohibited without statutory authority. The rule applies equally to (1) transfers from one agency to another,40 (2) transfers from one account to another within the same agency,41 and (3) transfers to an interagency or intra-agency working fund.42 In each instance, statutory authority is required. An agency’s erroneous characterization of a proposed transfer as a “reprogramming” is irrelevant. See B-202362, Mar. 24, 1981. Moreover, informal congressional approval of an unauthorized transfer of funds between appropriation accounts does not have the force and effect of law. B-248284.2, Sept. 1, 1992.

The prohibition against transfer is codified in 31 U.S.C. § 1532, the first sentence of which provides:

“An amount available under law may be withdrawn from one appropriation account and credited to another or to a working fund only when authorized by law.”

In addition to the express prohibition of 31 U.S.C. § 1532, an unauthorized transfer would violate 31 U.S.C. § 1301(a) (which prohibits the use of appropriations for other than their intended purpose); would constitute an unauthorized augmentation of the receiving appropriation; and could, if the transfer led to overobligating the receiving appropriation, result in an Antideficiency Act (31 U.S.C. § 1341) violation as well. E.g., B-286929, Apr. 25, 2001; B-248284.2, Sept. 1, 1992; B-222009-O.M., Mar. 3, 1986; 15 Op. Off. Legal Counsel 74 (1991). Some agencies have limited transfer authority either in permanent legislation or in appropriation act provisions. Such authority will commonly set a percentage limit on the amount that may be transferred from a given appropriation and/or the amount by which the receiving appropriation may be augmented. A transfer pursuant to such authority is, of course, entirely proper. B-290659, Oct. 31, 2002; B-167637, Oct. 11, 1973.

* * * * * *



INS vs. Chadha

►Committees cannot veto President; Requires entire Congress

Reprogramming is different

►

No need for statutory authority. It’s inherent

Stay within the purpose, obey the rules

Some transfer statutes have included requirements for approval by one or more congressional committees. In light of the Supreme Court’s decision in I mmigration & Naturalization Service v. Chadha , 462 U.S. 919 (1983) , such “legislative veto” provisions are no longer valid. Whether the transfer authority to which the veto provision is attached remains valid depends on whether it can be regarded as severable from the approval requirement.

* * * * * *Reprogramming:

* * * * * *Reprogramming is the utilization of funds in an appropriation account for purposes other than those contemplated at the time of appropriation. In other words, it is the shifting of funds from one object to another within an appropriation. The term “reprogramming” appears to have come into use in the mid-1950s although the practice, under different names, predates that time.

The authority to reprogram is implicit in an agency’s responsibility to manage its funds; no statutory authority is necessary. See Lincoln v. Vigil, 508 U.S. 182, 192 (1993) (“After all, the very point of a lump-sum appropriation is to give an agency the capacity to adapt to changing circumstances and meet its statutory responsibilities in what it sees as the most effective or desirable way.”). See also 4B Op. Off. Legal Counsel 701 (1980) (discussing the Attorney General’s authority to reprogram to avoid deficiencies); B-196854.3, Mar. 19, 1984 (Congress is “implicitly conferring the authority to reprogram” by enacting lump-sum appropriations).

Indeed, reprogramming is usually a nonstatutory arrangement. This means that there is no general statutory provision either authorizing or prohibiting it, and it has evolved largely in the form of informal (i.e., nonstatutory) agreements between various agencies and their congressional oversight committees. These informal arrangements do not have the force and effect of law. Blackhawk Heating & Plumbing Co. v. United States, 622 F.2d 539, 548 (Ct. Cl. 1980). See also 56 Comp. Gen. 201 (1976), holding that the Navy’s failure to complete a form required by Defense Department reprogramming regulations was not sufficient to support a claim for proposal preparation costs by an unsuccessful bidder upon cancellation of the proposal.

* * * * * *

Thus, as a matter of law, an agency is free to reprogram unobligated funds as long as the expenditures are within the general purpose of the appropriation and are not in violation of any other specific limitation or otherwise prohibited. E.g., B-123469, May 9, 1955; B-279338, Jan. 4, 1999.



Congress may regulate reprogramming by statute

Notifications may be required

But not approvals by the committees

Cooperation; Keeping faith

This is true even though the agency may already have administratively allotted the funds to a particular object. 20 Comp. Gen. 631 (1941). In some situations, the agency’s discretion may rise to the level of a duty. E.g., Blackhawk Heating & Plumbing, 622 F.2d at 552 n.9 (satisfaction of obligations under a settlement agreement)

In some cases, Congress has attempted to regulate reprogramming by statute, and of course any applicable statutory provisions control. B-283599.2, Sept. 29, 1999; B-279886, Apr. 28, 1998; B-164912-O.M., supra.

* * * * * *Reprogramming frequently involves some form of notification to the appropriations and/or legislative committees. In a few cases, the notification process is prescribed by statute. However, in most cases, the committee review process is nonstatutory and derives from instructions in committee reports, hearings, or other correspondence. Sometimes, in addition to notification, reprogramming arrangements also provide for committee approval. As in the case of transfer, under the Supreme Court’s decision in Immigration & Naturalization Service v. Chadha, 462 U.S. 919 (1983), statutory committee approval or veto provisions are no longer permissible. However, an agency may continue to observe committee approval procedures as part of its informal arrangements, although they would not be legally binding. B-196854.3, supra.

* * * * * *In sum, reprogramming procedures provide an element of congressional control over spending flexibility short of resort to the full legislative process. They are for the most part nonbinding, and compliance is largely a matter of “keeping faith” with the pertinent committees.

* * * * * *

End of the Transfer and Reprogramming Section



The Antideficiency Act

►Don’t over obligate

Don’t obligate before the appropriation is enacted

Depletion (exhaustion) of an appropriation also applies to earmarks

Antideficiency Act.

The key provision of the Antideficiency Act is 31 U.S.C. 1341(a)(1). An officer or employee of the United States Government or of the District of Columbia government may not–

“(A) make or authorize an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation; or

“(B) involve either government in a contract or obligation for the payment of money before an appropriation is made unless authorized by law.” Not only is section 1341(a)(l) the key provision of the Act, it was originally the only provision, the others being added to ensure enforcement of the basic prohibitions of section 1341.

* * * * * *

When we talk about an appropriation being “exhausted,” we are really alluding to any of several different but related situations: Depletion of appropriation account (i.e., fully obligated and/pr expended). Similar depletion of a maximum amount specifically earmarked in a more general lump-sum appropriation. Depletion of an amount subject to a monetary ceiling imposed by some other statute (usually, but not always, the relevant program legislation).

* * * * * *



Overobligation

Recording of Obligations

►31 U.S.C. 1501 applies to recording of obligations

►

Obligations in Excess or Advance of Appropriations

It is easy enough to say that the Antideficiency Act prohibits you from obligating a million dollars when you have only half a million left in the account, or that it prohibits you from entering into a contract in September purporting to obligate funds for the next fiscal year that have not yet been appropriated. Many of the situations that actually arise from day to day, however, are not quite that simple. A useful starting point is the relationship of the Antideficiency Act to the recording of obligations under 31 U.S.C. 1501.

(1) Recording obligations.

Proper recording practices are essential to sound fund control. However, it should be apparent that, if the Antideficiency Act is to mean anything, the actual recording of obligations cannot by itself provide a sufficient basis on which to assess potential violations.

Reliance solely on the recording of obligations can produce error in two directions. It can suggest violations that in fact do not exist, and it can overlook violations that do exist.

If an examination of recorded obligations can be misleading in the sense of indicating violations that in fact do not exist, the converse is also true. Violations may exist which recorded obligations alone will not disclose. Again, there are several reasons. One important principle is stated in the following passage:

“[T]he recording of obligations under 31 U.S.C. 1501 is not the sole consideration in determining violations of 31 U.S.C. 1341 . . . . We believe that the words ‘may contract or other obligation’ as used in [the predecessor of 31 U.S.C. 1341] encompass not merely recorded obligations but other actions which give rise to Government liability and will ultimately require the expenditure of appropriated funds.”

* * * * * *Also, in many situations, the amount of the government’s liability is not definitely freed at the time the obligation is incurred. An example is a contract with price escalation provisions. In other situations, such as certain contingent liability cases, the government is not required to record any obligation unless and until the contingency materializes. Thus, while examining the actual recording of obligations is a necessary first step, it is also essential to look at what happens as the contract is performed.



When an agency fails to record an obligation

►

Overobligations occur whether the amounts are recorded or not

►

Finally, the possibility exists that there are valid obligations which the agency has failed or neglected to record. The incurring of an obligation in excess or advance of appropriations violates the Act, and this is not affected by the agency’s failure to record the obligation. ~, 65 Comp. Gen. 4,9 (1985); 62 Comp. Gen. 692,700 (1983); 55 Comp. Gen. 812,824 (1976).

In sum, for purposes of assessing violations of the Antideficiency Act, you must start by looking at the actual recording of obligations, but you cannot end there.

(2) Obligation in excess of appropriation

Incurring an obligation in excess of the available appropriation violates 31 U.S.C. S 1341 (a)(l) .13 As the Comptroller of the Treasury advised an agency head many years ago, “your authority in the matter was strictly limited by the amount of the appropriation. . .; otherwise there would be no limit to your power to incur expenses for the service of a particular fiscal year. . . .“ 9 Comp. Dec. 423, 425 (1903). If you want higher authority, the Supreme Court has stated that, absent statutory authorization, “it is clear that the head of the department cannot involve the government in an obligation to pay any thing in excess of the appropriation.” Bradley v. United States, 98 U.S. 104, 114 (1878).

* * * * * *

In Chapter 4 we covered in some detail 31 U.S.C. 1301(a) which prohibits the use of appropriations for purposes other than those for which they were appropriated. As seen in that chapter, violations of purpose availability can arise in a wide variety of contexts-charging an obligation or expenditure to the wrong appropriation, making an obligation or expenditure for an unauthorized purpose, violating a statutory prohibition or restriction, etc. The question we explore in this section is the relationship of purpose availability to the Antideficiency Act. In other words, when and to what extent does a purpose violation also violate the Antideficiency Act?

Why does it matter whether you have violated one statute or two statutes? To our knowledge, nobody is keeping score. The reason here is that, if the second statute is the Antideficiency Act, there are reporting requirements and potential penalties to consider.

A useful starting point is the following excerpt from 63 Comp, Gen.422,424 (1984):



Apparent overobligations may be remedied

“Not every violation of 31 U.S.C. 1301(a) also constitutes a violation of the Antideficiency Act. Even though expenditure may have been charged to an improper source, the Antideficiency Act’s prohibition against incurring obligations in excess or in advance of available appropriations is not also violated unless no other funds were available for that expenditure. Where, however, no other funds were authorized to be used for the purpose in question (or where those authorized were already obligated), both 31 U.S.C. 1301(a) and 1341(a) have been violated. In addition, we would consider an Antideficiency Act violation to have occurred where an expenditure was improperly charged and the appropriate fund source, although available at the time, was subsequently obligated, making readjustment of accounts impossible.”

First, suppose an agency charges an obligation or expenditure to the wrong appropriation account. This can involve either charging the wrong appropriation for the same time period, or charging the wrong fiscal year. The answer is found in the above passage from 63 Comp. Gen. 422. If the appropriation that should have been charged in the first place has sufficient available funds to enable the adjustment of accounts, there is no Antideficiency Act violation. A violation exists if the proper account does not have enough money to permit the adjustment, and this includes cases where sufficient funds existed at the time of the error but have since been obligated or expended. See also 70 Comp. Gen. 592 (1991); B-222048, February 10, 1987; B-95136, August 8, 1979.

* * * * * * *



Apportionment of Appropriations

As a general proposition, an agency does not have the full amount of its appropriations available to it at the beginning of the fiscal year. This is because of what, prior to the 1982 recodification of Title 31, was subsection (c) of the Antideficiency Act and is now 31 U.S.C. 1512. Subsection (a) of section 1512 establishes the basic requirement:

“(a) Except as provided in this subchapter, an appropriation available for obligation for a definite period shall be apportioned to prevent obligation or expenditure at a rate that would indicate a necessity for a deficiency or supplemental appropriation for the period. An appropriation for an indefinite period and authority to make obligations by contract before appropriations shall be apportioned to achieve the most effective and economical use. An apportionment maybe reapportioned under this section.”

Although apportionment was first required legislatively in 1905 (33 Stat. 1257), the current form of the statute derives from a revision enacted in 1950 as section 1211 of the General Appropriation Act, 1951. The 1950 revision was part of an overall effort by Congress to amplify and enforce the basic restrictions against incurring deficiencies in 31 U.S.C. 1341. Section 1512(a) requires that all appropriations be administratively apportioned so as to ensure their obligation and expenditure at a controlled rate that will prevent deficiencies from arising before the end of a fiscal year. Although section 1512 does not tell you who is to make the apportionment, section 1513, discussed later, specifies the President as the apportioning official for most executive branch agencies. The function was delegated to the Director of the Bureau of the Budget in 1933, and now reposes in the successor to that office. the Director, Office of Management and Budget (OMB).

The term “apportionment” may be defined as-“A distribution made by the Office of Management and Budget of amounts available for obligation . . . in an appropriation or fund account. Apportionments divide amounts available for obligation by specific time periods (usually quarters), activities, projects, objects, or a combination thereof. The amounts so apportioned limit the amount of obligations that maybe incurred.”

OMB apportionments provides additional controls in addition to Congressionally imposed requirements.

OMB can’t change the law.

►The apportionment process provides a set of administrative controls over the use of appropriations in addition to those Congress has imposed through the appropriations act itself. ►The apportionment process cannot alter or otherwise affect the operation of statutory requirements concerning the availability or use of appropriated funds. In this regard, OMB’s guidance on apportionments states:

“. . . The apportionment of funds should not be used as a means of resolving any question dealing with the legality of using funds for the purposes for which they are appropriated. Any questions as to the legality of using funds for a particular purpose must be resolved through legal channels.” OMB Circ. No. A-11, pt. 4, § 120.17.117



CIRCULAR NO. A–11PREPARATION, SUBMISSION, AND

EXECUTION OF THE BUDGET

Selected Portions

EXECUTIVE OFFICE OF THE PRESIDENT

OFFICE OF MANAGEMENT AND BUDGET

JULY 2004



SECTION 120—APPORTIONMENT/REAPPORTIONMENT PROCESS

Preparing the Apportionment/Reapportionment Request

120.26 What format is used for the apportionment request? 120.27 Can I combine TAFSs on the apportionment? 120.28 Will comments and attachments become part of the apportionment? 120.29 When are initial apportionments due at OMB? 121.30 Who can sign the apportionment request? 120.31 How many copies should I submit? 120.32 Should I assemble apportionment requests for multiple TAFSs in a single package? 120.33 How can I expedite OMB approval of my apportionment request? 120.34 How will OMB indicate its approval of my apportionment request? 120.35 What program changes will require that I submit a reapportionment request to OMB? 120.36 What adjustments can I make without submitting a reapportionment request? 120.37 What other types of adjustments can I request OMB to allow me to make without submitting a reapportionment request? 120.38 How do I treat automatic adjustments on subsequent reapportionment requests?

120.1 What is an apportionment? ► An apportionment is a plan, approved by OMB, to spend resources provided by law. The law providing the resources may be a permanent law (mandatory appropriations), one of the 13 annual appropriations acts, a supplemental appropriations act, or a continuing resolution. The apportionment also identifies meaningful program reporting categories that agencies will report obligations against in their SF 133 Reports on Budget Execution and Budgetary Resources (see section 130) (over obligation of these program reporting categories are not a violation of the Antideficiency Act).

Reapportionments are made when you need to make changes to the previously approved apportionment. For example, you should request a reapportionment when approved apportionments are no longer appropriate or applicable because the amounts available for obligation have changed or unforeseen events have occurred.



Section 120–2 OMB Circular No. A–11 (2004) SECTION 120—APPORTIONMENT / REAPPORTIONMENT PROCESS

120.2 What are the purposes of the apportionment process? The primary purpose of the apportionment process is to centralize the Administration approval of agency spending plans to:

►• Prevent agencies from obligating funds in a manner that would require deficiency or supplemental appropriations. In certain specified instances (see section 120.38), OMB may approve apportionments and reapportionments that indicate the necessity for a deficiency or supplemental appropriation. However, these instances must be reported to Congress.

• Achieve the most effective and economical use of amounts made available.

► Apportionments also may reflect any legal limitations imposed by Congress. The secondary purpose of the apportionment process is to identify meaningful program reporting categories that agencies will report their obligations against in their SF 133 Reports on Budget Execution and Budgetary Resources (see section 130). For example, rather than reporting a single number for its obligations, a Department of the Interior account may separately show obligations for: maintaining land resources; protecting endangered species; and, managing recreational sites. Other kinds of accounts would use program reporting categories suited to their needs.

► OMB and agencies work together to determine what program categories agencies will report upon. Program categories should be based on elements that agencies track in their financial systems. In some cases, you may choose to report upon programs that are or will be evaluated using the Program Assessment Rating Tool. In other cases, you may choose to report upon the same programs that appear in the Program and Financing Schedule of the President’s Budget. Though you are encouraged to use program reporting categories, there are some cases where OMB and agencies will choose not to use any reporting categories. The program reporting categories are not used to apportion funds, are not subject to the Antideficiency Act (Appendix G), and are not shown on the actual SF 132 apportionment or letter apportionment forms, but are included as attachments to these forms.

OMB and agencies are encouraged to identify reporting categories well in advance of the beginning of a fiscal year, and in advance of the time that the first apportionment requests are produced by the agencies. The reason is that agencies need time to place entries in their financial systems to allow them to track these program categories throughout the year. Agencies may need considerable time (many months) to add new categories to their financial systems. One reason is that large numbers of staff including timekeepers, procurement staff, administrative officers, and others need to document the new program categories, and train program office staff on how to use the new categories. In addition, agencies may need time to update their computer programs to extract the data.

Section 121.2 describes how to use program reporting categories in the apportionment process.



120.3 Are apportionments made at the Treasury appropriation fund symbol (TAFS) level, and what is a TAFS?

► Apportionments are made at the TAFS level. OMB makes apportionments and reapportionments at the TAFS level maintained by the Treasury Department’s Financial Management Service. This level includes the Treasury agency or department, the period of availability to incur new obligations, and the Treasury account symbol.

In cases of allocation transfers (see section 120.19), the agency administering the parent appropriation will submit a consolidated SF 132 that encompasses the parent TAFS and all allocations. Receiving agencies will not prepare an SF 132 for allocation accounts unless required by OMB.

120.4 What types of resources are apportioned by OMB? OMB apportions budgetary resources (such as budget authority), non-budgetary resources (such as foreign currency, as described in section 120.39), and non-financial resources (such as personnel and motor vehicles).

120.6 What TAFSs are apportioned? All TAFSs will be apportioned, using the SF 132 (see section 121.1), unless OMB determines otherwise and informs you (or has informed you) in writing, except those listed in section 120.7. The following types of funds will be apportioned:

• All credit program, financing, and liquidating TAFSs; • Trust funds; • Intra-governmental revolving funds; • Receipts made available by law for industrial and power operations; and • Grants to the States under titles I, IV, X, XIV, XVI, XIX, or XX of the Social Security Act

or under any other public assistance title in such Act.



120.8 What categories does OMB use to apportion funds? ► OMB usually uses one of three categories to distribute budgetary resources in a TAFS.

► Category A apportionments distribute budgetary resources by fiscal quarters.

► Category B apportionments typically distribute budgetary resources by activities, projects, objects or a combination of these categories. One TAFS can potentially have dozens of Category B apportionments, each pertaining to specific activities, projects, and so on. There are also cases when it makes programmatic sense for OMB to use a single, Category B apportionment for a given TAFS.

Category C apportionments may be used in multi-year and no-year TAFSs to apportion funds into future fiscal years. See section 120.9 for additional information. Apportionments may include a combination of categories.

► 145.1 What is the Antideficiency Act? The Antideficiency Act consists of provisions of law that were passed by Congress (beginning in the nineteenth century and later incorporated into Title 31 of the United States Code) to prevent departments and agencies from spending their entire appropriations during the first few months of the year. The Act prohibits you and any other Federal employee from:

• Entering into contracts that exceed the enacted appropriations for the year. • Purchasing services and merchandise before appropriations are enacted.

The Act: • Requires that OMB apportion the appropriations, that is, approve a plan that spreads out

spending over the fiscal period for which the funds were made available. • Restricts deficiency apportionments to amounts approved by the agency heads only for

extraordinary emergency or unusual circumstances." • Establishes penalties for Antideficiency Act violations. Violations are obligations or

expenditures in excess of the lower of the amount in the affected account, the amount apportioned, or the amount allotted.

• Requires the agency head to report any Antideficiency Act violations to the President, through the OMB Director, and Congress.

► Under the Act, if you obligate or expend more than the amount in the TAFS or the amount apportioned or any other subdivision of funds, you will be subject to appropriate administrative discipline, including—when circumstances warrant—a written reprimand, suspension from duty without pay, or removal from office.

In addition, if you are convicted of willfully and knowingly overobligating or overexpending the amount, then you shall be fined not more than $5,000, imprisoned for not more than 2 years, or both.

* * * * * *



► 145.2 What violations must I report?

If you . . . The amount . . . Then, you must report a violation of . . .

Authorize or make an obligation exceeding

An appropriation or fund. This may include obligations for purchases of goods or items that are prohibited by statute.

31 U.S.C. 1341(a)

An apportionment or reapportionment (a type of administrative subdivision of funds), such as a category B apportionment.

31 U.S.C. 1517(a)(1)

An allotment or a suballotment (a type of administrative subdivision of funds).

31 U.S.C. 1517(a)(2)

Any other administrative subdivision of funds, if the overobligation results in the overobligation of one of the previous amounts.

31 U.S.C. 1517(a)

End of the Antideficiency Act Section



The Conference

61

CASE STUDY 2 • The Conference

CASE STUDY 2: THE CONFERENCE

OBJECTIVES

Within the context of the case study, you will learn how to analyze and apply principles of law relating to:

Purposes for use of appropriations

Augmentation of appropriations through use of miscellaneous receipts


PRINCIPLES OF LAW

THE PURPOSE STATUTE

Appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law. 31 U.S.C. 1301(a) (4-6)

THE NECESSARY EXPENSE DOCTRINE (4-19)

The spending agency has reasonable discretion in determining how to carryout the purposes of the appropriation. (4-20)

Three tests must be met:

- Direct contribution to the appropriation

- Not illegal

- Not otherwise provided for in another funding scheme

Meetings and conferences (4-37)

- Government sponsored - no problem

- Private associations, societies – rules apply



Attendance at meetings and conferences (4-37)

- Private associations and societies

No federal funds unless: Training Act applies (5 U.S.C. 4109)

No federal funds unless: Topics of interest to the agency (5 U.S.C. 4110)

- Government sponsored meetings (4-41)

- No significant legal problems with authority

- Can’t pay for non-federal attendees—except the following: persons rendering a direct service or Statutory Exceptions (Department of Labor, HHS, Education)

- Formal government-sponsored meetings

ENTERTAINMENT (4-100) The principle: Appropriated funds may not be used to entertain federal or

non-federal personnel without statutory authority

Defined as an umbrella term: (4-102) Food & drink

Receptions, banquets, etc.

Music, live or recorded; concerts

Artistic performances, dance, etc.

Recreation facilities; sports tickets

Morale and welfare facilities

Exceptions: (4-101) Government corporations

Donated funds; foundations

Commissions and boards

Where other statutory authority exists



Food: (4-103) Principle: “… as a general rule, appropriated funds are not available …. to

provide free food to employees at their official duty stations …”

Exceptions: Where other statutory authority exists

- Travel (5 U.S.C. 5702)

- Training (5 U.S.C. 4109)

- Award Ceremonies (5 U.S.C. 4501–4506)

- Miscellaneous statutes (Safety, etc.)

At meetings, conventions, conferences, seminars, symposiums and etc. (4-108)

Non-government sponsored meetings (4-108)

- Registration Fee: Not itemized—Pay it

- Registration Fee: Itemized—Food must be incidental, important, and mandatory

Food at meetings Government sponsored meetings (4-109)

Two types of government sponsored meetings:

- Formal (5 U.S.C. 4110):

Typically external and attended by government and/or non-government persons; topics of broad interest to both; and food must be incidental, important, and mandatory

- Routine

Day-to-day; discussions of internal agency matters—no food. For Cultural Awareness Ceremonies—small food samples permitted

FOOD IN OTHER CONTEXTS: OTHER NOTABLE MATTERS INVOLVING FOOD(4-110 – 111)Bolger Conference Center (4-110) B-281063 (1999)

Single, nonseparable charge for facilities and food

No evidence of attempts to avoid food prohibitions

Cheaper than any other similar facility available



GSA Light Refreshments (4-111) In January 2000, GSA authorized light refreshments at conferences that

included travelers under the FTR. 41 CFR 301-11 & 301-74 (2003)

The GAO, in January 2003, said GSA only half right. B-288266 (2003)

- GSA can authorize food for federal travelers—not others

Commercial (bottled) water. (4-119)

- Not authorized under ordinary circumstances. 17 Comp Gen 698 (1938)

Permitted if public water supply is: tested and found to be unsafe (EPA standards); unavailable; or interrupted

References: B-247871 (1992; B-147622 (1961); B-236330 (1989). DoD refer to DoD Reg. 7000-14, Vol 10, Chapter 12, Sec. 120230

Refrigerators, microwaves, etc. (4-119) Lunch/break room appliances are not authorized under ordinary

circumstances. 47 Comp Gen 657 (1968)

Permitted if necessary for efficient accomplishment of mission B-210433 (1983); no readily available eating facilities B-276601 (1997); or necessary to ensure a safe workplace. B-302993 (2004)

Reception and Representation Funds (4-135) Appropriated to most federal agencies

No precise definition

Designed to pay for hospitality events involving visiting dignitaries

Such as expenditures for entertainment, gifts

Because these funds are provided in limited amounts, Test 3 of the Necessary Expense Doctrine applies (not otherwise provided for)

GIFTS AND AWARDS (4-155) The principle: Gifts can rarely be justified (4-155)

Statutory authority is necessary

Items given away in program promotion efforts (4-227)

- Thin line between promotion and information (4-231)

- Informing the public is a necessary agency function (4-227)

- Promoting a program requires specific authority



INSURANCE (4-176) The principle: Generally, the government self-insures its property and

operations (4-155)

A few statutory exceptions exist: Employee Professional Liability Insurance. PL 106-58 (1999)

NON-STATUTORY EXCEPTIONS: (4-179) Economies would result

Sound business practices; savings would result

Necessary to obtain services (Loaned private property, etc.)

WEARING APPAREL (4-266)The Rule:

Employees are expected to report for duty properly attired

Exceptions: Unusual; necessary for safe accomplishment of mission; in hazardous

situations 5 U.S.C. 7903 (1946)

Uniforms 5 U.S.C. 5901

OSHA 29 U.S.C. 668 (1970)

Other statutory authority

THE ANTIDEFICIENCY ACT

THE LAW PROHIBITS: Overobligation of an appropriation (31 U.S.C. 1341)

Obligating in advance of an appropriation (31 U.S.C. 1341)

Accepting volunteer services (31 U.S.C. 1342)

Overobligation of an apportionment, allotment or similar legal instrument (31 U.S.C. 1517)

THE LAW DOES NOT APPLY TO: Allowances, operating targets, administrative fund ceilings, etc.



THE LAW GENERALLY PROHIBITS: (6-103)Augmentation of an appropriation

31 U.S.C. 1301(a) Purpose statute

31 U.S.C. 3302(b) Miscellaneous receipts statute: “...An official or agent of the government receiving money for the government from any source shall deposit the money in the Treasury as soon as practicable…”

Exceptions include: Where statutory authority exists; Repayments to the appropriation (6-108)

FACTS OF CASE STUDY NUMBER 2: THE CONFERENCE

A MILITARY COMMANDER HOSTS A CONFERENCE

Attended by government and non-government persons

Commander has one-year appropriation

Identified in the Conference Report for purposes covered by the conference

No other specific authority

No Reception and Representation money

TYPES OF COSTS

Hotel conference facilities and related audio-video equipment rental

Conference books and materials; name plates; briefcases; mementos and plaques

Equipment display of a drone aircraft

Travel costs for nonfederal attendees

Jerseys for facilitators

Guest speaker costs (travel, honoraria)

Social functions

Meals and refreshments

Commercial bus transportation

You are the certifying/approving official for all costs for this conference.



SUMMARY OF SPECIFIC ISSUES

Under what conditions may an agency use appropriated funds for certain conference expenses? Specifically:

Food

Gifts and mementos

Conference supplies and materials

Social functions

Costs for non-federal attendees

Special clothing

What is the law regarding the collection of a registration fee for some or all of the above types of expenses? When does a violation of 31 U.S.C. 1301(a) rise to a violation of the Antideficiency Act?



INDEX

Item Page

1. Details of the Conference 71

2. Specific issues Handout

3. Extract of selected portions of Principles of Appropriations Law

Tab 2 A -- Purpose Statute and Necessary Expense Theory 73

Tab 2 B -- Meetings and conventions 77

Tab 2 C -- Gifts and awards 83

Tab 2 D -- Insurance 89

Tab 2 E -- Wearing apparel 93

Tab 2 F -- Entertainment 101

Tab 2 G -- Ratification of Unauthorized Purchases 115

Tab 2 H -- Miscellaneous Receipts Statute 119

Tab 2 I -- Antideficiency Act 123

Tab 2 J -- Selected Comp. Gen. Decisions and other references 125



Details of the Conference

Background The commanding general of a major military base held a conference to develop mission priorities and improve coordination with tenant commands, federal agencies and supported civilian authorities. The base mission is to provide support to local authorities engaged in enhanced homeland defense against terrorism in a three state region. This support involves the loan/operation of equipment requested by civilian authorities during an emergency; providing communications equipment and services; providing expertise in certain matters as requested by civilian authorities; and the sharing of intelligence and other information as needed. The general decided that a conference was needed to define the nature of the support that would be required and to establish operational lines of communication between all concerned.

Details The conference commenced on Tuesday morning at 8:00 a.m. It lasted three and one half days with a “no host” reception from 7:00 to 9:00 PM Monday night and a social outing on Friday afternoon. Except for classified sessions, which were held on base in the afternoon of the first day, the conference was held at the le Elegant Airport Hotel and Conference Center, the only local establishment large enough and available for this event.The attendees included: (1) Local representatives of the major command over the base; (2) Tenant and base staff officers, (3) Centers for Disease Control (CDC) bio-terrorism experts (TDY); (4) Senior officials from the regional headquarters of FAA, FEMA, Department of Justice, EPA (Local and TDY); and (5) State and local civilian law enforcement and emergency preparedness officials within the three state region. 465 persons attended the conference.

Funding The total budget for the base is $295 million in Operations and Maintenance funds. Within that budget, it received $1.4 million identified (not earmarked) to support local authorities in homeland defense missions. The budget does not include Reception and Representation appropriated funds

ExpensesHotel: Conference rooms (one main, four breakout); audio-visual support; set-up, breakdown; refreshments for breaks (2 daily); lunches (3); and a banquet (1) ; Room charges for nonfederal travelers on invitational travel orders (211).

Materials: Conference binders; workbooks; pens; desk name plates; name tags; secure briefcases; mementos and plaques; and registration desk supplies.

Equipment display: A prototype of an unmanned surveillance drone suitable for urban deployment was demonstrated following the on-base briefings on the first day of the conference.

Travel and transportation costs of non-federal attendees (211)

Honorarium, travel and transportation costs of guest speakers (4)

Social outing Friday afternoon/evening (By invitation only)

Bus transportation (9 buses)

Assignment You are a certifying officer/approving official. It is now several weeks after the conference. The project officer has submitted documents to you for certification. They include payments for commercial contracts, invitational travel orders and government purchase card purchases as shown on the following page. Answer the “Specific Issues” questions in the Specific Issues Handout booklet.



Invoices/Charges

1 Hotel Charges (Contract)1. Conference Rooms ($2,900 per day @ 4 days2. Audio-visual equipment rental ($700 @ 4 days)3. Refreshments ($8.50/person/day)4. Mandatory Lunch ($10.50/person/day)5. Mandatory Banquet ($27.00 each)6. No-host mixer/reception (Flat Fee)

$11,600 2,800

15,810 19,530 12,555 4,000

7. Room charges for 211 nonfederal attendees (4 nights @ $108) $91,1522 Conference Materials (Government Purchase Card)

1. Binders, supplies, secure briefcase ($115 each), name tags, desk plates 2. Mementos & plaques to distinguished civilian attendees 3. Registration table supplies

$62,310986186

3 Equipment Display (Contract)1. Transportation for loaned equipment from the manufacturer2. Insurance premium required by Allied-Techtronic to protect their prototype

$ 1,800675

4 Travel costs for Non-Federal attendees (Invitational travel orders)211 Invitational Travel Orders ($190 transportation; $38 meals)

$42,162

5 Guest Speaker expenses (4) (Invitational travel orders)Honorarium $500 each; Travel: $190 transportation; 1 day/night @ $108 room; $38 meals

$3,344

Hotel Golf Club - Social Outing (Arranged through the hotel)Golf outing at the hotel golf course (12 federal and 108 non-federal participants) $ 12,000Bus Transportation for TDY/non-federal personnel (Contract)$120 per 45 passenger bus per day (4)

$ 4,320

Facilitator Jerseys (Government Purchase Card)40 polo-style jerseys with command logos for wear by the conference facilitators

9 Miscellaneous note: A registration fee was collected: $40 per person

The project officer has the money in a special checking account in the base credit union. He plans to use it to pay the hotel charges for:

No-host reception $ 4,000

Social function $ 12,000

$16,000



Extracted Portions of


Purpose Statute and theNecessary Expense Theory



Red Book Reference

Vol. I, Principles of Appropriations Law>Availability of Appropriations: Purpose>Necessary Expense Theory

Short Title Purpose and Necessary Expenses

Principles of Law

(1) Appropriations are available only for their intended purposes.(2) An official may exercise reasonable discretion in determining how to carry-out the purposes of the appropriation.

ExceptionsAn expenditure may be justified as necessary if it meets three tests: (1) The expenditure must make a direct contribution to the appropriation being charged; (2) The expenditure must not be prohibited by law; and (3) The expenditure must not be something that is provided for in another appropriation or funding scheme.

Pages RB Pages 4-6; 4-19

Purpose

This chapter introduces the concept of the “availability” of appropriations. The decisions are often stated in terms of whether appropriated funds are or are not “legally available” for a given obligation or expenditure. This is simply another way of saying that a given item is or is not a legal expenditure. Whether appropriated funds are legally available for something depends on three things:

1. the purpose of the obligation or expenditure must be authorized; 2. the obligation must occur within the time limits applicable to theappropriation; and 3. the obligation and expenditure must be within the amounts Congress has established.

Thus, there are three elements to the concept of availability: purpose, time, and amount. All three must be observed for the obligation or expenditure to be legal. Availability as to time and amount will be covered in Chapters 5 and 6. This chapter discusses availability as to purpose.

One of the fundamental statutes dealing with the use of appropriated fundsis 31 U.S.C. § 1301(a):

“Appropriations shall be applied only to the objects forwhich the appropriations were made except as otherwise provided by law.”

Simple, concise, and direct, this statute was originally enacted in 1809 (ch. 28, § 1, 2 Stat. 535, (Mar. 3, 1809)) and is one of the cornerstones of congressional control over the federal purse. Because money cannot be paid from the Treasury except under an appropriation (U.S. Const. art. I, § 9, cl. 7), and because an appropriation must be derived from an act of Congress, it is for Congress to determine the purposes for which an appropriation may be used. Simply stated, 31 U.S.C. § 1301(a) says that public funds may be used only for the purpose or purposes for which they were appropriated. It prohibits charging authorized items to the wrong appropriation, and unauthorized items to any appropriation.



B. The “Necessary Expense” Doctrine.

The Theory. The preceding discussion establishes the primacy of 31 U.S.C. § 1301(a) in any discussion of purpose availability. The next point to emphasize is that 31 U.S.C. § 1301(a) does not require, nor would it be reasonably possible, that every item of expenditure be specified in the appropriation act. While the statute is strict, it is applied with reason.

The spending agency has reasonable discretion in determining how to carry out the objects of the appropriation. This concept, known as the “necessary expense doctrine,” has been around almost as long as the statute itself. An early statement of the rule is contained in 6 Comp. Gen. 619, 621 (1927):

“It is a well-settled rule of statutory construction that where an appropriation is made for a particular object, by implication it confers authority to incur expenses which are necessary or proper or incident to the proper execution of the object, unless there is another appropriation which makes more specific provision for such expenditures, or unless they are prohibited by law, or unless it is manifestly evident from various precedent appropriation acts that Congress has specifically legislated for certain expenses of the Government creating the implication that such expenditures should not be incurred except by its express authority.”

* * * * * * * * * *

When applying the necessary expense rule, an expenditure can be justifiedafter meeting a three-part test:

1. The expenditure must bear a logical relationship to the appropriation sought to be charged. In other words, it must make a direct contribution to carrying out either a specific appropriation or an authorized agency function for which more general appropriations are available.

2. The expenditure must not be prohibited by law.

3. The expenditure must not be otherwise provided for, that is, it must not be an item that falls within the scope of some other appropriation or statutory funding scheme.

* * * * * * * * * *



Extracted Portions of


Meetings and Conferences



Red Book Reference

Vol. I, Principles of Appropriations Law>Availability of Appropriations: Purpose>Specific Purpose Authorities and Limitations>Attendance at meetings and conventions

Short TitleMeetings and Conventions

Principle of Law

Government agencies have an inherent authority to sponsor meetings and to send officers and employees to attend other government meetings. Federal law prohibits payment of costs to attend a meeting of a private society or association

ExceptionsMeetings of a private society or association may be financed if the meeting complies with 5 U.S.C. 4109 (Training) or 5 U.S.C. 4110 (Topics relating to agency business / mission).

Pages RB Pages 4-36..50; B-300826, pages 125-131 (particularly Footnote 5).

Attendance at meetings and conventions

Meetings have become a way of life in contemporary American society and the federal bureaucracy is no exception. It seems that there are meetings on just about everything. Quite often they can be very useful. They can also be expensive. It is no surprise that lots of meetings are held in places like Honolulu and San Francisco. This section will explore when appropriated funds may be used to send people, government employees and others, to meetings. Congress has passed a number of statutes in this area and the cases usually involve the interpretation and application of the various statutory provisions. For purposes of this discussion, the term “meeting” includes other designations such as conference, congress, convention, seminar, symposium, and workshop; what the particular gathering is called is irrelevant.

a. Government Employees. (1) Statutory framework. To understand the law in this area, it is necessary to understand the interrelationship of several statutes. Listed in the order of their enactment, they are: 5 U.S.C. 5946, 31 U.S.C. 1345, 5 U.S.C. 4109 and 5 U.S.C. 4110. This interrelationship is best seen by outlining the statutory evolution.

The first piece of legislation was enacted in 1912. As relevant here, section 8 of the Act of June 26, 1912, 37 Stat. 139, 184, prohibited the payment, without specific statutory authority, of the expenses of attendance of an individual at meetings or conventions of members of a society or association. With exceptions to be noted below, this statute is now found at 5 U.S.C. 5946. For the most part, it has always been viewed as applying to attendance by federal employees at non-federally sponsored meetings. See, e.g., B-140912, November 24, 1959.



The next relevant legislative action came in 1958 with two provisions of the Government Employees Training Act, 72 Stat. 327. Section 10 of the Act, 5 U.S.C. 4109, authorizes payment of certain expenses in connection with authorized training. Section 19(b) of the Act, 5 U.S.C. 4110, makes travel appropriations available for expenses of attendance at meetings “which are concerned with the functions or activities for which the appropriation is made or which will contribute to improved conduct, supervision, or management of the functions or activities.” When Title 5 of the United States Code was recodified in 1966, qualifying language was added to 5 U.S.C. 5946 to make it clear that the requirement for specific statutory authority no longer applied to the extent payment was authorized by 5 U.S.C. 4109 or 4110. See 38 Comp. Gen. 800 (1959).

With this statutory framework as background, it is now possible to attempt to state some rules. A government employee may attend a non-government sponsored meeting at government expense (1) if it is part of an authorized training program under 5 U.S.C. 4109, or (2) if it is related to agency functions or management under 5 U.S.C. 4110. For example, the Labor Department could use its Salaries and Expenses appropriation to pay the attendance fees of its Director of Personnel at a conference of the American Society of Training Directors since the meeting qualified under the broad authority of 5 U.S.C. 4110. 38 Comp. Gen. 26 (1958).

The expenses of attendance may not be paid if the employing agency refuses to authorize attendance, even if authorization would have been permissible under the statute. B-164372, June 12, 1968. (This was sort of an odd case. An employee wanted to attend a conference in Tokyo, Japan. The agency refused authorization because the employee had announced his intention to resign after the conference. The employee went anyway, and for some reason filed a claim for his expenses. GAO said no.) Where attendance is authorized, the fact that the sponsor is a profit-making organization is immaterial. B-161777, July 11, 1967.

The express inclusion of “management” in 5 U.S.C. 4110 is significant. Before the Training Act, GAO had strictly construed grants of statutory authority for attendance at meetings as excluding meetings concerning general problems such as management that are common to all agencies. 37 Comp. Gen, 335 (1957). This type of meeting is now expressly authorized. If neither 5 U.S.C. 4109 nor 5 U.S.C. 4110 applies and the meeting is a meeting of a “society or association, ” then it is subject to the prohibition of 5 U.S.C. 5946.

However, if a given gathering was viewed as a meeting or convention of a society or association, the expenses were consistently disallowed. E.g., 16 Comp. Gen. 252 (1936); 5 Comp. Gen. 599 (1926), affirmed by 5 Comp. Gen. 746 (1926); 3 Comp. Gen. 883 (1924). GAO often told agencies in those days that if they thought attendance would be in the interest of the government, they should present the matter to Congress. E.g., 5 Comp. Gen, at 747. In fact Congress granted specific authority to a number of agencies (for an example, see B-136324, August 1, 1958), and later, as will be seen below, enacted general legislation that renders 5 U.S.C. 5946, as it relates to attendance at meetings, of very limited applicability.



Employee attendance at meetings.

Travel expenses of nonfederal personnel

Also see B-300826

The next congressional venture in this field was Public Resolution No, 2, 74th Congress, 49 Stat. 19 (1935), aimed primarily at restricting the use of appropriated funds to pay expenses of nongovernment persons at conventions. This statute, now codified at 31 U.S.C. 1345, provides in relevant part:

Except as specifically provided by law, an appropriation may not be used for travel, transportation, and subsistence expenses for a meeting. This section does not prohibit—

“(1) an agency from paying the expenses of an officer or employee of the United States Government carrying out an official duty; “

Significantly, 31 U.S.C.1345 does not apply to government employees in the discharge of official duties. Thus, as of 1935, 31 U.S.C. 1345 prohibited attendance by private parties at government expense; attendance by government employees was prohibited by the 1912 statute for meetings of a society or association (regardless of the relationship to official duties), and by 31 U.S.C. 1345 for other types of meetings unless attendance was in the discharge of official duties.

Since the exception for government employees in 31 U.S.C. 1345 is limited to the discharge of official duties, the statutory prohibition applies to government employees to the extent that a given meeting is not part of the discharge of official duties. If a meeting is not part of authorized training under 5 U.S.C. 4109 and cannot qualify as related to agency functions under 5 U.S.C. 4110, it would certainly not be within the exception in 31 U.S.C. 1345 for the discharge of official duties.

* * * * * *

A distinction must be drawn between the authority to sponsor a meeting and the authority to pay the types of expenses prohibited by 31 U.S.C. § 1345. An agency may be able to do the former but not the latter. Thus, in B-166506, July 15, 1975, GAO pointed out that EPA could hold a solid waste management convention as a legitimate means of implementing its functions under the Solid Waste Disposal Act. What it could not do without more specific statutory authority was pay the travel and lodging expenses of the state participants. Sponsoring the meeting itself is essentially a “necessary expense” question. See also 62 Comp. Gen. 531 (1983); B-239856, Apr. 29, 1991. Cf. 45 Comp. Gen. 333 (1965); B-147552, Nov. 29, 1961.

Thus, depending on the agency’s statutory authority, it may be authorized to incur such expenses as renting conference facilities, financing the participation of its own employees, bringing in guest speakers, both federal and nonfederal, and preparing and disseminating literature. The prohibition of 31 U.S.C. § 1345 comes into play only when the agency purports to pay the travel, transportation, or subsistence expenses of nonfederal attendees.

* * * * * *



A few months later, relying on 14 Comp. Gen. 638, the Comptroller General held similarly that 31 U.S.C. § 1345 prohibited the American Battle Monuments Commission from providing transportation and refreshments for private individuals at monument dedication ceremonies in Europe. 14 Comp. Gen. 851 (1935). Other early decisions applying the statutory prohibition are 15 Comp. Gen. 1081 (1936); B-53554, Nov. 6, 1945; B-27441, Aug. 25, 1942; and A-66869, Jan. 31, 1936.

Some more recent cases in which GAO found expenditures prohibited by 31 U.S.C. § 1345 are summarized below:

• The Environmental Protection Agency (EPA) could not pay the transportation and lodging expenses of state officials attending a National Solid Waste Management Association Convention. B-166506, July 15, 1975, aff’d, 55 Comp. Gen. 750 (1976).

• The Mine Safety and Health Administration, Department of Labor, could not pay travel and subsistence expenses of miners and mine operators attending safety and health training seminars. B-193644, July 2, 1979.

• Maritime Administration could not pay transportation and subsistence expenses of nonfederal participants in a 2-week seminar for general publication maritime writers. B-168627, May 26, 1970. • Navy could not pay for a dinner and cocktail party for nongovernment minority group leaders. B-176806-O.M., Sept. 18, 1972.

• National Highway Traffic Safety Administration could not pay travel and lodging expenses of state officials at a workshop on odometer fraud. 62 Comp. Gen. 531 (1983).

* * * * * *(2) Invitational travel

Another statute we should note is 5 U.S.C. § 5703, which provides:

“An employee serving intermittently in the Government service as an expert or consultant …or serving without pay or at $1 a year, may be allowed travel or transportation expenses, under this subchapter, while away from his home or regular place of business and at the place of employment or service.”

* * * * * *

Even before 5 U.S.C. § 5703 was enacted, GAO had recognized that a private individual “invited” by the government to confer on official business was entitled to reimbursement of travel expenses if specified in the request and justified as a necessary expense. 8 Comp. Gen. 465 (1929); 4 Comp. Gen. 281 (1924); A-41751, Apr. 15, 1932.



The direct service test

Guest speakers

Honorarium payments to guest speakers

The enactment of 31 U.S.C. § 1345 in 1935 did not change this. Thus, the Comptroller General recognized in 15 Comp. Gen. 91, 92 (1935) that while the statute might prohibit the payment of expenses of private individual called together as a group, it would not apply to “individuals called to Washington or elsewhere for consultation as individuals.” See also A-81080, Oct. 27, 1936. Viewed in this light, the 1946 enactment of 5 U.S.C. § 5703 in large measure merely gave express congressional sanction to a rule that had already developed in the decisions.

* * * * * *

There is a limit to this rationale and a point at which 5 U.S.C. § 5703 collides head-on with 31 U.S.C. § 1345. This point was discussed in 55 Comp. Gen. 750, supra, and reiterated in B-193644, July 2, 1979. In 1976, 55 Comp. Gen. 750 affirmed B-166506, July 15, 1975, and held that 31 U.S.C. § 1345 prohibited the Environmental Protection Agency (EPA) from paying travel and lodging expenses of state officials at a solid waste management convention; B-193644 reached the same result for safety and training seminars for miners and mine operators. In both cases, the Comptroller General rejected the suggestion that the expenses could somehow be authorized under the “invitational travel” statute. In neither case were the attendees providing a direct service for the government, even though in both cases the government may have derived some incidental benefit in terms of enhancement of program objectives. The following passage illustrates the “collision point”:

“We thus do not believe that [5 U.S.C. § 5703] was ever intended to establish the proposition that anyone may be deemed a person serving without compensation merely because he or she is attending a meeting or convention, the subject matter of which is related to the official business of some Federal department or agency…. We believe that being called upon to confer with agency staff on official business is different from attending a meeting or convention in which a department or agency is also interested.”

55 Comp. Gen. at 752–53 (explanatory information provided). Thus, 5 U.S.C. § 5703 permits an agency to invite a private individual (or more than one) to a meeting or conference at government expense, if that individual is legitimately performing a direct service for the government such as making a presentation or advising in an area of expertise. Invitational travel also encompasses private individuals whose travel is a necessary incident to the service that provides a direct benefit to the government. B-259620, Feb. 29, 1996 (cross-cultural training for spouses of Federal Aviation Administration employees living abroad directly benefits the agency). See also 71 Comp. Gen. 9 (1991); 71 Comp. Gen. 6 (1991). However, 5 U.S.C. § 5703 is not a device for circumventing 31 U.S.C. § 1345. The “direct service” test is not met merely because the agency is interested in the subject matter of the conference or because the conference will enhance the agency’s program objectives. B-251921, Apr. 14, 1993 ………

Payment of an honorarium to an invited guest speaker (other than a government employee) is permissible under a necessary expense rationale. See A-69906, Mar. 16, 1936 (payment of an honorarium by an agency of the District of Columbia government was found to be an allowable administrative expense). See also B-20517, Sept. 24, 1941.

* * * * * *





Gifts and Awards



Red Book Reference

Vol I, Principles of Appropriations Law>Availability of Appropriations: Purpose>Specific Purpose Authorities and Limitations>Gifts and Awards

Short Title Gifts and Awards

Principle of Law

Appropriated funds may not be used for personal gifts, unless, of course, there is specific statutory authority.

Exceptions (1) When authorized by statute; (2) Directly related to mission accomplishment; (3) An award under the Government Employee Incentive Awards Act.

Pages 4-155..171

“..it is impossible to draw a rational line..”

Many, many decisions ruled negatively.

Key Chains

An agency frequently wants to use gifts to attract attention to the agency or to specific programs. For example, gifts can be used as recruiting tools, to commemorate an event, or to inform the public or agency employees about the agency. Appropriated funds may not be used for personal gifts, unless, of course, there is specific statutory authority.

The cases generally involve the application of the necessary expense doctrine, and, as with any necessary expense analysis, the result turns on whether the item will directly further the agency’s mission. Occasionally, an item that would typically be viewed as a personal gift may, in other circumstances, help advance an agency’s mission. In making the analysis, it makes no difference whether the “gift items” are given to federal employees or to others. The connection is either there or, far more commonly, it is not. In each of the cases in which funds have been found unavailable, there was certain logic to the agency’s justification, and the amount of the expenditure in many cases was small. The problem is that, in most cases, were the justification put forward by the agency deemed sufficient, there would be no stopping point. If a free ashtray might generate positive feelings about an agency or program or enhance motivation, so would a new car or an infusion of cash into the bank account. The rule prohibiting the use of appropriated funds for personal gifts reflects the clear potential for abuse. Because a necessary expense analysis is, of course, case specific, it is impossible to draw a rational line identifying those gift items that are acceptable and those that are not. That certainly is evident from the discussion that follows. It is important that anyone confronting a “gift” issue scrutinize the case law carefully to appreciate distinctions that may not be apparent at first read.

In this section, we provide a short discussion of decisions in which we concluded that the item at issue was a gift. We follow that with a discussion of decisions in which we found that items ordinarily considered to be gifts were connected to carrying out the agency’s mission. The discussion, of course, does not identify all of our gift decisions and, while we provide our holdings, the discussion does not substitute for a full analysis of these decisions. We encourage the reader to use the discussion as a tool for honing his or her research.

In 54 Comp. Gen. 976 (1975), specially made key chains, which were distributed to educators who attended seminars sponsored by the Forest Service, were determined to be personal gifts despite the Department of Agricultures claim that their distribution would generate future responses from participants. That decision stated:



Candy in garbage cans.

But when it can be shown to relate directly to the agency’s mission.

“The appropriation …proposed to be charged with payment for the items in question is available for ‘…expenses necessary for forest protection and utilization….’ Since the appropriation is not specifically available for giving key chains to individuals, in order to qualify as a legitimate expenditure it must be demonstrated that the acquisition and distribution of such items constituted a necessary expense of the Forest Service.” The decision concluded that the key chains were not necessary to implement the appropriation and were, therefore, improper expenditures.

This line of reasoning was also used in 57 Comp. Gen. 385 (1978). There it was held that novelty plastic garbage cans containing candy in the shape of solid waste, which were distributed by the Environmental Protection Agency to attendees at an exposition, were personal gifts. The agency’s argument that the candy was used to attract people to its exhibit on the Resource Conservation and Recovery Act and therefore to promote solid waste management was not sufficient to justify the expenditure.

What follows is a discussion of some expenditures that resemble personal gifts, but which we approved because they were found necessary to carry out the purposes of the agency’s appropriation. For example, in B-193769, Jan. 24, 1979, it was held that the purchase and distribution of pieces of lava rocks to visitors of the Capulin Mountain National Monument was a necessary and proper use of the Interior Department’s appropriated funds. The appropriation in question was for “expenses necessary for the management, operation, and maintenance of areas and facilities administered by the National Park Service ….” The distribution of the rocks furthered the objectives of the appropriation because it was effective in preserving the Monument by discouraging visitors from removing lava rock elsewhere in the Monument. Thus, the rocks were not considered to be personal gifts.

Similarly, GAO concluded in B-230062, Dec. 22, 1988, that the Army could use its appropriations to give away framed recruiting posters as “prizes” in drawings at national conventions of student organizations. The students had to fill out cards to enter the drawings, and the cards would provide leads for potential recruits. Also, the Army is authorized to advertise its recruitment program, and posters are a legitimate form of advertising.

Another case in which GAO found adequate justification is 68 Comp. Gen. 583 (1989), concluding that the U.S. Mint may give complimentary specimens of commemorative coins and medals to customers whose orders have been mishandled. Since customers who do not receive what they paid for may be disinclined to place further orders, the goodwill gesture of giving complimentary copies to these customers would directly contribute to the success of the Mint’s commemorative sales program.



Awards are different.

The Government Employee Incentive Awards Act

In another case involving buttons, 72 Comp. Gen. 73 (1992), GAO responded to a request from the Comptroller of the Environmental Protection Agency for an opinion on the availability of appropriated funds to acquire buttons and magnets inscribed with messages related to indoor air quality, concluding that appropriated funds were available for such items. GAO discussed and distinguished cases such as 53 Comp. Gen. 770 (SBA decorative ashtrays) and 54 Comp. Gen. 976 (key chains for participants at Forest Service seminars), above, noting that the buttons and magnets, “unlike a container of candy, a key chain, or an ice scraper,” had “no real use other than to convey a message.” 72 Comp. Gen. at 74. Also key was the “direct link between the items and an authorized agency function,” which involved conveying a message to increase public awareness of indoor air quality. Id.

In yet another “button” case, B-257488, Nov. 6, 1995, GAO concluded that the Food and Drug Administration could use appropriated funds to purchase “No Red Tape” buttons for employees to wear at work. GAO noted that the buttons had “no intrinsic value” to the recipients and served solely to assist the achievement of agency objectives. The agency had demonstrated “the requisite nexus between its appropriation’s purpose and the ‘No Red Tape’ buttons. The message [was] clearly informational and directed at the promotion of an internal agency management objective.”

A number of early decisions established the proposition that, absent specific statutory authority, appropriations could not be used to purchase such items as medals, trophies, or insignia for the purpose of making awards. The rationale follows that of the gift cases. The prohibition was applied in 5 Comp. Gen. 344 (1925) (medals for winners of athletic events) and 15 Comp. Gen. 278 (1935) (annual trophies for Naval Reserve bases for efficiency). In 10 Comp. Gen. 453 (1931), the Comptroller General held that a general appropriation could be used to design and procure medals of honor for airmail flyers where the awarding of the medals had been authorized in virtually concurrent legislation. The general appropriation was viewed as available to carry out the specifically expressed intent of Congress and the express authorization obviated any need for a more specific appropriation.

The rule was restated in 45 Comp. Gen. 199 (1965) and viewed as prohibiting the purchase of a plaque to present to a state to recognize 50 years of achievement in forestry. While the voucher in that case was paid because the plaque had already been presented, the decision stated that payment was for that instance only and that congressional authority should be sought if similar awards were considered desirable in the future. A more recent case applying the prohibition is B-223447, Oct. 10, 1986.

Several statutes now authorize the making of awards in various contexts. Perhaps the most important is the Government Employees’ Incentive Awards Act, enacted in 1954 101and now found at 5 U.S.C. 4501–4506. The Act authorizes an agency to pay a cash award to an employee who by his or her “suggestion, invention, superior accomplishment, or other personal effort contributes to the efficiency, economy, or other improvement of Government operations or achieves a significant reduction in paper work” or performs a special act or service in the public interest related to his or her official employment. 5 U.S.C. 4503. The agency may also incur “necessary expenses” in connection with an incentive award.



An item classified as a gift might be legal if it had been presented as an award under the act.

Awards under the Act may take forms other than cash. Thus, in 55 Comp. Gen. 346 (1975), the Comptroller General held that the Army Criminal Investigation Command could award marble paperweights and walnut plaques to Command employees, including those who had died in the line of duty, if the awards conformed to the Act and applicable regulations. In situations not covered by the statute (e.g., presentations to nongovernment persons to recognize cooperation and enhance community relations), however, such awards would be personal gifts and therefore improper. Similarly authorized as “honorary” awards are desk medallions (B-184306, Aug. 27, 1980); telephones of nominal value (67 Comp. Gen. 349 (1988)); $50 jackets bearing agency insignia (B-243025, May 2, 1991); coffee mugs and pens (B-257488, Nov. 6, 1995); tickets to local sporting events or amusement parks (B-256399, June 27, 1994); and meals or gift certificates for meals (B-271511, Mar. 4, 1997).





Insurance



Red Book Reference

Vol I, Principles of Appropriations Law>Availability of Appropriations: Purpose>Specific Purpose Authorities and Limitations>Insurance

Short Title Insurance

Principle of Law

Appropriated funds are not available to pay insurance premiums

Exceptions (1) When authorized by statute; (2) economies; (3) sound business practice, or (4) benefits not otherwise obtainable.

Pages 4-144..155

Content

One frequently hears that the government is a self-insurer. This is not completely true. There are many situations in which the government buys or pays for insurance, Among the more well known examples are the Federal Employees’ Health Benefits Program and Federal Employees’ Group Life Insurance. Also, the government frequently pays for insurance indirectly through contracts, grants, and leases. E.g., B-72120, January 14, 1948 (lease). A comprehensive treatment may be found in a report of the Comptroller General entitled Survey of the Application of the Government’s Policy on Self-Insurance, B-168106, June 14, 1972. Another useful report, although more limited in scope, is Extending the Government’s Policy of Self-Insurance in Certain Instances Could Result in Great Savings, PSAD 105-75 (August 26, 1975).

However, the government is essentially a self-insurer in certain important areas, primarily loss or damage to government property and the liability of government employees insofar as the government is legally responsible or would ultimately bear the loss. The rule to be discussed in this section may be stated thus: In the absence of express statutory authority to the contrary, appropriated funds are not available for the purchase of insurance to coverloss or damage to government property or the liability of government employees. The rule and its evolution are summarized in B-158766, February 3, 1977.

* * * * * * * * Many of the decisions in this area include a statement to the effect that the government’s practice of self-insurance “is one of policy and not of positive law.” E.g., 21 Comp. Gen. 928, 931 (1942). While the statement is true, as it has been carried from decision to decision the word “positive” has occasionally been omitted and this has caused some confusion. All the statement means is that the rule is not mandated by statute, but has evolved administratively from the policy considerations summarized above.

* * * * * * * *



Exceptions

1. Departments and agencies generally:

Exceptions to the self-insurance rule may of course be authorized by statute. The absence of an express prohibition on insurance is not enough to authorize it; rather, specific statutory authority is required. 19 Comp. Gen. 798, 800 (1940); 14 Comp. Dec. 836, 839 (1908). Although legislation in this area has been minimal, Congress has occasionally authorized the procurement of insurance in some instances and prohibited it in others. By this pattern, congressional recognition of the rule may be inferred. Also, the existence of statutory authority to buy insurance does not necessarily mean it has to be exercised. In one case, the Comptroller General recommended against the purchase of insurance although recognizing that it was statutorily authorized in that instance. 19 Comp, Gen. 211 (1939).

There are also non-statutory exceptions where the underlying policy considerations do not apply. The standards for exception were summarized in B-151876, April 24, 1964, as follows:

1. Where the economy sought by self-insurance would be defeated;2. Where sound business practice indicates that a savings can be effected; or3. Where services or benefits not otherwise available can be obtained by purchasing insurance.

* * * * * * *

However, insurance may be purchased on loaned private property only where the owner requires insurance coverage as part of the transaction. If the owner does not require insurance, private insurance is not a necessary expense and the government should self-insure. B-151876 (1964)

Finally, it is important to keep in mind that the self-insurance rule is aimed at insurance whose purpose is to protect the United States from risk of financial loss. Applying the rule from this perspective, GAO found that it would not preclude the Federal Bureau of Investigation from purchasing insurance in connection with certain of its undercover operations, The objective in these instances was not to protect the government against risk of loss, but to maintain the security of the operation itself, for example, by creating the appearance of normality for FBI-run undercover proprietary corporations. Thus, the FBI could treat the expenditure purely as a “necessary expense” question. B-204486, January 19, 1982. For additional exceptions, see 59 Comp. Gen. 369 (1980) and B-197583, January 19, 1981.





Wearing Apparel



Red Book Reference

Vol. I, Principles of Appropriations Law>Availability of Appropriations: Purpose>Specific Purpose Authorities and Limitations>

Short TitleWearing Apparel

Principle of LawAgency appropriated funds are not available to pay or reimburse for ordinary wearing apparel for its employees

Exceptions(1) When authorized by statute; (2) Unusual clothing necessary for safe performance of hazardous duties; (3) Uniforms, or (4) benefits not otherwise obtainable.

Pages 4-265..272

The rule:

Out of the ordinary

The starting point is the principle that “every employee of the Government is required to present himself for duty properly attired according to the requirements of his position.” 63 Comp. Gen. 245, 246 (1984), quoting from B-123223, June 22, 1955. In other words, the government will not clothe the naked, at least where the naked are receiving government salaries.

Nevertheless, there are certain out-of-the-ordinary items, required by the nature of the job that the government should furnish. The test was described in 3 Comp. Gen. 433 (1924), and that discussion is still relevant today:

“In the absence of specific statutory authority for the purchase of personal equipment, particularly wearing apparel or parts thereof, the first question for consideration in connection with a proposed purchase of such equipment is whether the object for which the appropriation involved was made can be accomplished as expeditiously and satisfactorily from the government’s standpoint, without such equipment. If it be determined that use of the equipment is necessary in the accomplishment of the purposes of the appropriation, the next question to be considered is whether the equipment is such as the employee reasonably could be required to furnish as part of the personal equipment necessary to enable him to perform the regular duties of the position to which he was appointed or for which his services were engaged, Unless the answer to both of these questions is in the negative, public funds can not be used for the purchase. In determining the first of these questions there is for consideration whether the Government or the employee receives the principal benefit resulting from use of the equipment and whether an employee reasonably could be required to perform the service without the equipment. In connection with the second question the points ordinarily involved are whether the equipment is to be used by the employee in connection with his regular duties or only in emergencies or at infrequent intervals and whether such equipment is assigned to an employee for individual use or is intended for and actually to be used by different employees. ”



Three statutory provisions

First the

Administrative Expenses Act

OK to buy clothing and equipment if:

1. Special, unusual;

2. Benefits the government;

3. Hazardous duty

* * * * * * *There are now three statutory provisions that permit the purchase of items of apparel from appropriated funds in certain circumstances.

The first is 5 U.S.C. 7903, enacted as part of the Administrative Expenses Act of 1946. It provides:

“Appropriations available for the procurement of supplies and material or equipment are available for the purchase and maintenance of special clothing and equipment for the protection of personnel in the performance of their assigned tasks. For the purpose of this section, ‘appropriations’ includes funds made available by statute [to wholly-owned government corporations]. ”

In order for an item to be authorized by 5 U.S.C. 7903, three tests must be met: (1) the item must be “special” and not part of the ordinary and usual furnishings an employee may reasonably be expected to provide for himself; (2) the item must be for the benefit of the government, that is, essential to the safe and successful accomplishment of the work, and not solely for the protection of the employee, and (3) the employee must be engaged in hazardous duty. See 32 Comp. Gen. 229 (1952); B-193104, January 9, 1979. Thus, this provision is but a slight liberalization of the rule in 3 Comp. Gen. 433.

Applying 5 U.S.C. 7903, the Comptroller General has held that raincoats and umbrellas for employees who must frequently go out in the rain are not special equipment but are personal items that the employee must furnish. B-193104, January 9, 1979; B-122484, February 15, 1955, Similarly unauthorized are coveralls for mechanics (B-123223, June 22, 1955) and running shoes for Department of Energy nuclear materials couriers (B-234091, July 7, 1989). Nor does 5 US.C. 7903 authorize reimbursement for ordinary clothing and toiletry items purchased by narcotics agents on a “moving surveillance.” B-179057, May 14, 1974.



Uniforms

OSHA

Congress addressed the uniform problem with the second statutory provision under consideration, 5 U.S.C. 5901, the so-called Federal Employees Uniform Act, most recently amended by section 202 of the Federal Employees Pay Comparability Act of 1990, section 529 of the FY 1991 Treasury-Postal Service-General Government appropriation act, Pub, L. No. 101-509 (November 5, 1990), 104 Stat. 1389, 1456. This provision authorizes annual appropriations to each agency, on a showing of necessity or desirability, to provide a uniform allowance of up to $400 a year (or more if authorized under Office of Personnel Management regulations) to each employee who wears a uniform in the performance of official duties. The agency may pay a cash allowance or may furnish the uniform. [Note: Vol. II, Chapter 7, GAO stipulates that uniforms must be authorized by law or regulation.]

Note that 5 U.S.C, S 5901 is merely an authorization of appropriations. An appropriation is still required in order for payments to be made or obligations incurred. 35 Comp. Gen. 306 (1955). While the decision stated that specific appropriation language is preferable, it recognized that the inclusion of an item for uniforms in an agency’s budget request which is then incorporated into a lump-sum appropriation is legally sufficient.

An example of an item that could properly be required under 5 U.S.C. 5001 is frocks for Department of Agriculture meat grader employees. 57 Comp. Gen. 379, 383 (1978). Another example is robes for administrative law judges of the Occupational Safety and Health Review Commission. B-199492, September 18, 1980. (The decision concluded merely that the expenditure would be legal, not that it was an especially good idea, pointing out that federal judges pay for their own robes.)

The third piece of legislation which may permit the purchase of items of apparel from appropriated funds is the Occupational Safety and Health Act of 1970 (OSHA). Section 19 of OSHA, 29 U.S.C. 5668, requires each federal agency to establish an occupational safety and health program and to acquire necessary safety and protective equipment. Thus, protective clothing may be furnished by the government if the agency head determines that it is necessary under OSHA and its implementing regulations.

Under the OSHA authority, the following items have been held permissible:

1. Snowmobile suits, mittens, boots, and crash helmets for Department of Agriculture employees required to operate snowmobiles over rough and remote terrain. 51 Comp. Gen. 446 (1972). (This decision has already been noted in the discussion of 5 U.S.C. 7903 above. The decision held that the items were justifiable on either basis.)

2. Down-filled parkas for Interior Department employees temporarily assigned to Alaska or the high country of the Western states during the winter months. 63 Comp. Gen. 245 (1984). (This decision is also noted under 5 U.S.C.. 87903. As with 51 Comp. Gen. 446, the items could be justified under either statute.)


Students should carefully analyze the following CG Decision number B-288828, dated October 3, 2002


United States General Accounting OfficeWashington, DC 20548Comptroller Generalof the United States

DecisionMatter of: Purchase of Insulated Coveralls, Vicksburg, MississippiFile: B-288828Date: October 3, 2002________________________________________________________________________

DIGEST

Absent statutory authorities, items of wearing apparel are the employee's personal responsibility, and not the government's, and appropriated funds are not available for their purchase. Our Office has recognized three statutes that permit the purchase of wearing apparel. The purchase of insulated coveralls for use by employees at the Corps of Engineers’ Vicksburg Waterways Experiment Station when outside temperatures approach freezing is not authorized by any of these three statutes, and consequently is not a proper use of appropriated funds.

DECISION

The Deputy Director of Finance, United States Army Corps of Engineers, has requested an advance decision on whether it is proper to use appropriated funds for the purchase of insulated coveralls for employees to wear when outside temperatures fall below 35 degrees. Generally, it is the responsibility of the employee to report to duty properly clad to carry out his responsibilities. B-123223, June 22, 1955. There are three statutes, however, that permit agencies, in varying circumstances, to use appropriated funds to purchase clothing and other wearing apparel. None of these three authorities is available to the Corps to purchase insulated coveralls in the circumstances presented to us by the Deputy Director. We address each of the three statutes in our analysis below.

BACKGROUND

The United States Army Engineer Research and Development Center (ERDC), Corps of Engineers, Vicksburg, Mississippi, entered into an agreement with Local 3310 of the American Federation of Government Employees that would require ERDC to purchase and supply insulated coveralls to employees at the Vicksburg Waterways Experiment Station who work outside when



temperatures drop below 35 degrees, including periods when the wind chill factor is below 35 degrees. The coveralls would remain the property of the United States, and the agency would assume responsibility for cleaning and replacement of the coveralls. .ERDC Counsel has advised ERDC that obligation and expenditure of appropriated funds for the coveralls is “not one that is properly chargeable to appropriated funds,” and that “any obligation of appropriations for this expenditure would violate the purpose statute, 31 U.S.C. § 1301(a).” Memorandum from ERDC Counsel to CEERD-MS (Col. Weller) regarding “Purchase of Insulated Coveralls for Certain DPW Operations Division Employees,” Dec. 11, 2000. The local union has filed a charge of unfair labor practices with the Federal Labor Relations Authority. According to the Deputy Director of Finance, an arbitrator recommended that ERDC refer the issue to our Office for a decision, and agreed to defer his ruling pending our decision.

ANALYSIS

We generally consider items of clothing, such as the coveralls at issue here, to be a personal expense of the employee, and appropriated funds are not available for personal expenses without clear statutory authority. We stated the general rule in 1955, “that every employee of the government is required to present himself for duty properly attired according to the requirements of his position.” B-123223, June 22, 1955. In other words, it is the personal responsibility of the employee to report for duty properly clad to perform his duties. Id. Our Office has recognized three statutory provisions that permit the purchase of items of wearing apparel.

(1) First, the Secretary of Defense is authorized to pay an allowance or to provide a uniform to each civilian employee of the Department of Defense who is required by law or regulation to wear a prescribed uniform while performing official duties. 10 U.S.C. § 1593. It is not clear that coveralls, in these circumstances, would constitute a uniform for purposes of section 1593. Regardless, ERDC Counsel advised our Office that there is no law or regulation requiring the wearing of coveralls as a uniform or part of a uniform. Letter from Timothy L. Felker, Jr., ERDC Counsel to Doug MacArthur, Office of General Counsel, GAO, May 15, 2002 (hereinafter, May 15 Letter). The union, in its agreement with ERDC, also did not cite or refer to any law or regulation requiring ERDC employees to wear any prescribed uniform. See “Insulated Coveralls Agreement,” No. 00 FSIP 105. Section1593, consequently, does not authorize ERDC to use appropriated funds to supply the coveralls.

(2) Second, section 7903 of title 5, U.S. Code, provides that “[a]ppropriations available for the procurement of supplies and material or equipment are available for the purchase and maintenance of special



clothing and equipment for the protection of personnel in the performance of their assigned tasks. . .

” In order for an item to be authorized by section 7903, it must satisfy three tests: (1) the item must be "special" and not part of the ordinary and usual furnishings an employee may reasonably be expected to provide for himself; (2) the item must be for the benefit of the government, that is, essential to the safe and successful accomplishment of the work, and not solely for the protection of the employee, and (3) the employee must be engaged in hazardous duty. See 32 Comp. Gen. 229 (1952); B-193104, Jan. 9, 1979.”

We have generally been unwilling to hold that foul weather gear meets these standards; we view such gear as personal to the employee, with no more than an incidental relationship to their duties as employees of the government. B-230820, Apr. 25, 1988. In rare circumstances, however, we have recognized an exception. For example, in 1984, we applied these standards to allow the purchase of down-filled parkas for use by Office of Surface Mining employees in Alaska and the high country of the western states during the winter. 63 Comp. Gen. 245 (1984). In that case, however, the parkas were provided to employees who were assigned to temporary duty in Alaska and the high country. Id. at 247. Office of Surface Mining officials had advised us that heavy parkas were required as mandatory wear for personnel working in those locations. Employees assigned there only for temporary duty would not be expected to own clothing suitable for such extreme environments. Id.

In marked contrast, the instant case involves employees who want the government to supply a fairly common article of clothing—coveralls—for use at their permanent duty station. ERDC counsel argues that there is nothing “special” about the coveralls and nothing particularly hazardous about the employees’ duties. Letter from Lewis H. Burke, Agency Representative, ERDC Counsel to Doug MacArthur, Office of General Counsel, GAO, May 17, 2002. ERDC asserts that its employees permanently stationed in Vicksburg should own, and can be expected to own, climate-appropriate clothing, suitable to carry out their assigned duties. Id. We agree, and conclude that section 7903 does not authorize the purchase of the coveralls.

Although we conclude that ERDC may not purchase the coveralls under authority of section 7903, we do not read section 7903 to bar negotiations between an agency and a union with respect to matters of safety and health. See 57 Comp. Gen. 379, 382 (1978). (3) An agency may provide protective clothing regardless of whether the purchase satisfies the three tests of section 7903 if the agency determines that the clothing is necessary to satisfy Occupational Safety and Health Act (OSHA) requirements. Id. Section 19 of OSHA requires the head of each federal agency to establish and



maintain an effective and comprehensive occupational safety and health program consistent with standards promulgated by the Secretary of Labor pursuant to the Act. Pub. L. No. 91-596, 84 Stat. 1590, 1609, 29 U.S.C. § 668 (1994). See generally 51 Comp. Gen. 446 (1972). One of these standards addresses personal protective equipment:

“. . . Protective equipment, including personal protective equipment for eyes, face, head, and extremities, protective clothing, respiratory devices, and protective shields and barriers, shall be provided, used, and maintained in a sanitary and reliable condition wherever it is necessary by reason of hazards of processes or environment, chemical hazards, radiological hazards, or mechanical irritants encountered in a manner capable of causing injury or impairment in the function of any part of the body through absorption, inhalation or physical contact.”

29 C.F.R. § 1910.132(a) (2001). The standard requires the employer (here, ERDC) to assess the workplace to determine if hazards are present, and, as necessary, to make available appropriate protective equipment to affected employees. Id. § 1910.132(d). While this standard does not directly address the hazards of cold weather or establish specific standards for protection against the elements, we have held that weather-related protective clothing, such as swamp boots to work in a jungle environment or ski boots for Forest Service snow rangers, may be furnished by the government if the agency head determines the clothing to be necessary under OSHA and its implementing regulations and standards. 51 Comp. Gen. at 448; B-187507, Dec. 23, 1976. Similarly, we would not object to an agency’s use of appropriated funds to furnish insulated coveralls so long as the agency determines the coveralls to be necessary under OSHA. In the instant case, however, ERDC Counsel advises our Office that the agency has not determined that insulated coveralls are necessary to comply with OSHA or its implementing regulations. May 15 Letter. Section 19, therefore, does not provide authority for ERDC to use appropriated funds to purchase the insulated coveralls.

CONCLUSION

ERDC appropriations are not available to purchase the insulated coveralls. Absent statutory authority, appropriated funds are not available to purchase articles of clothing for federal employees. Here are three statutes that permit agencies to use appropriations, in varying circumstances, for this purpose. None of the three statutes authorize ERDC to purchase insulated coveralls in the circumstances presented herein.

Anthony H. GamboaGeneral Counsel





Entertainment



Red Book Reference

Vol. I, Principles of Appropriations Law>Availability of Appropriations: Purpose>Specific Purpose Authorities and Limitations>Entertainment>Food

Short TitleEntertaining federal employees and others using appropriated funds.

Principle of LawEntertaining federal employees or non-federal personnel can rarely be justified and is prohibited without specific Congressional approval.

Exceptions(1) Certain boards and commissions with specific authority; authorized donated funds; where other statutory authority exists; (2) meals at non-government meetings; (3) meals at formal, typically external government sponsored meetings with broad topic interest attended by government and non-government attendees; (4) Government Employee Training Act sessions; (4) Government Employee Incentive Awards Act ceremonies; (5) Cultural Awareness ceremonies; (6) Light refreshments for government travelers at government meetings; (7) food at government meetings where the food charge is included in a non-separable facility charge and the charge is lower than any other available suitable facility.

Pages RB 4-82..102

The Rule

5. Entertainment— Recreation—Morale and Welfare

a. Introduction The concept to be explored in this section is the rule that appropriated funds may not be used for entertainment except when specifically authorized by statute and also authorized or approved by proper administrative officers, E.g., 43 Comp. Gen. 305 (1963). The basis for the rule is that entertainment is essentially a personal expense even where it occurs in some business-related context.

Except where specifically appropriated for, entertainment cannot normally be said to be necessary to carry out the purposes of an appropriation. The reader will readily note the sharp distinction between government practice and corporate practice in this regard. “Entertainment” as a business-related expense is an established practice in the corporate sector. No one questions that it can be equally business-related for a government agency, The difference—and the policy underlying the rule for the government—is summarized in the following passage from B-223678, June 5, 1989:

“The theory is not so much that these items can never be business-related, because sometimes they clearly are. Rather, what the decisions are really saying is that, because public confidence in the integrity of those who spend the taxpayer’s money is essential, certain items which may appear frivolous or wasteful—however legitimate they may in fact be in a specific context— should, if they are to be charged to public funds, be authorized specifically by the Congress.”



Three situations in which the rule does not apply.

Government Corps.

Donated funds

Certain commissions, boards and authorities.

What is entertainment?

(1) Application of the rule: As a general proposition, the rule applies to all federal departments and agencies operating with appropriated funds. For example, it has been held applicable to the Alaska Railroad, B-124195 O. M., August 8, 1977. The question in B-170938, October 30, 1972, was whether the entertainment prohibition applied to the revolving fund of the National Credit Union Administration. The fund is derived from fees collected from federal credit unions and not direct appropriations from the Treasury. Nevertheless, the authority to retain and use the collections constitutes a continuing appropriation since, but for that authority, the fees would have to be deposited in the Treasury and Congress would have to make annual appropriations for the agency’s expenses. Therefore, the revolving fund could not be used for entertainment.

There are three situations in which the rule has not been applied. The first is certain government corporations. For example, the Corporation for Public Broadcasting, since it was established as a private nonprofit corporation and is not an agency or establishment of the U.S. government (notwithstanding that it receives appropriations), could use its funds to hold a reception in the Cannon House Office Building. B-131935, July 16, 1975.

The rule has also been held not to apply to government corporations that are classed as government agencies but which have statutory authority to determine the character and necessity of their expenditures. B-127949, May 18, 1956 (Saint Lawrence Seaway Development Corporation); B-35062, July 28, 1943. There are limits, however. See, e.g., B-45702, Nov. 22, 1944, disallowing the cost of a “luncheon meeting” of government employees.

The second exception is donated funds where the recipient agency has statutory authority to accept and retain the gift. The availability of donated funds for entertainment is discussed further, with case citations, in Chapter 6.

The third exception, infrequently applied, is for certain commissions with statutory authority to procure supplies, services, or property, and to make contracts, without regard to the laws and procedures applicable to federal agencies, and to exercise those powers that are necessary to enable the commission to carry out the purposes for which it was established efficiently and in the public interest. B-138969, April 16, 1959 (Lincoln Sesquicentennial Commission); B-138925, April 15, 1959 (Civil War Centennial Commission); B-1 29102, October 2, 1956 (Woodrow Wilson Foundation).

(2) What is entertainment? The Comptroller General has not attempted a precise definition of the term “entertainment.” In one decision, GAO noted that one court had defined the term as “a source or means of amusement, a diverting performance, especially a public performance, as a concert, drama, or the like. ”

Another court said that entertainment “denotes that which serves for amusement and amusement is defined as a pleasurable occupation of the senses, or that which furnishes it, as dancing, sports, or music. ” 58 Comp. Gen. 202, 205 (1979) (Overruled on other grounds by 60 Comp. Gen. 303 (1981).



The definition:

An umbrella term

Biggest problem is food

‘appropriated funds are not available…’

Includes refreshments and snacks; also coffee cups and makers

For purposes of this discussion, the term “entertainment,” as used in decisions of the Comptroller General and Comptroller of the Treasury, is an “umbrella” term which includes: food and drink, either as formal meals or as snacks or refreshments; receptions, banquets, and the like; music, live or recorded; live artistic performances; and recreational facilities. Our treatment includes one other category that, even though not “entertainment” as such, is closely related to the entertainment cases: facilities for the welfare or morale of employees.

Earlier decisions from time to time had occasion to address the components of entertainment. Can it include liquor? Responding to an inquiry from the Navy, a Comptroller of the Treasury, obviously not a teetotaler, said: “Entertainments . . without wines, liquors or cigars, would be like the play of Hamlet with the melancholy Dane entirely left out of the lines. ” 14 Comp. Dec. 344,346 (1907.

In a 1941 decision (B-20085, September 10, 1941), the Coordinator of Inter-American Affairs asked whether authorized entertainment could include such items as cocktail parties, banquets and dinners, theater attendance, and sightseeing parties. The Comptroller General, recognizing that an appropriation for entertainment conferred considerable discretion, replied, in effect, “all of the above.”

That’s entertainment.

b. Food for Government Employees: It may be stated as a general rule that appropriated funds are not available to pay subsistence or to provide free food to government employees at their official duty stations (“at headquarters”). In addition to the obvious reason that food is a personal expense and government salaries are presumed adequate to enable employees to eat regularly, furnishing free food might violate 5 U.S.C.. S 5536, which prohibits an employee from receiving compensation in addition to the pay and allowances fixed by law. See, e.g., 68 Comp.Gen. 46,48 (1988); 42 Comp. Gen. 149, 151 (1962); B-140912, November 24, 1959.

The “free food” rule applies to snacks and refreshments as well as meals, For example, in 47 Comp. Gen. 657 (1968), the Comptroller General held that Internal Revenue Service appropriations were not available to serve coffee to either employees or private individuals at meetings. Similarly prohibited was the purchase of coffeemakers and cups. Although serving coffee or refreshments at meetings may be desirable, it is not a “necessary expense” in the context of appropriations availability. See also B-159633, May 20, 1974.

The question of food for government employees arises in many contexts and there are certain well-defined exceptions. For example, the government may pay for the meals of civilian and military personnel in travel status because there is specific statutory authority to do so. The rule and exception are illustrated by 65 Comp. Gen. 16 (1985), in which the question was whether the National Oceanic and Atmospheric Administration could provide in-flight meals, at government expense, to persons on extended flights on government aircraft engaged in weather research, The answer was yes for government personnel in travel status, no for anyone else, including government employees not in official travel status.



Where there is a statute, GAO defers.

Specific non-statutory provisions:

Unusual working conditions: Not normally. But…

Exception: Extreme emergency; danger to human life; protecting government property

Danger to human life

While feeding employees may not be regarded as a “necessary expense” as a general proposition, it may qualify when the agency is carrying out some particular statutory function where the necessary relationship can be established. Thus, in B-201186, March 4, 1982, it was a permissible implementation of a statutory accident prevention program for the Marine Corps to setup rest stations on highways leading to a Marine base to serve coffee and doughnuts to Marines returning from certain holiday weekends.

* * * * * * *(1) Working at official duty station under unusual conditions The well-settled rule is that the government may not furnish free food (the decisions sometimes get technical and use terms like “per diem” or “subsistence”) to employees at their official duty station, even when they are working under unusual circumstances. An early illustration is 16 Comp. Gen. 158 (1936), in which the expense of meals was denied to an Internal Revenue investigator who was required to maintain a 24-hour surveillance. The reason payment was denied is that the investigator would presumably have eaten (and incurred the expense of) three meals a day even if he had not been required to work the 24-hour shift. Payment was also denied in 42 Comp. Gen. 149 (1962), where a postal official had bought carry-out restaurant food for postal employees conducting an internal election who were required to remain on duty beyond regular working hours.

* * * * * * *An exception was permitted in 53 Comp. Gen. 71 (1973). In that case, the unauthorized occupation of a building in which the Bureau of Indian Affairs was located necessitated the assembling of a cadre of General Services Administration special police, who unexpectedly spent the whole night there in alert status until relieved the following morning. Agency officials purchased and brought in sandwiches and coffee for the cadre. GAO concluded that it would not question the agency’s determination that the expenditure was incidental to the protection of government property during an extreme emergency involving danger to human life and the destruction of federal property, and approved reimbursement. The decision emphasized, however, that it was an exception and that the rule still stands.

A similar exception was permitted in B-189003, July 5, 1977, where agents of the Federal Bureau of Investigation (FBI) had been forced to remain at their duty stations within the office during a severe blizzard in Buffalo, New York. The area was in a state of emergency and was later declared a national disaster area. GAO agreed with the agency’s determination that the situation presented a danger to human life of Buffalo citizens and that it was imperative for FBI employees to maintain the essential functions of the office during the emergency.

The rationale of 53 Comp, Gen, 71 and B-189003 was applied in B-232487, January 26, 1989, for government employees required to work continually for a 24-hour period to evacuate and secure an area threatened by the derailment of a train carrying toxic liquids.



Imminent danger

Meetings

Nongovernment:

Registration fee; not itemized: Pay it.

The exception, however, is limited. The requirement to remain on duty for a 24-hour period, standing alone, is not enough. In B-185159, Dec. 10, 1975, for example, the cost of meals was denied to Treasury Department agents required to work over 24 hours investigating a bombing of federal offices. The Comptroller General pointed out that dangerous conditions alone are not enough. Under the exception established in 53 Comp. Gen. 71, it is necessary to find that the situation involves imminent danger to human life or the destruction of federal property. Also, in that case, the agents were only investigating a dangerous situation that had already occurred and there was no suggestion that any further bombings were imminent. A similar case is B-217261, Apr. 1, 1985, involving a Customs Service official required to remain in a motel room for several days on a surveillance assignment. See also 16 Comp. Gen. 158 (1936); B-202104, July 2, 1981.

* * * * * * *Naturally, statutory authority will overcome the prohibition. Thus, where the Veterans Administration had statutory authority to accept uncompensated services and to contract for related “necessary services, ” the VA could, upon an administrative determination of necessity, contract with local restaurants for meals to be furnished without charge to uncompensated volunteer workers at VA outpatient clinics when their scheduled assignment extended over a meal period. B-1 4,5430, May 9, 1961. There is also authority to make subsistence payments to law enforcement officials and members of their immediate families when threats to their lives force them to occupy temporary accommodations. 5 U.S.C. 5706a.

(2) Attendance at meetings and conferences. In section C.2 of this chapter, we discuss when appropriated funds may be used to finance the attendance of government employees at meetings and conferences. This section addresses when the government may pay for meals at meetings and conferences when attendance is authorized under the principles and statutes set forth in section C.2. As the reader will discover from the discussion that follows, there are many authorities available to planners of meetings and conferences for this purpose, and planners should become familiar with them. For day-to-day routine business meetings, our case law has consistently held that the Training Act does not provide authority to use appropriations to supply food items. As our case law demonstrates, agencies appear to struggle with this rule. In this regard, our case law is not static or inflexible. As recent history demonstrates, GAO is willing to reexamine its case law and to revise, to the extent permitted by law, rules that agency officials believe frustrate efficient, effective, and responsible government. B-288266, Jan. 27, 2003. Any revision, of course, must be founded on sound legal reasoning, and must include appropriate controls to prevent abuses and ensure public confidence in the integrity of those who spend the taxpayer’s money.

For meetings sponsored by nongovernment organizations, the attendee will commonly be charged a fee, usually but not necessarily called a registration fee. If a single fee is charged covering both attendance and meals and no separate charge is made for meals, the government may pay the full fee, assuming of course that funds are otherwise available for the cost of attendance. 38 Comp. Gen. 134 (1958); B-249351, May 11, 1993; B-233807, Aug. 27, 1990; B-66978, Aug. 25, 1947. The same is true for an evening social event where the cost is a mandatory nonseparable element of the registration fee. 66 Comp. Gen. 350 (1987).



Registration fee; itemized:

IncidentalImportantMandatory

Regular, day-to-day government meetings:

No food.

“generally”

If a separate charge is made for meals, the government may pay for the meals if there is a showing that (1) the meals are incidental to the meeting; (2) attendance of the employee at the meals is necessary to full participation in the business of the conference; and (3) the employee is not free to take the meals elsewhere without being absent from essential formal discussions, lectures, or speeches concerning the purpose of the conference. B-233807, Aug. 27, 1990; B-160579, Apr. 26, 1978; B-166560, Feb. 3, 1970. Absent such a showing, the government may not pay for the meals. B -154912, Aug. 26, 1964; B-152924, Dec. 18, 1963; B-95413, June 7, 1950; B-88258, Sept. 19, 1949. As an examination of the cited cases will reveal, these rules apply regardless of whether the conference takes place within the employee’s duty station area or someplace else.

Where the government is authorized to pay for meals under the above principles, the employee normally cannot be reimbursed for purchasing alternate meals. See B-193504, August 9, 1979; B-186820, February 23, 1978. Personal taste is irrelevant. Thus, an employee who, for example, loathes broccoli will either have to eat it anyway, pay for a substitute meal from his or her own pocket, or go without. For an employee on travel or temporary duty status, which is where this rule usually manifests itself, per diem is reduced by the value of the meals provided. E.g., 60 Comp, Gen. 181, 183-84 (1981). The rule will not apply, however, where the, employee is unable to eat the meal provided (and cannot arrange for an acceptable substitute) because of bona fide medical or religious reasons. B-231703, October 31, 1989 (per diem not required to be reduced where employee, an Orthodox Jew who could not obtain kosher meals at conference, purchased substitute meals elsewhere).

The above rules will not apply to day-to-day routine agency-sponsored meetings. GAO has described “day-to-day” business meetings as meetings that involve discussions of the internal procedures or operations of the agency. See 68 Comp. Gen. 604, 605 (1989). Meetings or conferences that are not routine involve topical matters of general interest that might appeal to governmental and nongovernmental participants. Id. Attendance at routine agency-sponsored meetings will generally be subject to the prohibition on furnishing free food to employees at their official duty stations. Thus the cost of meals could not be provided at a conference of field examiners of the National Credit Union Administration. B-180806, Aug. 21, 1974. Use of appropriated funds was prohibited for coffee breaks at a management seminar, B-159633, May 20, 1974; meals served during “working sessions” at Department of Labor business meetings, B-168774, Jan. 23, 1970; and meals at monthly luncheon meetings for officials of law enforcement agencies, B-198882, Mar. 25, 1981. Appropriated funds also could not be used for meals at quarterly managers meetings of the U.S. Army Corps of Engineers, 72 Comp. Gen. 178 (1993), and meals and refreshments served to government employees attending Federal Communication Commission radio spectrum auctions. B-260692, Jan. 2, 1996. See also 47 Comp. Gen. 657 (1968); B-45702, Nov. 22, 1944.



The Bolger case

Nonseparable charge; competitively priced with others without food

GSA rule on light refreshments:

OK for meetings involving travelers under FTR.

But, GSA does not have authority over food for non-travelers.

So, GAO overturns part of the GSA rule.

While 5 U.S.C. § 4110 does not apply to a routine business meeting, in B-281063, Dec. 1, 1999, the Nuclear Regulatory Commission (NRC) could pay an all-inclusive facility rental fee for a meeting to discuss internal matters, even though the fee resulted in food being served to NRC employees at their official duty stations. Because the fee would have remained the same for NRC whether or not it accepted and its employees ate the food, the harm that the general rule is meant to prevent (i.e., expenditure of federal funds on personal items) was not present.

In January 2000, the General Services Administration (GSA) published an amendment to the Federal Travel Regulations to address “conference planning.” 41 C.F.R. pts. 301-11 and 4301-74, 65 Fed. Reg. 1326 (Jan. 10, 2000). The amendment defined “conference” as “[a] meeting, retreat, seminar, symposium or event that involves attendee travel.” The amendment included a provision permitting agencies to pay for light refreshments for agency employees at conferences. 41 C.F.R. § 301-74.11. In agency guidance explaining the regulation, GSA advised agencies that they could use appropriated funds to pay for refreshments for nontravelers at some conferences. In particular, GSA advised that if the majority of the attendees were in travel status, the agency could fund refreshments for all attendees.

In a 2003 decision, GAO explained that GSA’s statutory basis for the light refreshment provision is 5 U.S.C. § 5702, which addresses the subsistence expenses of federal employees “when traveling on official business away from the employees designated post of duty”; therefore, while Congress has authorized GSA to prescribe regulations necessary for the administration of travel and subsistence expenses, GSA’s authority does not extend to employees who are not in travel status. B-288266, Jan. 27, 2003.

Accordingly, GAO held that the light refreshment provision of the travel regulation applies only to federal employees who are in travel status. Id.66 The decision also clarified that although section 4110 generally applies only to meetings sponsored by nongovernmental organizations, the Comptroller General extended section 4110 to a government-sponsored meeting, regardless of whether an employee is in travel status or not, as long as the meeting satisfies the same conditions as required for nongovernment sponsored meetings and the government-sponsored meeting is not an internal day-to-day business meeting.

In response to this decision, GSA agreed that its authority extended only to employees in travel status and in its guidance would refer agencies to GAO decisions holding that section 4110 of the Training Act authorizes agencies to provide light refreshments to nontravelers at a government-sponsored meeting as long as the meeting meets the requirements of section 4110 and is not a “day-to-day” or “routine” business meeting. Letter from Raymond J. McNamara, General Counsel, GSA, to Anthony H. Gamboa, General Counsel, GAO, undated, received by GAO June 9, 2003.



Special, formal government meetings:

Externally organized;Broad topics; government and nongovernment attendees:

IncidentalImportantMandatory

Some jumped on the lunch wagon; Triggered many clarifications.

In 1980, the President’s Committee on Employment of the Handicapped held its annual meeting in the Washington Hilton Hotel. The affair was to last for three days and included a luncheon and two banquets. There was no registration fee for the meeting but there were charges for the meals. GAO ’ S Equal Employment Opportunity Office planned to send three employees to the meeting and asked whether the agency could pick up the tab for the meals. The three employees were to make a presentation at the meeting and it seemed clear that attendance was authorized under 5 U.S.C. 94110. Also, if a registration fee were involved, the prior decisions noted above would presumably have answered the question. The Comptroller General reviewed the precedents such as B-160579, April 26, 1978, and B-166560, February 3, 1970, and took the logical step of applying them to the situation at hand. Thus, GAO could pay for the meals if administrative determinations were made that (1) the meals were incidental to the meeting, (2) attendance at the meals was necessary for full participation at the meeting, and (3) the employees would miss essential formal discussions, lectures, or speeches concerning the purpose of the meeting if they took their meals elsewhere. B-198471, May 1, 1980.

This decision, so it seems, became perceived as the loophole through which the lunch wagon could be driven. So apparently compelling is the quest for free food that it became necessary to issue several additional decisions to clarify B-198471 and to explain precisely what the rationale of that decision does and does not authorize.

In 64 Comp. Gen. 406 (1985), the Comptroller General held that the cost of meals could not be reimbursed for employees attending monthly meetings of the Federal Executive Association within their duty station area. The meetings were essentially luncheon meetings at which representatives of various government agencies could discuss matters of mutual interest. The decision stated: “What distinguishes [B-198471] is that the President’s annual meeting was a 3-day affair with meals clearly incidental to the overall meeting, while in [the cases in which reimbursement has been denied] the only meetings which “took place were the ones which took place during a luncheon meal . . .. In order to meet the three-part test [of B-198471], a meal must be part of a formal meeting or conference that includes not only functions such as speeches or business carried out during a seating at a meal but also includes substantial functions that take place separate from the meal. [W]e are unwilling to conclude that a meeting which lasts no longer than the meal during which it is conducted qualifies for reimbursement, ”

A similar case the following year, 65 Comp. Gen. 508 (1986) reiterated that the above-quoted test of 64 Comp. Gen. 406 must precede the application of the three- part test of B-198471, The three-part test, and hence the authority to reimburse, relates to a meal that is incident to a meeting, not a meeting that is incident to a meal. 65 Comp. Gen. at 510; 64 Comp. Gen. at 408.



In a nutshell:

Guaranteed minimums

Training

5 U.S.C. 4109

Two 1989 decisions, 68 Comp. Gen. 604 and 68 Comp, Gen, 606, defined the rules further, holding that 5U.S.C.4110 and B-198471 do not apply to purely internal business meetings or conferences sponsored by government agencies. Noting that this result is consistent with the legislative history of 5 US.C.4110 as summarized in prior decisions, both decisions stated:

“We think . . . that there is a clear distinction between the payment of meals incidental to (1) formal conferences or meetings, typically externally organized or sponsored, involving topical matters of general interest to governmental and nongovernmental participants, and (2) internal business or informational meetings primarily involving the day-to-day operations of government. With respect to the latter, 5 US.C.4110 has little bearing.” 68 Comp. Gen. At 605 and 608. (Emphasis added)

* * * * * * *Before we depart the topic, two cases involving a different twist. Payment for meals not eaten— deserve mention. In B-208729, May 24, 1983, the Army Missile Command sponsored a luncheon to commemorate Dr. Martin Luther King, Jr., open to both government employees and members of the local community. Attendees were to be charged a fee for the lunch. In order to secure the necessary services, the Army contracted with a caterer (in this case the local Officers Club), guaranteeing a minimum revenue based on the anticipated number of guests. Bad weather on the day of the luncheon resulted in reduced attendance. Under the circumstances, GAO approved payment of the guaranteed minimum as a program expense.

GAO similarly approved payment of a guaranteed minimum balance in B-230382, December 22, 1989, this time involving the Army’s “World-Wide Audio Visual Conference. ” As in B-208729, attendees were charged for the meal but attendance was less than expected. This case had two additional complications. First, the official who made the arrangements lacked the authority to do so. Payment could therefore be authorized only on a quantum merit basis for the lunch. Second, the arrangements also included a buffet, open bar, and several coffee breaks. Payment for these items could not be authorized, even under the quantum merit concept, since they would not have been authorized had proper procurement procedures been followed.

(2) Under the Government Employees Training Act (Training Act), an agency may pay, or reimburse an employee for, necessary expenses incident to an authorized training program. 5 U.S.C. § 4109. This applies whether the training is held through a nongovernment facility or by the federal government itself. 5 U.S.C. § 4105; B-258442, Apr. 19, 1995; B-244473, Jan. 13, 1992. The event, however, must comply with the Training Act’s definition of “training” in 5 U.S.C. § 4101(4). 72 Comp. Gen. 178 (1993). As with meetings, an agency may pay for the costs of meals and refreshments when they are included as an incidental and nonseparable portion of a training registration or attendance fee. 66 Comp. Gen. 350, 1987; B-288266, Jan. 27, 2003



Food is not automatic

It must really be training

Award Ceremonies

RefreshmentsMeals

If the cost of the food is not included in a registration or attendance fee, the Comptroller General has held that the government can provide meals or refreshments under this authority if the agency determines that providing meals or refreshments is necessary to achieve the objectives of the training program. 48 Comp. Gen. 185 (1968); 39 Comp. Gen. 119 (1959); B-247966, June 16, 1993; B244473, Jan. 13, 1992; B-193955, Sept. 14, 1979. The government may also furnish meals to nongovernment speakers as an expense of conducting the training. 48 Comp. Gen. 185.

* * * * * * *The fact that an agency characterizes its meeting as “training” is not controlling. In other words, for purposes of authorizing the government to feed participants, something does not become “training” simply because it is called “training.” In B-168774, September 2, 1970, headquarters employees of the (then) Department of Health, Education, and Welfare met with consultants in a nearby hotel at what the agency termed a “research training conference. ” However, the conference consisted of little more than “working sessions” and included no employee training as defined in the Government Employees Training Act. Therefore, the cost of meals could not be paid. See also 68 Comp. Gen. 606 (1989); B-208527, September 20, 1983; B-187150, October 14, 1976; B-140912, November 24, 1959. In 65 Comp. Gen. 143 (1985).

GAO held that a Social Security Administration employee who had been invited as a guest speaker at the opening day luncheon of a legitimate agency training conference in the vicinity of her duty station could be reimbursed for the cost of the meal. The decision unfortunately confuses 5U.S.C 4109 and 4110 by analyzing the case under section 4110 yet concluding that reimbursement is authorized “as a necessary training expense,” which is the standard under section 4109.

(3) General operating appropriations may be used to provide refreshments at award ceremonies under the Government Employees’ Incentive Awards Act, 5 U.S.C. §§ 4501–4506. 65 Comp. Gen. 738 (1986); B-271551, Mar. 4, 1997. This Act authorizes an agency to use its operating appropriations to cover the “necessary expense for the honorary recognition of” the employee or employees receiving the awards. 5 U.S.C. § 4503. The Act also directs the Office of Personnel Management to prescribe regulations and instructions to govern agency awards programs. 5 U.S.C. § 4506.

* * * * * * *The decision essentially followed B-167835, November 18, 1969, which had concluded that the Incentive Awards Act authorized the National Aeronautics and Space Administration to fund part of the cost of a banquet at which the President was to present the Medal of Freedom to the Apollo 11 astronauts. What made the fuller treatment in 65 Comp. Gen. 738 necessary was that a 1974 decision, B-114827, October 2, 1974, had found the cost of refreshments at an awards ceremony under the Incentive Awards Act payable only from specific entertainment appropriations. The 1986 case partially modified B-1 14827 to the extent it had held that an entertainment appropriation was the only available funding source.



Armed Forces have similar authority in 10 U.S.C. 1124

Cafeterias

Lunch room equipment

Finally, 65 Comp. Gen. 738 distinguished 43 Comp. Gen. 305 (1963), which had disallowed the cost of refreshments at an awards ceremony for persons who were not federal employees (and therefore not authorized under the Incentive Awards Act nor governed by the “necessary expense” language of that statute).

The Government Employees Incentive Awards Act does not apply to members of the armed forces. However, the uniformed services have similar authority, including the identical “necessary expense” language, in 10 U.S.C. S 1124. Therefore, 65 Comp. Gen. 738 applies equally to award ceremonies conducted under the authority of 10 U.S.C. 1124

(4) Cafeterias and lunch facilities. The government has no general responsibility to provide luncheon facilities for its employees. 10 Comp. Gen. 140 (1930). However, plans for the construction of a new government building may include provision for a lunchroom or cafeteria, in which event the appropriation for construction of the building will be available for the lunch facility. 9 Comp. Gen. 217 (1929).

An agency may subsidize the operation of an employees’ cafeteria if the expenditure is administratively determined to be necessary the efficiency of operations and a significant factor in the hiring and retaining of employees and in promoting employee morale. B-216943, March 21, 1985; B-169141, November 17, 1970; B-169141, March 23, 1970. See also B-204214, January 8, 1982 (temporarily providing paper napkins in new government cafeteria) and GAO report entitled Benefits GSA Provides by Operating Cafeterias in Washington, D. C., Federal Buildings, LCD-78-316 (May 5, 1978).

The purchase of equipment for use in other than an established cafeteria may also be authorized in certain circumstances. In B-173149, August 10, 1971, GAO approved the purchase of a set of stainless steel cooking utensils for use by air traffic controllers to prepare food at a flight service station. There were no other readily accessible eating facilities and the employees were required to remain at their post of duty for a full 8-hour shift. Similar cases are: l B-180272, July 23, 1974: purchase of a sink and refrigerator to provide lunch facilities for the Occupational Safety and Health Review Commission where there was no government cafeteria on the premises. l B-210433, April 15, 1983: purchase of microwave oven by Navy facility to replace non-working stove. Facility was in operation 7 days a week, some employees had to remain at their duty stations for 24-hour shifts, and there were no readily accessible eating facilities in the area during nights and weekends.

* * * * * * *

c. Entertainment for Government Employees Other Than Food.

Miscellaneous Cases. (There have been relatively few cases in this area, probably because there are few situations in which entertainment for government employees could conceivably be authorized.

An early decision held that 10 U.S.C. § 4302, which authorizes training for Army enlisted personnel “to increase their military efficiency and to enable them to return to civilian life better equipped for industrial, commercial, and business occupations,” did not include sending faculty members and students of the Army Music School to grand opera and symphony concerts. 4 Comp. Gen. 169 (1924). Another decision found it improper to hire a boat and crew to send federal employees stationed in the Middle East on a recreational trip to the Red Sea. B-126374, Feb. 14, 1956.



Cultural Awareness events

Music, dance, OK. Not food.

A 1970 decision deserves brief mention although its application will be extremely limited. Legislation in 1966 established the Wolf Trap Farm Park in Fairfax County, Virginia, as a park for the performing arts and directed the Interior Department to operate and maintain it. A certifying officer of the National Park Service asked whether he could certify a voucher for symphony, ballet, and theater tickets for Wolf Traps Artistic Director. The Comptroller General held that such payments could be made if an appropriate Park Service official determined that attendance was necessary for the performance of the Artistic Directors official duties. The Justification was that the Artistic Director attended these functions not as personal entertainment but so that he could review the performances to determine which cultural and theatrical events were appropriate for booking at Wolf Trap. B-168149, Feb. 3, 1970. As noted, this case would seem to have little precedent value except for the Artistic Director at Wolf Trap.

(2) Cultural awareness programs. One area that has generated several decisions, and a change in GAO’S position, has been equal employment opportunity special emphasis or cultural awareness programs. There are many areas in which the law undergoes refinement from time to time but remains essentially unchanged. There are other areas in which the law has changed to reflect changes in American society. This is one of those latter areas. The issue first arose in 58 Comp. Gen. 202 (1979). In that case, the Bureau of Mines, Interior Department, in conjunction with the Equal Employment Opportunity Commission, sponsored a program of live entertainment for National Hispanic Heritage Week. The program consisted of such items as a lecture and demonstration of South American folk music, a concert, a slide presentation, and an exhibit of Hispanic art and ceramics. The decision concluded that, while the Bureau’s Spanish-Speaking Program was a legitimate component of the agency’s overall EEO program, appropriated funds could not be used to procure entertainment. This holding was followed in two more cases, B-194433, July 18, 1979, and B-199387, August 22, 1980.

In 1981, however, GAO reconsidered its position. The Internal Revenue Service asked whether it could certify a voucher covering payments for a performance by an African dance troupe and lunches for guest speakers at a ceremony observing National Black History Month. The Comptroller General held the expenditure proper in 60 Comp. Gen. 303 (1981). The decision stated: “[W]e now take the view that we will consider a live artistic performance as an authorized part of an agency’s EEO effort if, as in this case, it is part of a formal program determined by the agency to be intended to advance EEO objectives, and consists of a number of different types of presentations designed to promote EEO training objectives of making the audience aware of the culture or ethnic history being celebrated.” Id. at 306. — Further, the lunches for the guest speakers could be paid under 5 U.S.C. 65703 if they were in fact away from their homes or regular places of business. The prior inconsistent decisions—58 Comp. Gen. 202, B-194433, and B-199387—were overruled.



But, they reconsidered

Now, small food samples are OK

Entertainment of nonfederal personnel

It should be emphasized that the prior decisions were overruled only to the extent inconsistent with the new holding. Two specific elements of 58 Comp. Gen. 202 were not involved in the 1981 decision and remain valid. First, use of appropriated funds to serve meals or refreshments remains improper except under specific statutory authority. 58 Comp. Gen. at 206.4fi Second, 58 Comp. Gen. 202 found the purchase of commercial insurance on art objects improper. Id. at 207. This portion also remains valid. — The decision at 60 Comp. Gen. 303 was expanded in B-199387, March 23, 1982, to include small “samples” of ethnic foods prepared and served during a formal ethnic awareness program as part of the agency’s equal employment opportunity program. In the particular program being considered, the attendees were to pay for their own lunches, with the ethnic food samples of minimal proportion provided as a separate event. Thus, the samples could be distinguished from meals, which remain prohibited.

d. Entertainment of Non-Government Personnel. Just as the entertainment of government personnel is generally unauthorized, the entertainment of non-government personnel is equally impermissible. The basic rule is the same regardless of who is being fed or entertained: Appropriated funds are not available for entertainment, including free food, except under specific statutory authority,

Two of the most frequently cited decisions for this proposition are 5 Comp. Gen. 455 (1925) and 26 Comp. Gen. 281 (1946). In 5 Comp. Gen, 455, expenditures by two Army officers for entertaining officials of foreign governments while making arrangements for an around-the-world flight were disallowed. In 26 Comp. Gen. 281, appropriations were held unavailable for dinners and luncheons for “distinguished guests” given by a commissioner of the Philippine War Damage Commission. Other early decisions on point are: 5 Comp. Gen. 1018 (1926); B-85555, June 6, 1949; and A-10221, October 8, 1925. A limited exception was recognized in B-22307, December 23, 1941, to permit entertainment of officials of foreign governments incident to the gathering of intelligence for national security.

As with the cases dealing with government employees, a large proportion of the decisions tend to involve food. In 43 Comp, Gen. 305 (1963), funds were not available to furnish food or refreshments at “recognition ceremonies” for volunteers at. Veterans Administration field stations. The ceremonies had been designed as an inducement to the volunteers to continue rendering service. Naturally, the situation would be permissible under specific statutory authority. B-152331, November 19, 1975. Other examples are 26 Comp. Gen. 281, cited above, and B-138081, January 13, 1959, disallowing the cost of a breakfast meeting with Canadian officials called at the initiative of the Chairman of the Securities and Exchange Commission,


Tab2-E

At Tab 2-J, students will find extracts of several of the documents that have an important bearing on the outcome of this case and the current legal authorities to serve food to employees at meetings at or near the headquarters.

Any analysis of this case will not be complete without a careful review of those documents. They include (1) the NRC/Bolger decision; (2) the GSA Rule on Light Refreshments and GAO’s subsequent decision reversing portions of the GSA rule; and (3) the GAO decision involving the National Institutes of Health’s use of appropriated funds to pay for food at a formal government meeting.


Extracted portions of the

Federal Acquisition Regulation

Ratification of Unauthorized Purchases



FAR 1.602-3 Ratification of unauthorized Commitments.

(a) Definitions.

"Ratification," as used in this subsection, means the act of approving an unauthorized commitment by an official who has the authority to do so.

"Unauthorized commitment," as used in this subsection, means an agreement that is not binding solely because the Government representative who made it lacked the authority to enter into that agreement on behalf of the Government.

(b) Policy.

(1) Agencies should take positive action to preclude, to the maximum extent possible, the need for ratification actions. Although procedures are provided in this section for use in those cases where the ratification of an unauthorized commitment is necessary, these procedures may not be used in a manner that encourages such commitments being made by Government personnel.

(2) Subject to the limitations in paragraph (c) of this subsection, the head of the contracting activity, unless a higher level official is designated by the agency, may ratify an unauthorized commitment.

(3) The ratification authority in paragraph (b)(2) of this subsection may be delegated in accordance with agency procedures, but in no case shall the authority be delegated below the level of chief of the contracting office. (4) Agencies should process unauthorized commitments using the ratification authority of this subsection instead of referring such actions to the GAO for resolution. (See 1.602-3(d).)

(5) Unauthorized commitments that would involve claims subject to resolution under the Contract Disputes Act of 1978 should be processed in accordance with Subpart 33.2, Disputes and Appeals.

(c) Limitations. The authority in paragraph (b)(2) of this subsection may be exercised only when-

(1) Supplies or services have been provided to and accepted by the Government, or the Government otherwise has obtained or will obtain a benefit resulting from performance of the unauthorized commitment;

(2) The ratifying official has the authority to enter into a contractual commitment;



(3) The resulting contract would otherwise have been proper if made by an appropriate contracting officer;

(4) The contracting officer reviewing the unauthorized commitment determines the price to be fair and reasonable;

(5) The contracting officer recommends payment and legal counsel concurs in the recommendation, unless agency procedures expressly do not require such concurrence;

(6) Funds are available and were available at the time the unauthorized commitment was made; and

(7) The ratification is in accordance with any other limitations prescribed under agency procedures.

(d) Nonratifiable commitments. Cases that are not ratifiable under this subsection may be subject to resolution as recommended by the Government Accountability Office under its claim procedure (GAO Policy and Procedures Manual for Guidance of Federal Agencies, Title 4, Chapter 2), or as authorized by FAR Part 50. Legal advice should be obtained in these cases.





Miscellaneous Receipts



Red Book Reference Vol 1 & 2, Principles of Appropriations Law>Availability of Appropriations: Amount

Short Title Miscellaneous Receipts

Principle of Law

Money received from any source other than through congressional appropriations must be deposited in the Miscellaneous Receipts Account of the Treasury.

Exceptions As provided by specific statutory authority

Pages RB 1-12; 4-279..280;6-105;

The definition

An example: The Air Force can either charge a fee or provide the childcare free of charge.

But, if they charge a fee, the money goes to Treasury

The “miscellaneous receipts” statute:

A very important statute in the overall scheme of government operations is 31 U.S.C. 3302(b), known as the “miscellaneous receipts” statute. Originally enacted in 1849 (9 Stat. 398), 31 U.S.C. 3302(b) provides:

“Except as provided in section 3718(b) of this title, an official or agent of the Government receiving money for the Government from any source shall deposit themoney in the Treasury as soon as practicable without deduction for any charge orclaim.”

Penalties for violating 31 U.S.C. 3302(b) are found in 31 U.S.C. 3302(d), and include the possibility of removal from office. In addition, if funds which should have been deposited in the Treasury but were not are lost or stolen, there is the risk of personal liability.

* * * * * *

For example, with respect to child care centers on an Air Force Base:

The Air Force can, either with or without charge, allot space in government buildings under its control for childcare facilities for civilian employees, and can provide the services outlined in the statute.

The Air Force can use its appropriations to renovate, modify, or expand the space allotted to make it suitable for use as a child care facility,

The Air Force can expand existing childcare facilities for military personnel to accommodate the children of civilian employees. The decision also concluded that any reimbursements received from a childcare center (which, as noted, are optional under 40 U.S.C. 5490b) must be deposited in the Treasury as miscellaneous receipts.

In 70 Comp. Gen. (B-239708, January 31, 1991), GAO concluded that 40 U.S.C. 5490b does not preclude the General Services Administration from leasing space or constructing buildings for child care facilities if there is insufficient space available in existing federal buildings. The authority in section 490b to use existing space is not exclusive. (The 1988 decision to the Air Force, 67 Comp. Gen. 443 had expressed a contrary view and was overruled to that extent.)

In late 1989, Congress enacted new childcare legislation for the armed forces, including the authority to use fees collected from parents. Military Child Care Act of 1989, title XV of the National Defense Authorization Act for Fiscal Years 1990 and 1991, Pub. L. No, 101-189, 103 Stat. 1352, 1589 (1989).

* * * * * * *



Exceptions

Receipts of money not “for the government”

In addition to 31 U.S.C. 3302(b), several other statutes require that moneys received in various specific contexts be deposited as miscellaneous receipts.

Examples are:

7 U.S.C. 2241,2242,2246,2247 (proceeds from sale of various products by Secretary of Agriculture)

10 U.S.C. 2667 (moneys received by the military departments from authorized leases)

16 U.S.C. 499 (revenue from the national forest such as timber sales, subject to the deductions specified in 16 U.S.C. 500 and 501) 19 U.S.C. 527 (customs frees, penalties, and forfeitures)

40 U.S.C. 485(a) (proceeds from sale of surplus public property, except as provided in other subsections of section 485

* * * * *“It is difficult to see,” said an early decision, “how a legislative prohibition could be more clearly expressed.” 10 Comp. Gen. 382, 384 (1931). Simply stated, any money an agency receives from a source outside of the agency must be deposited into the Treasury. This means deposited into the general fund (“miscellaneous receipts”) of the Treasury, not into the agency’s own appropriations, even though the agency’s appropriations may be technically still ‘in the Treasury” until the agency actually spends them.

* * * * *Exceptions to the “miscellaneous receipts” requirement fall into two broad categories, statutory and nonstatutory:

1. An agency may retain moneys it receives if it has statutory authority to do so. In other words, 31 U.S.C. 3302(b) will not apply if there is specific statutory authority for the agency to retain the funds.

2. Receipts that qualify as “repayments” to an appropriation maybe retained to the credit of that appropriation and are not required to be deposited into the General Fund. 6 Comp. Gen. 337 (1926); 5 Comp. Gen. 734,736 (1926); B-138942-O. M., August 26, 1976.

* * * * * *Money not received “for the Government”

As originally enacted, 31 U.S.C. 3302(b) required deposit in the Treasury of moneys received “for the use of the United States” (9 Stat. 398). The 1982 recodification of Title 31 changed this language to moneys received “for the Government.” The meaning, of course, is the same. Although the Comptroller General has not attempted to define this phrase in any detail, its scope, consistent with the statutory purpose, is broad. There is no distinction between money received for the use of the United States and money received for the use of a particular agency; such a distinction would largely nullify the statute.

As will be seen from the following case summaries, situations in which the “for the use of the United States” clause was the primary basis for the decision do not fall into any particular pattern.

In B-205901, May 19, 1982, a railroad had furnished 15,000 gallons of fuel to the



Federal Bureau of Investigation for use in an undercover investigation of thefts of diesel fuel from the railroad. The railroad and FBI agreed that the fuel or the proceeds from its sale would be returned upon completion of the investigation. In view of 31 U.S.C. 3302(b), the FBI then asked whether money generated from the sale of the fuel had to be deposited in the Treasury as miscellaneous Receipts.

In one sense, it could be argued that the money was received “for the use of the United States,” in that the FBI planned to use it as evidence. However, the Comptroller General pointed out, this is not the kind of receipt contemplated by 31 US.C. 3302(b). Citing 33 Op. Att’y Gen. 316,321 (1922), the decision concluded that “[f]unds are received for the use of the United States only if they are to be used to bear the expenses of the Government or to pay the obligations of the United States.” Therefore, there was no legal barrier to returning the funds to the railroad.





Antideficiency Act



Red Book Reference Vol 2, Principles of Appropriations Law>Availability of Appropriations: Amount>

Short Title Improper use of Appropriated fundsPrinciple of Law Appropriated funds are available only for their intended purposes.

Exceptions As authorized by statute.

Pages RB pages 6-42..45In Chapter 4, we covered in some detail 31 U.S.C. 1301(a), which prohibits the use of appropriations for purposes other than those for which they were appropriated. As seen in that chapter, violations of purpose availability can arise in a wide variety of contexts-charging an obligation or expenditure to the wrong appropriation, making an obligation or expenditure for an unauthorized purpose, violating a statutory prohibition or restriction, etc. The question we explore in this section is the relationship of purpose availability to the Antideficiency Act. In other words, when and to what extent does a purpose violation also violate the Antideficiency Act?

Why does it matter whether you have violated one statute or two statutes? To our knowledge, nobody is keeping score. The reason here is that, if the second statute is the Antideficiency Act, there are reporting requirements and potential penalties to consider.

A useful starting point is the following excerpt from 63 Comp, Gen. 422,424 (1984):“Not every violation of 31 U.S.C. 1301(a) also constitutes a violation of the Antideficiency Act.

Even though an expenditure may have been charged to an improper source, the Antideficiency Act’s prohibition against incurring obligations in excess or in advance of available appropriations is not also violated unless no other funds were available for that expenditure. Where, however, no other funds were authorized to be used for the purpose in question (or where those authorized were already obligated), both 31 U.S.C. 1301(a) and 1341(a) have been violated. In addition, we would consider an Antideficiency Act violation to have occurred where an expenditure was improperly charged and the appropriate fund source, although available at the time, was subsequently obligated, making readjustment of accounts impossible.”



Selected Decisions of the

Comptroller General

And Other References



Description Page

B-281063, Nuclear Regulatory Commission (NRC) – Payment of a Non-Negotiable, Non-Separable Facility Rental Fee that Covered the Cost of Food Served at NRC Workshops, December 1, 1999

127

Federal Register: January 10, 2000 (Volume 65, Number 6), GSA Rules on light refreshments at conferences and meeting 130

41 CFR 301-74.11. Code of Federal Regulations on light refreshments at conferences and meetings 131

B-288266, Light Refreshments at Conferences and Meetings, January 26, 2003 132

B-300826, NIH—Food at Government-Sponsored Conferences, March 3, 2005 138

FY2007 Defense Authorization Act, June 22, 2006 145

B-308968, No Cost Contracts for Events Planning Services, November 27, 2007 148

OMB Memo M-12-12, Promoting Efficient Spending to Support Agency Operations, dated May 11, 2012 154.1

Deputy Secretary of Defense Memo, Implementation of Conference Oversight Requirements and Delegation of Conference Approval Authority, dated September 29, 2012

154.7

General Services Administration, Office of Inspector General, Management Deficiency Report, subject: 2010 Western Regions Conference, dated April 2, 2012

154.25


Becky, this interim change adds about 40 pages to Tab 2J in the Participant Guide. I am using a temporary numbering system. It requires adding a page number to the bottom of the inserted pages to agree with the above. If you choose to do otherwise, that would mean renumbering all subsequent pages and the internal page references --- something I didn’t want to do with this small update primarily because I am redoing Case Studies 1, 2, & 3 this fall. Randy

Add



DecisionMatter of: Nuclear Regulatory Commission (NRC) – Payment of a Non-Negotiable, Non-Separable

Facility Rental Fee that Covered the Cost of Food Served at NRC Workshops

File: B-281063

Date: December 1, 1999

DIGEST

Notwithstanding the general prohibition against serving food to employees within their official duty station, agency may pay under limited circumstances a facility rental fee that includes the cost of food provided to agency employees at an agency workshop. The payment was not improper because the fee was all-inclusive, not negotiable, and competitively priced to those that did not include food.

DECISION

The Director of the Division of Accounting and Finance, Office of the Chief Financial Officer, United States Nuclear Regulatory Commission (NRC) requests our opinion on whether it was proper for NRC to pay a non-negotiable, non-separable facility rental fee for five NRC workshops when the fee covered the cost of meals and refreshments served at the workshops. Under the circumstances described below, we conclude that the payment was not improper.

Background

The NRC sponsored five workshops for its employees between July and October 1997. The workshops were held at the William F. Bolger Center for Leadership Development (Bolger) in Potomac, Maryland. The workshops were attended by NRC employees exclusively and focused on internal NRC matters. The employees were not in official travel status.

Regarding the first three workshops held in July, an NRC employee was tasked with obtaining on very short notice (within two weeks) an off-site conference facility convenient to headquarters at a cost less than $2,500 to accommodate 20 to 25 individuals to pursue NRC strategic planning initiatives. Due to the short timeframe, the employee only made inquiries to Bolger, which had been used by NRC in prior years, and one other facility. After receiving Bolger's proposal to charge a daily flat fee of 45.00 per person, 1 The employee determined that it was comparable to, if not less expensive than, the other facility and procured its use through his NRC BankCard (Visa). Bolger's flat fee included the use of a conference room and a breakout room, breaks (refreshments), lunch, equipment, and appropriate supplies. 2 With the success of the first three workshops at Bolger, two more workshops were scheduled at Bolger for August 15 and October 21, 1997 and procured in a similar manner.



One NRC certifying officer certified the payments to VISA for the first three workshops and another NRC certifying officer certified the last two.

Some NRC officials questioned whether these payments were proper to the extent of the cost of the food provided, and whether the workshop attendees or the certifying officers should reimburse NRC for the questioned costs. Although Bolger's flat rate was non-negotiable and non-separable, Bolger responded to NRC’s request to identify the portion of the daily fee attributable to meals and refreshments. Bolger stated that of the $45.00 flat rate, $13.00 represents amounts attributable to meals and refreshments. NRC identified 73 different employees attending one or more of the workshops, resulting in a total of 89 instances in which employees received meals and refreshments. NRC estimates the questioned costs to be $1,157. NRC then requested our opinion on whether the payments were improper. 3

Analysis

As a general rule, the government may not furnish meals or refreshments to employees within their official duty station. 65 Comp. Gen. 508, 509 (1986). This principle comes from the proposition that expenses for food and refreshments are considered personal expenses that government employees are expected to bear from their own salaries. Id. Two provisions of the Government Employees Training Act (Training Act) are often cited as authority for government agencies to provide meals or refreshments to employees within their official duty station. The first, 5 U.S.C. § 4109, authorizes agencies to reimburse the necessary expenses incurred by those who attend training programs at their duty stations. Agency funds may be used to provide meals under section 4109 if necessary to achieve the training program’s objectives, 50 Comp. Gen. 610 (1971); 48 Comp. Gen. 185 (1968); B-247966, June 16, 1993. Agency funds also may be used to pay for an employee’s meals incident to training provided by other than the government if the employee’s attendance at the meals is necessary to obtain the full benefit of the training, B-193955, Sept. 14, 1979. In this case, NRC acknowledges that the five workshops do not comply with the definition of “training” in the Training Act, 5 U.S.C. § 4101(4).

The second, 5 U.S.C. § 4110, allows an agency to pay for the expenses for attendance at certain meetings or conferences, but does not apply to purely internal business meetings or conferences sponsored by government agencies involving day-to-day agency operations and concerns. 72 Comp. Gen. 178 (1993); 68 Comp. Gen. 606 (1989); 68 Comp. Gen. 604 (1989). “The legislative history of [5 U.S.C. §4110] shows that it was intended to dispense with the specific appropriation authorizations required by [5 U.S.C. § 5946] for the payment of expenses of Federal officers and employees in attending meetings of members of any society or association”. 68 Comp. Gen. at 608; 68 Comp. Gen. at 605-606. Consequently, there is a clear distinction between paying for meals incidental to formal conferences or meetings, typically externally organized or sponsored, involving topical matters of general interest to governmental and nongovernmental participants, and internal business or informational meetings primarily involving day-to-day agency operations of government. 72 Comp. Gen. at 180.

The general prohibition against using appropriations for food for employees within their official duty station is meant to prevent the expenditure of government funds on items that are purely personal in nature. Here, the harm that the general prohibition is meant to prevent, i.e., expenditure of federal funds on personal items, is not present. NRC determined the Bolger facility met its needs and there is nothing indicating that Bolger’s fee structure providing for food influenced NRC’s determination. The facility fee itself was a reasonable and necessary expense for which NRC funds were available. The facility fee would have remained the same to the government whether or not NRC accepted and the employees ate the food. Because the meals were furnished at no additional cost to the government, there was no divergence of funds for meals. No purpose would be served by applying the general prohibition against using appropriations for food for employees within their official duty station in a way that requires NRC to either (1) reject the Bolger proposal, (2) reject the food at no savings to the government, or (3) have employees “reimburse” the government even though it incurred no additional cost for the food provided. Accordingly, under the circumstances, we conclude that NRC may pay the all-inclusive facility rental fee even though the fee resulted in food being served to NRC employees at their official duty stations.



Comptroller GeneralOf the United States

________________________________________________________________

1 Bolger inadvertently charged NRC $28.00 per person, a rate reserved for U.S. Postal Service conferences, for the first workshop.

2 Prior to 1997, Bolger's daily flat fee did not include meals or refreshments. Workshop participants paid for these costs.

3 Because of our conclusion that the payments were not improper, we do not address NRC’s questions about obtaining reimbursement for past improper payments, relief for two certifying officers under 31 U.S.C. § 3528, and appropriate NRC actions in future situations.



Federal Register: January 10, 2000 (Volume 65, Number 6)[Rules and Regulations] [Page 1326-1331] ------------------------------------------------------------------------------------------------------------GENERAL SERVICES ADMINISTRATION

41 CFR Parts 301-11 and 301-74

Federal Travel Regulation; Conference Planning

AGENCY: Office of Government wide Policy, GSA.

ACTION: Final rule.________________________________________________________________

SUMMARY: The General Services Administration (GSA) is amending the Federal Travel Regulation (FTR) governing conference planning. Because conferences have different requirements than routine temporary duty (TDY) travel, GSA is providing specific guidance to minimize overall Government expenses associated with conferences. This amendment will reduce agency costs by easing the administrative burden of conference planning and processing.

EFFECTIVE DATE: This final rule is effective January 14, 2000.

FOR FURTHER INFORMATION CONTACT: Jim Harte, Travel Team Leader, Travel Management Policy Division (MTT), telephone 202-501-0483.

Appendix E to Chapter 301--Suggested Guidance for Conference Planning

Terms

Conference: A meeting, retreat, seminar, symposium or event that involves attendee travel. The term ``conference'' also apples to training activities that are considered to be conferences under 5 CFR 410.404.

Conference lodging allowance: The rate that is up to 25 percent above the established lodging per diem rate.

Milestone schedule: Deadlines, which need to be reached in a progressive and orderly manner.



Code of Federal Regulations[Title 41, Volume 4][Revised as of July 1, 2001]From the U.S. Government Printing Office via GPO Access

[CITE: 41CFR301-74.11] [Page 81] TITLE 41--PUBLIC CONTRACTS AND PROPERTY MANAGEMENT CHAPTER 301--TEMPORARY DUTY (TDY) TRAVEL ALLOWANCES

PART 301-74--CONFERENCE PLANNING--Table of Contents Subpart A--Agency Responsibilities

SEC. 301-74.11 MAY WE PROVIDE LIGHT REFRESHMENTS AT AN OFFICIAL CONFERENCE?

Yes. Agencies sponsoring a conference may provide light refreshments to agency employees attending an official conference. Light refreshments for morning, afternoon or evening breaks are defined to include, but not be limited to, coffee, tea, milk, juice, soft drinks, donuts, bagels, fruit, pretzels, cookies, chips, or muffins.




DecisionMatter of: Use of Appropriated Funds to Purchase Light Refreshments at Conferences File: B-288266 Date: January 27, 2003 ______________________________________________________________________

DIGEST 1. The General Services Administration (GSA), through its travel regulation on conference planning, purports to authorize federal agencies to pay for light refreshments at official government-sponsored conferences where a majority of the attendees are in travel status. 41 C.F.R. § 301-74.11. While GSA is authorized to define subsistence for travelers to include light refreshments, 5 U.S.C. § 5702, GSA does not have the authority to authorize agencies to pay for light refreshments for those not in travel status. 2. The Comptroller General is required to settle the accounts of the United States. 31 U.S.C. § 3526(a). Pursuant to his account settlement authority, the Comptroller General can take exception to an improper transaction and refuse to relieve a certifying officer from personal liability for the amount of money improperly expended. Certifying officers are afforded protection from personal liability by relying on decisions of the Comptroller General concerning the legality of payments disbursing officers may make, or of expenditures covered by vouchers presented to certifying officers for certification. 31 U.S.C. § 3529. Since Congress reposed the authority in the Comptroller General to settle the accounts of the government, certifying officers should not rely on GSA's travel regulation on conference planning to authorize light refreshments at meetings for employees in nontravel status. 3. As a general proposition, absent statutory authority, appropriated funds are not available to feed government employees at their duty station. The Comptroller General has identified other authorities that, in certain circumstances, permit the use of appropriated funds to pay for meals and light refreshments. Agencies (and their accountable officers) should rely on existing, relevant statutory authority as interpreted by the Comptroller General to determine whether they may provide food to federal employees.

DECISION

Pursuant to 31 U.S.C. § 3529(a), a Navy certifying officer asks us to clarify whether the light refreshments provision of the General Services Administration (GSA) Federal Travel Regulation (FTR) on conference planning, 41 C.F.R. § 301-74.11, permits agencies to use appropriated funds for refreshments at a meeting to discuss internal, day-to-day business operations held within the official duty station. As a general proposition, an agency may not use appropriated funds to pay for light refreshments for business meetings conducted by government agencies at an employee's duty station. There are certain statutory authorities that may permit the use of appropriated funds for light refreshments in certain situations. GSA does not, however, have the authority to permit agencies to use appropriated funds to pay for employees' food and light refreshments, except as part of an employee's travel subsistence allowance. Moreover, since Congress reposed the authority to settle the accounts of the government in the Comptroller General, 31 U.S.C. § 3526, certifying officers should not rely on GSA's travel regulation on conference



planning to authorize light refreshments at meetings for employees in nontravel status. Background In January 2000, GSA published an amendment to the Federal Travel Regulations to address “conference planning.” 65 Fed. Reg. 1326, Jan. 10, 2000. The amendment defines “conference” as “[a] meeting, retreat, seminar, symposium or event that involves attendee travel. The term 'conference' also applies to training activities that are considered to be conferences under 5 CFR 410.404.” [1] 41 C.F.R. § 300-3.1. The regulation focuses on the total costs involved in employee travel to conferences, including guidance on comparing the cost of and selecting conference facilities, 41 C.F.R. §§ 301-74.2--74.5, and holding a conference at a hotel, motel, or other place of public accommodation. 41 C.F.R. § 301-74.14. In addressing the costs of conferences, the amendment includes a provision permitting agencies to pay for light refreshments at official conferences: Agencies sponsoring a conference may provide light refreshments to agency employees attending an official conference. Light refreshments for morning, afternoon or evening breaks are defined to include, but not be limited to, coffee, tea, milk, juice, soft drinks, donuts, bagels, fruit, pretzels, cookies, chips, or muffins. 41 C.F.R. § 301-74.11. In its Federal Register notice explaining the light refreshments provision, GSA asserted that “[t]he serving of light refreshments for conference attendees . . . is a common business practice, and should not be prohibited for Government-sponsored conferences.” 65 Fed. Reg. at 1326. GSA has advised agencies that they may use appropriated funds to pay for refreshments for nontravelers at some conferences. GSA's Travel Management Policy Homepage explained: “We have not made it mandatory that every attendee has to be in travel status, as that would not be practical at every conference/meeting. It would not be in the Government's best interests to not allow Non-travel attendees to participate in the break (forcing them to go elsewhere for refreshments) or to collect funds from just certain attendees and keep the appropriate records of those funds.” GSA advises, therefore, that if the majority of the attendees are in travel status, the agency may fund refreshments for all attendees. GSA, Travel Management Policy's Frequently Asked Questions, <http://www.gsa.gov/Portal/ content/offerings_content.jsp?contentOID =118763&Content Type=1004&PMTT=1>. A Navy certifying officer submitted a request for an advance decision pursuant to 31 U.S.C. § 3529(a). The certifying officer stated that since the light refreshment provision of the travel regulation on conference planning appears inconsistent with Comptroller General decisions, the regulation has created confusion regarding when an agency may provide food for employees. Analysis

Comptroller General's Authority to Settle Accounts At the outset it is useful to delineate the General Accounting Office's and GSA's authorities. The Comptroller General is required to settle the accounts of the United States. 31 U.S.C. § 3526(a). In carrying out this duty, the Comptroller General resolves questions about the legality of payments disbursing officers or heads of agencies may make, or the legality of expenditures covered by vouchers presented to certifying officers for certification. 31 U.S.C. § 3529. Thus, a certifying official may request a decision from the Comptroller General on a question involving a voucher in advance of the certifying officer's certification of that voucher. 31 U.S.C. § 3529(a). A decision by the Comptroller General pursuant to 31 U.S.C. § 3529 is conclusive on the Comptroller General when settling the account containing the payment. In more practical terms, the Comptroller General in an audit of agency obligations and expenditures may not legally object to particular financial transactions that he has already decided under section 3529 are in accordance with law. [



Congress has authorized GSA to prescribe regulations necessary for the administration of travel and subsistence expenses, and mileage allowances. 5 U.S.C. § 5707. Indeed, GSA promulgates and maintains the Federal Travel Regulation that provides travel policy for federal government agencies and their travelers. 41 C.F.R. Ch. 301-304. While we recognize GSA's role in promulgating travel regulations and the deference due GSA in the exercise thereof, there is nothing explicitly or implicitly in such function that affects the Comptroller General's role as the arbiter of the use of funds for official as opposed to personal purposes.

Appropriated Funds Generally Are Not Available for the Personal Expenses, Including Food, of Government Employees

Appropriations, as a general matter, are not available for the purchase of food for government employees. This rule, though often stated, is not often explained; hence, over time, the basis for the rule may be overlooked. Any analysis of the purpose availability of an appropriation begins with the purpose statute, 31 U.S.C. § 1301(a): “Appropriations shall be applied only to the objects for which the appropriations were made.” Additionally, because a federal agency is a creature of law, the Supreme Court has articulated an axiom of appropriations law: “The established rule is that the expenditure of public funds is proper only when authorized by Congress, not that public funds may be expended unless prohibited by Congress.” United States v. MacCollom, 426 U.S. 317, 321 (1976). We, of course, do not read the purpose statute to require, nor would it be reasonable to expect, that every item of expenditure be specified in an appropriations act. We do view appropriations of public funds as enacted to finance public purposes, not the personal expenses of federal employees. An employee is expected to bear the cost of personal expenses, such as meals and refreshments, from his or her salary. 72 Comp. Gen. 178 (1993); B-270327, Mar. 12, 1997. The Congress over the years has adjusted this rule by enacting statutory authority for agencies to pay for food for employees in particular circumstances. Some legislation addresses specific situations; for example, the John C. Stennis Center for Public Service Training and Development has statutory authority to provide meals and refreshments at its programs and activities. 2 U.S.C. § 1108(a)(7). Other legislation has government wide application. An example is the legislation at issue here—GSA's authority to define a traveler's subsistence costs that an agency may reimburse, 5 U.S.C. § 5702. In this decision, we analyze GSA's authority first, then we discuss briefly some other authorities. Because public confidence in the integrity of those who spend the taxpayer's money is essential, any item, such as meals or refreshments, that may appear frivolous or that is easily abused, however legitimate it may seem in a specific context, should be authorized by the Congress if it is to be charged to public funds. B-223678, June 5, 1989. Light Refreshment Provision of GSA's Travel Regulation on Conference Planning

Through informal contacts with accountable and other financial officers of the government, we are aware that many agency officials would like to use appropriations to pay for food and refreshments at government-sponsored meetings and conferences, including meetings to discuss internal operational or other day-to-day matters of agency business. Typically, we will be advised that the impetus is the agency's desire to follow common business practices in the private sector. Indeed, in its Federal Register notice explaining its light refreshments travel regulation, GSA asserts that “[t]he serving of light refreshments for conference attendees . . . is a common business practice, and should not be prohibited for Government-sponsored conferences.” 65 Fed. Reg. at 1326. Of course, reference to “common business practice” is not in itself an adequate justification for spending public money on food, or, for that matter, other objects. An expenditure of public funds must be anchored in existing law, not the practices and conventions of the private sector.



GSA's statutory basis for the light refreshment provision of its conference planning regulation is 5 U.S.C. § 5702. Section 5702 addresses the subsistence expenses of federal employees “when traveling on official business away from the employee's designated post of duty.” 5 U.S.C. § 5702(a)(1). Pursuant to section 5702, an employee is entitled to a per diem allowance or reimbursement for the actual expenses of travel. 5 U.S.C. § 5702(a)(1). Section 5701(3) defines “subsistence” as “lodging, meals, and other necessary expenses for the personal sustenance and comfort of the traveler.” GSA interprets “personal sustenance and comfort of the traveler” to include the light refreshments it identifies in its conference planning travel regulation. Letter from George N. Barclay, Acting General Counsel, Office of General Counsel, GSA, to Thomas H. Armstrong, Assistant General Counsel, GAO, Aug. 9, 2001. Traditionally, GSA has not viewed light refreshments as subsistence.[2] Nevertheless, while the travel regulation reflects a fairly broad view of subsistence, many would agree that a mid-afternoon snack or light refreshment, replenishing waning energy levels, is nourishment. Similarly, some may find morning and evening snacks nourishing as well. Accordingly, we do not object to GSA's determination that subsistence for travelers may include light refreshments. Important, nevertheless, are the statutory limitations on the application of the travel regulation. As stated above, GSA's statutory basis for the regulation is 5 U.S.C. § 5702, which authorizes agencies to use appropriated funds to pay the costs of subsistence for employees on official business away from their official duty stations. GSA's authority does not extend to employees who are not in travel status. Accordingly, certifying officers should not rely on the travel regulation to pay costs of refreshments for employees in nontravel status. Agencies (and their accountable officers) should rely on relevant statutory authority, as interpreted by the Comptroller General, to determine whether they may use appropriations to provide food or refreshments to their employees.

Other Authority

Another example of the Congress adjusting the general rule that appropriations are not available to pay for federal employees' food, and one that is relevant to the factual circumstances raised by the Navy certifying officer here, is the Government Employees Training Act (Training Act), Pub. L. No. 85-507, 72 Stat. 327 (1958). The Training Act authorizes agencies to “pay . . . for all or a part of the necessary expenses of training,” and to pay “for expenses of attendance at meetings which are concerned with the functions or activities for which the appropriation is made,” regardless of whether the event is held within the employees' official duty station. 5 U.S.C §§ 4109, 4110. The Comptroller General, exercising his statutory accounts settlement authorities, 31 U.S.C. §§ 3526, 3529, has interpreted and applied authorities such as the Training Act to accommodate the day-to-day realities of governmental operations within the limits imposed by the statute. To that end, in applying the Training Act, we have held that an agency may pay for the costs of meals and refreshments when they are included as an incidental and nonseparable portion of a training or meeting registration or attendance fee. 66 Comp. Gen. 350 (1987). If the cost of the food is not included in a registration or attendance fee, we have held that the meal or refreshments may be paid for if they are necessary to obtain the full benefit of the event. B-247966, June 16, 1993; B-244473, Jan. 13, 1992; B-198471, May 1, 1980. Although section 4110, which concerns meetings, generally applies only to meetings sponsored by nongovernmental organizations, we have extended section 4110 to government-sponsored meetings as long as the meeting satisfies the same conditions as required for nongovernment-sponsored meetings and the government sponsored meeting is not an internal day-to-day business meeting. See, e.g., B-198471, May 1, 1980.[3] In our analysis of whether an expenditure constitutes a personal or official expense, we do not view our case law as static and inflexible. Certainly, any analysis of a personal expense, necessarily, starts from the premise that the public's money is generally not available for the personal expenses of public employees. Recognition of that fundamental principle does not mean, for example, that an agency may

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not use appropriated funds to pay an expense in any given situation that in another context would be considered personal. See, e.g., 65 Comp. Gen. 677 (1986) (physical examination); B-239774, July 22, 1991 (cable television service). In these instances, we have not objected to the use of appropriations where the benefit to the government of what might otherwise be viewed as a personal expense weighs in favor of using appropriated funds. In this regard, as we weigh benefits to the agency, such as the recruitment and retention of a dynamic workforce and other considerations enabling efficient, effective, and responsible government, our decisions indicate a willingness to consider changes in societal expectations of benefits to be provided the nonfederal workforce. See, e.g., 71 Comp. Gen. 527 (1992) (eldercare as an employee benefit not typical of those benefits provided the nonfederal workforce); B-286026, June 12, 2001 (overruling our earlier decisions based on reassessment of the training opportunities afforded by examination review course). As we noted earlier, we recognize from informal contacts from agency officials an interest in re-examining the rules on food and refreshments. Indeed, GSA's light refreshments regulation, while it exceeds GSA's authority, is an expression of that interest. We remain willing to re-examine our case law, including our decisions on food, and to revise, to the extent permitted by law, rules that agency officials believe frustrate efficient, effective and responsible government. Any revision of these rules, of course, must be founded on sound reasoning, and must include appropriate safeguards to prevent abuse and to ensure public confidence in the integrity of those who spend the taxpayer's money.

Conclusion

GSA does not have the authority to permit agencies to use appropriated funds to pay for employees' food and refreshments except as part of an employee's travel subsistence allowance. 5 U.S.C. § 5702. Certifying officers should not rely on GSA's travel regulation on conference planning to authorize light refreshments at conferences for employees in nontravel status. Agencies (and their accountable officers) should rely on existing, relevant statutory authority as interpreted by the Comptroller General.

Anthony H. Gamboa General Counsel



Pursuant to Office of Personnel Management (OPM) regulations, an agency “may sponsor an employee's attendance at a conference as a developmental assignment under section 4110 of title 5, United States Code, when—

(a) The announced purpose of the conference is educational or instructional; (b) More than half of the time is scheduled for a planned, organized exchange of information between presenters and audience which meets the definition of training in section 4101 of title 5, United Stated Code; (c) The content of the conference is germane to improving individual and/or organizational performance, and (d) Development benefits will be derived through the employee's attendance.”

5 C.F.R. § 410.404. [2] Over the years, applying GSA regulations, we objected to agencies reimbursing travelers for the actual expenses of various snacks or light refreshments consumed while in travel status, because GSA did not deem them subsistence under GSA's regulations. See, e.g., B-167820, Oct. 7, 1969 (traveler's expenditures for newspapers, candy, pop, and coffee and rolls not consumed as part of a regular meal are not necessary expenses of subsistence). [3] The Comptroller General has exercised his statutory accounts settlement authorities in other instances, as well, to accommodate the ordinary needs of federal agencies. For example, in a 1999 decision, we concluded that the Nuclear Regulatory Commission (NRC) could pay an all-inclusive facility rental fee for a meeting of NRC employees to discuss internal NRC matters, even though the fee resulted in food being served to NRC employees at their official duty stations. B-281063, Dec. 1999. The facility charged a fixed fee that included conference rooms, refreshments at breaks, lunch, equipment and other supplies. We reasoned that renting the facilities was a reasonable expense of NRC's appropriations. Because the fee would have remained the same to NRC whether or not it accepted and its employees ate the food, the harm that the general rule is meant to prevent (i.e., expenditure of federal funds on personal items) was not present. B-281063, Dec. 1, 1999

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DecisionMatter of: National Institutes of Health - Food at Government-Sponsored

Conferences

File: B-300826

Date: March 3, 2005

DIGEST

The National Institutes of Health (NIH) may pay for legitimate, reasonable conference costs, including meals and light refreshments, of a formal conference pertaining to Parkinson’s disease subject to the conditions outlined herein. ► A formal conference typically involves topical matters of interest to, and participation of, multiple agencies and/or nongovernmental participants. In addition, other indicators of a formal conference include registration, a published substantive agenda, and scheduled speakers or discussion panels. An agency hosting a formal conference may consider the cost of providing meals and refreshments to conference attendees an allowable conference cost so long as ► (1) meals and refreshments are incidental to the conference, (2) attendance at the meals and when refreshments are provided is important for the host agency to ensure full participation in essential discussions, lectures, or speeches concerning the purpose of the conference, and (3) the meals and refreshments are part of a formal conference that includes ► not just the meals and refreshments and discussions, speeches, or other business that may take place when the meals and refreshments are served, but ► also includes substantial functions occurring separately from when the food is served. The NIH conference here satisfies these three criteria.

Without statutory authority to charge a fee and retain the proceeds, NIH may not charge a registration or other fee to defray the costs of providing meals or light refreshments. An appropriation establishes a maximum authorized program level, and an agency, without specific statutory authority, may not augment its appropriations from sources outside the government.

In applying this decision, NIH should develop an ►agency policy specifying the types of formal conferences at which NIH may consider providing food. NIH also should develop procedures to ensure that the provision of meals and refreshments meet the criteria listed above. We expect agency counsels, as well as certifying officers, agency auditors, and Inspectors General, to apply these criteria. To the extent that agency officials are uncertain as to the applicability of the criteria in particular circumstances, they may request a decision from this office, pursuant to 31 U.S.C. § 3529, before proceeding.



DECISION

Pursuant to 31 U.S.C. § 3529(a), a certifying officer at the National Institutes of Health (NIH) requested an advance decision regarding the use of appropriated funds to provide meals and light refreshments to federal government and nonfederal attendees and presenters at an NIH-sponsored conference. The certifying officer also asked whether NIH may charge a registration or other fee to defray the costs of any food provided.

NIH may pay for all legitimate, reasonable costs of hosting a formal conference pertaining to Parkinson’s disease. A formal conference typically involves topical matters of interest to, and the participation of, multiple agencies and/or nongovernmental participants. In addition, other indicators of a formal conference include registration, a published agenda, and scheduled speakers or discussion panels. An agency may consider the cost of providing meals and refreshments to conference attendees an allowable conference cost so long as ► (1) meals and refreshments are incidental to the conference, (2) attendance at the meals and when refreshments are provided is important to ensure full participation in essential discussions, lectures, or speeches concerning the purpose of the conference, and (3) the meals and refreshments are part of a formal conference that includes not just the meals and refreshments and discussions, speeches, or other business that may take place when the meals and refreshments are served, but also includes substantial functions occurring separately from when the food is served.

Agencies must have specific statutory authority to charge a fee for their meetings or programs and to retain the proceeds. NIH has no such specific authority and therefore may not charge a registration or other fee to defray the costs of the conference, including providing meals or light refreshments.

BACKGROUND

NIH plans to hold a formal conference on the latest scientific advances in treating Parkinson’s disease. NIH has designed the event to be of broad interest to a number of professional disciplines and to advance NIH’s research and information sharing efforts. Attendees will include a mix of federal employees and nonfederal individuals. Nonfederal attendees will include grantees, contractors, and research/science advisors. Some of the nonfederal individuals will be presenters who will receive honoraria, and some will be on invitational travel. NIH will engage a contractor to assist in organizing the conference. The conference will be held at a hotel in Maryland close to NIH headquarters. The cost of food will not be included in the fee NIH is paying for the conference space.1 NIH would like to charge a fee for meals and light refreshments that it plans to provide at the conference.

1 In a 1999 decision, we concluded that the Nuclear Regulatory Commission (NRC) could pay an all-inclusive facility rental fee for a meeting of NRC employees to discuss internal NRC matters, even though the fee also covered the cost of food. B-281063, Dec. 1, 1999. The facility charged a fixed fee that included conference rooms, refreshments at breaks, lunch, equipment, and other supplies. We concluded that renting the facilities was a reasonable expense of NRC’s Environmental Programs and Management appropriation. Because the fee would have remained the same to NRC whether or not it accepted, and its employees ate, the food, the harm that the general rule is meant to prevent (i.e., expenditure of federal funds on personal items) was not present. Id.



NIH asked us if its appropriated funds are available to pay for food for the various attendees and whether NIH has the authority to charge the attendees a fee that could be used to recover the costs of the food.

ANALYSIS

Questions concerning the cost of food at a conference are often raised when an agency wants to know whether it may pay for food for an employee attending a formal conference. In this decision we address the question from a different perspective—that of the agency hosting a conference—and whether, as host, it may use its appropriation to provide food to conference participants. In our analysis we first discuss when an agency may sponsor a formal conference. Then, from the perspective of the agency as host, we analyze whether the agency may provide food, as a conference expense, to participants, and whether appropriated funds may be used to provide food for other federal agency and nonfederal attendees. We also analyze whether agencies must have specific authority to both charge a fee for conference-related expenses, including food, and retain the proceeds.

NIH’s authority to host a formal conference.

An agency, generally, does not need express statutory authority to host a conference, so long as the agency determines that a formal conference is reasonably and logically related to carrying out its statutory responsibilities and serves its statutory mission.

It would not be inappropriate, for example, for an agency that is charged with promoting public health to organize a conference to bring together elected local officials, physicians, public health leaders and practitioners to identify precautions to avoid a possible influenza epidemic. Similarly, it is not inappropriate for NIH to organize a conference to coordinate and discuss Parkinson’s disease research efforts within the scientific community.2

NIH, an agency of the Public Health Service, is composed of 27 institutes and centers that were established “to conduct and support research, training, health information, and other programs with respect to any particular disease or groups of diseases or any other aspects of human health.” 42 U.S.C. § 281. Several of its research institutes, as well as a number of universities, medical centers, and pharmaceutical companies, conduct research to understand and find a cure for Parkinson’s disease. For the formal conference discussed in this decision, NIH has invited experts from the private sector as well as from other federal agencies, in addition to researchers from its own research institutes. Given NIH’s statutory mission “to conduct and support” research, ► it is well within NIH’s discretion, we believe, to organize a formal conference of

2 Because several of NIH’s research institutes conduct Parkinson’s disease research, Congress has required NIH tocoordinate their research efforts. 42 U.S.C. § 284f(b)(1). “Coordination shall include the convening of a research planning conference not less than once every 2 years.” 42 U.S.C. § 284f(b)(2).



interested researchers to discuss and coordinate research efforts to encourage efficient and productive research aimed at a common goal— understanding and curing Parkinson’s disease.3

Provision of food at an agency hosted formal conference

In hosting a formal conference, an agency incurs a number of expenses, many of which are discretionary but legitimate nonetheless so long as they serve the purposes of the conference. For example, a conference host typically incurs such obvious expenses as the cost of program materials, conference space, signage, the production of a video or other form of presentation, and personnel costs to administer the conference and conference registration. While meals and refreshments have not been obvious costs of government-sponsored conferences, meals or refreshments are not significantly different from these other expenditures and in some circumstances may be considered, like programs, videos, and signage, to be reasonable, legitimate expenses of the conference.

In determining when meals or refreshments are allowable expenses of an agency hosting a formal conference, we turn to earlier decisions dealing with the cost of food as an employee training expense. As noted earlier, the perspective of these decisions look at when an agency may pay for the costs of meals and refreshments incurred by an agency in providing training to its own employees or to an agency employee attending a conference. The Government Employees Training Act (Training Act), Pub. L. No. 85-507, 72 Stat. 327 (1958), authorizes an agency to pay the necessary expenses incident to an authorized training program. 5 U.S.C. § 4109. We have held that the government can provide meals and light refreshments under this authority if the agency determines that providing the meals and refreshments to federal employees is necessary to achieve the objective of the training program. 48 Comp. Gen. 185 (1968); 39 Comp. Gen. 119 (1959); B-247966, June 16, 1993; B-193955, Sept. 14, 1979. Similarly, the Training Act authorizes agencies to pay “for expenses of attendance at meetings which are concerned with the functions or activities for which the appropriation is made.” 5 U.S.C § 4110. To be considered “expenses of attendance at meetings” under section 4110, we have held that the costs of meals and refreshments must be included as an incidental and nonseparable portion of a registration or attendance fee—B-288266, Jan. 27, 2003; 64 Comp. Gen. 406 (1985); 38 Comp. Gen. 134 (1958); B-233807, Aug. 27, 1990—or satisfy the following criteria: (1) the meals and refreshments are incidental to the conference or meeting, (2) attendance at the meals and when refreshments are served is important for the employees’ full participation in the conference or meeting, and (3) the meals and refreshments are part of a formal conference or meeting that includes not just the meals and refreshments and discussions, speeches, lectures, or other business that may take place when the meals and refreshments are served, but also includes substantial functions occurring separately from when the food is served. 72 Comp. Gen. 178 (1993); B-233807, Aug. 27, 1990; B-198471, May 1, 1980.

3 From the perspective of participating or sponsoring federal agencies and their employees, many conferences similar to NIH’s proposed conference may qualify as “training” under the broad definition thereof in the Government Employees Training Act, 5 U.S.C. § 4101. Paragraph 4 of section 4101, title 5, United States Code, defines “training” to include “making available to an employee . . . a planned, prepared, and coordinated program . . . of instruction or education, in scientific, professional . . . fields which will improve individual and organizational performance and assist in achieving the agency’s mission and performance goals.” Although not crucial to our holding, the NIH conference, arguably, falls within this definition.



We think similar criteria should apply to determining whether the costs of meals or refreshments are allowable expenses of the agency hosting a formal conference. As the discussion above indicates, we have long permitted agencies, under appropriate circumstances, to cover their employees’ costs of meals when attending formal conferences. 38 Comp. Gen. 134 (1958); B-198471, May 1, 1980; B-154912, Aug. 26, 1964. Further, we have permitted agencies that hold formal in-house training conferences for their employees to cover the cost of meals when necessary to achieve the program or conference objective. 48 Comp. Gen. 185 (1968); 39 Comp. Gen. 119 (1959).4 We think the presence of private citizens or federal employees from other agencies who are essential to achieve the program or conference objectives should not change the character of the expense from allowable to unallowable. The fact that the meals and refreshments also are available to private citizens and employees of other agencies should not be an obstacle so long as an administrative determination is made that their attendance is necessary to achieve the conference objectives.

The extension of the availability of appropriated funds to these circumstances should satisfy the criteria discussed earlier. In this regard, to determine whether the costs of meals and refreshments at an agency-hosted conference involving, in addition to its employees, other interested federal employees and private citizens administratively determined necessary to achieve the conference objectives, ►the criteria are as follows: (1) the meals and refreshments are incidental to the formal conference, (2) attendance at the meals and when refreshments are served is important for the host agency to ensure attendees’ full participation in essential discussions, lectures, or speeches concerning the purpose of the formal conference, and (3) the meals and refreshments are part of a formal conference that includes not just the meals and refreshments and discussions, speeches, lectures, or other business that may take place when the meals and refreshments are served, but also includes substantial functions occurring separately from when the food is served.

The level of formality required is the same as what one would expect of a conference sponsored by a nongovernmental entity. See 64 Comp. Gen. 604 (1980); B-249795, May 12, 1993. Thus, a formal conference must involve topical matters of interest to, and the participation of, multiple agencies and/or nongovernmental participants. See B-249795, May 12, 1993. In addition, a formal conference would include, among other things, registration, a published substantive agenda, and scheduled speakers or discussion panels. Meetings discussing business matters internal to an agency or other topics that have little relevance outside of the agency do not constitute formal conferences. For example, day-long quarterly supervisors meetings discussing general business/management topics, suggestions, issues, and problems of the agency are not formal conferences. 68 Comp. Gen. 606 (1989); B-249749, May 12, 1993.

4 Federal employees who are in travel status, however, are required to reduce their allowances for meals by the amounts specified in the regulations for each meal furnished as part of the event. 41 C.F.R. § 301-74.21.



As NIH explained its conference to us, the conference has the indicia of a formal conference and will meet the three criteria described above. The conference will include a registration process, a published substantive agenda, and scheduled speakers or discussion panels. It is designed to be of broad interest to a number of professional disciplines, and attendees will include a mix of federal employees and nonfederal individuals. The conference will be organized to take full advantage of the participants’ and presenters’ time and availability and not to accommodate the provision of food. In order to make the best use of the participants’ and presenters’ time, essential discussions, panels, and speeches will occur at the time the meals and light refreshments are served. Finally, NIH also has scheduled substantive presentations and discussions separately from the time when the food is served. Accordingly, based on the conference description NIH provided to us, we conclude that NIH may provide food at this formal conference.5

The purpose of the criteria we set out is to balance the legitimate benefits that accrue to an agency hosting a conference with the need to ensure that the agency is not expending public funds on a personal expense, food. It is important to note that these criteria necessarily apply on a case-by-case basis. Before implementing this decision, an agency should develop an agency policy specifying the types of formal conferences at which the agency may consider providing food, consistent with the criteria contained in this decision. An agency also should develop procedures to ensure that the provision of meals and refreshments meet the criteria listed above. We expect agency counsels, as well as certifying officers, agency auditors, and Inspectors General, to apply these criteria. To the extent that agency officials are uncertain as to the applicability of the criteria in particular circumstances, they may request a decision from this office, pursuant to 31 U.S.C. § 3529, before proceeding.

Registration fees to cover expenses of formal conferences

If an agency wishes to charge a fee for one of its programs or activities, it must have statutory authority to do so. B-300248, Jan. 15, 2004. In addition, even if an agency has authority to charge a fee, it may not retain and use the amounts collected without statutory authority. Id. An appropriation establishes a maximum authorized program level, meaning that an agency, absent statutory authorization, cannot operate beyond the level that can be paid for by its appropriations. See 72 Comp. Gen. 164, 165 (1993). An agency may not circumvent these limitations by augmenting its appropriations from sources outside the government, unless Congress has so authorized the agency. Id.

In a recent decision we explained that the Independent Offices Appropriation Act, 31 U.S.C. § 9701, known as the user fee statute, provides general authority for an agency to impose a fee if certain conditions are met. Id. The user fee statute authorizes an agency to charge recipients of special benefits or services a user fee. 62 Comp. Gen. 262 (1983). Our decisions have not

5 ? Because hosting this conference is reasonably related to NIH’s statutory responsibilities and serves to advance its statutory mission, NIH is not barred by the prohibition of 31 U.S.C. § 1345 from providing food. Section 1345 prohibits the use of appropriated funds for “travel, transportation, and subsistence expenses for a meeting.” Section 1345, however, has limited application, addressing only those conventions and other forms of assemblages or gatherings that private organizations seek to hold at government expense. See 72 Comp. Gen. 229, 231 (1993) (effectively overruling prior GAO decisions that applied section 1345 to meetings and conferences other than assemblages and gatherings that private organizations sought to hold at government expense).



addressed specifically whether the user fee statute authorizes an agency to charge a conference registration or attendance fee, and we need not address that question here. ►Even if we were to conclude that the user fee statute would permit NIH to charge a registration fee, we are aware of no specific authority that would permit NIH to retain the proceeds. Without such a specific authorization, agencies may not retain or use fees collected under the user fee statute or other laws but must deposit them in the general fund of the Treasury as miscellaneous receipts.6 B-300248, Jan. 15, 2004. Nor could NIH authorize its contractor to charge a fee to offset costs because, pursuant to 31 U.S.C. § 3302(b), a contractor receiving money for the government may not retain funds received for the government to pay for the conference costs. B-300248, Jan. 15, 2004.7

If a host agency concludes that it cannot use its appropriations to provide food to participants because the conference does not satisfy the criteria we discuss herein, or if the host agency otherwise decides not to provide food (for example, because of budgetary constraints), the participants may cover the costs of their food using their own personal funds.

CONCLUSION

NIH may pay for meals and light refreshments, for all conference participants including federal employees from other agencies and nonfederal participants, at a formal conference pertaining to Parkinson’s disease, subject to the conditions outlined herein. However, without statutory authority to charge a fee and credit the proceeds to its appropriation, ► NIH may not charge a registration or other fee that can then be used to defray the costs of providing meals or light refreshments.

In applying this decision, NIH should develop an agency policy specifying the types of formal conferences at which NIH may provide food. NIH also should develop procedures to ensure that the meals and refreshments meet the criteria above. We expect agency counsels, as well as certifying officers, agency auditors, and Inspectors General, to apply these criteria. To the extent that agency officials are uncertain as to the applicability of the criteria in particular circumstances, they may request a decision from this office, pursuant to 31 U.S.C. § 3529, before proceeding.

Anthony H. Gamboa General Counsel

6 The “miscellaneous receipts” statute requires an official or agent of the government receiving money for the government from any source, absent statutory authority to the contrary, to deposit the money into the general fund of the Treasury. 31 U.S.C. § 3302(b).

7 The only other statute that would have bearing in this situation -- the Economy Act, 31 U.S.C. § 1535, which authorizes an agency to provide goods or services to another agency on a reimbursable basis -- is not applicable in these factual circumstances.



Collection of Conference Fees from Outside DoD Sources

June 22, 2006Ordered to be printed as passed

109TH CONGRESS2D SESSION

S. 2766AN ACT

To authorize appropriations for fiscal year 2007 for military activities of the Department of Defense, for military construction, and for defense activities of the Department of Energy, to prescribe personnel strengths for such fiscal year for the Armed Forces, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; FINDINGS.

(a) SHORT TITLE.—This Act may be cited as the ‘‘John Warner National Defense Authorization Act for Fiscal Year 2007’’.

* * * * * Portions Omitted * * * * * *

Page 616Subtitle F—Miscellaneous Authorities on Availability and Use of Funds

SEC. 1051. ACCEPTANCE AND RETENTION OF REIMBURSEMENT FROM NON-FEDERAL SOURCES TO DEFRAY DEPARTMENT OF DEFENSE COSTS OF CONFERENCES.

(a) IN GENERAL.— Subchapter II of chapter 134 of title 10, United States Code, is amended by adding at the end the following new section:

“§ 2262. Department of Defense conferences: collection of fees to cover Department of Defense costs



(a) IN GENERAL. —

(1) The Secretary of Defense may, whether directly or by contract, collect fees from any individual or commercial participant in a conference, seminar, exhibition, symposium, or similar meeting (in this section referred to collectively as a ‘conference’) conducted by the Department of Defense.

(2) Fees may be collected with respect to a conference under this subsection in advance of the conference.

(3) The total amount of fees collected under this subsection with respect to a conference may not exceed the costs of the Department of Defense with respect to the conference.

(b) TREATMENT OF COLLECTIONS.—

(1) Amounts collected under subsection (a) with respect to a conference shall be credited to the appropriation or account from which the costs of the conference are paid.

(2) In the event the total amount of fees collected with respect to a conference exceeds the costs of the Department with respect to the conference, the amount of such excess shall be deposited into the Treasury as miscellaneous receipts.

(3) Amounts credited to an appropriation or account under paragraph (1) with respect to a conference shall be available to pay the costs of the Department with respect to the conference or to reimburse the Department for costs incurred with respect to the conference.

(c) ANNUAL REPORTS.—

(1) Each year, not later than 45 days after the President submits to Congress the budget for a fiscal year under section 1105 of title 31, the Secretary shall submit to the congressional defense committees budget justification documents summarizing the use of the authority under this section.

(2) Each report under this subsection shall include the following:

(A) A list of conferences during the last two calendar years for which fees were collected under subsection (a).

(B) For each conference listed under subparagraph (A)—

(i) The estimated costs of the Department for such conference.



(ii) The actual costs of the Department for such conference, including a separate statement of the amount of any conference coordinator fees associated with such conference.

(iii) The amount collected under subsection (a) for such conference.

(C) An estimate of the number of conferences to be conducted in the calendar year of such report for which the Department will collect fees under subsection (a).’’

End of the extract



United States Government Accountability OfficeWashington, DC 20548

Comptroller Generalof the United States

Decision

B-308968

November 27, 2007

The Honorable Barbara A. Mikulski. United States Senate

Subject: No-Cost Contracts for Event Planning Services

Dear Senator Mikulski:

This opinion responds to your letter of January 26, 2007, requesting that we “clarify the suitability of using no-cost contracts to obtain conference, event and trade show planning services.” Specifically, you asked us to review a model contract supplied to us by National Conference Services, Inc.’s (NCSI) counsel.[1] Letter from Antonio R. Franco and Jonathan T. Williams, Piliero Mazza, to Thomas H. Armstrong, Assistant General Counsel, GAO, Re: No Cost Contract for Conference Services, Jan. 23, 2007 (NCSI Letter). In its model contract, NCSI offers to provide conference planning services with no financial obligation to the government; NCSI would recoup its costs by charging exhibitors, sponsors, and attendees of the conference. Id.

We conclude that the NCSI contract is a valid, binding no-cost contract that agencies may utilize to obtain conference planning services without violating the voluntary services prohibition of the Antideficiency Act, 31 U.S.C. sect. 1342. Because of the terms and conditions of the NCSI contract, an agency would incur no financial liability and NCSI would have no expectation of payment from the government. Before engaging in no-cost contracts, however, agencies should

[1] Our practice when rendering legal opinions is to obtain the views of the relevant agency to establish a factual record and to elicit the agency’s legal position on the subject matter of the request. GAO, Procedures and Practices for Legal Decisions and Opinions, GAO-06-1064SP (Washington, D.C.: Sept. 2006) available at www.gao.gov/congress.html (last visited Oct. 16, 2007). In this instance, your letter did not identify an agency that had contracted with NCSI. At your request, NCSI provided us with a copy of its model contract and its explanation of the contract.


http://www.gao.gov/congress.html


address several considerations to balance the financial flexibility of no-cost contracts with achievement of agency objectives in hosting a conference.

BACKGROUND

NCSI provides “event planning, production and support services.” NCSI, About NCSI—Who We Are, available at www.ncsievents.com/aboutncsi/who_we_are.aspx (last visited Oct. 16, 2007). NCSI reports that it has conducted business with various government agencies, including those within the intelligence community and the Department of Defense, by facilitating “information technology conferences, industry days, [and] meetings and technology expositions . . . .” Id.

NCSI’s services include: “Planning; Selecting venues; Negotiating contracts; Marketing; Coordinating logistics; Taking registrations; Processing payments; [and] Post-event reporting.” NCSI, Federal, Intelligence Community and Department of Defense Services—Conferences, available at www.ncsievents.com/federal/federal_conferences.aspx (last visited Oct. 16, 2007) (NCSI Conferences). NCSI offers to plan “Sponsored receptions;” “Break-out meetings; Seminars; Working luncheons;” and “Workshops.” NCSI, Events—Conferences, available at www.ncsievents.com/event/conferences.aspx (last visited Oct. 16, 2007). In contracting with its clients, “NCSI is able to . . . offer its event planning services to government hosts at zero cost . . . .” NCSI Conferences.

The proposed NCSI contract provides:

“The Contractor may choose to provide for all services as required by the task order at no cost to the Government. The Contractor is entitled to all of the registration, exhibition, sponsorship and/or other fees collected as payment for performance under the task order if there is no cost to the Government. In this case, the Contractor is liable for all costs related to the performance of the task order as defined in the task order and the government’s liability for payment of services under this task order is ‘zero.’”NCSI Letter, Exhibit E. NCSI explained that it recoups its costs by “charging the attendee and exhibitor participants of the event.” NCSI Letter.

DISCUSSION

Generally, a no-cost contract is a formal arrangement between a government entity and a vendor under which the government makes no monetary payment for the vendor’s performance. B-302811, July 12, 2004. “Under a typical no-cost contract, a vendor provides a service that [an] agency would otherwise perform, but instead of receiving compensation from the agency, the vendor charges and retains fees [assessed against third parties] for its services.” B-300248, Jan. 15, 2004. See also Ober United Travel Agency, Inc. v. United States Department of Labor, 135 F.3d 822, 823 (D.C. Cir. 1998). In the instant case, NCSI intends to recoup its costs, and


http://www.ncsievents.com/event/conferences.aspx

http://www.ncsievents.com/federal/federal_conferences.aspx

http://www.ncsievents.com/aboutncsi/who_we_are.aspx


presumably earn a profit, by charging conference attendees and other participants.[2] At issue when a federal agency agrees to a no-cost contract and receives services without having to pay is whether the agency has violated the Antideficiency Act’s voluntary services prohibition, 31 U.S.C. sect. 1342.

The Antideficiency Act prohibits federal agencies from accepting voluntary services without specific statutory authority.[3] 31 U.S.C. sect. 1342. The purpose of the prohibition is to preclude situations that might generate claims for compensation that might exceed an agency’s available funds. See, e.g., B-211079.2, Jan. 2, 1987.

We have previously examined no-cost contracts in the context of the voluntary services prohibition.[4] In 1928, we concluded that the Federal Trade Commission (FTC) was not prohibited from entering into a no-cost contract for stenographic services. 7 Comp. Gen. 810 (1928). There, FTC gave the contractor the exclusive right to report FTC proceedings and to sell copies of transcripts to the public at rates specified in the contract; in return, the contractor would furnish copies to FTC without cost. Id. We determined that FTC did not violate the prohibition because “services furnished pursuant to a formal contract are not voluntary within the meaning” of the statute. Id. at 811.

More recently, we found no violation when the General Services Administration (GSA) proposed a no-cost contract with real estate brokers. B-302811, July 12, 2004; B-291947, Aug. 15, 2003. The contract awarded four real estate brokers “exclusive rights to represent the United States with respect to all GSA real property leases” in exchange for the brokers’ lease acquisition services. B-302811, July 12, 2004. Reflecting industry practice, the real estate brokers would stipulate in the contract that they had no expectation of payment from the government and GSA had no financial liability to the brokers. B-302811, July 12, 2004; B-291947, Aug. 15, 2003. Nor would any other party pay the brokers on the government’s behalf. Instead, consistent with industry norms, the brokers would receive commissions from landlords with whom they did

[2] To be enforceable, a contract with the United States government requires an offer, acceptance of the offer, and consideration. Rick’s Mushroom Service, Inc. v. United States, 76 Fed. Cl. 250, 259 (2007), citing Total Medical Management, Inc. v. United States, 104 F.3d 1314, 1319 (Fed. Cir. 1997). A no-cost contract “raises the question . . . whether it is void for lack of consideration.” 7 Comp. Gen. 810, 811 (1928). A federal agency accepting the NCSI-proposed contract would provide as consideration exclusive access to a group from which the contractor may earn income. Concurrently, the federal agency would receive NCSI’s services in planning a conference.

[3] The Act makes an exception “for emergencies involving the safety of human life or the protection of property.” 31 U.S.C. sect. 1342.

[4] GAO has also considered award of various no-cost contracts in the context of bid protests. See, e.g.,

B-283731.2, Dec. 21, 1999.



business. B-302811, July 12, 2004; B-291947, Aug.15, 2003. We reiterated our long-standing rule that “services received . . . free of cost pursuant to a formal contract or agreement do not constitute ‘voluntary services’” within the meaning of the Antideficiency Act, and determined that GSA did not violate the voluntary services prohibition.[5] B-291947, Aug. 15, 2003.

Critical in the GSA case were the terms and conditions of the contract and the attendant expectations of each party regarding payment. We emphasized, “Because the contract was constructed as a no cost contract, GSA will have no financial liability to [the] brokers, and [the] brokers will have no expectation of a payment from GSA.” B-302811, July 12, 2004. As a consequence, even if the third parties making remuneration to the real estate brokers failed to pay, “the broker would have no claim against GSA.” Id. Cf. B-300248, Jan. 15, 2004. We concluded that “accept[ing] services without payment pursuant to a valid, binding no-cost contract does not augment an agency’s appropriation nor does it violate the voluntary services prohibition.” B-302811, July 12, 2004.

In its contract, NCSI would stipulate that it will provide its services “at no cost to the Government,” specifying that “the government’s liability for payment of services under this task order is ‘zero.’” NCSI Letter, Exhibit E. NCSI expects to retain “all of the registration, exhibition, sponsorship and/or other fees collected as payment for performance.” Id. As with the FTC and GSA contracts, an agency agreeing to the NCSI contract would have no financial liability to NCSI, nor would NCSI have any expectation of payment from the government. Consequently, an agency entering into the NCSI contract would neither augment its appropriation nor run afoul of the voluntary services prohibition.

In 2006, the Department of Justice’s Office of Legal Counsel (OLC) addressed a Department of Commerce proposal asking whether an agency, when hosting a conference, may permit its contractor “(1) to provide meals, lodging, refreshments, and other goods and services to conference attendees and (2) to charge the attendees a ‘personal convenience’ fee to cover the costs of these items.” Memorandum Opinion for the General Counsel, Department of Commerce, Applicability of the Miscellaneous Receipts Act to Contractors Receiving Personal Convenience Fees from Attendees at an Agency-Sponsored Conference, OLC Opinion, Nov. 22, 2006. OLC did not object to the proposal because the personal convenience fees “are not used, and are not intended to be used, by or for the benefit of the host agency that hires the event planner.” Id. OLC noted that collected amounts do not “compensate the event planner for any contractual obligation that the host agency owes to it, or enable the agency to avoid expending

[5] In our decision, we did not evaluate “the soundness of the terms of the contract or advisability of entering into” no-cost contracts. B-291947, Aug. 15, 2003. In January 2007, GAO reported on the first contract year of GSA’s no-cost leasing contracts with the brokers. GAO, GSA Leasing: Initial Implementation of the National Broker Services Contracts Demonstrates Need for Improvements, GAO-07-17 (Washington, D.C.: Jan. 31, 2007).



appropriations . . . .” Id. We agree with OLC’s distinction and the rationale OLC applied to the issue before it.

Notably, the scenario presented by the Department of Commerce to OLC differs from scenarios that we have considered previously regarding agency attempts to collect fees from conference participants. In 2005, we advised the National Institutes of Health (NIH) that absent statutory authority to charge a fee and retain the proceeds, neither NIH, nor a contractor on its behalf, may charge a registration or other fee to defray the costs of providing meals or light refreshments integral to a conference. B-300826, Mar. 3, 2005. Doing so would impermissibly augment NIH’s appropriation. Id. In January 2006, we reiterated the holding in B-300826 -- an agency may no more engage a contractor to charge and retain a fee than the agency itself may charge and retain fees for its own benefit without specific statutory authority. B-306663, Jan. 4, 2006. In its request to OLC, the Department of Commerce represented that the department did not intend to provide meals, refreshments, and lodging to conference participants. Nov. 22, 2006, OLC Opinion. In both B-300826 and B-306663, however, we addressed a scenario where the host agency provided food as part of the conference with the purpose of ensuring full participation in the conference. In that situation, an agency may not charge participants to offset the agency’s costs without statutory authority.

As with the no-cost contract GSA employed with real estate brokers, we do not opine on the wisdom of such arrangements for conference planning services.[6] Although a no-cost contract such as that offered by NCSI does not violate the Antideficiency Act, there are other considerations beyond compliance with fiscal laws that an agency should take into account before agreeing to a no-cost contract. An agency contemplating use of a no-cost contract for conference planning services should weigh the value of the services received from the contractor with that of the concession offered by the contractor. Important considerations include, for example, who may approve and sign such contracts, registration procedures and collection of fees, and, particularly where many, if not most, attendees are expected to be government employees, the ultimate cost to the government as a whole. Agency officials also should consider possible conflicts of interest before signing a no-cost contract, keeping in mind that control of the agenda, selection of speakers, and other matters concerning content should serve the government’s, not the contractor’s, purpose. In addition, agencies should ensure an open, transparent selection process before entering into no-cost contracts. Ultimately, an agency must not lose sight of its objectives for a particular event and should ensure that in avoiding costs to

[6] An agency, of course, may request legislation authorizing the agency to charge an attendance fee at conferences

and use the fees to offset conference costs. B-306663, Jan. 4, 2006. Last year, Congress enacted authority for the

Department of Defense to collect and retain conference fees for the purpose of crediting the appropriation charged to

pay conference costs. National Defense Authorization Act for Fiscal Year 2007, Pub. L. No. 109-364, div. A, title X,

subtitle F, sect. 1051, 120 Stat. 2083, 2395–96 (Oct. 17, 2006), codified at 10 U.S.C. sect. 2262. See S. Rep. No.

109-254, at 385-86 (2006). The same provision also allows the department to permit a contractor to collect fees on

the department’s behalf. Id.



the agency, it does not take actions that compromise the effectiveness of its conference, undermine the achievement of agency goals, or violate ethics rules.

CONCLUSION

The NCSI contract is a valid, binding no-cost contract. An agency may enter into such a contract without violating the Antideficiency Act’s voluntary services prohibition, 31 U.S.C. sect. 1342. Services performed pursuant to a formal contract, in which the agency has no financial obligation and the contractor has no expectation of payment from the government, are not “voluntary” within the meaning of the prohibition. Id.

Sincerely yours,

Gary L. KepplingerGeneral Counsel



The Mind Boggling Study

157

CASE STUDY 3 • The Mind Boggling Study

CASE STUDY 3: THE MIND BOGGLING STUDY

OBJECTIVES

Expand your knowledge of obligating time limited including:

Obligating contracts which cross fiscal years

Replacement contracts

Modification of contracts


PRINCIPLES OF LAW

CONGRESS DETERMINES THE LENGTH OF TIME

Congress has the right to limit the time of appropriations (5-3)

It’s intentions should be implicitly followed (5-3)

CONGRESS LIMITS TIME PERIODS

Annual appropriations

Multiyear appropriations

No-Year Appropriations

Permanent; Indefinite appropriations

Earmarks within an appropriation

THE BONA FIDE NEEDS PRINCIPLE (5-11)

A fiscal year appropriation may be obligated to meet: (5-11)

- A legitimate need of that year, or

- A need that arose in a prior year and continues to be a need

EXCEPTIONS (5-22) Delivery of materials beyond fiscal year

- Not available when needed

- Necessary for production or fabrication of materials

- Replacement of stock used in the FY



Services Non-severable (Entire)

Severable

- Old law

- New Laws

41 U.S.C. 253l; 10 U.S.C. 2410(a) (5-25)

10 U.S.C. 2306b & 2306c; 41 U.S.C. 254c

Replacement Contracts Default terminations

- Three conditions

Rule could apply in ‘special’ convenience terminations

Modifications of Contracts Crossing fiscal lines

- Scope

- Severable (specific exceptions)

- Antecedent liability

ADVANCE PAYMENTS

STATUTORILY PROHIBITED (31 U.S.C. 3324) (5-50) But many exceptions. Advances for:

- Some pay and allowances situations

- Travel pay

- Tuition to colleges

- Fast Pay

- Subscriptions (books and periodicals)



CONTRACT FINANCING (5-54) Advance payments generally not allowed

- Exceptions when in best interests of USA

- Adequate security is pledged

- FAR Part 32 spells out the rules

Progress payments are different

- Based on materials delivered; services performed

- Percent completion of work

- Other quantifiable measures

THE MIND BOGGLING STUDY: PART A

FACTS OF CASE : PART A

The Agency awarded a contract:

On September 1, 2008; using FY 08 annual appropriation

Work to commence immediately; continue into FY 09

Not obligated promptly by accounting dept.

Questions about which year funds to use

THE MIND BOGGLING STUDY: PART B

FACTS OF THE CASE: PART B

Contractor requests advance payment:

Personnel turbulence; hiring, training problems

About 85 percent completed with the Study Plan

PM wants to approve

Contracting officer does not



THE MIND BOGGLING STUDY: PART C

FACTS OF THE CASE: PART C

Original contract terminated on November 30, 2008:

For default; deobligated $1.450M

Replacement contract will be for $2.150M

You are certifying officer on the funds for the contract

THE MIND BOGGLING STUDY: PART D

FACTS OF THE CASE: PART D

New contractor started work

Experiences an unforeseen problem

Additional $800,000

Contractor also suggests an optional product be delivered. Cost: $675,000

PM says yes to both; Accounting Department disputes use of selected appropriation

You are the certifying officer



INDEX

Item Page

Part A: The Initial Contract Award 162

Part A: Specific Issues Handout

Tab 3 A: Red Book Extracts Relating to Bona Fide Needs Rule 163

Part B: Request for an Advance Payment 175

Part B: Specific Issues Handout

Tab 3 B: Red Book Extracts Relating to Advance Payments Rule 177

Part C: Termination and Replacement of the Contract 180

Part C: Specific Issues Handout

Tab 3 C Red Book Extracts Relating to Replacement Contract Rule 181

Part D: Request for a Modification Involving a Price Increase 186

Part D: Specific Issues Handout

Tab 3 D Red Book Extracts Relating to Amendments Affecting Price 187



Part A: The Initial Award

BackgroundIt is October 5, 2008. In FY 2008, the Center for Injury Prevention and Control (CIPC) solicited bids on a study to determine causes and consequences of childhood playground injuries. A contract was awarded for a study of childhood injuries related to playground equipment and playground surfaces. Raw data are available from numerous sources. The contractor is to collect the data, study the incidences analyzing by age, gender and geographic region the causes and effects of specific playground injuries. Make recommendations for federal rules to help prevent recurrence of the incidents.

DetailsAfter a lengthy solicitation process the CIPC awarded a $3.8 million study contract on September 25, 2008 (FY 08), to Speedy Studies, Inc., a beltway-consulting firm. They were the lowest bidder. Work on the study began on September 26, 2008. It will take more than two years to complete the contract. Phases 1, 2, & 3 are to be obligated in FY 08. Phase 4 will be obligated in FY 09 or FY 10 depending on the date of the notice to proceed. Phase 4 will be subject to the availability of funds.

The contract calls for 4 major deliverables/milestones: (1) Phase 1. Develop a study plan identifying all subsequent tasks and milestones. Submit it by October 25, 2008; $200,000 (2) Phase 2. Collect data from federal/state/local governments and data from private institutions (universities, profit and non-profit corporations, etc.); Complete by May 1, 2009 $975,000. (3) Phase 3. Analyze the data relating to playground surfaces. Provide a report by September 24, 2009; $475,000. (Government acceptance and notice to proceed will be necessary before proceeding into phase 4.) (4) Phase 4. (S.A.F.) Analyze the data relating to playground equipment. Provide a report by September 25, 2010; $2,150,000.

The Issues (1) The contract was awarded last FY and work commenced immediately. But the documents were lost in the contracting office and the accounting department received them yesterday, October 4, 2008. Thus the contract was not obligated last FY. The PM says the money should be obligated using FY 08 appropriation. Accounting says that it must be obligated using FY 09 money since last year’s appropriation has expired.

(2) If the FY 08 appropriation can be used, the accounting department supervisor says only that portion pertaining to the actual amount of work performed would be chargeable to last year. The rest must be obligated when the work is actually performed.

FundingThe CIPC is funded with a one-year (annual) appropriation (66 8 0100). The total annual budget is $2.2 billion. They have a mission to provide federal support and assistance to states, local governments and private institutions relating to injuries, other than on-the-job injuries covered by OSHA. Their primary focus is on domicile and recreation injuries.

AssignmentYou are the certifying officer. The accounting department supervisor has contacted you. She is certain that FY 08 appropriations cannot be used for Phases 1-3. The Project Manager (PM) insists this contract is like scores of others. The others were all obligated in a lump amount, not split between fiscal periods. This one should be obligated the same. Answer the specific issues questions in the Specific Issues Handout booklet.





Bona Fide Needs Rule



Part A: The Initial Award

Red Book Reference Vol 1, Principles of Appropriations Law>Availability of Appropriations: Time>Bona fide needs; Vol 2, Recording of Obligations

Short Title Bona Fide Needs

Principle of Law Appropriations may only be used to fund legitimate needs of the fiscal period for which the appropriations are made.

ExceptionsAs authorized by statute; contract authority; procurement lead-time rule; resupply of consumable stocks; nonseverable (entire) and certain severable services contracts.

Pages RB pages 5-3..4; 5-11..28; 7-6..61

The proposition

►

Types of Appropriations

Annual Appropriations

Our starting point is the firmly established proposition that—

“Congress has the right to limit its appropriations to particular times as well as to particular objects, and when it has clearly done so, its will expressed in the law should be implicitly followed.”

13 Op. Att’y Gen. 288, 292 (1870). The placing of time limits on the availability of appropriations is one of the primary means of congressional control. By imposing a time limit, Congress reserves to itself the prerogative of periodically reviewing a given program or agency’s activities.

When an appropriation is by its terms made available for a fixed period of time or until a specified date, the general rule is that the availability relates to the authority to obligate the appropriation, and does not necessarily prohibit payments after the expiration date for obligations previously incurred, unless the payment is otherwise expressly prohibited by statute. 37 Comp. Gen. 861, 863 (1958); 23 Comp. Gen. 862 (1944); 18 Comp. Gen. 969 (1939); 16 Comp. Gen. 205 (1936).

Thus, a time-limited appropriation is available to incur an obligation only during the period for which it is made. However, it remains available beyond that period, within limits, to make adjustments to the amount of such obligations and to make payments to liquidate such obligations. In this connection, 31 U.S.C. § 1502(a) provides:

“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 complete contracts properly made within that period of availability and obligated consistent with section 1501 of this title. However, the appropriation or fund is not available for expenditure for a period beyond the period otherwise authorized by law.”

* * * * * *Annual appropriations (also called fiscal year or 1-year appropriations) are made for a specified fiscal year and are available for obligation only during the fiscal year for which made. The federal government’s fiscal year begins on October 1 and ends on September 30 of the following year. 31 U.S.C. §



Multiple-year Appropriations

No-year Appropriations

Available until expended or canceled

►The Bona Fide needs rule

1102. For example, fiscal year 2009 begins on October 1, 2008, and ends on September 30, 2009.

All appropriations are presumed to be annual appropriations unless the appropriation act expressly provides otherwise.

* * * * * *

Multiple year appropriations are available for obligation for a definite period in excess of one fiscal year. 37 Comp. Gen. 861, 863 (1958). For example, if a fiscal year 2009 appropriation act includes an appropriation account that specifies that it shall remain available until September 30, 2006, it is a 2-year appropriation. As a more specific illustration, the appropriation accounts for military construction are typically 5-year appropriations. Apart from the extended period of availability, multiple year appropriations are subject to the same principles applicable to annual appropriations and do not present any special problems.

A no-year appropriation is available for obligation without fiscal year limitation. For an appropriation to be considered a no-year appropriation, the appropriating language must expressly so provide. 31 U.S.C. § 1301(c). The standard language used to make a no-year appropriation is “to remain available until expended.” 40 Comp. Gen. 694, 696 (1961); 3 Comp. Dec. 623, 628 (1897); B-279886, Apr. 28, 1998; B-271607, June 3, 1996.

Unless canceled in accordance with 31 U.S.C. § 1555 or rescinded by another law, there are no time limits as to when no-year funds may be obligated and expended and the funds remain available for their original purposes until expended. 43 Comp. Gen. 657 (1964); 40 Comp. Gen. 694 (1961). This includes earmarks applicable to the use of no-year funds since they are coextensive with, and inseparable from, the period of availability of the no-year appropriation to which they relate. B-274576, Jan. 13, 1997.

Over a century ago, the Comptroller of the Treasury stated, “An appropriation should not be used for the purchase of an article not necessary for the use of a fiscal year in which ordered merely in order to use up such an appropriation.” 8 Comp. Dec. 346, 348 (1901). The bona fide needs rule is one of the fundamental principles of appropriations law: A fiscal year appropriation may be obligated only to meet a legitimate, or bona fide, need arising in, or in some cases arising prior to but continuing to exist in, the fiscal year for which the appropriation was made. Citations to this principle are numerous. See, e.g., 33 Comp. Gen. 57, 61 (1953); 16 Comp. Gen. 37 (1936); B-289801, Dec. 30, 2002; B-282601, Sept. 27, 1999; B-235678, July 30, 1990.



The concept

No ‘cookie-cutter’ answer. The facts govern.

Use it or lose it!

Resupply of stock items

The bona fide needs rule has a statutory basis. As noted in Chapter 1, the first general appropriation act in 1789 made appropriations “for the service of the present year,” and this concept continues to this time. This “one-year” concept is also reflected in 31 U.S.C. § 1502(a), sometimes called the “bona fide needs statute.” Originally enacted in 1870 (16 Stat. 251 (July12, 1870)), section 1502(a) provides that the balance of a fixed-term appropriation “is available only for payment of expenses properly incurred during the period of availability or to complete contracts properly made within that period….” The key word here is “properly”—expenses “properly incurred” or contracts “properly made” within the period of availability. See, e.g., 37 Comp. Gen. 155, 158 (1957). Additional statutory support for the rule is found in the Antideficiency Act, 31 U.S.C. § 1341(a), and the so-called Adequacy of Appropriations Act, 41 U.S.C. § 11. (Bona fide needs questions may involve other statutory restrictions as well. It also should be apparent that they are closely related to the subject matter covered in Chapter 7 on obligations.) For an early but still relevant and useful discussion, see 6 Comp. Dec. 815 (1900).

While the rule itself is universally applicable, determination of what constitutes a bona fide need of a particular fiscal year depends largely on the facts and circumstances of the particular case. 70 Comp. Gen. 469, 470(1991); 44 Comp. Gen. 399, 401 (1965); 37 Comp. Gen. at 159.

In its most elementary form—where the entire transaction (contract or purchase, delivery or other performance, and payment) takes place during the same fiscal year—the rule means simply that the appropriation is available only for the needs of the current year. A common application of the rule in this context is that an appropriation is not available for the needs of a future year. For example, suppose that, as the end of a fiscal year approaches, an agency purchases a truckload of pencils when it is clear that, based on current usage, it already has in stock enough pencils to last several years into the future. It would seem apparent that the agency was merely trying to use up its appropriation before it expired, and the purchase would violate the bona fide needs rule.

We do not mean to suggest that an agency may purchase only those supplies that it will actually use during the fiscal year. Agencies normally maintain inventories of common use items. The bona fide needs rule does not prevent maintaining a legitimate inventory at reasonable and historical levels, the “need” being to maintain the inventory level so as to avoid disruption of operations. The problem arises when the inventory crosses the line from reasonable to excessive. Future years’ needs and year-end spending are covered further in section B.2 of this chapter. Prior years’ needs are covered in section B.3 of this chapter.

Contracts or purchases crossing FY lines

►

Bona fide needs questions also frequently involve transactions that cover 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 following fiscal year. The question 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 fide need of the fiscal year to be charged. E.g., 70 Comp. Gen. 664, 667 (1991); 64 Comp. Gen. 359362



►Future year needs

Sharks?

‘…a plain violation of the law.’

►

The other side of the coin

►

(1985); 35 Comp. Gen. 692 (1956); 20 Comp. Gen. 436 (1941); 16 Comp. Gen. 37 (1936); 21 Comp. Dec. 822 (1915); 4 Comp. Dec. 553 (1898); B-289801, Dec. 30, 2002; B-257977, Nov. 15, 1995.

* * * * * *

Any discussion of obligating for future years’ needs inevitably leads to the question of year-end spending. Federal agencies as a fiscal year draws to a close are often likened to sharks on a feeding frenzy, furiously thrashing about to gobble up every appropriated dollar in sight before the ability to obligate those dollars is lost. The Comptroller of the Treasury stated the legal principle very simply in an early decision:

“An appropriation should not be used for the purchase of an article not necessary for the use of a fiscal year in which ordered merely in order to use up such appropriation. This would be a plain violation of the law.”8 Comp. Dec. 346, 348 (1901).

Thus, where an obligation is made toward the end of a fiscal year and it is clear from the facts and circumstances that the need relates to the following fiscal year, the bona fide needs rule has been violated. The obligation is not a proper charge against the earlier appropriation, but must be charged against the following year’s funds. This was the result, for example, in 1 Comp. Gen. 115 (1921), in which an order for gasoline had been placed 3 days before the end of fiscal year 1921, with the gasoline to be delivered in monthly installments in fiscal year 1922.

* * * * * *

Yet, this is only one side of the coin. The other side is illustrated in another passage from 8 Comp. Dec. at 348:

“An appropriation is just as much available to supply the needs of the [last day] of a particular year as any other day or time in the year.”

Thus, a year-end obligation perhaps raises the possibility that the agency is trying to “dump” its remaining funds and warrants a further look, but the timing of the obligation does not, in and of itself, establish anything improper. 38 Comp. Gen. 628, 630 (1959); 6 Comp. Dec. 815, 818 (1900).

►Delivery of Materials beyond the Fiscal Year

Legitimate situations

* * * * * *

When the government purchases goods or materials in one fiscal year and delivery occurs in whole or in part in a subsequent fiscal year, the question is whether the contract meets a bona fide need of the fiscal year in which it was made. This was the central legal issue in our discussion of year-end spending in section B.2 of this chapter, but the issue exists regardless of when in the fiscal year the contract is made. In this section we will explore those contracts where the agency intends to meet the needs of the fiscal year in which it entered into the contract. We will discuss multiyear contracts, where an agency intends to meet its needs for more than one fiscal year, in sections B.8 and B.9.

An agency may not obligate funds when it is apparent from the outset that



for an order to cross FY lines

Procurement lead time rule

Materials not obtainable in market

Unforeseen delays

Resupply stock used in the FY

►Ordering Services that cross FY lines

First, ‘entire”; nonseverable;

there will be no requirement until the following fiscal year.However, the timing of delivery, while obviously a relevant factor, is not conclusive. There are perfectly legitimate situations in which an obligation may be incurred in one fiscal year with delivery to occur in a subsequent year.

Thus, where materials cannot be obtained in the same fiscal year in which they are needed and contracted for, provisions for delivery in the subsequent fiscal year do not violate the bona fide needs rule as long as the time intervening between contracting and delivery is not excessive and the procurement is not for standard commercial items readily available from other sources. 38 Comp. Gen. at 630.

Similarly, an agency may contract in one fiscal year for delivery in a subsequent year if the material contracted for will not be obtainable on the open market at the time needed for use, provided the intervening period is necessary for production or fabrication of the material. 37 Comp. Gen. 155, 159 (1957).

If an obligation is proper when made, unforeseen delays that cause delivery or performance to extend into the following fiscal year will not invalidate the obligation. In one case, for example, although work under a construction contract was performed during the fiscal year following its execution, the Comptroller General approved payment to the contractor under the original obligation since the agency had awarded the contract as expeditiously as possible and had made provision for the work to begin within the current fiscal year, but experienced a delay in obtaining certain materials the government had agreed to provide. 1 Comp. Gen. 708 (1922). See also 23 Comp. Gen. 82 (1943); 20 Comp. Gen. 436 (1941).

An order or contract for the replacement of stock is viewed as meeting a bona fide need of the year in which the contract is made as long as it is intended to replace stock used in that year, even though the replacement items will not be used until the following year. See 44 Comp. Gen. 695 (1965). “Stock” in this context refers to “readily available common-use standard items.” Id. at 697. See also 73 Comp. Gen. 259 (1994); 32 Comp. Gen. 436 (1953). Generally, scheduling delivery for the following year would seem irrelevant. There are limits, however. GAO has questioned the propriety, from the bona fide needs perspective, of purchases of materials carried in stock for more than a year prior to issuance for use. B-134277, Dec. 18, 1957.

* * * * * *

Services procured by contract are generally viewed as chargeable to the appropriation current at the time the services are rendered.16 38 Comp. Gen. 316 (1958). However, a need may arise in one fiscal year for services that, by their nature, cannot be separated for performance in separate fiscal years. The Comptroller General has held that the question of whether to charge the appropriation current on the date the contract is made, or to charge funds current at the time the services are rendered, depends upon whether the services are “severable” or “entire”.

23 Comp. Gen. 370, 371 (1943). A contract that is viewed as “entire” is chargeable to the fiscal year in which it was made, notwithstanding that performance may have extended into the following fiscal year. The



A project

Severable(continuing and recurring in nature)

determining factor for whether services are severable or entire is whether they represent a single undertaking. Thus, in 23 Comp. Gen. 370, a contract for the cultivation and protection of a tract of rubber-bearing plants, payable on completion of the services, was chargeable against fiscal year funds for the year in which the contract was made. Because the services necessarily covered the entire growing period, which extended into the following fiscal year, the Comptroller General characterized them as a single 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 therefore at the time the contract was entered into.” Id.at 371.

The rationale of 23 Comp. Gen. 370 was applied in 59 Comp. Gen. 386 (1980) (requisition for printing accompanied by manuscript sufficient for Government Printing Office to proceed with job). See, e.g., 65 Comp. Gen. 741 (1986) (contract for study and final report on psychological problems among Vietnam veterans); B-257977, Nov. 15, 1995 (contract for 2-year intern training program since interns are required to complete entire training program to be eligible for noncompetitive Presidential Management Intern appointment). See also 73 Comp. Gen. 77 (1994) (subsequent modifications to Fish and Wildlife Service research work orders should be charged to the fiscal year current when the work orders were issued since the purpose of the research is to provide a final research report and the services under the contract are nonseverable). The last opinion is noteworthy because it pointed out that a limitation of funds clause does not affect the application of the bona fide needs rule and the severable test. 73 Comp. Gen. at 80.

However, where the services are continuing and recurring in nature, the contract is severable. Service contracts that are “severable” may not cross fiscal year lines unless authorized by statute. 71 Comp. Gen. 428 (1992); 58 Comp. Gen. 321, 324 (1979); B-192518, Aug. 9, 1979; B-133001, Mar. 9, 1979; B-187881, Oct. 3, 1977. See also B-287619, July 5, 2001 (TRICARE contractors provide on-going services such as enrolling beneficiaries, adjudicating claims, etc., that are severable into components that independently provide value). Most federal agencies have authority to enter into a 1-year severable service contract, beginning at any time during the fiscal year and extending into the next fiscal year, and to obligate the total amount of the contract to the appropriation current at the time the agency entered into the contract.17 10 U.S.C. § 2410a (defense agencies); 41 U.S.C. § 253l (civilian agencies); 41 U.S.C. § 253l-1 (Comptroller General); 41 U.S.C. § 253l-2

Severable services must be charged to the FY in which work is performed

(Library of Congress); 41 U.S.C. § 253l-3 (Chief Administrative Officer of the House of Representatives); 41 U.S.C. § 253l-4 (Congressional Budget Office). See also B-259274, May 22, 1996. Otherwise, the services must be charged to the fiscal year(s) in which they are rendered. 65 Comp. Gen. at 743; 33 Comp. Gen. 90 (1953) (trucking services); 10 Comp. Dec. 284 (1903) (contract for services of various categories of skilled laborers in such quantities and at such times as may be deemed necessary is severable). As stated in 33 Comp. Gen. at 92:

“The need for current services, such as those covered by the contract here under consideration, arises only from day to day, or month to month, and the Government cannot, in the absence of specific legislative authorization, be obligated for such services by any contract running beyond the



Severable or nonseverable?

The type of contract does not dictate the obligation treatment

►But, how you chose to word the statement of work does

A simple test

►Multiple year arrangements

fiscal year.”

See also 35 Comp. Gen. 319 (1955), amplified by B-125444, Feb. 16, 1956 (gardening and window cleaning services).

* * * * * *

After a confusing start, we have determined that the type of contract does not affect the severable versus nonseverable distinction. For example, “level-of-effort” contracts may be severable or nonseverable. A level-of effort contract is a type of cost-reimbursement contract in which the scope of work is defined in general terms, with the contractor being obligated to provide a specified level of effort (e.g., a specified number of person-hours) for a stated time period. Federal Acquisition Regulation, 48 C.F.R. § 16.306(d)(2). The bona fide needs determination is based not on the contract type but on the nature of the work being performed and is, in the first instance, the responsibility of the contracting agency. B-235678, July 30, 1990. A 1985 case, 65 Comp. Gen. 154, had implied that all level-of effort contracts were severable by definition (id. at 156), and to that extent was modified by B-235678. See also B-277165, Jan. 10, 2000 (cost-plus-fixed fee contracts are presumptively severable unless the actual nature of the work warrants a different conclusion).

The Comptroller General has noted that to some degree an agency can control whether services are severable or nonseverable by selecting the type of contract and crafting the statement of work. B-277165, supra (“one might reasonably conclude that the initial agency determination whether the contract is for funding purposes severable or nonseverable takes place roughly contemporaneously with agency selection of contract type”).

As a final thought, there is a fairly simple test that is often helpful in determining whether a given service is severable or nonseverable. Suppose that a service contract is to be performed half in one fiscal year and half in the next. Suppose further that the contract is terminated at the end of the first fiscal year and is not renewed. What do you have? In the case of a window-cleaning contract, you have half of your windows clean, a benefit that is not diminished by the fact that the other half is still dirty. What you paid for the first half has not been wasted. These services are clearly severable. Now consider a contract to conduct a study and prepare a final report, as in 65 Comp. Gen. 741 (1986). If this contract is terminated halfway through, you essentially have nothing. The partial results of an incomplete study, while perhaps beneficial in some ethereal sense, do not do you very much good when what you needed was the complete study and report. Or suppose the contract is to repair a broken frammis. If the repairs are not completed, certainly some work has been done but you still don’t have an operational frammis. The latter two examples are nonseverable.

* * * * * *

There are several general authorities to contract across a fiscal year or to enter into multiyear contracts. For example, 41 U.S.C. § 253l authorizes the heads of executive agencies to enter into procurement contracts for severable services for periods beginning in one fiscal year and ending in the next fiscal year as long as the contracts do not exceed 1 year. It permits agencies to obligate the total amount of the contract to appropriations of the first fiscal year. Without specific statutory authority such as this, such action would violate the bona fide needs rule (see section B.5 of this chapter).



41 U.S.C. 253l

►10 U.S.C. 2410a for DoD

►10 U.S.C 2306b, 2306c

DoD may obligate (for certain programs)requirements for up to 5 years and obligate entire amount using appropriation available when contract is effective.

►

Section 253l, in effect, redefines for an agency that elects to contract under authority of section 253l its bona fide need for the severable services for which it is contracting. Related statutes extend this authority to various legislative branch entities. 29

Similarly, 10 U.S.C. § 2410a authorizes the military departments to use current fiscal year appropriations to finance severable service contracts into the next fiscal year for a total period not to exceed 1 year. GAO states in B-259274, May 22,1996, that “[t]he purpose of 10 U.S.C. § 2410a is to overcome the bona fide needs rule,” which is another way of saying that Congress has provided the military departments with authority to properly enter into a contract not to exceed 1 year that crosses fiscal years. The statute specifically authorizes the departments to obligate “[f]unds made available for a fiscal year …for the total amount of a contract entered into” under section 2410a(a).

In addition to the severable services contracting authority, Congress has provided executive, legislative, and judicial entities substantial authority for multiyear contracting for goods and services using annual funds. The military departments are authorized by 10 U.S.C. §§ 2306b and 2306c to enter into multiyear contracts for goods and services, respectively, for periods of not more than 5 years if certain administrative determinations are made. Section 2306b applies not only to routine supplies, but also to the military departments acquisition of weapon systems and items and services associated with such systems. Section 2306c, enacted in response to the Wake Island decision (see 67 Comp. Gen. 190, 193 (1988)), applies to such services as installation maintenance and support, maintenance or modification of aircraft and other complex military equipment, specialized training, and base services. Sections 2306b and 2306c permit the military departments to obligate the entire amount of the 5-year contract to the fiscal year appropriation current at the time of contract award, even though the goods or services procured for the final 4 years of the contract do not constitute needs of that fiscal year. Alternatively, sections 2306b and 2306c permit the military departments to obligate the amount for each of the 5 years against appropriations enacted for each of those years. If funds are not made available for continuation in a subsequent fiscal year, cancellation or termination costs may be paid from appropriations originally available for the contract, appropriations currently available for the same general purpose, or appropriations made specifically for those payments. 10 U.S.C. §§ 2306b(f) and 2306c(e). The authority contained in sections 2306b and 2306c is also available to the Coast Guard and the National Aeronautics and Space Administration. 10 U.S.C. § 2303.

The Federal Acquisition Streamlining Act of 1994 (FASA) and related statutes extended multiyear contracting authority with annual funds to nonmilitary departments. FASA authorizes an executive agency to enter into a multiyear contract for the acquisition of property or services for more than 1, but not more than 5 years, if the agency makes certain administrative determinations. 41 U.S.C. § 254c. Related laws extend this authority to various legislative branch agencies. Through FASA and the related laws, Congress has relaxed the constraints of the bona fide needs rule by giving agencies the flexibility to structure contracts to fund the obligations up front, incrementally, or by using the standard bona fide needs rule approach. B-277165, Jan. 10, 2000. To the extent an agency elects to obligate a 5-year contract incrementally, it must also obligate termination costs.



41 U.S.C. 254c

Non-DoD agencies also have the authority

Congress relaxed the bona fide need restrictions

The enactment of FASA satisfied the GAO recommendation for the enactment of legislation to authorize all federal agencies to engage in limited multiyear procurement. See U.S. General Accounting Office, Federal Agencies Should Be Given General Multiyear Contracting Authority For Supplies and Services, PSAD-78-54 (Washington, D.C.: Jan. 10, 1978). See also B-214545, Aug. 7, 1985 (comments on proposed legislation).



End-of-Year Funds

The requirements for the use of end-of-year funds are provided in the below-cited United States Codes and the Federal Acquisition Regulation sections. For the original versions refer to (http://uscode.house.gov/usc.htm) and (http://www.gsa.gov).

UNITED STATES CODE:

o 41 U.S.C. Section 253 l - Severable services contracts for periods crossing fiscal years a. Authority

The head of an executive agency may enter into a contract for procurement of severable services for a period that begins in one fiscal year and ends in the next fiscal year if (without regard to any option to extend the period of the contract) the contract period does not exceed one year.

b. Obligation of funds Funds made available for a fiscal year may be obligated for the total amount of a contract entered into under the authority of subsection (a) of this section.

o 42 U.S.C. Section 3515, Chapter 43, Subchapter I - Performance of one-year contracts during two fiscal years. Funds provided in this Act or subsequent Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Acts may be used for one-year contracts that are to be performed in two fiscal years, so long as the total amount for such contracts is obligated in the year for which the funds are appropriated.

FEDERAL ACQUISITION REGULATION: o FAR 32.703-3 Contracts crossing fiscal years.

a. A contract that is funded by annual appropriations may not cross fiscal years, except in accordance with statutory authorization (e.g., 41 U.S.C. 11A, 31 U.S.C. 1308, 42 U.S.C. 2459A, 42 U.S.C. 3515, and paragraph (b) of this subsection), or when the contract calls for an end product that cannot feasibly be subdivided for separate performance in each fiscal year (e.g., contracts for expert or consultant services).

b. The head of an executive agency, except NASA, may enter into a contract, exercise an option, or place an order under a contract for severable services for a period that begins in one fiscal year and ends in the next fiscal year if the period of the contract awarded, option exercised, or order place does not exceed one year (10 U.S.C. 2410a and 41 U.S.C. 253l). Funds made available for a fiscal year may be obligated for the total amount of an action entered into under this authority.


http://uscode.house.gov/uscode-cgi/fastweb.exe?getdoc+uscview+t09t12+1378+1++()%20%20AND%20((10)%20ADJ%20USC)%3ACITE%20AND%20(USC%20w%2F10%20(2410a))%3ACITE%20%20%20%20%20%20%20%20%20

http://uscode.house.gov/uscode-cgi/fastweb.exe?getdoc+uscview+t41t42+3786+0++()%20%20AND%20((42)%20ADJ%20USC)%3ACITE%20AND%20(USC%20w%2F10%20(3515))%3ACITE%20%20%20%20%20%20%20%20%20





http://www.arnet.gov/far/current/html/Subpart_32_7.html#998209



http://uscode.house.gov/uscode-cgi/fastweb.exe?getdoc+uscview+t41t42+130+119++()%20%20AND%20((41)%20ADJ%20USC)%3ACITE%20%20%20%20%20%20%20%20%20

http://www.gsa.gov/

http://uscode.house.gov/usc.htm


FAR 37.106 Funding and term of service contracts.

a. When contracts for services are funded by annual appropriations, the term of contracts so funded shall not extend beyond the end of the fiscal year of the appropriation except when authorized by law (see paragraph (b) of this section for certain service contracts, FAR 32.703-2 for contracts conditioned upon availability of funds, and FAR 32.703-3 for contracts crossing fiscal years).

b. The head of an executive agency, except NASA, may enter into a contract, exercise an option, or place an order under a contract for severable services for a period that begins in one fiscal year and ends in the next fiscal year if the period of the contract awarded, option exercised, or order placed does not exceed one year (10 U.S.C. 2410a and 41 U.S.C. 253l). Funds made available for a fiscal year may be obligated for the total amount of an action entered into under this authority.

c. Agencies with statutory multiyear authority shall consider the use of this authority to encourage and promote economical business operations when acquiring services.







Part B: Request for Advance Payment

BackgroundIt is October 13, 2008. On October 11, 2008 the Project Officer for Speedy Studies Inc. formally requested a $400,000 advance payment to cover costs associated with developing the study plan and the initial data collection efforts. The contracting officer has forwarded the request to your office asking you to certify the advance payment to disbursing.

DetailsThe contractor is running behind schedule. He states he is having some labor shortages and serious cash flow problems all related to the war on terrorism and the recession. It seems that a large number of his employees were members of a local National Guard unit which was activated for two years during the Iraq war. If he can have the advance he can hire more people, get them trained on the specifics of this contract and complete the plan, which he says is 85% finished. Without the advance, the contractor may not be able to resume work on the project until after January 1, 2009.

The Program Manager (PM) is sympathetic with Speedy’s situation and believes it only proper and patriotic that the advance payment be approved.

The contracting officer indicates that if it were left up to him the advance would be denied. He and the PM are engaged in a minor bureaucratic war over the matter.

Funding Same as Part 1.

AssignmentYou are the certifying official responsible for approving the advance payment. In making your decision, answer the “Specific Issues” questions in the Specific Issues Handout booklet.





Advance Payments



Part B: Request for Advance Payment

Red Book Reference

Vol 1, Principles of Appropriations Law>Availability of Appropriations: Time>Advance Payments

Short Title Advance Payments

Principle of Law

Payments shall be for not more than the value of the actual goods or services received.

Exceptions As authorized by statute; tuition payments; magazine subscriptions, certain fast pay provisions

Pages RB pages 5-50..67

The Principle of Law

Types of contracts financing

Advance payments in general are prohibited by 31 U.S.C. § 3324, which provides in part:

“(a) Except as provided in this section, a payment under a contract to provide a service or deliver an article for the United States Government may not be more than the value of the service already provided or the article already delivered.

“(b) An advance of public money may be made only if it is authorized by—

“(1) a specific appropriation or other law ….”

* * * * * *“Contract financing payment” is defined by the Federal Acquisition Regulation (FAR) as an authorized government disbursement of moneys to a contractor prior to acceptance of supplies or services by the government. Such payments include: advance payments; performance-based payments; commercial advance and interim payments; certain cost-based progress payments; certain percentage- or stage-of-completion-based progress payments; and interim payments under certain cost reimbursement contracts. 48 C.F.R. § 32.001. “Advance payments” are payments made to a prime contractor before, in anticipation of, and for the purpose of complete performance under one or more contracts. Such payments are not measured by performance. 48 C.F.R. § 32.102(a). “Progress payments based on costs” are made on the basis of costs incurred by the contractor as work progresses under the contract. 48 C.F.R. § 32.102(b). Progress payments based on percentage or stage of completion are to be made under agency procedures that ensure that payments are commensurate with the work accomplished that meets the quality standards established under the contract. 48 C.F.R. § 32.102(e).



Adequate security; liens on property

Other governmental entities

Economy Act

State and local government entities

Applies only to exclusive state or local services and materials

Both provisions provide that whenever practicable, payments are to be made based on (1) performance, using quantifiable methods such as delivery of acceptable items, work measurement, or statistical process controls; (2) accomplishment of events defined in a program management plan; or (3) other quantifiable measures of results. 10 U.S.C. § 2307(b); 41 U.S.C. § 255(b). Both provisions establish conditions for progress payments for work in process and limit such payments to 80 percent of the contract price for contracts over $25,000. 10 U.S.C. § 2307(e); 41 U.S.C. § 255(e).

* * * * * *

Both provisions provide that advance payments may be made only upon adequate security and a determination by the agency head that such would be in the public interest. Such security interest may be in the form of a lien in favor of the government on the property contracted for, on the balance in an account in which such payments are deposited, and such of the property acquired for performance of the contract as agreed to by the parties. The lien is to be paramount to all other liens and effective immediately upon the first advance of funds without filing, notice, or any other action by the government. 10 U.S.C. § 2307(d); 41 U.S.C. § 255(d). Advance payments for commercial items may not exceed 15 percent of the contract price in advance of any performance of work under the contract.

* * * * * *

The Comptroller General has not applied the advance payment prohibition to payments to other federal agencies. As noted previously, the primary purpose of the prohibition is to preclude the possibility of loss in the event a contractor, after receipt of payment, should fail to perform and fail or refuse to refund the money to the United States. The danger of such a loss is minimized when the contractor is another government agency. Thus, 31 U.S.C. § 3324 does not prohibit advance payment of post office box rentals. 25 Comp. Gen. 834 (1946).

Also, the Economy Act, 31 U.S.C. § 1535, expressly authorizes advance payments for transactions within its scope. GAO has applied the same rationale to exempt state and local governments from the advance payment prohibition. E.g., 57 Comp. Gen. 399 (1978) (no objection to advance payment of rent under lease of land from state of Idaho).

This exception, however, applies only where the state is furnishing noncommercial services reasonably available only from the state. 39 Comp. Gen. 285 (1959); B-250935, Oct. 12, 1993 (sewer service charge); B-118846, Mar. 29, 1954 (expenses of state water commissioner administering Indian irrigation project pursuant to court order); B-109485, July 22, 1952 (repair, operation, and maintenance of roads in conjunction with permanent transfer of federal roads to county); B-65821, May 29, 1947, and B-34946, June 9, 1943 (state court fees and other items of expense required to litigate in state courts in compliance with the requirements of state law); B-36099, Aug. 14, 1943 (lease of state lands); B-35670, July 19, 1943 (state forest fire prevention and suppression services).

Conversely, where a state provides the federal government with services that are freely and readily available in the commercial market, the statutory advance payment restrictions applicable to private contractors govern. 58 Comp. Gen. 29 (1978) (telephone services).



Part C: Termination and Replacement of the Contract

BackgroundIt is December 10th, 2008. The Center for Injury Prevention and Control (CIPC) terminated the original contract with Speedy Studies on November 30, 2008. $1.450 million of the original $1.650 million contract (FY 08 appropriation) was deobligated and credited back to the expired appropriation’s unobligated balance. The original contract was awarded using the authority of 41 U.S.C. 253L The Program Manager (PM) wants to reuse the deobligated FY 08 funds and $700,000 of other FY 08 unobligated funds to award a replacement contract of $4.3 million. The accountable officer is uncertain it would be legal to use last year’s money.

DetailsSpeedy Studies, Inc. completed the Study Plan and the Project Manager (PM) accepted it. A payment of $200,000 was made. Unfortunately, the company filed for bankruptcy on November 11, 2008 and its project officer quit. All work stopped. Although the contractor’s difficulties contributed directly to the substandard performance on the contract, the PM, who felt the problem would not have occurred in the first place if the National Guard troops had not been mobilized, argued we should terminate the contract for convenience rather than default. He pointed out a protest relating to the refusal of the agency to provide an advance payment was sure to be lodged if the contract was terminated for default. This would be costly to the government to fight and would delay the rearward of the study contract to another contractor. The CIPC General Counsel and Contracting Officer disagreed. The Director, CIPC terminated the contract for default. A replacement contract could be awarded to the next best-qualified bidder, Reliable Research, Inc., a West Virginia based firm, for $4.3 million. They would commence work in 30 days.

FundingThe CIPC was funded in FY 08 with a one-year (annual) appropriation (66 8 0100). The total annual budget is $2.2 billion. Counting the deobligated amount from the terminated contract, there remain $5.6 million in the prior year appropriation.

AssignmentYou are the accountable certifying officer. The replacement contract is on your desk awaiting your certification. The Contracting Office, acting on the assurance of the Project Manager has placed FY 08 funds on the replacement contract. The Chief of Accounting disagrees. In analyzing whether you can certify the reobligation of the expired FY 08 appropriation, answer the “Specific Issues” questions in the Specific Issues Handout booklet.





Replacement Contracts



Part C: Termination and Replacement of the Contract

Red Book Reference

Vol 2, Principles of Appropriations Law>Availability of Appropriations: Time>Replacement Contracts

Short Title Replacement Contracts

Principle of LawReplacement contracts following a terminated prior year contract shall be obligated using appropriations in effect at the time of the replacement unless an exception applies.

Exceptions As authorized by statute; default terminations; convenience terminations where the government has no discretion regarding the termination.

Pages RB pages 5-3..4; 5-28..33

The rule

Agency should not be denied use of the appropriation due to contractor’s default.

Terminations for default.

In an early decision, the Comptroller of the Treasury was asked whether fiscal year 1902 funds, originally obligated under a contract but unexpended because of contractor default, could be used in the following year to continue the original object of the contract. The Comptroller stated:

“A contract was properly made within the fiscal year 1902, and it would seem that any part of the consideration of that contract which failed of use owing to the default of the contractor could still be used in carrying out the object of the original contract within the meaning of [31 U.S.C. § 1502(a)]. Appropriations are made to be used and not to be defeated in their use, and it would be a narrow construction to hold that a default on a properly made contract would prevent the use of the appropriation for the object for which it was made and for carrying out which the contract was executed.”

In its traditional form, the rule is well settled that, where it becomes necessary to terminate a contract because of the contractor’s default, the funds obligated under the original contract are available, beyond their original period of obligational availability, for the purpose of engaging another contractor to complete the unfinished work. 60 Comp. Gen. 591 (1981); 55 Comp. Gen. 1351 (1976); 44 Comp. Gen. 623 (1965); 40 Comp. Gen. 590 (1961); 32 Comp. Gen. 565 (1953); 2 Comp. Gen. 130 (1922); 21 Comp. Dec. 107 (1914); B-160834, Apr. 7, 1967; B-105555, Sept. 26, 1951; A-22134, Apr. 12, 1928.

Implicit in the rule is the premise that the original contract validly obligated then current funds. See 34 Comp. Gen. 239 (1954). In addition, the rule is based on the notion that the default termination does not eliminate the bona fide need of the fiscal year in which the original contract was executed. 44 Comp. Gen. 399, 401 (1965). In accordance with 31 U.S.C. § 1502, amounts from the appropriation available at the time the original contract was entered would remain available to fund costs properly chargeable to that appropriation. See B-242274, Aug. 27, 1991. Accordingly, the replacement contract seeks only to meet the agency’s preexisting and continuing need relying on the budget authority obligated by the original contract.



Three tests must be met

Must still need it

Can’t exceed scope

Replacement award reasonably soon after termination

Applies to convenience termination where no fault exists on either party

In order for funds to remain available beyond expiration for a replacement contract, three conditions must be met:

• A bona fide need for the work, supplies, or services must have existed when the original contract was executed, and it must continue to exist up to the award of the replacement contract. E.g., 55 Comp. Gen. 1351, 1353 (1976); 34 Comp. Gen. 239, 240 (1954). If a terminated contract is found to have been improperly made to fulfill a need of a fiscal year other than the year against which the obligation was recorded, it would also be improper to charge that same appropriation for obligations incident to a replacement contract. 35 Comp. Gen. 692 (1956). In addition, if contracts made in a subsequent fiscal year do not satisfy a continuing need for the goods and/or services provided under the original contract from a prior fiscal year, then the subsequent fiscal year contracts are not replacements and those contracts are not chargeable to the prior fiscal year appropriation. See B-242274, Aug. 27, 1991.

• The replacement contract must not exceed the scope of the original contract. If it does, it is a new obligation and must be charged to funds currently available for obligation at the time the replacement contract is entered into. E.g., 44 Comp. Gen. 399 (1965); B-181176-O.M., June 26, 1974.

• The replacement contract must be awarded within a reasonable time after termination of the original contract. E.g., 60 Comp. Gen. at 593. Excessive delay raises the presumption that the original contract was not intended to meet a then existing bona fide need. The same result may follow if there is unwarranted delay in terminating the original contract. 32 Comp. Gen. 565 (1953).

At one time, the replacement contract rule was mostly (but not exclusively) limited to the default situation. E.g., 24 Comp. Gen. 555 (1945), overruled by 55 Comp. Gen. 1351. It has, however, been expanded. In 34 Comp. Gen. 239 (1954), a default termination was found to be erroneous and was converted to a termination for convenience by agreement of the parties to permit settlement of the contractor’s claim for damages. The decision held that, in view of the original termination, the funds originally obligated were available for the timely execution of a new contract for the performance of the unfinished work.19 A further question in that case was whether the replacement contract rule was affected by the newly enacted 31 U.S.C. § 1501(a), which requires that contractual obligations be supported by a binding agreement in writing executed prior to expiration of the appropriations availability. The decision held that the original contract met these requirements. 34 Comp. Gen. at 241.

* * * * * *In a later case, a contract for flooring repairs was awarded in fiscal year 1975, obligating fiscal year 1975 funds, conditioned upon a determination from the Small Business Administration (SBA) that the contractor qualified as a small business. SBA found the contractor not to be a small business. Concluding that the original award was sufficient to support an obligation under 31 U.S.C. § 1501(a), the Comptroller General applied the replacement contract rule and held that the funds obligated for the contract in fiscal year 1975 could be used to resolicit in fiscal year 1976. 55 Comp. Gen. 1351 (1976).



GAO had an inconsistent view on the matter of convenience terminations

More inconsistency

In 1976 the matter began to take a clearer shape.

Now, more certainty

“..clear evidence the award was erroneous..”

Cases involving the termination of erroneously or improperly awarded contracts have been less than consistent, although a clear direction now appears evident. The earliest decisions applied the replacement contract rule. Thus, 17 Comp. Gen. 1098 (1938) held, without much discussion, that funds obligated by an award to a bidder subsequently determined not to have been the low bidder could be used for an award to the otherwise low bidder in the following fiscal year. In a 1953 case, a contract had to be partially canceled because the contractor’s bid had not conformed to the advertised specifications. GAO noted that “the obligating instrument was legally defective in such a way as to render the contract voidable at the election of the Government,” but nevertheless applied the replacement contract rule. B-116131, Oct. 19, 1953. See also B-89019, May 31, 1950.

GAO’s position seemed to change with the enactment of 31 U.S.C. § 1501(a) in 1954, on the theory that a contract award found to be invalid did not constitute a binding agreement so as to support a recordable obligation. 38 Comp. Gen. 190 (1958); B-118428, Sept. 21, 1954, overruling B-116131 and B-89019. However, B-116131 was at least arguably “reinstated” by B-152033, May 27, 1964, which followed both the “voidable at the election of the government” rationale and the result of B-116131, without citing either it or the case that presumably overruled it. See also B-173244(2), Aug. 10, 1972; B-158261, Mar. 9, 1966. This latter group of cases was in turn cited with approval in 55 Comp. Gen. 1351, 1353 (1976).

The apparent direction indicated by 55 Comp. Gen. 1351 (1976) and the cases it cited was called into question by statements in 60 Comp. Gen. 591 (1981) to the effect that the replacement contract rule does not apply to terminations for the convenience of the government, whether initiated by the contracting agency or on recommendation of some other body such as GAO. Of course, the typical situation in which a replacement contract is needed following a termination for convenience is where the original contract is found to have been improperly awarded. An important clarification occurred in 68 Comp. Gen. 158 (1988), which modified 60 Comp. Gen. 591 and held the replacement contract rule applicable where a contract must be terminated for convenience, without a prior default termination, pursuant to a determination by competent administrative or judicial authority (court, board of contract appeals, GAO) that the contract award was improper. As noted previously, the bona fide need of the original contract must continue, and the replacement contract must be made without undue delay after the original contract is terminated and must be awarded on the same basis as, and be substantially similar in scope and size to, the original contract.

Logically and inevitably, the next question would be why the rule should not be the same regardless of whether the defect leading to termination is determined by an external reviewing body or by the contracting agency itself. It should make no difference, GAO concluded in 70 Comp. Gen. 230 (1991). The essence of the problem—a legal impropriety in the procurement process requiring corrective action—is no different. Thus, the replacement contract rule, with its attendant conditions, applies where the contracting agency determines that a contract award was improper and terminates the contract for the convenience of the government, provided there is clear evidence that the award was erroneous and the agency documents its determination with appropriate findings of fact and law. Id.



And, thus a fourth test added to the previously stated three

It is worth noting that with regard to agencies that terminate their contracts based on improper awards, the 1991 GAO decision added a fourth condition to the three articulated earlier in this section that determine whether funds remain available in a subsequent fiscal year for replacement contracts. In addition to the existence of a continuing bona fide need, a replacement contract of the same size and scope as the original, and the execution of the replacement without undue delay, the decision added that the original contract had to be made in “good faith” before an agency could use prior year appropriations to fund a replacement contract after terminating the original for convenience due to an improper award; 70 Comp. Gen. 287, 289 (1991).



Part D: Amendment Affecting Price

SummaryThe decision having been made as to the proper appropriation to use for the replacement contract you are prepared to certify the appropriation and obligate the funds. But, before the replacement is issued, Reliable is now requesting two modifications to the original award be added to the replacement award that would result in an increase in the contract price. There are questions as to which appropriation should pay for the changes: FY 08 or FY 09.

DetailsReliable Research, Inc. commenced work on December 30, 2008. On January 14, 2009 they reported to the PM they were unable to complete the work as contracted. It seems the data they are attempting to import from the various sources around the country are not compatible with it’s software and there is not a product on the market that can convert the data into a single database. The conversion will be time consuming resulting in additional costs and further delays. The government did not address the conversion issue in the solicitation and the contractor could not possibly have anticipated the problem in its bid. The General Counsel for the CIPC concurs with Reliable’s assessment. Reliable estimates the conversion process will cost an additional $800,000. The PM says the conversion must be done and the amount seems reasonable. Without it the study cannot be accomplished. On another matter, Reliable has offered to provide the government with a deliverable that was identified in the original solicitation but the CIPC did not award that line item due to financial reasons. Reliable now asks if the CIPC wants to include the additional project. They can expand the analysis to include data from Canada and Mexico for an additional $675,000, which is their previous bid amount for the work. (Conversion issues were considered when they made the bid for this line item.) The PM wants the added deliverable as well. He says there is enough money in the selected appropriation to cover both. The accounting department says selected appropriation cannot be used because both tasks represent a change in scope and must be charged to the current year appropriation.

FundingThe CIPC was funded in FY 08 with a one-year (annual) appropriation (66 8 0100). The total annual budget was $2.2 billion. There remains unobligated $1,752,863 in the prior year appropriation.

AssignmentYou are the accountable certifying officer with whom the decision rests as to which appropriation to use in funding the two modifications, if undertaken. In completing your research, answer the Specific Issues questions in the Specific Issues Handout booklet.





Amendments Affecting Price



Part D: Amendment Affecting Price

Red Book Reference

Vol II, Principles of Appropriations Law>Availability of Appropriations: Time>Contract Modifications and Amendments Affecting Price

Short Title Contract Modifications

Principle of Law Modifications are generally charged to the appropriation in effect at the time of the modification.

Exceptions Amendments that don’t change price; Antecedent liability;

Pages RB pages 5-3..4; 5-33..37

The rule

Scope changes are new obligations

Severable services charged to FY in which services are performed

Contract performance may extend over several years. During this time, the contract may be modified or amended for a variety of reasons at the instigation of either party. An amendment within the general scope of the contract that does not increase the contract price remains an obligation of the year in which the contract was executed. B-68707, Aug. 19, 1947. If the codification results in an increase in contract price, the question from the bona fide needs perspective is which fiscal year to charge with the modification.

If the modification exceeds the general scope of the original [nonseverable] contract, for example, by increasing the quantity of items to be delivered, the modification amounts to a new obligation and is chargeable to funds current at the time the modification is made. 37 Comp. Gen. 861 (1958); B-207433, Sept. 16, 1983. When the Internal Revenue Service (IRS) benefited from a contractual provision that allowed its contractor to pass along cost savings to the agency in a fiscal year subsequent to when it entered the contract, IRS could not use those cost savings to increase the quantity of items that the contract required the contractor to deliver. B-257617, Apr. 18, 1995. Although there was a bona fide need for an increased quantity of items that had continued from the fiscal year that IRS entered the contract, it was not within the scope of the contract to increase the quantity of items delivered. If the contractual provision had stated that a cost savings would be passed on to IRS in the form of an increased quantity of items delivered, then increasing the quantity would not have constituted a contract modification creating a new obligation. Id.

In the case of a contract for severable services, a modification providing for increased services must be charged to the fiscal year or years in which the services are rendered, applying the principles discussed in this chapter in section B.5.20 61 Comp. Gen. 184 (1981), aff’d upon reconsideration, B-202222, Aug. 2, 1983; B-224702, Aug. 5, 1987. See also B-235086, Apr. 24, 1991. In 61 Comp. Gen. 184, for example, a contract to provide facilities and staff to operate a project camp was modified in the last month of fiscal year 1980. The modification called for work to be performed in fiscal year 1981.



41 U.S.C. 253l and 10 U.S.C. 2410a - big changes(See Part 1)

Modifications the result of contract clauses

Antecedent liability

Regardless of whether the contract was viewed as a service contract or a contract to provide facilities, the modification did not meet a bona fide need of fiscal year 1980. The modification amounted to a separate contract and could be charged only to fiscal year 1981 funds, notwithstanding that it purported to modify a contract properly chargeable to fiscal year 1980 funds.

Footnote 20. Presumably, if an agency, acting under authority to charge a 12-month severable services contract that crosses fiscal years to the appropriation current in the first fiscal year, had charged the original obligation to the first fiscal year, the agency should charge the costs of the modification to that same appropriation. We discuss this authority for civilian agencies and 10 U.S.C. § 2410a for military departments) in section B.9.a of this chapter. We found no case law addressing this point, however. See generally B-259274, May 22, 1996 (discussing 10 U.S.C. § 2410a).

For modifications within the general scope of the original contract, the situation is a bit more complicated. Most government contracts contain provisions which, under certain conditions, render the government liable to make equitable adjustments in the contract price. Such liability may arise due to changes in specifications, government-caused delay, changed conditions, increased overhead rates, etc. These conditions are set out in standard contract clauses such as the “Changes” clause, “Government Property” clause, or “Negotiated Overhead Rates” clause.

Because there is no way to know whether the government will actually incur liability under these provisions, and if so, the amount of such liability, until the occurrence of the specified conditions (cf. 50 Comp. Gen. 589, 591 (1971)), the appropriations charged with the cost of the contract are not firmly obligated to cover future price increases, which arise due to the operation of these clauses. Nevertheless, as noted, government contracts frequently contemplate that performance will extend into subsequent fiscal years. When an upward price adjustment is necessitated in a subsequent year, the general approach is to ask whether the adjustment is attributable to an “antecedent liability”—that is, whether the government’s liability arises and is enforceable under a provision in the original contract. If the answer to this question is yes, then a within-scope price adjustment, which is requested and approved in a subsequent fiscal year, for example, under the “Changes” clause, will—with one important qualification to be noted later—be charged against the appropriation current at the time the contract was originally executed. Cases supporting this proposition in various contexts are 59 Comp. Gen. 518 (1980); 23 Comp. Gen. 943 (1944); 21 Comp. Gen. 574 (1941); 18 Comp. Gen. 363 (1938); A-15225, Sept. 24, 1926; B-146285-O.M., Sept. 28, 1976.21 See also B-197344, Aug. 21, 1980, where supplemental work was done without issuance of a formal contract modification. This principle is occasionally referred to as the doctrine of “relation back.” E.g., 37 Comp. Gen. 861, 863 (1958).



Change order does not alter the bona fide need of the year awarded

Closed appropriations

The reasoning is that a change order does not give rise to a new liability, but instead only renders fixed and certain the amount of the government’s preexisting liability to adjust the contract price. Since that liability arises at the time the original contract is executed, the subsequent price adjustment is viewed as reflecting a bona fide need of the same year in which funds were obligated for payment of the original contract price. The concept was stated as follows in 23 Comp. Gen. 943, 945 (1944) (explanatory information provided):

“It is true that at the time the contract was executed it as not known that there would, in fact, be any changes ordered …for which the contractor would be entitled to be paid an amount in addition to amounts otherwise payable under the contract. Also, it is true that [the Changes clause] contemplates the execution of amendments to the contract from time to time covering such changes. However, the fact remains that the obligations and liabilities of the parties respecting such changes are fixed by the terms of the original contract, and the various amendments merely render definite and liquidated the extent of the Government’s liability in connection with such changes.”

* * * * * *

For contracts spanning lengthy periods of time, funding of within scope modifications involves the use of expired appropriations. As discussed later in this chapter, the balances in expired accounts prior to closing are available without further congressional action.

Not all price adjustments arising from contract modifications or amendments represent a bona fide need of the year in which the agreement was made. If, as noted above, the change or amendment exceeds the general scope of the contract, or is not made pursuant to a provision in the original contract, then it is not based on any antecedent liability, in which event it may obligate only appropriations current at the time it is issued. 56 Comp. Gen. 414 (1977). See also 25 Comp. Gen. 332 (1945) (purported change order issued after completion of contract, covering work the contractor was not legally bound to do under the original contract, amounted to a new contract).

* * * * * *

Once an appropriation account has closed (generally five fiscal years after the expiration of obligational availability), questions of antecedent liability or relation back are no longer relevant for purposes of determining the availability of amounts in the closed accounts since, at that time, appropriation balances cease to be available for expenditure. However, questions of antecedent liability or relation back are used to determine the extent to which current funds are available since, once an appropriation closes, only current funds may be used, up to specified limits, for such obligations. 31 U.S.C. §§ 1552 and 1553.
