BNUMBER: B-260993
DATE: June 26, 1996
TITLE: Economy Act Payments After Obligated Account is
Closed
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Matter of:Economy Act Payments After Obligated Account is Closed
File: B-260993
Date: June 26, 1996
DIGEST
After an Economy Act agreement is completed and the ordering agency's
appropriation obligated by the agreement is closed, i.e., canceled, an
audit of the performing agency's contractor (engaged to provide the
ordered services under the agreement) discloses that the performing
agency owed the contractor additional amounts. Using no year funds,
the performing agency pays the contractor and seeks reimbursement from
the ordering agency. Since the Economy Act requires the ordering
agency to reimburse the performing agency its actual costs, the
ordering agency should reimburse the performing agency for payments
made to the contractor using current appropriations available for the
same general purpose. 31 U.S.C. sec. 1551 note.
DECISION
The Chief Financial Officer, Department of Energy (DOE), has requested
a decision on the liability of the Office of Surface Mining (OSM),
Department of the Interior (an ordering agency under the Economy Act)
to reimburse the DOE (a performing agency under the Economy Act)
additional amounts owed for work performed roughly 10 years earlier
and after the appropriation OSM obligated to perform the agreement has
closed. As explained below, OSM should reimburse DOE for costs
properly incurred to perform an Economy Act agreement even though the
appropriation obligated by the agreement has closed.
BACKGROUND
The Surface Mining Control and Reclamation Act of 1977, Pub. L. No.
95-87, 91 Stat. 447 (1977) (30 U.S.C. sec. 1201 et seq. (1994)),
established the OSM with responsibility to identify and reclaim
abandoned coal mines and land or waters affected by the mining
process. In March 1979, under the Economy Act, the DOE and OSM
entered into a Memorandum of Understanding pursuant to which the Oak
Ridge National Laboratory (ORNL) was to implement a national inventory
capability and provide an analysis and maintenance function for the
abandoned mines program. OSM agreed to reimburse DOE for actual costs
under the agreement. The work was to be performed in four phases
(with each phase involving a number of separate tasks) from March 1979
through September 1982. OSM modified the agreement to authorize
various tasks and accordingly raised the total estimated cost for the
agreement by the amount of the estimated costs of each modification.
The fifth and final modification dated December 20, 1982, raised the
total amount of funds obligated for the agreement to $5,867,500.
The DOE contractor operating and managing ORNL[1] executed a
cost-plus-fixed-fee contract with Lockheed Missiles and Space Company,
Inc., to perform the OSM Economy Act agreement. The DOE and OSM
considered the work complete in 1983 and closed the project.
Approximately 10 years later, the Defense Contract Audit Agency (DCAA)
audited the subcontract and issued a Contract Audit Closing Statement
dated March 1, 1993. As a result of DCAA audit, DOE determined that
it owed Lockheed an additional payment of $27,763, and paid this
amount to Lockheed. According to DOE, OSM has questioned its
obligation to pay since the agreement was completed in 1983 and the
appropriation used to fund the interagency agreement has been closed
and is no longer available for payment. We have been informally
advised by a DOE official that DOE made the contract/subcontract
payments to implement the interagency agreement (and for which it
seeks reimbursement) using no-year appropriations.
THE ECONOMY ACT
The Economy Act, 31 U.S.C. sec. 1535, 1536 (1994), authorizes one agency
to perform services or provide items to another government agency
either directly or by contract with a private party. An Economy Act
agreement represents a valid obligation against the ordering agency's
appropriations under 31 U.S.C. sec. 1501(a)(1) (1994), in an amount (1)
equal to the value of services performed for, or items provided to,
the ordering agency during the fiscal year, or (2) equal to the cost
of a contract entered into by the performing agency to provide the
ordered service or item. 31 U.S.C. sec. 1535(d). Payments under the
Economy Act may be made in advance of, or following, performance. The
Economy Act requires the ordering agency to pay the performing agency
its actual cost of performance.
When an agreement is funded by advances, the advances are usually
deposited to a special fund against which the performing agency
charges costs and makes payments to carry out the agreement. Any
advances remaining after the performing agency reconciles its actual
costs must be returned to the ordering agency. When the performing
agency chooses to finance the Economy Act agreement from its own
appropriations and recovers its actual costs by way of reimbursements
from the ordering agency, the performing agency may deposit the
reimbursements to the appropriation that funded the work. 31 U.S.C. sec.
1535(b), 1536. Thus where a no-year account or a current
appropriation has funded the work, the reimbursements would be
available for incurring new obligations. Where an expired or a closed
account has funded the work, the reimbursement would be deposited to
the credit of the expired account or the appropriate miscellaneous
receipt account in the General Fund of the Treasury, respectively. 31
U.S.C. sec. 1552(b) (1994).
THE ACCOUNT CLOSING LAW
Under the account closing law in effect until 1990, once a fixed
period appropriation was properly obligated, it remained available
indefinitely to pay the underlying obligation. 31 U.S.C. sec. 1551 et
seq. (1988). The obligation was initially recorded against the
currently available appropriation. If the obligation had not been
entirely performed by the time the appropriation expired, the agency
continued to carry the obligation in the expired account for 2 years.
After 2 years, the expired account was closed and the balance of any
remaining unperformed obligations were transferred to the merged ("M")
account which remained available indefinitely until the obligation was
completed and paid. When the appropriation account expired, the
unobligated balance was withdrawn to the Treasury as surplus
authority. The surplus authority could be restored to make upward
adjustments to the amount of a recorded obligation in the expired
account. When the appropriation account closed, the surplus
authority merged with the surplus authority that had been withdrawn
for all closed appropriation accounts for a similar purpose for prior
fiscal years. The merged surplus authority was available for
restoration indefinitely to make upward adjustments to obligations in
the "M" account. (See B-245856.4, Apr. 16, 1992 for a detailed
discussion of the procedure under the account closing law in effect
prior to 1990.) Thus, until 1990, a contract entered into by the
performing agency pursuant to an Economy Act agreement served to
obligate the appropriation of the ordering agency indefinitely until
the contract was performed and the actual cost was reimbursed.
In 1990, Pub. L. No. 101-510, sec. 1405(a), 104 Stat. 1675-1681 (1990),
amended the account closing law to close fixed period appropriations 5
years after they expire, by cancellation of their obligated and
unobligated balances. 31 U.S.C. sec. 1552 (1994). Section 1405(a) also
amended the law to provide that appropriation accounts that are
available for an indefinite period of time (commonly referred to as
no-year appropriation accounts) shall be closed, and any remaining
balances canceled, if the head of the agency or the President
determines that the appropriation's purpose has been carried out and
no disbursements have been made from the appropriation for 2
consecutive years. 31 U.S.C. sec. 1555 (1994). Thereafter, payments,
obligations or adjustments to obligations that would have been
properly chargeable to a closed account both as to purpose and amount
may be charged to a current account available for the same purpose,
subject to certain limitations not relevant here. 31 U.S.C. sec. 1553(b)
(1994).
To complete the transition to the new account closing procedure,
section 1405(b)(4) of the 1990 amendments (31 U.S.C. sec. 1551 note
(1994)) phased out the "M" accounts over a 3-year period, canceling
all remaining balances as of midnight September 30, 1993. Section
1405(b)(3) of the 1990 amendments (31 U.S.C. sec. 1551 note (1994))
canceled the merged surplus authority at midnight December 4, 1990.
Section 1405(b)(7) of the 1990 Amendments (31 U.S.C. sec. 1551 note
(1994)) provides that any obligation or adjustment to obligations that
would have been chargeable to canceled "M" account balances or
canceled merged surplus authority may be charged to current
appropriations subject to certain limitations. (See B-245856.4, Apr.
16, 1992, for a detailed discussion of the procedures enacted by the
1990 amendments to the account closing law). Thus, regardless of
whether an obligation was chargeable to an "M" account or an expired
account on the date the account was canceled, the 1990 amendments
authorize the payment of the obligation from current appropriations.
We assume for purposes of this discussion that the OSM charged the
obligation in question to a fixed period appropriation that had moved
to the "M" account and that subsequently had been canceled. However,
our holding is the same even if the question involved an obligation
charged against a no-year account that was closed either before or
after the 1990 amendments to the account closing law.[2] This is
relevant because the annual Department of the Interior and Related
Agencies Appropriations Acts for fiscal years 1979 through 1983
appropriated for the "Office of Surface Mining Reclamation and
Enforcement" annual funds under the heading "Regulation and
Technology" to carry out Pub. L. No. 95-87 and no-year funds under the
heading "Abandoned Mine Reclamation Fund" to carry out Title IV of
Pub. L. No. 95-87. It is unclear from the record before us whether
annual or no-year funds were used to fund the Economy Act
agreement.[3]
DISCUSSION
The Economy Act requires the ordering agency to reimburse the
performing agency the actual cost of providing the item or service to
avoid an unauthorized augmentation of the ordering agency's
appropriation. 65 Comp. Gen. 635 (1986); 64 Comp. Gen. 370 (1985).
This is true even when the performing agency incurs costs in excess of
the amounts set forth in the Economy Act agreement and the requesting
agency has received the benefits of the expenditures. B-250941.2,
Feb. 19, 1993. Also, the performing agency must refund overpayments
to the ordering agency (amounts advanced in excess of the actual cost
incurred) made from a no-year account under an Economy Act agreement
even though 12 years had elapsed since the completion of the Economy
Act agreement. 72 Comp. Gen. 120 (1993). We concluded in that
decision that "[t]he performing agency may only recover the actual
cost of goods and services provided and, when advance payment is made,
must return to the ordering agency amounts in excess of actual costs."
Id. at 122.
Similarly, an ordering agency should reimburse the performing agency
for actual costs incurred in performing an Economy Act agreement (that
in this case it has charged to no-year accounts) even though roughly
10 years have passed since the completion of the contract. This is
true even though the account or accounts originally obligated to fund
individual tasks under the Economy Act agreement have been closed. To
hold otherwise would result in an unauthorized augmentation of the
ordering agency's current appropriations at the expense of the
performing agency's no-year account. The fact that the DCAA audit did
not take place until some 10 years after the work was completed does
not serve to abrogate the reimbursement requirement.
/s/Robert Murphy
for Comptroller General
of the United States
1. The information submitted with the request indicates that at the
time DOE and OSM entered into the Economy Act agreement, the Union
Carbide Corporation, Nuclear Division (UC), operated and managed ORNL
for DOE under a cost type contract. However, Martin Marietta Energy
Systems, Inc., had replaced UC in operating and managing ORNL at the
time that DOE paid Lockheed the additional amount that OSM has refused
to reimburse.
2. See 31 U.S.C. sec. 1555(b) (1988) concerning payment of obligations
chargeable to no-year accounts closed prior to the 1990 amendments and
31 U.S.C. sec. 1553(b)(1) (1994) concerning payment of obligations
chargeable to no-year accounts properly closed after the 1990
amendments. See also, B-242666, August 31, 1993, concerning payment
of obligations chargeable to no-year accounts improperly closed after
the 1990 amendments.
3. See, e.g., Pub. L. No. 95-465, 92 Stat. 1279, 1286 (1978); Pub. L.
No. 97-394, 96 Stat. 1966, 1974 (1982).