BNUMBER: B-262110
DATE: March 19, 1997
TITLE: Environmental Protection Agency--Inspector
General--Cooperative Agreement--Procurement
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Matter of:Environmental Protection Agency--Inspector
General--Cooperative Agreement--Procurement
File: B-262110
Date: March 19, 1997
DIGEST
Environmental Protection Agency (EPA) should have used a procurement
contract rather than a cooperative agreement to obtain support
services from the University of Kansas (KU) for an EPA data management
conference. If EPA had chosen to use a contract to procure the
services, KU would not have been allowed to pay travel and related
expenses for non-federal conference attendees. However, since the EPA
Assistant Regional Administrator caused the error by choosing an
inappropriate funding vehicle, neither the certifying official nor KU
should have to repay EPA; both acted in good faith in fulfilling their
obligations and neither had a basis for questioning the Assistant
Regional Administrator's decision to use the cooperative agreement.
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DECISION
This responds to a request from the Inspector General of the
Environmental Protection Agency (EPA) for our opinion on whether EPA
should require either its certifying official or the University of
Kansas (KU) to repay the cost of travel and related expenses incurred
by non-federal attendees of an EPA conference, and paid by KU under a
cooperative agreement between EPA and KU for conference support
services. The Inspector General has concluded, and EPA agrees, that
under the Federal Grant and Cooperative Agreement Act, EPA should have
acquired conference support services from KU using a contract instead
of a cooperative agreement. 31 U.S.C. sec. 6303. The Inspector General
notes that under a contract, funds would not have been available to KU
to pay for the travel and related expenses of non-federal attendees,
and asks whether EPA's certifying official or KU should be required to
repay those amounts. In our opinion, neither the official who
certified the payments nor KU should be required to reimburse EPA for
the travel and related expenses since they both acted in good faith
and had no basis to question the decision of EPA's Assistant Regional
Administrator to use a cooperative agreement.
BACKGROUND
In April 1989, EPA's Region 7 awarded a cooperative agreement to KU in
response to a proposal to provide management services for EPA's
National Environmental Information Conference. The total amount
awarded was $533,523, which included approximately a 5 percent
contribution from KU. Approximately 400 EPA employees, a handful of
other federal employees, and almost 300 non-federal representatives,
primarily from state agencies, attended the conference. Just as it
had outlined in its proposal to EPA, KU used amounts awarded to cover
the cost of travel, hotels and meals for 171 of the non-federal
attendees. After an audit of the conference and the cooperative
agreement, the EPA Inspector General issued a report in June 1994
concluding that EPA should have used a contract to procure the
services of KU rather than a cooperative agreement because the support
services that KU provided were a direct benefit to EPA. Under the
Federal Grant and Cooperative Agreement Act of 1977, when the
principal purpose of the funding instrument is to acquire services
"for the direct benefit or use of the United States Government," the
agency acquiring the services should use a procurement contract to
fund the acquisition. 31 U.S.C. sec. 6303.
The Inspector General's report stated that as a result of using a
cooperative agreement instead of a contract, EPA circumvented the
statutory prohibition against using appropriated funds to pay for
travel and related expenses of non-federal officials. See 31 U.S.C. sec.
1345. The Inspector General, citing 55 Comp. Gen. 750, 754 (1976),
explained that while a contractor's use of contract funds are subject
to the restrictions placed on the contracting agency's use of
appropriated funds, funds transferred pursuant to a cooperative
agreement are not.[1] Because the travel and related expenses of
non-federal attendees would not have been allowed if EPA had chosen
the proper funding instrument, the report recommended that EPA
disallow all of the travel and related expenses and recover those
amounts from KU or the EPA certifying official.
ANALYSIS
Even though EPA management does not dispute that it should have
obtained the conference support services from KU through the use of a
contract instead of a cooperative agreement, it disagrees with the
Inspector General's recommendation that either the certifying official
or KU should reimburse EPA for the travel and related expenses of the
non-federal officials. EPA management asserts that neither of the two
parties should be held liable for the expenses since the payments on
behalf of the non-federal officials were the result of an error by the
Assistant Regional Administrator, Region 7. For the reasons discussed
below, we agree.
Prior to making the award to KU, EPA management had determined that
the only way for the conference to be successful was to ensure the
attendance of certain state and Native American officials. According
to EPA, the Assistant Regional Administrator, with this in mind, opted
to fund the conference with a cooperative agreement, knowing that the
travel and related costs of these officials could not be paid under a
contract. It appears from the record submitted to us, however, that
the Assistant Regional Administrator made her choice without reference
to the requirements of the Federal Grant and Cooperative Agreement
Act, and without confirmation by appropriate legal authority that her
choice was proper. In a July 30, 1993 memorandum, EPA's Deputy
Assistant Administrator for Management and Administration stated, "Had
we realized that the choice of instrument was at all questionable, we
would have obtained a more formal ruling, and sought advice from
contracts, grants, or legal counsel on this matter." He stated,
further, that the Assistant Regional Administrator "had every reason
to believe that she was correct in using a cooperative agreement. . .
. She was simply following [an approach] that I and others had assured
her was correct based on our honest opinion and experience." As
suggested by both EPA management and the Inspector General, with
respect to the Assistant Regional Administrator, any recourse is
through such personnel actions, including disciplinary ones,
appropriate under the facts and circumstances.
With respect to the certifying official and KU, we conclude that
neither may be required to repay the amount improperly spent to pay
the travel and related expenses of non-federal attendees. As a
general matter, certifying officials are responsible for the legality
of a payment under an appropriation, and are held strictly liable for
authorizing any payment that is prohibited by law. See 31 U.S.C. sec.
3528(a). Here, there was such an illegal payment; however, the
certifying official may be relieved of his liability upon a
determination that "(i) the obligation was incurred in good faith;
(ii) no law specifically prohibited the payment; and (iii) the United
States Government received value for payment." 31 U.S.C. sec.
3528(b)(1)(B).
A finding of good faith is premised, in large part, on our finding
that the certifying official did not have, nor should reasonably have
had, doubt regarding the propriety of the payment. B-257893, June 1,
1995. Whether the certifying official should have been in doubt
requires weighing all surrounding facts and circumstances and cannot
be resolved by any "hard and fast rule." 70 Comp. Gen. 723, 726
(1994). In many cases, good faith is found simply by the absence of
any evidence to the contrary. B-250884, Mar. 18, 1993. Here, we
found no evidence indicating that the certifying official doubted or
had reason to doubt his authority to certify the payments to KU.
The request for payment was submitted pursuant to a cooperative
agreement and we did not find anything on the face of the materials
that the certifying official had before him at the time of the
certification that would signify that the Assistant Regional
Administrator had erred in her choice of a funding instrument. To
suggest, in hindsight, that the certifying official should not have
relied on the Assistant Regional Administrator's determination, but
should have, instead, second guessed the Administrator's exercise of
discretion and refused to make the payment to KU, would create an
unreasonably high standard for the proper certification of payments.
It is often difficult to draw fine lines between the types of
arrangements and fact situations that require the use of a procurement
contract and those that do not. B-257430, Sept. 12, 1994; B-227084.6,
Dec. 19, 1988. We are not willing to charge the certifying official
with the responsibility of ensuring that agency officials are always
correct in exercising their discretion in choosing funding
instruments. A certifying official's inquiry should be directed at
assuring that correct administrative procedures are followed and the
agency's payment is within statutory limits. See B-257334, June 30,
1995. It becomes the certifying official's duty to second guess
matters usually reserved for the discretion of program officers only
when, in conducting his inquiry, the certifying official uncovers
information that indicates that the payment may be questionable, and
he must question the program officer's discretion in order to verify
the propriety of the payment.
In addition, no law specifically prohibited the payments certified
pursuant to the cooperative agreement. Without any indication that
Region 7's principal purpose was to acquire the services of KU, there
would be no reason for the certifying official to question the
Assistant Regional Administrator's choice of funding instruments. In
this regard, since no law prohibits the use of cooperative agreements
to pay the travel expenses of non-federal officials[2] and since the
proposed expenditure fell within amounts available to EPA, it was not
unreasonable for the official to certify the payment.
Regarding the third criterion for relief of the certifying official,
EPA received value for the payments to KU. The purpose of the
conference was to provide information on data management to the
attendees. EPA officials stated that it was critical for the state
and Native American officials to attend the conference so that they
would learn how to manage data effectively so that they could provide
timely, accurate and complete information to EPA. Since all three
elements for relief under section 3528(b)(1)(B) are present, we grant
relief to the certifying official.
With respect to KU, EPA has no claim. After awarding the cooperative
agreement to KU, EPA may not argue that KU should have to repay the
funds because it should have known that the EPA Assistant Regional
Administrator chose an improper funding instrument. KU apparently
performed in accordance with the terms of the cooperative agreement,
thereby discharging its obligations under its agreement with EPA. The
choice of instruments was EPA's, not KU's. Nor was KU in a position
to question the Assistant Regional Administrator's use of a
cooperative agreement to acquire the conference support services.
See, e.g., B-198976, Feb. 24, 1981 (Matters involving the exercise of
discretion afforded by law to an agency are not subject to the review
of a grantee).
Accordingly, we agree with EPA management that neither the certifying
official nor KU should have to repay EPA for the travel and related
expenses of the non-federal officials paid in accordance with the
terms of the cooperative agreement.
/s/Robert P. Murphy
for Comptroller General
of the United States
1. Because the nature of cooperative agreements "is to transfer a
thing of value to the . . . recipient," 31 U.S.C. sec. 6305(1), awards
made under cooperative agreements lose their identity as federal
funds.
2. See 62 Comp. Gen. 531, 533 (1983).