TITLE: B-308944, Expired Funds and Interagency Agreements between GovWorks and the Department of Defense, July 17, 2007
BNUMBER: B-308944
DATE: July 17, 2007
****************************************************************************************************************
B-308944, Expired Funds and Interagency Agreements between GovWorks and the Department of Defense, July 17, 2007

   Decision

   Matter of: Expired Funds and Interagency Agreements between GovWorks and
   the Department of Defense

   File: B-308944

   Date:  July 17, 2007

   DIGEST

   GovWorks, a Department of the Interior franchise fund, entered into four
   contracts on behalf of the Department of Defense (DOD). With one
   exception, the Military Interdepartmental Purchase Requests (MIPRs) used
   to finance these contracts did not identify the specific items or services
   that DOD wanted GovWorks to acquire on its behalf. Lacking the necessary
   specificity as to the items or services ordered, these MIPRs did not
   properly obligate DOD's appropriation. Accordingly, in fiscal year 2005,
   when GovWorks used these funds for three of the four contracts, GovWorks
   improperly used prior year funds.

   One MIPR, for laser printers, described the goods DOD sought with enough
   specificity to create a valid interagency agreement and to properly
   obligate DOD's appropriation. Although the laser printers ordered are a
   readily available commercial item, GovWorks did not use the funds to
   execute a contract on DOD's behalf until 17 months after the date of the
   MIPR, and 11 months after the funds expired. Because GovWorks did not use
   the funds within a reasonable time of their receipt, the contract did not
   fulfill a bona fide need arising during the funds' period of availability.

   DOD and GovWorks share responsibility for ensuring the proper use of DOD
   funds transferred to and "parked" at GovWorks. DOD must adjust its
   appropriations accounts to record obligations for these four contracts
   against fiscal year 2005 appropriations. If DOD has insufficient
   unobligated balances in these appropriations, DOD must report violations
   of the Antideficiency Act.

   To prevent future occurrences of the problems associated with the four
   contracts, GovWorks should examine its accounts to identify interagency
   agreements that lack the requisite specificity under the recording
   statute. For those agreements that do not meet the requirements, GovWorks
   should return the funds advanced by the ordering agency. GovWorks also
   should develop internal controls to ensure that it does not accept
   nonspecific, indefinite orders nor use expired funds to enter into
   contracts on behalf of the ordering agency.

   DECISION

   The Inspector General for the Department of the Interior (Interior)
   requests our decision under 31 U.S.C. sect. 3529 regarding issues raised
   by four contracts that GovWorks, an Interior franchise fund, entered into
   with private vendors in fiscal year 2005 using Department of Defense (DOD)
   funds.[1] The Inspector General (IG) is concerned that certain Military
   Interdepartmental Purchase Requests (MIPRs), used to document DOD's
   interagency agreements with GovWorks, may not have identified DOD's needs
   with the specificity required to create an obligation under 31 U.S.C.
   sect. 1501(a). Devaney Letter. The IG expressed concern that most of the
   DOD funds that GovWorks used to finance the four contracts were no longer
   available to incur obligations when GovWorks executed the contracts in
   fiscal year 2005. Id. The IG believes that DOD improperly "parked" funds
   with GovWorks. Id. This decision examines the four contracts to determine
   whether they fulfilled a bona fide need arising during the period of
   availability of the funds that GovWorks used to finance the contracts.[2]

   For the reasons discussed below, we conclude that, with one exception, the
   MIPRs between DOD and GovWorks did not identify the specific items or
   services that GovWorks was to acquire. As a result, the MIPRs did not
   properly obligate DOD's funds. It was not until fiscal year 2005 that DOD
   perfected its orders and established valid interagency agreements by
   asking GovWorks to acquire specific goods or services. Consequently,
   GovWorks improperly used expired funds, transferred by DOD's MIPRs, to
   finance these three contracts. DOD may not extend the availability of its
   appropriated funds by "parking" funds at GovWorks. DOD and GovWorks should
   adjust their appropriations accounts, charging the obligations for these
   three contracts to fiscal year 2005 DOD funds. If there is an insufficient
   unobligated balance remaining in DOD's fiscal year 2005 expired
   appropriation, DOD should report a violation of the Antideficiency Act
   consistent with Office of Management and Budget Circular A-11.

   One MIPR, for laser printers, funding one of the four contracts had the
   requisite specificity to properly obligate DOD's funds. Because laser
   printers are a readily available commercial item, GovWorks's use of the
   transferred funds to acquire laser printers almost 17 months after DOD and
   GovWorks entered into the interagency agreement and transferred the funds
   to GovWorks, and 11 months after the funds expired, did not fulfill a bona
   fide need arising during the funds' period of availability. Rather, the
   contract satisfied a bona fide need of the following fiscal year. DOD and
   GovWorks should adjust their accounts, deobligating the funds from fiscal
   year 2004 and obligating instead funds from fiscal year 2005.

   Our practice when rendering decisions is to obtain the views of the
   relevant federal agencies. GAO, Procedures and Practices for Legal
   Decisions and Opinions, GAO-06-1064SP (Washington, D.C.: Sept. 2006),
   available at http://www.gao.gov/legal.htm. In this regard, Interior and DOD
   responded to questions from our office about the four contracts. Letter
   from David L. Bernhardt, Solicitor, Department of the Interior, to Thomas
   H. Armstrong, Assistant General Counsel for Appropriations Law, GAO, Apr.
   20, 2007 (Bernhardt Letter); Letter from Roger F. Pitkin, Acting Deputy
   General Counsel (Fiscal), DOD, to Thomas H. Armstrong, Assistant General
   Counsel for Appropriations Law, GAO, June 6, 2007 (Pitkin Letter).
   Interior provided requested information but declined to provide its legal
   views in response to the questions we asked. Bernhardt Letter.

   BACKGROUND

   GovWorks is a franchise fund originally established as a pilot program in
   1996. Department of the Interior and Related Agencies Appropriations Act,
   Pub. L. No. 104-208, div. A, title I, sect. 113, 110 Stat. 3009, 3009-200
   (Sept. 30, 1996). Congress has reauthorized GovWorks through fiscal year
   2007. Revised Continuing Appropriations Resolution, 2007, Pub. L. No.
   110-5, sect. 2, 121 Stat. 8, 57 (Feb. 15, 2007).

   As a franchise fund, GovWorks is a revolving fund designed to provide
   common administrative services to Interior and other agencies on a
   competitive basis. Government Management Reform Act of 1994, Pub. L. No.
   103-356, title IV, sect. 403, 108 Stat. 3410, 3413 (Oct. 13, 1994)
   (authorizing franchise fund pilot programs). GovWorks is "a full service
   acquisition center" that procures goods and services from vendors on
   behalf of federal agencies. GovWorks, Frequently Asked Questions, General
   Questions, para. 1, available at http://www.govworks.gov/home/faqs.asp (last
   visited July 2, 2007).

   An agency wishing to acquire products or services through GovWorks tells
   GovWorks the goods or services the agency would like GovWorks to acquire
   on its behalf. GovWorks, Getting Started Details, available at
   http://www.govworks.gov/home/getting_started_details.asp (last visited July 2,
   2007) (Getting Started Details). The ordering agency then transfers funds
   from its appropriation to GovWorks for acquisition of the goods or
   services sought. Id. DOD uses MIPRs both to identify its needs and to
   transfer funds to GovWorks. Pitkin Letter; Robert McNamara, Acting Deputy
   Chief Financial Officer, Office of the Under Secretary of Defense,
   Comptroller, Memorandum for the Secretaries of the Military Departments,
   et al., Non-Economy Act Orders, Oct. 16, 2006. If GovWorks believes it can
   procure the goods or services sought by DOD as specified in the MIPR,
   GovWorks replies to DOD with an "Acceptance of MIPR." Bernhardt Letter at
   tab 1A. Upon GovWorks's acceptance of the MIPR, GovWorks and DOD have
   cemented an interagency agreement, and DOD records an obligation in the
   amount it transferred to GovWorks. Pitkin Letter. GovWorks then locates a
   vendor who can provide the goods or services DOD seeks and enters into a
   contract with the vendor for the goods or services using the funds
   transferred by DOD. See Getting Started Details. GovWorks charges ordering
   agencies a service fee of 4 percent of the contract award. Id. These fees,
   once earned, are available to GovWorks without fiscal year limitation to
   cover GovWorks's administrative costs. Pub. L. No. 104-208, sect. 113.

   In January 2007, the Interior IG reported its audit of the GovWorks
   transactions made using DOD funds in fiscal year 2005, including contracts
   made with vendors on behalf of DOD. Interior IG Report. The Interior IG
   determined that in many cases GovWorks had accepted MIPRs from DOD that
   did not indicate the goods or services sought with the level of
   specificity necessary to incur an obligation against DOD's funds. Id. at
   4. In addition, GovWorks had entered into contracts with vendors using DOD
   funds whose period of availability for obligations had expired.[3] Id.

   The Interior IG is concerned that these practices may have violated fiscal
   law and may indicate that DOD "parked" funds at GovWorks. See Devaney
   Letter at 1--2. To address these concerns, the Interior IG asked that we
   examine four contracts that GovWorks entered into in fiscal year 2005
   using DOD funds. Id.

   Contract 44435 for Laser Printers

   On April 9, 2004, DOD transferred $40,283.46 of fiscal year 2004 Operation
   and Maintenance Army funds to GovWorks for the purchase of "XEROX 3400
   Printers." MIPR 4GINTMM054, Apr. 9, 2004. Sixteen months later, DOD sent
   an e-mail to GovWorks requesting that GovWorks use these funds to acquire
   20 HP 1300 laser printers and 20 HP 4350n network printers, or printers of
   equal specifications and value, to be delivered to the Pentagon within 30
   days of contract award. E-mail from Georgette Sumpter, DOD, to Donald
   Clifton, GovWorks, Subject: Project Number 5229-0002 Printers, Aug. 17,
   2005. Using these funds, GovWorks entered into Contract 44435 with
   CounterTrade Products, Inc. on August 29, 2005, for 40 HP laserjet
   printers at a cost of $37,643.10. Contract 44435, Aug. 29, 2005. The funds
   GovWorks used to finance this contract expired 11 months before GovWorks
   entered into the contract and were only available to liquidate obligations
   properly incurred during fiscal year 2004.

   Contract 43270 for Body Armor

   On March 24, 2004, DOD transferred $1.1 million of 3-year Other
   Procurement Navy funds, which were available for fiscal years 2002--2004,
   to GovWorks for "the procurement and fielding of AT/FP shipboard equipment
   utilized for the protection of Navy afloat assets." MIPR N6553804MP00018,
   Mar. 24, 2004. Almost 14 months later, DOD sent an e-mail to GovWorks
   requesting that GovWorks place an order with Point Blank Body Armor, Inc.,
   for 50 sets of T1 Special Body Armor and 100 Gamma Plates.[4] E-mail from
   Eugene M. DuCom, John J. McMullen Associates (JJMA), to Donald Clifton,
   GovWorks, Subject: HSV-X1 Body Armor PKG Point Blank Justification, May
   16, 2005 (DuCom E-mail 1).[5] On May 18, 2005, DOD e-mailed GovWorks with
   instructions to use the funds transferred by the March 24, 2004, MIPR for
   this purchase. E-mail from Eugene M. DuCom, JJMA, to Donald Clifton,
   GovWorks, Subject: Re: FW: Quote with shipping, May 18, 2005 (DuCom E-mail
   2). Using these funds, GovWorks entered into Contract 43270 with Point
   Blank Body Armor, Inc., on May 20, 2005, in the amount of $61,112 to
   purchase body armor and gamma plates. Contract 43270, May 20, 2005. The
   funds GovWorks used to finance this contract expired over 6 months before
   GovWorks entered into the contract and were only available to liquidate
   obligations properly incurred during fiscal years 2002--2004.

   Contract 41181 for Computer Hardware

   DOD made the following funds transfers to GovWorks:

     o $50,000 of 2001 Operation and Maintenance Army funds, "for the
       acquisition of toner cartridges." MIPR 1JDIT0N046, July 10, 2001.
     o $70,000 of 2001 Operation and Maintenance Army funds, "for the
       acquisition of [automated data processing] and supply." MIPR
       1KINTWS058, July 24, 2001.
     o $40,783 of 2001 Operation and Maintenance Army funds, "for the
       acquisition of [automated data processing] and supplies." MIPR
       1MINTPR070, Sept. 14, 2001.

     o $1.8 million of 2004 Operation and Maintenance Army funds, "for
       equipment through the Pentagon IT Store." MIPR 4MINTMM125, Sept. 17,
       2004.

   On November 9, 2004, DOD sent GovWorks an e-mail requesting that GovWorks
   acquire 160 items of various computer hardware using the funds transferred
   via the September 17, 2004 MIPR. E-mail from Michael Bucceroni, DOD, to
   Andrew Carrington, GovWorks, Subject: FW: Project Number 4303-0002
   Decision Agent Network Equipment, Nov. 9, 2004 (Bucceroni E-mail). On
   December 21, 2004, GovWorks entered into Contract 41181 with Norseman,
   Inc. for "Decision Agent Network Equipment"[6] in the amount of $108,196.
   Contract 41181, Dec. 21, 2004. To finance this contract, GovWorks, at
   DOD's direction, used a portion of the funds DOD transferred on September
   17, 2004. See Bucceroni E-mail. GovWorks also used, apparently on its own
   initiative, funds from the three other MIPRs listed above. Contract 41181.

   On January 18, 2005, GovWorks modified Contract 41181 to remove the fiscal
   year 2001 funds[7] that DOD had transferred on July 10, 2001, and replaced
   them with the following:

     o $3,600 of 2000 Operation and Maintenance Army funds, "for the
       acquisition of [automated data processing] and services." MIPR
       0MGSAIT092, Sept. 29, 2000.
     o $94,351 of 2001 Operation and Maintenance Army funds, "for the
       acquisition of [automated data processing] and supplies." MIPR
       1MITST0074, Sept. 24, 2001.
     o $158,273.50 of 2004 Operation and Maintenance Army funds, "for
       equipment through the Pentagon IT Store." MIPR 4LINTMM111, Aug. 18,
       2004.
     o $1.4 million of 2004 Operation and Maintenance Army funds, for
       "[defense messaging system] equipment." MIPR 4MINTMM130, Sept. 24,
       2004.

   The funds GovWorks used to finance this contract expired over 50 months,
   38 months, and 2 months, respectively, before GovWorks entered into the
   contract and were only available to liquidate obligations properly
   incurred during fiscal years 2000, 2001, and 2004.

   Contract 43387 for Telecommunications Support

   GovWorks entered into Contract 43387 with Northrop Grumman in the amount
   of $3,908,420 for "technical and functional support to the Pentagon
   Telecommunications Center" consisting of systems and security management,
   maintenance, and operation of hardware and software. Contract 43387, June
   30, 2005. This was a sole source contract, intended as a bridge contract
   pending award of a final contract. Letter from Paul Martin, Contracting
   Officer, GovWorks, to Allen Sauck, Northrop Grumman, Subject: Request for
   Proposal 43387, Pentagon Telecommunications Center, Decision Agent and
   Enhanced Communication Gateway System, June 8, 2005. The duration of the
   contract was 6 months, from July 1, 2005, to December 31, 2005. Contract
   43387, Statement of Work at para. 5.0. To fund this contract, GovWorks
   used Operation and Maintenance Army funds that DOD had transferred to
   GovWorks via 17 separate MIPRs. Id. Of these 17 MIPRs, 1 transferred
   fiscal year 2003 funds in fiscal year 2003, 13 transferred fiscal year
   2004 funds in fiscal year 2004, and 3 transferred fiscal year 2005 funds
   in fiscal year 2005. Id.

   The 17 MIPRs used to fund this contract also had four different
   descriptions of the services DOD wished GovWorks to procure on its behalf:

     o "[Decision Agent/Defense Messaging System] Core Product," 13 MIPRs.
       E.g., MIPR 4GINTMM058, Apr. 26, 2004.
     o "[S]upport of the Decision Agent," 2 MIPRs. E.g., MIPR 5CINTMM013,
       Dec. 15, 2004.
     o "Secondary site [Defense Messaging System] requirements," MIPR
       3LINTMM101, Aug. 29, 2003.
     o "Support [for] the [network] Printers," MIPR 4HINTMM069, May 26, 2004.

   GovWorks executed this contract on June 30, 2005, pursuant to a Statement
   of Work from DOD dated June 15, 2005 ,[8] and GovWorks, at DOD's
   direction, funded this contract with funds transferred to GovWorks through
   the 17 MIPRs listed above. E-mail from Georgette Sumpter, DOD, to Michael
   Bucceroni, DOD,  Subject: Project Number 5095-0001 DA, May 31, 2005
   (Sumpter E-mail 2). [9] The fiscal year 2003 and fiscal year 2004 funds
   GovWorks used to finance this contract expired 19 months and 7 months,
   respectively, before GovWorks entered into the contract.

   DISCUSSION

   The overarching issue presented by the Interior IG is whether DOD and
   GovWorks used the correct appropriation to finance the four contracts. The
   IG raises the issue because GovWorks, on behalf of DOD, entered into the
   four contracts in fiscal year 2005 but used expired DOD funds, not fiscal
   year 2005 funds,[10] to finance the contracts. Expired funds are only
   available to liquidate obligations properly incurred during their period
   of availability. To answer the question, we must first determine when DOD
   incurred obligations against its appropriations: either when it
   transferred the funds to GovWorks with the MIPRs or at some later time.
   Second, having established when DOD incurred an obligation, we must
   determine whether DOD incurred an obligation within the funds' period of
   availability and, if so, whether GovWorks promptly used the funds to
   execute a contract on DOD's behalf. We also respond to the IG's concern
   that DOD and GovWorks may have improperly parked funds with GovWorks.

   Incurring Obligations

   An interagency transaction like that authorized by Interior's franchise
   fund authority is, in some ways, not unlike a contractual transaction.
   [11] See, e.g., B-286929, Apr. 25, 2001. Similar to a contractual
   transaction, at the time the agencies involved in the transaction enter
   into an interagency agreement, the ordering agency incurs an obligation
   for the costs of the work to be performed. See B-302760, May 17, 2004.
   However, to incur an obligation, an ordering agency must have documentary
   evidence of a binding agreement between the two agencies for specific
   goods or services.

   The specificity requirement is a long-standing principle of appropriations
   law, supported by decisions of the Comptroller General and by the
   recording statute, 31 U.S.C. sect. 1501(a). For example, in 44 Comp. Gen.
   695 (1965), we considered fiscal year 1964 purchase orders placed by the
   United States Travel Service (USTS) with the Government Printing Office
   (GPO) for the printing of sale and promotion materials. 44 Comp. Gen. at
   696. The purchase orders stated that manuscripts of the materials to be
   printed and specifications of the work to be performed by GPO would
   follow. Id. at 698. USTS provided these materials to GPO several months
   later in fiscal year 1965. Id. We concluded that a USTS purchase order for
   printing services for manuscript material to be provided later did not
   constitute a firm and complete order needed to create a binding
   obligation. Id. Instead, USTS incurred an obligation in fiscal year 1965
   when it provided the manuscripts to GPO. Id. An order that lacks a
   specific, definite description of the goods or services to be provided is
   not firm and complete.[12] B-196109, Oct. 23, 1979 (National Park Service
   did not incur an obligation against fiscal year 1978 appropriations with
   purchase order lacking specificity; the Service incurred an obligation
   when it provided specifications to vendor in fiscal year 1979).

   The recording statute provides additional support for this proposition. As
   pertinent here, it requires that an interagency agreement be evidenced by
   a written document, executed during the period of availability of the
   appropriation used, for "specific goods to be delivered . . . or work . .
   . to be provided." 31 U.S.C. sect. 1501(a) (emphasis added). The statute's
   obvious purpose is to ensure that the parties understand and accept their
   rights and duties under the agreement and that Congress, as part of its
   oversight role, knows how agencies are obligating their funds. See 71
   Comp. Gen. 109, 110 (1991). See generally Senate Committee on Government
   Operations, Financial Management in the Federal Government, S. Doc. No.
   87-11, at 85 (1961). In other words, Congress did not want agencies to
   record obligations against current appropriations based on inchoate
   agreements--whether with vendors or other agencies. See 31 U.S.C. sect.
   1501(a)(1).

   Here, only one MIPR was sufficiently specific to establish an obligation
   against DOD's appropriation--the April 2004 MIPR for "XEROX 3400 Printers"
   that GovWorks used to finance contract 44435. MIPR 4GINTMM054, Apr. 9,
   2004. The remaining MIPRs, used to finance contracts 41181, 43387, and
   43270, were too vague in their descriptions to establish DOD's and
   GovWorks's rights and duties. For example, several MIPRs sought "equipment
   through the Pentagon IT Store." E.g., MIPR 4MINTMM125, Sept. 17, 2004.
   Without further advice from DOD, GovWorks would not know whether any
   particular equipment purchase at the Pentagon IT Store satisfied DOD's
   needs. Several other MIPRs sought "secondary site [defense messaging
   system] requirements," without specifying the details needed for GovWorks
   to address DOD's needs. E.g., MIPR 3LINTMM101, Aug. 29, 2003.

   Not until DOD e-mailed GovWorks identifying specific items did DOD perfect
   its orders and incur obligations. 44 Comp. Gen. 695. For Contract 41181,
   DOD incurred an obligation against its appropriation on November 9, 2004,
   when it e-mailed GovWorks descriptions of specific goods it sought.
   Bucceroni E-mail. For Contract 43387, DOD incurred an obligation against
   its appropriation when it transmitted its Statement of Work to
   GovWorks.[13] For Contract 43270, DOD incurred an obligation in May 2005,
   when it perfected its order for body armor and gamma plates.[14] DuCom
   E-mail 1; DuCom E-mail 2. DOD and GovWorks, therefore, must use fiscal
   year 2005 funds for Contracts 41181, 43387, and 43270. See B-302760, May
   17, 2004. To the extent that DOD has recorded obligations against its
   prior fiscal year funds, DOD should adjust its accounts, deobligating
   those fiscal year funds and obligating fiscal year 2005 funds. Should DOD
   lack sufficient fiscal year 2005 funds, it must report Antideficiency Act
   violations to the President and Congress, with a copy of the report to the
   Comptroller General. 31 U.S.C. sect. 1351.

   Bona Fide Needs Rule

   An appropriation is available for obligation only to fulfill a genuine
   need of the period of availability for which it was made. B-308010, Apr.
   20, 2007. This maxim, the bona fide needs rule, applies to all uses of
   federal funds, including contracts and interagency transactions. B-286929,
   Apr. 25, 2001. The bona fide needs rule is rooted in 31 U.S.C. sect.
   1502(a). This statute provides that a fixed-term appropriation is
   available only for payment of expenses "properly incurred" during the

   appropriation's period of availability and to complete contracts "properly
   made" during that period.

   In other words, if an agency with an identified bona fide need does not
   act to fill that need before the end of an appropriation's period of
   availability, that appropriation is no longer available to fill that need.
   B-286929, Apr. 25, 2001. If the agency acts in a subsequent fiscal year to
   meet its continuing need, it must obligate the subsequent fiscal year's
   appropriation, notwithstanding that the bona fide need was first
   identified, but not satisfied, in a prior fiscal year. Id.

   As discussed above, for Contracts 43270, 41181, and 43387, DOD incurred
   obligations in fiscal year 2005, but DOD and GovWorks used expired funds
   to cover these obligations. As previously discussed, although DOD
   transferred these funds to GovWorks during their period of availability,
   the MIPRs did not obligate these funds and they were no longer available
   for obligation at the time they were used. Consequently, GovWorks
   improperly used the expired funds to enter into these three contracts in
   violation of the bona fide needs rule.

   For Contract 44435, although DOD and GovWorks had entered into a valid
   interagency agreement obligating funds, DOD and GovWorks improperly used
   the fiscal year 2004 funds to finance a fiscal year 2005 contract. Like a
   contract with a private vendor, funds obligated for an interagency
   agreement with a franchise fund are used to pay for the supplies or
   services ordered.[15] However, the fact that GovWorks did not execute
   Contract 44435 until almost 17 months after executing the interagency
   agreement, and 11 months after the end of fiscal year 2004, indicates that
   Contract 44435 did not satisfy a bona fide need of fiscal year 2004.

   Of course, a performing agency should have a reasonable period of time to
   use transferred funds, depending on the nature of the order.[16] Here, DOD
   incurred an obligation against its fiscal year 2004 appropriation on
   April 9, 2004, when it transferred fiscal year 2004 funds to GovWorks with
   a MIPR seeking "XEROX 3400 Printers." GovWorks did not execute Contract
   44435 to acquire printers for DOD until almost 17 months later and 11
   months after the end of fiscal year 2004. Contract 44435. We have been
   provided no information suggesting that the printers GovWorks purchased on
   DOD's behalf are anything but readily available commercial items that
   GovWorks could have purchased on DOD's behalf with little lead time. As
   such, we find it unreasonable that GovWorks took 17 months to execute
   Contract 44435. Rather than fulfilling a bona fide need of fiscal year
   2004, Contract 44435 at best filled a need of fiscal year 2005. GovWorks
   improperly used fiscal year 2004 funds to purchase the printers.

   As with the other three contracts, GovWorks and DOD should adjust their
   accounts to deobligate DOD's fiscal year 2004 appropriations and record
   the obligation for Contract 44435 against fiscal year 2005 appropriations.
   See B-307137, July 12, 2006. Should DOD lack sufficient fiscal year 2005
   funds, it must report Antideficiency Act violations to the President and
   Congress, with a copy of the report to the Comptroller General. 31 U.S.C.
   sect. 1351. GovWorks should return to DOD any expired DOD funds that
   GovWorks retains that are not properly obligated. See B-288142, Sept. 6,
   2001.

   Parking

   For almost 4 years, DOD's Comptroller has expressed concern about the
   possibility of DOD components "banking," or "parking," DOD funds with
   other agencies in the course of interagency agreements. In a 2003
   memorandum issued departmentwide, the Comptroller alerted DOD to media
   attention focusing "on the impropriety of using interagency agreements to
   `bank' funds that would otherwise expire at the end of the fiscal year."
   Dov S. Zakheim, Office of the Under Secretary of Defense, Comptroller,
   Memorandum for the Chairman of the Joint Chiefs of Staff, et al., Fiscal
   Principles and Interagency Agreements, Sept. 25, 2003.

   Distinguishing Economy Act orders from non-Economy Act orders, the
   Comptroller explained that with some federal agencies, such as GovWorks,
   who have legal authority separate from the Economy Act, DOD need not
   retrieve DOD funds advanced to the servicing agency but not yet used by
   the servicing agency.[17] Id. The Comptroller noted, however, that "an
   interagency agreement must be based upon a legitimate, specific and
   adequately documented requirement representing a bona fide need of the
   year in which the order is made." Id. The Comptroller advised, "If these
   basic conditions are met, these servicing agencies may retain . . . the
   funds in the following fiscal year." Id. (emphasis in original). The
   Comptroller admonished DOD officials to "resist the misguided desire to
   bank government funds through improper use of interagency agreements," and
   warned that "[m]isuse of interagency agreements may result in disciplinary
   action, adverse media attention and additional congressional limitations
   and oversight Department-wide." Id.

   The Comptroller's Office reiterated its concern in 2005 and provided
   additional guidance. Teresa McKay, Deputy Chief Financial Officer, Office
   of the Under Secretary of Defense, Comptroller, Memorandum for the
   Assistant Secretary of the Army (Financial Management and Comptroller), et
   al., Proper Use of Interagency Agreements for Non-Department of Defense
   Contracts Under Authorities Other Than the Economy Act, Mar. 24, 2005
   ("[I]t appears that some interagency agreements continue to be used in an
   attempt to keep funds available for new work after the period of
   availability for those funds expired.").

   In October 2006, the Comptroller's Office issued detailed policy and
   procedures, amending the DOD Financial Management Regulation, for
   non-Economy Act interagency agreements. Robert McNamara, Acting Deputy
   Chief Financial Officer, Office of the Under Secretary of Defense,
   Comptroller, Memorandum for the Secretaries of the Military Departments,
   et al., Non-Economy Act Orders, Oct. 16, 2006. The Comptroller required
   that DOD components execute such interagency agreements using MIPRs,
   accepted by the servicing agency, including, among other things, "a firm,
   clear, specific, and complete description of the goods or services
   ordered," "[a] statement of work that is specific, definite, and certain
   both as to the work encompassed by the order and the terms of the order
   itself," and "[s]pecific performance or delivery requirements." Id. paras.
   C.2, C.4. The Comptroller specified that the interagency agreement "must
   serve a bona fide need arising, or existing, in the fiscal year (or years)
   for which the appropriation is available for new obligations." Id. para.
   C.7. The Comptroller provided instructions for components to retrieve from
   a servicing agency expired DOD funds to ensure that they are not used for
   new obligations.[18] Id.  para. D.2.d.

   Unfortunately, the Comptroller's fears, in this case at least, were
   realized. Clearly, DOD parked funds at GovWorks. An agency may not extend
   the availability of its appropriated funds by transferring them to another
   agency. B-288142, Sept. 6, 2001. DOD transferred funds to GovWorks using
   indefinite, nonspecific MIPRs, and GovWorks held these funds, in some
   cases for as long as 50 months. DOD improperly directed GovWorks to use
   expired DOD funds for these contracts. GovWorks, for one contract,
   improperly substituted expired funds from previous fiscal years. DOD and
   GovWorks officials share responsibility for the transactions at issue here
   and should be accountable. Because DOD funds were used to finance the
   agreements and subsequent contracts, DOD's responsibility is obvious.
   GovWorks, acting as DOD's contracting agent, also is responsible for
   ensuring proper use of the funds entrusted to it. In this case, officials
   of both agencies acted in disregard of the recording statute and the bona
   fide needs rule, parking DOD funds at GovWorks and possibly violating the
   Antideficiency Act.

   DOD has already advised GovWorks "that any funds in excess of $100,000
   provided . . . to GovWorks before [May 31, 2007] that have not already
   been placed on contract by GovWorks must be returned to [DOD]
   immediately." Letter from Shay D. Assad, Director, Defense Procurement and
   Acquisition Policy, Office of the Undersecretary of Defense, Acquisition,
   Technology and Logistics, to Nina Rose Hatfield, Deputy Assistant for
   Business Management and Wildland Fire, Department of the Interior, May 31,
   2007. DOD also has stopped the practice of advancing funds to GovWorks,
   with any future payments to be based on billings for completed services or
   delivered goods. Letter from Robert P. McNamara, Office of the
   Undersecretary of Defense, Comptroller, to Nina R. Hatfield, Deputy
   Assistant for Business Management and Wildland Fire, Department of the
   Interior, Feb. 7, 2007. In addition, as we noted earlier, DOD must adjust
   its appropriations accounts to record obligations for these four contracts
   against its fiscal year 2005 appropriations. If DOD has insufficient
   unobligated balances in these appropriations, DOD must report violations
   of the Antideficiency Act. 31 U.S.C. sect. 1351.

   CONCLUSION

   For the reasons discussed above, DOD and GovWorks should review and adjust
   their accounts for the four contracts reviewed here. We further suggest
   that GovWorks examine its accounts to identify interagency agreements that
   lack the requisite specificity. For those agreements that do not
   constitute firm and complete orders, GovWorks should so inform the
   ordering agency and return any funds advanced. GovWorks should also
   develop adequate internal controls to ensure that it does not accept
   orders lacking the requisite specificity to constitute firm and complete
   orders nor use expired funds to enter into contracts on behalf of the
   ordering agency.

   Gary L. Kepplinger
   General Counsel

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

   [1] Letter from Earl E. Devaney, Inspector General, Office of the
   Inspector General, Department of the Interior, to David M. Walker,
   Comptroller General of the United States, Jan. 22, 2007 (Devaney Letter).
   This request arose out of the Inspector General's report on an audit of
   transactions between DOD and Interior. U.S. Department of the Interior
   Office of Inspector General, FY 2005 Department of the Interior Purchases
   Made on Behalf of the Department of Defense, Report No. X-IN-MOA-0018-2005
   (Jan. 9, 2007), available at http://www.doioig.gov/upload/2007-G-0002.txt (last
   visited July 2, 2007) (Interior IG Report). The Inspector General for the
   Department of Defense also audited many of these transactions and reported
   results in U.S. Department of Defense Office of Inspector General, FY 2005
   DOD Purchases Made Through the Department of the Interior, Report No.
   D-2007-044 (Jan. 16, 2007), available at
   http://www.dodig.osd.mil/Audit/reports/07report.htm (last visited July 2, 2007)
   (DOD IG Report).

   [2] In response to the IG's request, we issued a decision related to
   obligation of funds under an indefinite delivery, indefinite quantity
   contract. B-308969, May 31, 2007. A third decision in response to the IG's
   request, B-309181, relating to authority to enter into a lease, will be
   issued in the near future.

   [3] The DOD Inspector General reached conclusions similar to those of the
   Interior IG. DOD IG Report.

   [4] We understand that body armor is used to protect personnel on board
   ships. Each set of body armor is fitted, front and back, with gamma
   plates, ceramic plates manufactured to protect personnel from projectiles.

   [5] These instructions did not come from DOD directly, but from John J.
   McMullen Associates, a private contractor working on DOD's behalf.

   [6] The Decision Agent is a suite of software applications that
   automatically identifies, filters, and distributes electronic messages.
   Interior IG Report at 4 n. 3.

   [7] The July 10, 2001, MIPR sought "toner cartridges" and the GovWorks
   contracting officer servicing Contract 41181 believed that Contract 41181,
   for Decision Agent Network Equipment, did not fill this need. Bernhardt
   Letter at tab 1H.

   [8] DOD originally submitted a Statement of Work to GovWorks on April 14,
   2005. E-mail from Kimberly Elmore, Interior Office of Inspector General,
   to Wesley Dunn, Senior Staff Attorney, GAO, Subject: Fw: GAO Request #2,
   May 7, 2007. This Statement of Work was revised on June 15, 2005. Id.

   [9] We have no documents showing GovWorks's acceptance of the funding
   instructions in this e-mail. However, we may infer acceptance of these
   terms, as GovWorks followed them. Contract 43387.

   [10] GovWorks used fiscal year 2005 funds to partially fund Contract
   43387.

   [11] Both DOD and GovWorks consider MIPRs to be obligating documents.
   Bernhardt Letter; Pitkin Letter.

   [12] The specificity required of interagency agreements under the
   recording statute is similar, even if not necessarily identical, to the
   specificity required of solicitations under the Federal Acquisition
   Regulation (FAR). For example, the FAR requires that solicitations, even
   for indefinite-quantity contracts, describe the "scope, nature,
   complexity, and purpose of the supplies or services the Government will
   acquire." 48 C.F.R. sect. 16.504(a)(4). See also B-277979, Jan. 26, 1998
   (agency's solicitation was invalid because it did not "reasonably
   describ[e] the general scope, nature, complexity, and purpose of the
   services or property to be procured under the contract").

   [13] Neither DOD nor GovWorks provided us with documentation of when DOD
   transmitted the Statement of Work to GovWorks. It is clear, however, that
   DOD did this sometime between April 15, 2005 (the date of the original
   Statement of Work) and June 30, 2005 (the date GovWorks signed the
   contract).

   [14] Neither DOD nor Interior provided us with documentation of an exact
   date that DOD perfected the order that resulted in Contract 43270.
   Nevertheless, the circumstances surrounding Contract 43270 show that DOD
   perfected its order sometime between May 11 and May 20, 2005.

   [15] Under the Economy Act, 31 U.S.C. sect. 1535, an ordering agency must
   deobligate any fixed year funds at the end of their period of availability
   to the extent that the performing agency has not performed or incurred
   valid obligations under the agreement. 31 U.S.C. sect. 1535(d); B-289380,
   July 31, 2002. When an agency validly obligates its funds through an
   interagency agreement not governed by the Economy Act, the ordering agency
   does not have to deobligate its funds at the end of their period of
   availability. B-302760, May 17, 2004; B-286929, Apr. 25, 2001.

   [16] In 1984, we concluded that because Army regulations required use of
   transferred funds within 90 days from receipt of an order, DOD industrial
   funds had not begun work ordered by other DOD components within a
   reasonable period of time when work began more than 90 days after receipt.
   GAO, Improper Use of Industrial Funds by Defense Extended the Life of
   Appropriations Which Otherwise Would Have Expired, GAO/AFMD-84-34
   (Washington, D.C.: June 5, 1984).

   [17] See footnote 15.

   [18] See also 1 TFM Bulletin No. 2007-03, Attachment I, para. III.B.2,
   Oct. 1, 2006 (ordering agencies should monitor the activity and age of an
   order and where there has been no activity for more than 180 days, the
   ordering agency "shall determine the reason for the lack of activity on
   the order").