TITLE:	Unauthorized Legal Services Contracts Improperly Charged to Resource
Management Appropriation
BNUMBER:	   B-290005
DATE:		   July 1, 2002
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Unauthorized Legal Services Contracts Improperly Charged to Resource
Management Appropriation, B-290005, July 1, 2002

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B-290005




July 1, 2002

The Honorable Dan Burton
Chairman, Committee on
   Government Reform
House of Representatives

Subject: Unauthorized Legal Services Contracts Improperly Charged to
Resource Management Appropriation

Dear Mr. Chairman:

The purpose of this letter is to advise you of contracts for legal services
that the Fish and Wildlife Service (Service) entered into without authority
and that the Service improperly charged to its resource management
appropriation.  During the course of GAO's review of the Service's
implementation of the endangered species program,[1] we learned that the
Service had entered into contracts with a law firm and with an attorney for
assistance with various personnel issues, labor law matters, and allegations
of discrimination. As of April 9, 2002, the Service had paid over $155,000
for these legal services, using funds from its fiscal year 2001 resource
management appropriation.  For the reasons explained below, the Service has
no authority to acquire legal services, and payments the Service made under
the contracts were improper.  In addition, the Service's resource management
appropriation is not available for the purchase of legal services.
Accordingly, the Service has violated the Antideficiency Act and should
report the violation to the Congress and the President in accordance with
the provisions of Office of Management and Budget (OMB) Circular A-34,
(2000).
BACKGROUND

During our review of the Service's implementation of the endangered species
program, we discovered that the Service's California/Nevada Operations
office in Sacramento, California (CNO) had contracted with the law firm
Powell, Goldstein, Frazer & Murphy of Atlanta, Georgia, for advice on
employment problems, assistance in negotiating labor agreements, and review
of draft responses to discrimination charges and related matters. [2]  The
Service paid Powell, Goldstein, Frazer & Murphy over $65,000 out of its
resource management appropriation for itemized services provided under the
contract, including research on labor relations issues, review and revision
of management bargaining proposals, and preparation and review of letters to
a union.

The Service's CNO and the Portland Oregon Regional Office both contracted
with
Mr. Samuel A. Vitaro, an attorney who performs mediation, arbitration, and
fact-finding services.  In total, the CNO and Portland offices paid over
$90,000 for
Mr. Vitaro's services.  The CNO office contracted with Mr. Vitaro to provide
consultation services on August 15, 2001.[3]  The Portland Oregon Service
office contracted with Mr. Vitaro to conduct administrative fact-finding at
the Western Washington Office in Lacey, Washington, and to provide a written
report containing findings and recommendations to Service management.[4]
Both offices made the payments out of the Service's resource management
appropriation.

DISCUSSION

The Solicitor of the Department of Interior is solely responsible for the
legal work of the Department of the Interior, including the Fish and
Wildlife Service:  ?the legal work of the Department of the Interior shall
be performed under the supervision and direction of the Solicitor of the
Department of the Interior.?   43 U.S.C. ï¿½ 1455.  Therefore, to the extent
that the Service, or any of its offices identifies a need for legal
services, the Service should engage the offices of the Solicitor and the
Solicitor's staff.  Interior's Departmental Manual emphasizes that the
Solicitor is responsible for ?all of the legal work of the Department,?
including ?providing legal advice to . . . the heads of the offices and
bureaus of the Department and all other officers and employees of the
Department? and ?providing legal services for all programs, operations and
activities of the Department.?  109 Departmental Manual 3.1, 3.2.

Despite this exclusive assignment of responsibility to the Solicitor's
Office, most, if not all, of the services acquired by the Service under
these contracts appear to be for legal work.  When we learned of these
contracts, we brought this matter to the Solicitor's attention.  GAO letter
to the Solicitor, December 28, 2001.  In a letter dated February 1, 2002,
the Solicitor confirmed that his Office has exclusive responsibility for
legal matters.  In addition, the Solicitor stated that ?[t]he term ?legal
work? as used in 43 U.S.C. ï¿½ 1455 and in the [Departmental Manual]
encompasses a wide range of activities?.  The nature of activities
constituting the legal work of the Solicitor is broadly described as
including the ?interpretation and application of all legal authority
affecting actions proposed or taken under the Department's programs and
operations.?  109 Departmental Manual 3.4C.  The subject areas over which
the Solicitor's Office is responsible includes matters related to equal
employment opportunity internal (EEO) complaints, personnel and EEO
litigation, and labor relations.  Solicitor's Manual, Appendix 1(A)(3).

The work that the Service acquired under the contract with Powell,
Goldstein,
Frazer & Murphy, falls within the scope of the Solicitor's responsibilities
as described in the Departmental and Solicitor's Manuals.  The firm's
efforts included the interpretation and application of labor relations
laws.  While not as straightforward, the contracts with Samuel Vitaro also
appear to be for legal work, especially to the extent that Mr. Vitaro may
have provided advice with regard to an EEO complaint.[5]  The Solicitor,
while agreeing that the Service did not have authority to enter into these
contracts, stated that the Service had not obtained the necessary Solicitor
approval for the contracts at issue here, nor had the Solicitor's office
exercised any supervisory control over the contractors.

The Service paid for these services out of its resource management
appropriation.  The resource management appropriation was not available for
legal services.[6]  To the extent that the contracts entered into were for
legal services, the Service's use of the resource management appropriation
was improper.

For fiscal year 2001, the Service resource management appropriation provided
for ?necessary expenses of the . . . Service, for scientific and economic
studies, conservation, management, investigations, protection, and
utilization of fishery and wildlife resources . . . and for the performance
of other authorized functions related to such resources . . .?  Pub. L. No.
106-291, 114 Stat. 922, 926 (2000).  It is well settled that even an
expenditure which may be reasonably related to a general appropriation may
not be paid out of that appropriation where the expenditure falls
specifically within the scope of another appropriation.  See, e.g., 63 Comp.
Gen. 422, 427-28, 432 (1984); B-289209, May 31, 2002; and B-139510, May 13,
1959.

Of the appropriations available to the Department of the Interior, there is
such a specific appropriation.  The Office of the Solicitor, which is solely
responsible for the provision of legal services, receives an appropriation
each year to fund the legal work of the Department.  For fiscal year 2001,
the Office of the Solicitor received a salaries and expenses appropriation
?[f]or necessary expenses of the Office of the Solicitor.?  Pub. L. No.
106-291, 114 Stat. 922, 939 (2000).  Since the Solicitor, by law, is solely
responsible for the legal work of the Department, and since the Solicitor
receives an appropriation ?for necessary expenses? of the Solicitor's
Office, we view the Solicitor's appropriation as specifically available for
the legal work of the Department.  Cf. B-256172, April 8, 1997 (Department
of Agriculture's Office of the General Counsel appropriation is the only
appropriation available to cover the cost of providing legal services to the
Forest Service).  The Service's resource management appropriation,
therefore, is not available for legal work.  Accordingly, the Service's use
of its resource management appropriation to pay for the contract expenses
described above violated the purpose statute, 31 U.S.C. ï¿½ 1301(a), which
prohibits the use of appropriations for purposes other than those for which
they were appropriated.

The Solicitor's Office advised us that the Acting Director of the Service
was directed to terminate the subject contracts immediately and it is our
understanding that the contracts have been terminated.  Nevertheless,
because the Service had no appropriation available for legal work, the
Service incurred obligations and made payments of $155,000 in excess of
available appropriations.  The Antideficiency Act, 31 U.S.C. ï¿½ 1341(a),
prohibits officers and employees of the United States from incurring
obligations in excess or advance of appropriations.  63 Comp. Gen. 422, 424
(1984).  Agencies must report violations of the Antideficiency Act
immediately to the President and Congress in accordance with OMB Circular
A-34.  31 U.S.C. ï¿½ 1351.  Such reports must include a statement of all
relevant facts and of actions taken to address and correct the
Antideficiency Act violation.  Id; OMB Circular A-34, 133-34 (2000).

There are a number of ways the Department can correct the Service's
Antideficiency Act violations.  The Department could ask the Congress to
provide a deficiency appropriation of the budget authority needed to cover
amounts the Service paid to these contractors. [7]  Absent such an
appropriation, the Solicitor could ratify the contracts and cover their
costs out of unobligated balances of the applicable fiscal year
appropriation to the Solicitor.[8]  The Solicitor, also, may agree to pay
these contractors on a quantum meruit basis.[9]  Finally, we are not
unmindful of the budgetary and related administrative consequences that flow
from our holding that the Office of the Solicitor's appropriation is the
exclusive source of funding ?all of the legal work of the Department.?  109
Departmental Manual 3.1, 3.2, above.  One consequence is reduced flexibility
in responding to significant and unanticipated demands for legal work.  If
the Department concludes that such budgetary flexibility is needed, the
Department may want to ask Congress to provide the Office of the Solicitor
with specific, limited authority to transfer funds from the appropriation
accounts of the Department's various bureaus and offices to meet such needs.


CONCLUSION

By entering into unauthorized contracts for the provision of legal services
and charging the expenditures to its resource management appropriation, the
Service violated 31 U.S.C. ï¿½ 1301(a) and the Antideficiency Act, 31 U.S.C. ï¿½
1341.  The Service must report the Antideficiency Act violation to the
Congress and the President in accordance with the provisions of OMB Circular
A-34 (2000).

Should you have any questions, please contact Ms. Susan Poling at (202)
512-2667.  We are sending copies of this letter to the Secretary of the
Interior, the Ranking Member, House Committee on Government Reform, and
other interested congressional committees.  The letter will also be
available on GAO's home page at http://www.gao.gov.

Sincerely yours,




Anthony H. Gamboa
General Counsel

-------------------------

[1] U.S. General Accounting Office, Endangered Species Program:  Information
on How Funds Are Allocated and What Activities Are Being Emphasized,
GAO-02-581 (Washington, D.C.; June 25, 2002).
[2] Blanket Purchase Agreement number 101811A006.
[3] Purchase Order No. 10101-1-M103A.
[4] Purchase Order No. 101811M093.
[5] The Solicitor acknowledged that the contract with Powell, Goldstein,
Frazer & Murphy appeared to be for legal services and that the anecdotal
evidence suggested that the contracts with Samuel Vitaro were also for legal
services.  To resolve any uncertainty concerning the contracts with Samuel
Vitaro, the Department should pursue sufficient fact-finding to determine
whether these contracts were, in fact, for legal services.
[6] While the Solicitor concurs that these contracts were improper, he did
not address the propriety of the Service's use of its resource management
appropriation to pay for legal services.
[7] Our review suggests that it is possible that funds, in addition to the
$155,000 out of fiscal year 2001, were obligated and expended for the
contract services at issue.  If this is the case, the Department should
ensure that the full extent of the Service's unauthorized contracting and
improper payments is reported and that corrective action is also taken.
[8] Federal Acquisition Regulations ï¿½ 1.602-3(c).  If the Solicitor chooses
to ratify these contracts, the Solicitor must determine whether sufficient
unobligated funds remain in the Solicitor's appropriation for fiscal year
2001.  See B-208730, January 6, 1983 (ratifying official must assure that
sufficient funds from the proper appropriation remain unobligated to assume
the cost of the contracts).
[9] Payment under this authority is appropriate where there is no
enforceable contractual obligation on the part of the government but where
the government has received a benefit not prohibited by law conferred in
good faith.  See 70 Comp. Gen. 644, (1991) and 40 Comp. Gen. 447, 451
(1961).  As with ratification, the Solicitor may not agree to quantum meruit
payments unless sufficient unobligated amounts remain in the Solicitor's
fiscal year 2001 appropriations.