TITLE:  Continued Availability of Expired Appropriation for Additional Project, B-286929, April 25, 2001
BNUMBER:  B-286929
DATE:  April 25, 2001
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Continued Availability of Expired Appropriation for Additional Project,
B-286929, April 25, 2001

Decision

Matter of: Continued Availability of Expired Appropriation for Additional
Project Phases

File: B-286929

Date: April 25, 2001

DIGEST

The U.S. Total Army Personnel Command (PERSCOM) entered into an agreement
with the General Services Administration's (GSA) Federal Systems Integration
and Management Center (FEDSIM) to implement a declassification information
management system pursuant to GSA's multiyear contract authority in 40
U.S.C.

sect. 757. Although the agreement envisioned a three-phase project, PERSCOM
obligated fiscal year 1997 funds to cover only the first phase. Because
PERSCOM entered into an agreement for only the first phase of the
declassification project and incurred an obligation during the period of
availability of the appropriation only for the first phase, PERSCOM may not
apply the expired balance of the amount originally obligated for the first
phase of the project to complete the remaining project phases.

DECISION

The certifying officer for the U.S. Total Army Personnel Command (PERSCOM)
requests a decision regarding the continued availability of a fiscal-year
1997 appropriation to cover additional phases of a project initiated through
an interagency agreement with the General Services Administration (GSA), as
authorized by 40 U.S.C. sect. 757. PERSCOM, in 1997, obligated its fiscal year
1997 appropriation in the amount of $17.5 million for one phase of a
three-phase project. To complete the first phase, PERSCOM needed only $8.5
million of the total amount obligated. PERSCOM would now like to apply the
remaining amount to the remaining two phases of the project. Because PERSCOM
entered into an agreement incurring an obligation for only one phase of the
project, it cannot now obligate and charge payments for additional phases to
the expired fiscal year 1997 appropriation.

BACKGROUND

Executive Order (EO) 12958, Classified National Security Information, dated

April 17, 1995, prescribes a uniform system for classifying, safeguarding,
and declassifying national security information. Pursuant to E.O. 12958, the
U.S. Army is required to develop and implement a classified information
management system for review of classified records prior to declassification
to prevent the release of classified information that may have a negative
impact on national security.

Department of the Army Headquarters delegated the mission of developing and
implementing a declassification information management system to PERSCOM. To
accomplish this task, PERSCOM entered into an agreement on May 2, 1997 with
the GSA's Federal Systems Integration and Management Center (FEDSIM). FEDSIM
provides a wide range of technical and contracting services to federal
agencies related to the acquisition, management and use of information
systems and technology.

The agreement was authorized pursuant to the Brooks Act, sect. 111, Pub. L. No.
89-306, as amended, now codified at 40 U.S.C. sect. 757. Section 757 provides
GSA statutory authority to enter into multiyear contracts for the provision
of information technology hardware, software, or services for periods up to
five years.

The agreement stated as follows:

"FEDSIM derives its financing from the Information Technology Fund, a
revolving fund established under the authority of the Brooks Act (PL 89-306)
as amended by the Paperwork Reduction Reauthorization Act of 1986, as
included in PL 99-500 and PL 99-591. In accordance with a Comptroller
General ruling (Memorandum of Decision, File B-186535, Matter of:
Interagency Agreement -- Administrative Office of the U.S. Courts), payments
for FEDSIM services under this agreement are governed by the terms of the
Brooks Act rather than the Economy Act. Under these terms, the existence of
a defined requirement at the time this Basic Agreement is executed forms the
basis for the incurring and recording of a financial obligation on the part
of the client. This obligation remains in force across fiscal year
boundaries until the specified services are delivered or the Agreement is
rescinded by the signatories. The funds so obligated by the client do not
have to be deobligated at the end of a fiscal year as they would have been
if subject to the Economy Act. The client should ensure that any financial
obligation incurred under this Agreement is properly recorded so that the
funds are available to pay for FEDSIM services for the duration of this
Agreement."

The agreement articulated a three-phase project, but provided for only the
first phase. The agreement stated that "This Basic Agreement addresses Phase
I. Phase II and III will be addressed upon completion of Phase I." Phase I,
which the parties called a Proof of Principle, consisted of designing and
testing. Phase II will consist of establishing the declassification program
in accordance with the provisions of E.O. 12958. Phase III will consist of
developing a long-term program to sustain the declassification effort.

The agreement was composed of separate project element plans, each of which
contained specific requirements for each element of work to be completed.
The agreement described the requirements, deliverables, and timeframes for
Phase I and stated that the estimated cost for this project element was
$17.5 million. The agreement also provided that, pending approval of
PERSCOM, this project element plan might be expanded to include Phases II
and III. However, the agreement did not provide specific work requirements,
time frames, or cost estimates for additional phases.

PERSCOM obligated $17.5 million of fiscal year 1997 funds towards the
agreed-upon work under Phase I. FEDSIM completed this work in May of 1998 at
a cost of $8.5 million. PERSCOM would now like to use the unexpended, but
expired, balance of

$9 million to complete work at least on Phase II of the declassification
project.

Discussion

Obligated budget authority is available only to liquidate liabilities (i.e.,
obligations) legally incurred during the period for which the appropriation
is available. B-129579, Dec. 7, 1956. Generally, if an agency has obligated
more funds than needed for a project, it should deobligate the excess
amount. B-207433, Sept. 16, 1983; B-183184, May 30, 1975. If an agency
deobligates the unobligated balance within the period of availability of the
appropriation, the funds are available to support new obligations. If an
agency deobligates funds after the expiration of the period of availability,
the funds are not available for new obligations. 64 Comp. Gen. 410 (1985);
52 Comp. Gen. 179 (1972). However, the unobligated funds remain available to
the agency for up to five years to cover appropriate adjustments for
obligations in an expired account. 31 U.S.C. sect. 1553(a).

Unless otherwise authorized by law, transfers of funds between government
agencies and instrumentalities, such as between PERSCOM and FEDSIM, are
prohibited by law. [1] Transfers must be authorized pursuant to statutory
authority such as the Economy Act, 31 U.S.C. sect. 1535, which authorizes an
agency to provide goods or services to another agency on a reimbursable
advance payment basis.

70 Comp. Gen. 592, 595 (1991). The Economy Act requires that a fixed-year
appropriation be deobligated at the end of the fiscal year charged to the
extent that the performing agency has not performed or incurred valid
obligations under the agreement. 31 U.S.C. sect. 1535(d); 39 Comp. Gen. 317
(1959); 34 Comp. Gen. 418, 421-22 (1955).

The PERSCOM agreement with FEDSIM was authorized by the Brooks Act, as
amended, and not the Economy Act. As FEDSIM noted in its agreement with
PERSCOM, the Brooks Act, as amended, does not require a fixed-year
appropriation to be deobligated at the end of the period of availability;
obligated budget authority remains obligated at the end of the fiscal year
of availability as an expired appropriation to liquidate the obligation when
FEDSIM completes the agreed upon work. 40 U.S.C. sect. 757(c)(1). In this
regard, the Brooks Act, as amended, treats interagency obligations between
FEDSIM and its customers like other agency obligations, rather than Economy
Act obligations. However, as with other contractual obligations, once the
agency liquidates the obligation, any remaining balances are not available
to enter into a new obligation after the account has expired (i.e., if
fiscal year funds, after the end of the fiscal year). 51 Comp. Gen. 766
(1972).

As noted earlier, PERSCOM entered into an agreement only for Phase I of the
declassification project, with the understanding that other phases would
follow. The fiscal year 1997 funds that PERSCOM obligated at the time of the
agreement, therefore, were available only to liquidate obligations incurred
for Phase I during the fiscal year. While PERSCOM obligated more funds than
it needed to complete Phase I, it did not deobligate the fiscal year 1997
budget authority prior to the expiration of the fiscal year. Therefore, the
funds are no longer available for new obligations, including Phases II and
III.

PERSCOM argues that Phases II and III are bona fide needs of fiscal year
1997, and that the expired budget authority should remain available to fund
these additional phases. The bona fide needs rule 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" 31 U.S.C. sect. 1502 (a) (emphasis added).
What this means is that an agency may validly obligate an appropriation only
to meet a legitimate need existing during the period of availability. 73
Comp. Gen. 77, 79 (1994); 65 Comp. Gen. 741, 743 (1986). Even conceding that
PERSCOM could establish Phases II and III as a bona fide need of fiscal year
1997, PERSCOM did not take appropriate action to satisfy that need during
the fiscal year by contracting (i.e., incurring valid obligations) for
additional phases during the period of availability of the appropriation.
Nothing in the bona fide needs rule suggests that expired appropriations may
be used for a project for which a valid obligation was not incurred prior to
expiration merely because there was a need for that project during that
period. B-207433, Sept. 16, 1983. Once the obligational period has expired,
new obligations must be charged to current funds even if a continuing need
arose during the prior period. [2]

Accordingly, PERSCOM cannot charge payments for additional phases of the
project to the balance of the expired, unliquidated fiscal year 1997
appropriation. This does not mean, however, that PERSCOM cannot now satisfy
these needs using current year funds. PERSCOM may enter into a new agreement
for the remainder of the project using current year funds assuming, of
course, sufficient budget authority is available currently for that purpose.

/signed/

Anthony H. Gamboa

General Counsel

Notes

1. There are several legal impediments to inter- and intra-agency transfers.
These include 31 U.S.C. 1301(a), which requires that appropriations be
applied only to the objects for which appropriated; 31 U.S.C. sect. 1532, which
prohibits agencies from transferring amounts between accounts unless
otherwise authorized by law; and the Rule Against Augmenting Appropriations,
which proscribes unauthorized augmentations of agency appropriations. See 31
U.S.C. sect.sect. 1301(a), 1532; B-217093, Jan. 9, 1985.

2. Within scope modifications of the original contract are charged to the
same appropriation as the original contract. 61 Comp. Gen. 184 (1981);
B-202222, Aug. 2, 1983. The reason is that the obligation reflected by the
within scope modification relates back to and stems from the original
contractual liability.