TITLE: B-310725, National Science Foundation--Disposition of False Claims Act Recoveries, May 20, 2008
BNUMBER: B-310725
DATE: May 20, 2008
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B-310725, National Science Foundation--Disposition of False Claims Act Recoveries, May 20, 2008

   Decision

   Matter of: National Science Foundation--Disposition of False Claims Act
   Recoveries

   File: B-310725

   Date:  May 20, 2008

   DIGEST

   The Inspector General (IG) for the National Science Foundation (NSF) may
   not credit to the IG appropriation amounts recovered pursuant to the False
   Claims Act that represent investigative costs incurred by the office.
   Recovery of these costs cannot be characterized as a repayment of an
   appropriation--the narrow exception to the miscellaneous receipts rule, 31
   U.S.C. sect. 3302(b). Congress appropriates a specific amount to the IG
   for costs to carry out its duties under the Inspector General Act of 1978,
   including investigations of payments made pursuant to a false claim.
   Crediting the IG appropriation with these amounts recovered for
   investigative costs without specific statutory authority would violate the
   miscellaneous receipts statute and constitute an improper augmentation of
   the IG appropriation.

   DECISION

   The Inspector General (IG) for the National Science Foundation (NSF) has
   requested a decision regarding the disposition of recoveries under the
   False Claims Act, 31 U.S.C. sect. 3729. Specifically, the IG has asked
   whether amounts the government recovers that represent investigative costs
   incurred by the IG may be credited to the IG appropriation. For the
   reasons stated below, we conclude that the recoveries for investigative
   costs may not be credited to the IG appropriation, but should be deposited
   into the Treasury as miscellaneous receipts.

   Our practice when rendering decisions is to obtain the views of the agency
   to establish a factual record and to elicit the agency's legal position in
   the matter. GAO, Procedures and Practices for Legal Decisions and
   Opinions, GAO-06-1064SP (Washington, D.C.: Sept. 2006), available at
   www.gao.gov/legal/resources.html. In this regard, we spoke with several
   NSF officials to obtain factual information and solicit NSF's legal
   views.[1] We also had telephone conversations and e-mail correspondence
   with Counsel to the IG to obtain factual information.[2]

   BACKGROUND

   The False Claims Act establishes liability for knowingly presenting to the
   U.S. government, or causing to present, a false or fraudulent claim for
   payment. 31 U.S.C. sect. 3729. Under the Act, the government may impose a
   civil penalty of $5,000 to $10,000 "plus 3 times the amount of damages
   which the Government sustains because of the act of that person . . . ."
   Id. The agency that sustained the damages may credit to its appropriation
   that portion of amounts recovered that represent amounts it erroneously
   disbursed as a result of the false claim. See, e.g., 69 Comp. Gen. 260,
   262 (1990).

   Both IG and agency officials explained to us that IG staff, as part of
   their duties, investigate all potential False Claims Act claims for NSF
   and refer appropriate cases to the Department of Justice (DOJ) for
   litigation. Record of Interview, at 1; Chason E-mail. At NSF, most False
   Claims Act investigations involve false statements made to NSF by NSF
   grantees. Once DOJ reaches a settlement resolving a claim, IG staff notify
   the NSF Office of Budget, Finance, and Award Management (Budget Office)
   that a settlement will be forthcoming and advise the Budget Office of the
   amount of the settlement representing recovery for direct loss to NSF and
   the amount representing recovery of the IG investigative costs. Chason
   e-mail, attach. 2; Record of Interview, at 1.

   Upon settlement, DOJ forwards a check to the Budget Office for the amount
   of the settlement.[3] Referring to the settlement breakdown received from
   IG staff, the Budget Office credits amounts representing direct loss to
   the NSF appropriation from which the payment was originally made.[4]
   Record of Interview, at 1. The Budget Office deposits amounts identified
   as investigative costs into the Treasury as miscellaneous receipts. Record
   of Interview, at 1-2. The IG would like to credit amounts representing
   recovery of its investigative costs to the IG appropriation. Request, at
   2-3. Congress appropriates a specific amount to the IG. See, e.g., Science
   Appropriations Act, 2008, Pub. L. No. 110-161, div. B, title III, 121
   Stat. 1844, 1921-2 (Dec. 26, 2007).

   DISCUSSION

   Under 31 U.S.C. sect. 3302(b), also known as the miscellaneous receipts
   statute, agencies are required to deposit moneys received for the United
   States into the general fund of the Treasury unless otherwise authorized
   by law. Retention of moneys without proper statutory authority would
   violate the miscellaneous receipts statute and constitute an improper
   augmentation of an agency's appropriation. B-308476, Dec. 20, 2006. We
   have not identified, nor has the IG identified, any relevant statutory
   provision that would permit the IG to retain and credit to its
   appropriation amounts recovered in a False Claims Act settlement.

   GAO has recognized an exception to the miscellaneous receipts statute for
   repayments. There are two types of receipts that are classified as
   repayments: reimbursements and refunds. Amounts that qualify as
   reimbursements are limited to "amounts collected from outside sources for
   commodities or services furnished, which by law may be credited directly
   to the appropriations." B-305402, Jan. 3, 2006; see also 65 Comp. Gen.
   666, 670 (1986) (Job Training Partnership Act and the annual
   appropriations act authorized the Job Corps Center to retain receipts from
   the sale of various commodities). The amounts collected from False Claims
   Act settlements, whether they represent recovery of actual loss or
   investigative costs, do not constitute amounts collected for commodities
   or services provided by NSF, and the IG has no statutory authority to
   retain a reimbursement. Accordingly, the recovery for investigative costs
   cannot be credited to the IG appropriation as a reimbursement.

   Refunds are defined as "amounts collected from outside sources for
   payments made in error, overpayments, or adjustment for previous amounts
   disbursed." 65 Comp. Gen. 600, 602 (1986), citing Treasury Department-GAO
   Joint Regulation No. 1, later reprinted in GAO, Policy and Procedures
   Manual for Guidance of Federal Agencies, title 7, appendix II (Washington,
   D.C.: May 1, 1993).[5] A refund "simply restores to the appropriation
   amounts that should not have been paid from the appropriation" in the
   first place. B-302366, July 12, 2004, at 4. In the context of False Claims
   Act recoveries, the refund exception to the miscellaneous receipts statute
   allows agencies to retain the portion of a settlement that represents
   amounts erroneously disbursed due to a false claim. 69 Comp. Gen. at 262.
   Certainly, this exception would include the direct loss to NSF, that is,
   the payment that NSF made from the NSF appropriation due to the false
   claim. See id. The IG investigative costs, however, are not payments made
   in error, overpayments, or otherwise adjustments to amounts previously
   disbursed. On the contrary, the investigative costs are payments properly
   made from an appropriation that is available for incurring costs for such
   investigations.

   Congress appropriates a specific amount to the IG for the necessary
   expenses of carrying out its duties under the Inspector General Act of
   1978, as amended. Pub. L. No. 110-161, 121 Stat. at 1922. As part of its
   duties, the IG conducts audits and investigations of NSF programs and
   operations, including False Claims Act investigations. 5 U.S.C. App. 3
   sect. 4. The IG properly charges this appropriation for any costs incurred
   during the investigation of NSF's programs and operations under the
   Inspector General Act. In an analogous case, B-308476, Dec. 29, 2006, we
   found that the Federal Motor Carrier Safety Administration (FMCSA) could
   not retain a judicial award of criminal restitution calculated to cover
   its costs of investigating and prosecuting motor carrier safety regulation
   infractions. Crediting the agency's appropriation with the restitution
   award would not restore to the appropriation amounts that should not have
   been paid. Congress provided FMCSA with an appropriation to pay for costs
   of investigations. Thus, were FMCSA to retain the restitution amounts,
   FMCSA would violate the miscellaneous receipts statute and would
   improperly augment its appropriation. Id.

   Here, as with FMCSA, the investigative costs are necessary expenses of
   carrying out IG responsibilities for which the IG receives an
   appropriation. The time spent by IG staff or contractors on a matter like
   this is a cost contemplated by its underlying authority, the Inspector
   General Act. In enacting a specific sum to be available for IG expenses,
   Congress established a maximum authorized level at which the IG should
   operate, including investigations of false claims. See B-300248, Jan. 15,
   2004. Crediting any recovery for costs incurred by the IG during such
   investigations, without statutory authorization, would violate the
   miscellaneous receipts statute and improperly augment the IG
   appropriation, allowing the IG to operate at a level above the maximum
   level that Congress established.

   The IG cited two GAO cases to support its view that recovery of
   investigative costs should be credited to the IG appropriation: B-281064,
   Feb. 14, 2000 (Tennessee Valley Authority), and 69 Comp. Gen. 260 (1990)
   (National Insurance Development Fund). In B-281064, we concluded that the
   Tennessee Valley Authority (TVA) Fund could retain amounts from a False
   Claims Act settlement representing recovery of investigative costs.
   Congress established TVA as a wholly-owned government corporation to sell
   electric power to state and local entities and private individuals and
   businesses in seven states. 16 U.S.C. sect. 831i; 31 U.S.C. sect.
   9101(3)(N). Congress directed TVA to charge its customers rates for power
   that would produce sufficient revenue to finance the operations of TVA.
   TVA deposits this revenue into the TVA Fund to be available for TVA
   business operations without further appropriation. 16 U.S.C. sections
   831n-4(f), 831y. TVA is engaged in the business of selling power, and all
   costs TVA incurs, including the cost of False Claims Act investigations,
   are financed by TVA's customers through rates charged by TVA. TVA
   customers --state and local governments, businesses and individuals--would
   bear the costs of investigating false claims by paying higher rates for
   electricity if TVA were not permitted to retain recoveries of its
   investigative costs.

   Similarly, in 69 Comp. Gen. 260, we concluded that the Federal Emergency
   Management Agency could credit the National Insurance Development Fund
   with amounts from a False Claims Act settlement representing
   administrative and investigative costs. Congress authorized the federal
   crime insurance program to provide crime insurance in areas in which
   insurance would not otherwise be available. To fund the operations of this
   program, Congress directed the agency to collect premiums and other
   related fees and charges from those seeking insurance and to deposit those
   collections in the National Insurance Development Fund, where they were
   available without appropriation. Similar to TVA, if the recovered moneys
   are not credited to the National Insurance Development Fund, the insurance
   program participants--individuals and businesses--would bear the burden of
   these costs through adjustments in premiums and related fees and charges.
   Id.

   In both B-281064 and 69 Comp. Gen. 260, Congress established funding
   streams for the business activities of selling power and crime insurance,
   authorizing each agency to charge customers and retain and use amounts
   collected to cover costs of operation. The IG, however, is not financed by
   collections from nonfederal entities or private individuals . As noted
   above, Congress appropriates a specific amount each year for IG
   operations. Crediting recoveries of investigative costs to the IG
   appropriation would constitute an improper augmentation, permitting the IG
   to operate at a level greater than it could with its appropriations.
   Accordingly, recovery of amounts representing investigative costs incurred
   by the IG must be deposited in the Treasury as miscellaneous receipts
   under 31 U.S.C. sect. 3302(b).

   CONCLUSION

   Recovery of IG investigative costs does not meet the narrow exception to
   the miscellaneous receipts rule that allows agencies to retain amounts
   characterized as repayments. Congress appropriates a specific amount to
   the IG for costs incurred in carrying out its duties under the Inspector
   General Act of 1978, including investigations of payments made pursuant to
   a false claim. In such case, crediting this appropriation with amounts
   recovered for investigative costs under the False Claims Act without
   specific statutory authority would violate the miscellaneous receipts
   statute and constitute an improper augmentation of the IG appropriation.

   Gary L. Kepplinger
   General Counsel

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

   [1] Record of Interview of John Lynsky, Deputy Director, Office of Budget
   Finance and Award Management (Budget Office), Margie Yanchuk, Acting
   Deputy Director Budget Office, Karin Dasuki, Branch Chief, Accounting
   Operations Branch, and Sandy Scholar, Assistant General Counsel, NSF, by
   Thomas H. Armstrong, Assistant General Counsel, and Sheila Rajabiun,
   Senior Attorney, GAO, Feb. 1, 2008.

   [2] E-mail from Kenneth Chason, Counsel to NSF-IG, to Thomas H. Armstrong,
   Assistant General Counsel, and Sheila Rajabiun, Senior Attorney, GAO, Jan.
   11, 2008 (Chason e-mail).

   [3] DOJ deducts a 3-percent fee for its services from the total recovery.
   See 28 U.S.C. sect. 527.

   [4] If the appropriation account has expired at the time recovery is
   received, the Budget Office adjusts the accounts in the corresponding
   expired appropriation account. Record of Interview, at 1. If the expired
   appropriation account has closed, the Budget Office deposits these amounts
   in the Treasury as miscellaneous receipts. Id. at 1-2.

   [5] Available at www.gao.gov/special.pubs/ppm.html (last visited May 12,
   2008).