TITLE:   Unauthorized Use of Interest Earned on Appropriated Funds, B-283834, February 24, 2000
BNUMBER:  B-283834
DATE:  February 24, 2000
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Unauthorized Use of Interest Earned on Appropriated Funds
, B-283834, February 24, 2000

B-283834

February 24, 2000

Mr. John A. Carver
Trustee, Court Services and Offender Supervision Agency
for the District of Columbia
633 Indiana Avenue, N.W. 12th Floor
Washington, DC 20004

Subject: Unauthorized Use of Interest Earned on Appropriated Funds

Dear Mr. Carver:

Pursuant to a request from the Chairman of the House Subcommittee, District
of Columbia Appropriations, we reviewed interest earnings on federal funds
paid to various District of Columbia government entities from fiscal year
1995 through fiscal year 1999. During our review, we learned that the Court
Services and Offender Supervision Agency of the District of Columbia (CSOSA)
earned interest on funds appropriated to it and spent the interest in 1998
and 1999. As discussed below, we conclude that CSOSA lacked the requisite
statutory authority to spend the interest earned.

Congress appropriated to CSOSA $43 million for fiscal year 1998 and $59.4
million for fiscal year 1999. [1] Based on the information your agency
provided us, CSOSA earned approximately $1.693 million in interest by
depositing the 1998 appropriation in an interest bearing account. [2] Of the
interest earned, CSOSA spent approximately $1.575 million-approximately
$450,000 for 1999 contracts, approximately $688,000 for 1998 contracts and
approximately $437,000 for interagency services. Because CSOSA obligated all
but approximately $159,000 of its fiscal years 1998 and 1999 appropriations,
CSOSA's spending of the $1.575 million in interest resulted in CSOSA
spending in fiscal years 1998 and 1999 more than the budgetary resources
Congress provided in the appropriations acts.

The National Capital Revitalization and Self-Government Reorganization Act
of 1997 (Revitalization Act), Pub. L. No. 1105-33, Title XI, 111 Stat. 712
(1997) transferred a number of activities related to offender supervision
from District agencies to CSOSA. CSOSA will become an agency of the
executive branch of the federal government when the CSOSA Trustee certifies,
and the Attorney General concurs, that CSOSA can carry out the functions
assigned to it. [3] Until then, the functions are carried out under the
authority of the CSOSA Trustee, an independent officer of the District of
Columbia government. [4]

The District of Columbia Home Rule Act provides that no amount may be
obligated or expended by a District government officer or employee unless
such amount has been approved by an act of Congress and then only according
to such act. [5] The Antideficiency Act prohibits an officer or employee of
the District of Columbia Government from making or authorizing an
expenditure or obligation in excess of or in advance of an appropriation.
[6] Within this statutory framework, when Congress appropriates an amount
for the CSOSA Trustee, that amount establishes the authorized program
spending level beyond which the CSOSA Trustee may not operate in the absence
of additional authority.

When an agency retains and spends funds received from outside sources, it
augments its appropriation to the extent that such amount results in agency
spending in excess of the level established by the appropriation act. An
agency's authority to augment its appropriation is no greater than its
authority to spend funds in the absence of an appropriation. Further, even
when a law authorizes an officer or employee to receive funds from outside
sources, the authority to then spend the funds must be provided in law. The
authority to spend may not be inferred from the absence of an express
prohibition to spend in the law authorizing the collection. [7]

When Congress wants to authorize entities funded with appropriations to earn
and spend interest on appropriated funds, it expressly provides the
requisite legislative authority. For example, after Congress passed
legislation in 1995 establishing the Financial Responsibility and Management
Assistance Authority, the Congress amended the legislation in 1997 to
authorize the Authority to spend interest earned on various accounts,
including its annual appropriation. [8] Similarly, after we reported that DC
Courts had improperly spent interest earned on appropriated funds in fiscal
year 1998, Congress expressly provided for how DC Courts may spend interest
earned in fiscal year 1999. District of Columbia Appropriations Act, 2000,
Pub. L. No. 106-113, Div. A., Title I, 113 Stat. 1501, 1503 (1999). Congress
has not, however, enacted similar authority for CSOSA.

Early in our review, we solicited your agency's views regarding the legal
authority relied upon for CSOSA to spend interest earned on deposits.
Subsequently, we briefed CSOSA officials on our preliminary view that CSOSA
spent interest without the requisite authority. CSOSA's General Counsel
provided explanations that we considered in analyzing the issue. [9] Having
considered the material CSOSA provided, we conclude that CSOSA lacked the
requisite statutory authority to spend interest earned on appropriations,
and that CSOSA's spending the interest therefore constitutes an unauthorized
augmentation of its appropriation. To the extent the interest spent in 1998
and 1999 exceeds the unobligated balances of the appropriations made to
CSOSA for those fiscal years, CSOSA committed a reportable violation of the
Antideficiency Act. [10]

Sincerely yours,

Robert P. Murphy
General Counsel

Notes

1. Pub. L. No. 105-100, 111 Stat. 2160, 2161 (1997); Pub. L. No. 105-277,
112 Stat. 2681, 2681-123 (1998).

2. Congress changed the appropriation act language for fiscal year 1999 to
provide that Treasury would transfer the appropriated funds to CSOSA only as
needed to liquidate obligations. As a result, CSOSA did not earn interest on
the 1999 appropriation.

3. Sections 11232(h) and 11233 of the Revitalization Act, as amended, D.C.
Code Ann. sect.sect. 24-1232(h) and 1233 (1981, 1996 Replacement Vol. and 1999
Supp.)

4. D.C. Code Ann. sect. 24-1232(a).

5. Pub. L. No. 93-198, sect. 446, 87 Stat. 774, 801 (1973), D.C. Code Ann. sect.
47-304 (1981, 1997 Replacement Vol. and 1999 Supp.)

6. 31 U.S.C. sect. 1341 (1994).

7. We reached a similar conclusion regarding D.C. Courts spending interest
earned on federal appropriations. D.C. Courts, Planning and Budgeting
Difficulties During Fiscal Year 1998, GAO/AIMD/OGC-99-226, p. 10 (September
1999).

8. D.C. Code Ann. sect. 47-391.6(d)

9. CSOSA's comments focused primarily on the mitigating circumstances
relating to its spending in excess of available amounts and the corrective
action it has taken to prevent a recurrence.

10. 31 U.S.C. sect. 1351. See OMB Cir. A-34, sect.sect. 22.6 (November 1997) providing
guidance on the contents of an Antideficiency Act report to the President
and Congress.