TITLE: B-306284, Architect of the Capitol--Payment for Electrical and Security the Thurgood Marshall Federal Judiciary Building, January 5, 2006
BNUMBER: B-306284
DATE: January 5, 2006
***********************************************************************************************************************************************
B-306284, Architect of the Capitol--Payment for Electrical and Security Improvements at the Thurgood Marshall Federal Judiciary Building, 
January 5, 2006

   Decision

   Matter of: Architect of the Capitol--Payment for Electrical and Security
   Improvements at the Thurgood Marshall Federal Judiciary Building

   File: B-306284

   Date:  January 5, 2006

   DIGEST

   1. The Administrative Office of the United States Courts (AOUSC) ordered
   electric and security upgrades to the Thurgood Marshall Federal Judiciary
   Building (the building) that were completed in 2000. Because both the
   electrical and the security work benefited all tenants and enhanced the
   value of the building and improved its capacity, we do not object to
   viewing them as capital improvements.

   2. Under the Trust Agreement establishing, among others, the Operating
   Reserve Fund, such Fund was available to the extent of available funds for
   improvements generally to the building. Although the Architect of the
   Capitol (AOC) had other funding options available to it, so long as the
   Operating Reserve Fund has adequate available balances, we would not
   object to the AOC's use of the Operating Reserve Fund to cover the costs
   of the electrical and security improvements.

   3. Whether, under the circumstances present here, the Architect of the
   Capitol (AOC) should seek reimbursement from the Administrative Office of
   the United States Courts (AOUSC) for the electrical and the security work
   performed is a discretionary judgment reposed in him. Failure to obtain
   reimbursement would not be an augmentation of the AOUSC's funds because as
   capital improvements the AOUSC's funds are not directly available and
   because the AOUSC's appropriation does not constitute a specific and
   exclusive funding source for all improvements to the building.

   DECISION

   On September 30, 2005, the Architect of the Capitol (AOC), as certifying
   officer, requested an advance decision pursuant to 31 U.S.C. sect. 3529(a)
   regarding certain fiscal matters related to the disbursement and
   reimbursement of funds for electrical and security work performed at the
   Thurgood Marshall Federal Judiciary Building (the building). Specifically,
   the AOC asks the following three questions:

   "(1) Whether the security and electrical upgrades are capital improvements
   and not tenant improvements;

   "(2) Whether the non-appropriated Operating Reserve Fund was an available
   source of funds to pay for these upgrades as directed by my letter dated
   June 22, 2005, or was there a more specific source of appropriated funds
   that should have been used for either the upgrades to the security system
   or upgrades to the electrical system; and

   "(3) Whether the AOUSC must reimburse the Architect for any of these
   disbursements from the Operating Reserve Fund?"

   For the reasons discussed below, we do not object to the AOC's view that
   both the electrical and the security work were capital improvements.
   Second, we have no basis to object to the AOC's use of the Operating
   Reserve Fund to cover the cost of the improvements at issue here. Third,
   whether the AOC should seek reimbursement for the cost of the work is a
   discretionary judgment for the AOC.

   BACKGROUND

   Pursuant to Public Law 100-480, 102 Stat. 2328 (Oct. 7, 1988), codified at
   40 U.S.C. sections 6501--6507, the AOC, acting on behalf of the United
   States, entered into a series of agreements to effectuate the financing,
   construction, operation, and leasing of the Judiciary Office Building, now
   named the Thurgood Marshall Federal Judiciary Building, 40 U.S.C. sect.
   6502(a).

   On August 15, 1989, the AOC entered into four agreements for the building
   project--

     o a Trust Agreement with the United States Trust Company of New York
       (Trust Agreement) to finance building construction through the
       issuance of certificates of participation and the repayment thereof
       over 30 years based on payments from building tenants;
     o a Ground Lease of the government land where the building would be
       built to JOB Associates;
     o a Development Management Agreement with Boston Properties, as agent of
       JOB Associates, for the design, development, and construction of the
       building (Development Management Agreement); and
     o a Master Lease with JOB Associates, as owner of the building, leasing
       the building for a 30-year term (Master Lease).

   To supervise the building's design, construction, operation, maintenance,
   structural, mechanical, and domestic care, and security, Congress created
   the Judiciary Office Building Commission (Commission).[1] 40 U.S.C. sect.
   6503(c). Congress authorized the Commission to issue rules and regulations
   governing the AOC's actions related to the building and the building's use
   and occupancy. The Commission issued rules and regulations on June 22,
   1989 (Commission Rules and Regulations).

   During the project construction phase, the Commission delegated to the AOC
   the authority to take the necessary actions to execute the project. Rule 2
   of the Commission Rules and Regulations. After completion of the building
   by Boston Properties in 1992, the AOC entered into an Occupancy Agreement
   on July 27, 1992, with the AOUSC for the use of the building space.
   Finally, on August 1, 1996, the AOC entered into a management services
   contract with Boston Properties to manage the building.[2] The Commission
   also delegated to the AOC the authority, both during the project and
   after, to enter into ancillary agreements necessary to carry out its
   obligations under the approved Development Management Agreement, Master
   Lease, and Occupancy Agreement, including any documentation required for
   financing the transactions contemplated by the above agreements. Rule 2 of
   the Commission Rules and Regulations.

   Funding Sources and Accounting Process

   Congress did not appropriate funds for the construction of the building
   but, rather, authorized the use of private financing to cover its
   construction. The Commission approved the use of trust funds, consisting
   primarily of the proceeds from the sale of certificates, to finance the
   cost of constructing the building. Rule 2 of the Commission Rules and
   Regulations. To facilitate the financing, construction, operation, and
   leasing of the building, the Trust Agreement created four accounts--a
   Project Fund, an Operating Reserve Fund, a Fixed Rent Payment Fund and a
   Certificate Fund. Article III and IV of the Trust Agreement. Two accounts,
   the Project Fund and the Operating Reserve Fund, were created generally
   for the costs of the project and are relevant to the issues here.[3]

   The Trustee deposited the majority of the certificate proceeds in the
   Project Fund to cover the costs of the project. Trust Agreement at sect.
   3.01. The Project Fund was available, subject to the approval of the
   Commission,[4] for the "costs of the project" as defined in the
   Development Management Agreement. Trust Agreement at sect. 3.02. The
   Development Management Agreement defines the "cost of the project" as the
   "sum of development costs," which includes professional costs,
   construction costs, financing costs, costs to be reimbursed to the
   government, and reserves. Trust Agreement at sect. 3.02; Development
   Management Agreement at sections 8.1 and 12.1. After building completion,
   if any funds remained in the Project Fund, the Architect could expend such
   funds "on the costs of construction of improvements, additions, changes or
   renovations to the [building]" or transfer such remaining moneys to the
   Operating Reserve Fund. Trust Agreement at sect. 3.02.

   The Operating Reserve Fund received a portion of the certificate proceeds
   ($15,000,000), Trust Agreement sect. 3.01, and is available for, among
   other things, "costs to own, manage, operate, maintain, and repair
   premises" and for "costs of any improvements to the [building]." Trust
   Agreement at sect. 3.04.

   Apart from the accounts established by the Trust Agreement, Congress, in
   Public Law 100-480, established a revolving fund to, among other things,
   receive reimbursements from tenants, such as the AOUSC, and make lease
   payments to the Trustee and to pay for the "structural, mechanical, and
   domestic care, maintenance, operation, and utilities of the building and
   other improvements" (revolving fund). 40 U.S.C. sect. 6507. Finally, the
   AOUSC receives an annual appropriation for necessary expenses, as
   authorized by law, for the courts, see, e.g., "Salaries and Expenses,
   Court of Appeals, District Courts, and Other Judicial Services" in the
   Judiciary Appropriations Act, 2005, Pub. L. No. 108-447, 118 Stat. 2809,
   2892 (Dec. 8, 2004).[5]

   The AOC's financial staff explained the flow of federal funds as
   follows.[6] Annually, the AOC and the AOUSC agree on the cost of leasing
   space in the building for that year. The lease payment is comprised of
   three components--fixed costs, operating expenses, and special services,
   all of which are defined in paragraph 8 of the Occupancy Agreement.[7]
   Monthly, the AOC deposits into its revolving fund the monthly lease
   payment received from the AOUSC. Also monthly, the AOC expends monies for
   its operating costs (personnel, insurance, management fees, etc.) out of
   the revolving fund. Semiannually, the AOC disburses from the revolving
   fund monies to the Trustee for payment on the zero coupon certificates.
   See Trust Agreement at sections 3.03 (Establishment and Application of the
   Fixed Rent Payment Fund) and 4.02 (Transfers to Certificate Fund).

   The Work Performed

   In February 1998 and in June 2000, the AOUSC asked the AOC to approve
   proposed security and electrical improvements to the building,
   respectively. Memorandum from Peter M. Kushner, General Counsel, AOC, to
   Gary Kepplinger, Deputy General Counsel, GAO, May 13, 2005 (hereafter
   referred to as Kushner Memorandum). The AOUSC's request for the security
   upgrades to the building was in response to a 1995 Department of Justice
   Vulnerability Assessment of Federal Facilities Report. Kushner Memorandum.
   The work, identified by the vulnerability assessment as needed for this
   type of federal building, involved the addition of security cameras to the
   exterior and interior of the building, adding guard booths at the loading
   dock ramps, placing bollards around the front of the guard booths, and
   upgrading the monitors at the existing north security desk. Id.

   With respect to the electrical work, as early as 1999, the AOUSC
   identified a need for additional circuitry and wiring to meet demands on
   the building's electrical system's then existing capacity. AOUSC Response
   to AOC Request. AOUSC officials also told us that the building was
   designed and built to the 1980s era wattage-per-person standards.
   Specifically, at the time the building was designed and built, the General
   Services Administration (GSA) standard was 2 watts of power per square
   foot of space; the current standard is 6-8 watts per square foot. For both
   work requests, the AOUSC requested that the AOC cover the costs out of the
   Project Fund.

   The AOUSC ordered the security upgrades from Boston Properties in March
   1999, and the electrical upgrades between April and September 2000. The
   AOUSC accepted the security work in December 2001 and verbally accepted
   the electrical work around June 2001. The work for both was completed in
   late 2000 consistent with the AOUSC work orders. Boston Properties
   invoiced the AOC in August 2001 for the electrical upgrade work in the
   amount of $299,560 and in November 2001 for the security upgrade work in
   the amount of $208,600.

   Although the record is not complete, the AOC and the AOUSC agree that,
   with respect to the security work, AOC staff approved the AOUSC work
   request in July 1998, and with respect to the electrical work request,
   while documentation is limited, AOC staff apparently gave verbal approval
   sometime in June 2001. Because the process described in the Occupancy
   Agreement was not strictly followed and questions were raised over who was
   authorized to approve the requested work, the AOC's contracting officer
   submitted the procurement actions for proposed ratification of
   unauthorized commitments. In June 2005, the AOC ratified the unauthorized
   commitments, evidencing the belief that had the proper procedures been
   followed, the work orders would have been proper.[8]

   ANALYSIS

   Question 1: "Whether the security and electrical upgrades are capital
   improvements and not tenant improvements?"

   While the enabling legislation does not use the terms capital improvements
   or tenant improvements, the various agreements entered into pursuant to
   the authority granted in the enabling legislation use the term
   "improvement" or "tenant improvement." Only the Occupancy Agreement uses
   both the term "capital improvements" and "tenant improvements." The Master
   Lease describes tenant improvements as those tenant improvements
   constructed and installed pursuant to the terms and provisions of the
   Development Management Agreement. Article 8.1 of the Master Lease. The
   Development Management Agreement, executed on the same day as the Master
   Lease, describes a tenant improvement as those tenant improvements that
   are "designed, constructed and installed within the [building] in
   accordance with the Construction Documents for . . . the Judiciary."
   Development Management Agreement at sect. 3.1.4. While none of these
   agreements uses the term capital improvements, the Master Lease uses the
   term capital expenditures when describing those costs that the AOC, as the
   tenant, must pay as part of its operating expenses[9] for operating,
   maintaining, and repairing the building.[10] Article 5.2(h) of the Master
   Lease.

   It is within this framework that the terms and provisions in the Occupancy
   Agreement are used. Paragraph 7 of the Occupancy Agreement describes
   tenant improvements by referring to that term as it is used in Development
   Management Agreement. Further, paragraph 7 of the Occupancy Agreement
   contemplated these costs even after construction was complete and
   distinguished tenant improvements between those that occur during the
   initial construction of the building (pre-occupancy) and those that occur
   after occupancy of the building, both envisioning that a tenant
   improvement would be anything that was designed, constructed, and
   installed within the building for the AOUSC (or other occupants).
   Similarly, the term capital improvement in paragraph 8(d) of the Occupancy
   Agreement is used synonymously with the term capital expenditure in the
   Master Lease. Both documents include capital items as part of the
   operating expense component of their reimbursement and envision tenants
   requesting these capital items.

   While these agreements use the distinct words of capital improvement and
   tenant improvement and describe the term tenant improvement generally, the
   specificity of those terms as they relate to actual expenditures is
   absent. Absent a more specific definition, either in the agreements
   between the parties or the applicable statutes, we resort to the common
   usages of words and phrases to ascertain their meaning. B-302973, Oct. 6,
   2004. In this regard, we used the general parameters defined in the
   agreements as well as the common understanding of the concept of a capital
   improvement, which is an improvement that extends the useful life of the
   asset or enlarges or improves the asset's capacity.[11] A tenant
   improvement in this instance would be an improvement that is designed,
   constructed, and installed for the exclusive benefit of the AOUSC.

   Regarding the electrical work, AOUSC officials informally advised us that
   the electrical upgrades were in response to increased use of personal
   computers and other computing demands on the original electrical system.
   AOUSC officials also told us that the building was designed and built to
   the 1980s era wattage-per-person standards. Specifically, at the time the
   building was built, the GSA standard was 2 watts of power per square foot
   of space. Now the current standard is 6-8 watts per square foot.
   Regardless, the electrical upgrades are part of and functionally
   indistinguishable from the base electrical systems. In our opinion, they
   are as much an integral part of the building shell as the original
   electrical system included in the building shell. As an increase in
   capacity responding to increased computer usage consistent with normal
   business practices and current standards, they benefit all tenants and
   enhance the value of the building, both in the sense of the utility of the
   building and presumably in a financial sense. Accordingly, we view the
   electrical work as a capital improvement.

   Regarding the security work, AOUSC officials informally advised us, and
   the AOC agrees, that the security upgrades were in response to the 1995
   DOJ vulnerability assessment that identified security upgrades needed to
   secure a federal building of this type. Unlike the electrical upgrades,
   the type of work as well as the items acquired and installed are not all
   affixed to the building. For example, the AOUSC can easily remove the
   cameras and camera monitors without damaging the cameras or the monitors
   or their settings. Both these items have relatively short useful lives,
   and, as proof of this proposition, the AOUSC advised us that they have
   already replaced the cameras originally purchased as part of this work.
   The bollards, the guard booths, and electrical wiring to connect the
   cameras and the control monitors at the north guard desk arguably are more
   in the nature of fixtures and, from a security perspective, improve the
   value and capacity of the building security. Viewed from the perspective
   of the various components of the security system, we appreciate that one
   may doubt whether the security upgrades could be considered a capital
   improvement. Viewed as a whole, however, we would not object to the
   treatment of the security upgrade work as a capital improvement for two
   reasons: first, we think the work can reasonably be said to enhance and
   benefit the building and its tenants as a whole, and second, under similar
   circumstances and time frames, the executive branch treated similar
   security upgrades as capital improvements. With respect to the second
   point, GSA[12] treated similar security upgrades made in response to the
   DOJ vulnerability assessment to agency leased space as capital
   improvements. In informal discussions with GSA, we learned that security
   upgrades were needed to bring its federally occupied buildings into
   compliance with minimum standards for a federal building, without which
   the building would not be usable by federal tenants.

   Question 2(a): "Whether the non-appropriated Operating Reserve Fund was an
   available source of funds to pay for these upgrades as directed by [the
   Architect's] letter dated June 22, 2005 . . . ?"

   As discussed above, the Trust Agreement established the Operating Reserve
   Fund, Trust Agreement at sections 3.01, 3.04, and provided for the deposit
   to that Fund of $15,000,000 of the proceeds from the sale of the
   Certificates of Participation. Id. at sect. 3.01. The Trust Agreement
   provides that moneys in the Operating Reserve Fund may be expended solely
   for any one or more of the following purposes:

   "(a) to pay Operating Expenses (as that term is defined in the Master
   Lease);

   "(b) to pay Fixed Rent;

   "(c) to pay the costs of any improvements to the Judiciary Office
   Building; or

   "(d) to pay to the Trustee any and all fees, costs and expenses (including

   reasonable attorneys' fees) incurred in connection with any of the matters
   referred to in Sections 6.03 and 9.04 of this Agreement."

   Id. at sect. 3.04 (emphasis added). The issue of whether the electrical
   and security upgrades are capital improvements is irrelevant to the
   question of whether the Operating Reserve Fund is an available source of
   funds to pay for the upgrades. The availability of the Operating Reserve
   Fund does not depend on whether an upgrade is a capital improvement or a
   tenant improvement. The sole issue is whether the security and electrical
   upgrades are "improvements."

   The Trust Agreement does not define or limit the meaning of the word
   "improvement." To the contrary, the use of the adjective "any," in the
   sense of "every; all,"[13] indicates that the parties understood the
   Operating Reserve Fund to be available without limitation as to the type
   of improvement. Both in informal discussions with the AOC staff and in the
   Architect's request letter, the AOC took the view that both the security
   and the electrical work were improvements, generally, to the building.
   Given the common, ordinary meaning[14] of the word "improvements" as work
   done to the building that makes the building more useful, profitable, or
   valuable, whether benefiting one occupant or all, we would not disagree.
   Accordingly, to the extent that there are adequate and available
   balances,[15] we would not object to the use of the Operating Reserve Fund
   for both the security and the electrical work.[16]

   Question 2(b): "[W]as there a more specific source of appropriated funds
   that should have been used for either the upgrades to the security system
   or upgrades to the electrical system?"

   We have long recognized that where Congress has made a specific
   appropriation for a particular item or activity that such appropriation
   reflects the judgment of Congress of the amount of public resources
   available for such item or activity. 33 Comp. Gen. 214 (1953). The
   exhaustion of the amount provided by the specific appropriation does not
   authorize charging additional obligations or amounts to a more general
   appropriation otherwise available to cover the items or activities. 64
   Comp Gen. 138 (1984); 36 Comp. Gen. 526 (1957). To do so would constitute
   an improper augmentation of the appropriation specifically available for
   the items or activities. 57 Comp. Gen. 163 (1977); 4 Comp. Gen. 476
   (A-5216, Nov. 25, 1924). It is these principles which underlie the above
   question.

   If we assume that these concepts are relevant to the circumstances present
   here, there are possibly two appropriations that could be available for
   the costs of the improvements at issue. In this regard, the AOUSC receives
   annual appropriations for the Courts in the appropriation account
   "Salaries and Expenses, Court of Appeals, District Courts, and Other
   Judicial Services" (hereafter S&E appropriation). There is also an annual
   appropriation for "Court Security, Court of Appeals, District Courts, and
   Other Judicial Services" available for equipment and security services in
   federal courthouses. Historically, the AOUSC has used the S&E
   appropriation account for expenses related to the building, including
   lease payments to the AOC, and does not believe that the Court Security
   appropriation is available for the electrical and the security work
   performed in the building. AOUSC Response to AOC Request Letter. The
   AOUSC's rationale is straightforward--the Court Security appropriation is
   limited to security for U.S. courthouses, and the building here is not a
   courthouse.

   The second appropriation that may be available to cover these expenses is
   the revolving fund established in the legislation authorizing the project
   and its private financing. 40 U.S.C. sect. 6507. The revolving fund
   receives amounts transferred from the AOUSC as reimbursement for the costs
   of space made available to them. See 40 U.S.C. sections 6506(f), 6507;
   Occupancy Agreement at para. 8(a). (The Occupancy Agreement defines the
   cost components of the reimbursement to include "special services," which
   is defined as "including but not limited to tenant improvements made after
   initial occupancy." Id. at para. 8(e).) The revolving fund is available
   for paying expenses for "utilities" and "other improvements" of the
   building without distinction between capital and tenant improvements. 40
   U.S.C. sect. 6507(b)(1).[17] Accordingly, the revolving fund would appear
   to be available to the AOC to pay for the electrical and the security
   work. The only question is whether it is specifically and, in the
   appropriation context discussed above, exclusively available for this
   purpose.

   The AOUSC's S&E appropriation is provided annually to cover, among other
   things, AOUSC's costs of occupying the building. Congress established the
   revolving fund as a general account to receive all funds to design,
   construct, and operate the building, including rent payments and
   reimbursements, and to disburse funds for the building's care,
   maintenance, operations, utilities, and improvements generally. 40 U.S.C.
   sect. 6507. The accounts established under the Trust Agreement were
   created to facilitate the general financing arrangement for the building
   as envisioned by chapter 65 of title 40 of the United States Code.

   We do not view either of the two appropriation accounts noted above as
   specifically available to the exclusion of the accounts established under
   the Trust Agreement or each other. In our view the underlying principle of
   a specific appropriation account being available to the exclusion of a
   general account is inapposite since the accounts established under the
   Trust Agreement are not appropriation accounts.[18] As we have explained,
   the accounts mentioned above are generally interdependent and support the
   financing arrangement Congress chose to cover building construction.
   Significantly, the AOUSC's appropriation does not specifically and
   exclusively cover all improvements to the building, tenant or otherwise,
   but rather generally provides funding to cover the cost of the space
   including space alteration projects in the courts of appeals, district
   courts, and other judicial services. Further, the Occupancy Agreement
   allows[19] the AOUSC to pay for capital improvements as part of the
   operating expense component of the monthly lease payment and for tenant
   improvements out of the special services component.[20] Moreover, the
   statutory funding mechanism for the building envisioned the revolving fund
   being available to accept lease payments and pay for expenses of the
   building, some of which clearly could be interpreted to be tenant
   improvements. 40 U.S.C. sect. 6507. However, we would not view any one of
   these accounts as more specific than another, as we use that concept for
   purposes of the rules discussed above. In our view, all these accounts
   need to be understood as part of the general financing arrangement that
   Congress adopted for the construction and operation of the building. As
   such, we do not object to the AOC's use of the Operating Reserve Fund to
   pay for the work.

   Question 3: "Whether the AOUSC must reimburse the Architect for any of
   these disbursements from the Operating Reserve Fund?"

   After the invoices are paid, the AOC may seek reimbursement from the AOUSC
   but is not required to do so. There is nothing in the various agreements
   or in the enabling legislation that explicitly ties the availability of
   the Operating Reserve Fund or the revolving fund for improvements to a
   requirement that the AOC obtain reimbursement.[21] We do not read the
   Occupancy Agreement, as discussed above, to preclude the AOC from
   obtaining reimbursements from the AOUSC for the improvements as part of
   the monthly lease payment, either as part of the operating expense
   component for a capital improvement or as part of the special services
   component for a tenant improvement. While reimbursement may be the norm,
   it is not required for these expenses if the AOC so chooses. See paragraph
   8(d) of the Occupancy Agreement.

   A decision not to seek reimbursement from the AOUSC would not be an
   augmentation of the AOUSC funds for two reasons. First, the AOC views the
   work as capital improvements, which the AOUSC's funds are not directly
   available for. See footnote 18. Secondly, as noted above, we do not view
   the AOUSC's appropriation as providing specifically and exclusively for
   all tenant improvements.

   CONCLUSION

   The electrical and the security work performed were definitely
   improvements to the building. Because the improvements benefited all
   tenants and enhanced the value of the building and improved its capacity,
   we do not object to viewing them as capital improvements instead of tenant
   improvements. The AOC had the option of funding the improvements from the
   Operating Reserve Fund (and, indeed, from other accounts). Whether, given
   the facts and circumstances present here, the AOC should seek
   reimbursement from the AOUSC for the electrical and the security work
   performed is a discretionary judgment reposed in the AOC.

   /signed/

   Anthony H. Gamboa

   General Counsel

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

   [1] The Commission is comprised of 13 members as follows: (1) two
   individuals appointed by the Chief Justice from among justices of the
   Supreme Court and other judges of the United States; (2) the members of
   the House Office Building Commission; (3) the majority and minority
   leaders of the Senate; (4) the chairman and the ranking minority member of
   the Senate Committee on Rules and Administration; (5) the chairman and the
   ranking minority member of the Senate Committee on Environment and Public
   Works; and (6) the chairman and ranking minority member of the Committee
   on Transportation and Infrastructure of the House of Representatives. 40
   U.S.C. sect. 6503.

   [2] As of March 1, 2002, the building manager is now CESI. However, for
   purposes of the matters at issue here, the building manager was Boston
   Properties.

   [3] The other two accounts, the Fixed Rent Payment Fund and the
   Certificate Fund, are used to facilitate payment to the certificate
   holders.

   [4] Paragraph 8(c) of the Occupancy Agreement states that after
   construction work is complete, the AOC shall make a recommendation to the
   Commission for any uses of any excess funds in the Project Fund.

   [5] The AOUSC also receives an appropriation for the salaries and expenses
   of the AOUSC.

   [6] The AOC's financial staff informally told us that there also have been
   disbursements directly from the trust funds for improvements related to
   the building, as authorized by the AOC, and the AOUSC confirmed this to
   us. Electronic mail response from Robert Loesche, Deputy General Counsel,
   AOUSC, to Jacquelyn Hamilton, Deputy Assistant General Counsel, GAO,
   October 11, 2005 (hereafter referred to as AOUSC Response to AOC Request).

   [7] Fixed costs, based on a per rentable square footage, is a pro rata
   share of all costs involved in constructing the building; operating
   expenses are the pro rata share of the AOC's (1) actual costs of managing,
   operating, maintaining, servicing, cleaning, and repairing the building
   and grounds for tenants in general, (2) cost of capital improvements to
   the building requested by AOUSC, (3) actual costs of providing security,
   and (4) actual costs of electricity and other utilities consumed; and
   special services are for reimbursement of the AOC's actual expenses for
   providing individual or nonrecurring services requested by the AOUSC,
   including tenant improvements. Occupancy Agreement at para. 8(c), (d), and
   (e).

   [8] The AOC ratified these commitments based on its determinations that
   the work for both improvements was ordered, apparently with the knowledge
   and approval of staff of the AOC, and needed, performed, and accepted by
   the AOUSC; Boston Properties, the contractor, performed in good faith in
   accordance with the terms of the work orders; the amount claimed
   represented a fair and reasonable value for the benefit received; and
   there was no statutory prohibition that would preclude use of government
   funds for this purpose. AOC Memorandum, Approval to Ratify Unauthorized
   Commitment, June 1, 2005; See B-306353, Oct. 26, 2005.

   [9] In addition to paying the operating expenses, the AOC was also
   responsible for paying fixed rent as tenant under the Master Lease.

   [10] Section 3.04(a) of the Trust Agreement expressly adopts by reference
   the term capital expenditure for purposes of describing uses of the
   Operating Reserve Fund.

   [11] This common understanding is consistent with generally accepted
   government accounting standards. See Federal Accounting Standards Advisory
   Board, Statement of Federal Financial Accounting Standards No. 6,
   Accounting for Property, Plant, and Equipment. See also 42 C.J.S.
   Improvements sect. 2 (2005).

   [12] While the relationship between the AOC and the AOUSC is similar to
   the landlord-tenant relationship used by GSA with federal entities leasing
   space from it, it is not identical and there are some significant
   differences. Most notably is the statutory authority for tenants in space
   leased by GSA to pay GSA for capital improvements. It is important
   because, as discussed later, unless otherwise provided in law, agencies
   are prohibited from entering into contracts and paying for the erection,
   repair, or furnishing of any public building, or for any public
   improvement to the building without specific statutory authority. 41
   U.S.C. sect. 12.

   [13] The Random House College Dictionary 61 (1980) ("4. every; all: Read
   any books you find on the subject."). See also, B-302973, Oct. 6, 2004.

   [14] A common definition of "improvement" is "5. a bringing into a more
   valuable or desirable condition, as of land or real property; a making or
   becoming better; betterment. 6. something done or added to real property
   which increases its value." The Random House College Dictionary 669
   (1980).

   [15] The Trust Agreement at sect. 3.04 provides in effect for the AOC and
   the Trustee to maintain a minimum balance in the Operating Reserve Fund of
   $5,000,000 during the term of the Trust Agreement. The Trust Agreement
   further provides that after payment of all amounts due to certificate
   holders and all other obligations of the government under the Trust
   Agreement, any amounts remaining in the Funds established under the Trust
   Agreement shall be remitted to, or upon the order of, the AOC. Trust
   Agreement at sect. 3.05.

   [16] If we assume the various conditions on the use of the Project Fund
   are satisfied, i.e., Commission approval and minimum remaining balance,
   the reserves of the Project Fund are available (1) for the same reasons as
   the Operating Reserve Fund and (2) because the electrical and the security
   work would be considered an operating expense as defined by the various
   agreements. See Occupancy Agreement at para. 8(c), Trust Agreement at
   sect. 3.04, and Exhibit E (Glossary of Terms) of the Master Lease.

   [17] Nothing in the legislative history enacting the revolving fund would
   be inconsistent with this view.

   [18] The accounts established under the Trust Agreement hold private funds
   held for investment in trust in a commercial bank. Those funds are not
   held in trust for the benefit of the federal government and their use is
   governed by the Trust Agreement.

   [19] While section 12 of title 41 of the United States Code prohibits
   AOUSC from entering into contracts and directly paying for the erection,
   repair, or furnishing of any public building, or for any public
   improvement to the building, Congress did expressly provide for AOUSC's
   reimbursement of such expenses through the revolving fund and the
   Occupancy Agreement implements that authority by permitting the AOUSC to
   pay for capital improvements as part of the operating expense component of
   the monthly lease payment. See Occupancy Agreement at para. 8(d) and 40
   U.S.C. sect. 6507.

   [20] The Occupancy Agreement also allows the AOUSC to contract for
   directly and to fund tenant improvements separately with the approval of
   the AOC. Occupancy Agreement at para. 7(b).

   [21] As noted above, the only requirement is that the Operating Reserve
   Fund maintain a balance of $5,000,000. If the balance goes below
   $5,000,000, the AOC must restore the balance with existing available
   appropriations or seek in good faith an appropriation for such purposes
   from Congress. See Trust Agreement at sect. 3.04.