BNUMBER:  B-260993
DATE:  June 26, 1996
TITLE:  Economy Act Payments After Obligated Account is
Closed

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

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).