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  • Question

    Can RDT&E expired funds be used for this obligation adjustment or does my agency have to use funds currently available for new obligations? (Note: The updated DoD FMR seems rather ambiguous by stating "funds currently available for the same purpose)


    Answer

    There are always two steps in determining what appropriation should be used to pay any obligation.  The first is relatively simple, to determine that it is a valid invoice and, therefore, must be paid. This includes verification that there is a legal requirement (e.g., a contract) for the work claimed to have been done; that the work was actually received and accepted by the government; and that the invoice contains all of the information needed to make the payment. With some exceptions, “late” submission of an invoice by a contractor does not negate the need to pay for the work performed or the product delivered.  In your specific scenario, it appears that DCMA has complete this step for you with their final rate determination that has created an obligation increase of $200K to your RDT&E contract.
     
    As you have obviously discovered, sometimes the second step, which is the determination of what appropriation should be used to pay an obligation (bill) can be more problematic.  Therefore, let’s look at your specific scenario:
     
    The original RDT&E appropriation that was used for the contracted effort has entered the cancelled phase of its appropriation life-cycle. DoD Financial Management Regulation (FMR) 7000.14-R, Volume 2A, Chapter 1, Paragraph 010107, section B.14, states, “Closed (Canceled) Appropriations. An appropriation that is no longer available for the adjustment or payment of obligations.” FMR, Volume 3, Chapter 10, Paragraph 1002, section B, says, “When balances are cancelled, the amounts are not available for obligation or expenditure for any purpose.” Clearly, the original RDT&E appropriation that was used for the contracted effort cannot be used to pay the increased obligation in your situation.  Therefore, we have to look at the possibility of using either expired or current RDT&E appropriations.
     
    I understand how the wording of DoD Financial Management Regulation (FMR) 7000.14-R, Volume 3, Chapter 10, Paragraph 100303, section C, could cause some confusion with regard to the use of expired appropriations to pay a bill from a cancelled appropriation.  As you correctly state in your question background, FMR, Volume 3, Chapter 10, Paragraph 100303, section C, says. “In some instances, following closure/cancellation of an appropriation, it becomes necessary to adjust an obligation that otherwise would have been properly chargeable (both as to purpose and amount) to an appropriation before closure/cancellation. Should such an adjustment become necessary, the obligation must be charge to an appropriation currently available for the same purpose..."  The problem here is not the idea of “for the same purpose” (which is simply referring to the type of appropriation), but rather the vague treatment of the phrase “currently available.”
     
     DoD Financial Management Regulation (FMR) 7000.14-R, Volume 3, Chapter 10, Paragraph 100302, section A, provides some clarity when it states, “Expired funds are not available for new obligations.” However, FMR, Volume 2A, Chapter 1, Paragraph 010107, section B.25, is even more specific when it discusses expired appropriations, as it says, “An appropriation whose period of availability for incurring new obligations has expired, but the appropriation is not closed (Canceled). During this period, the appropriation is available for adjustment to, or payment of, existing obligations.” Therefore, an expired appropriation cannot be used for new obligations, but remains available for within-scope changes to work originally funded with the appropriation prior to its expiration.
     
    The increased obligation in your situation is clearly a new obligation, since it was not a bona fide need (
    Title 31, US Code, Sec 1502) of any of the years for which the expired appropriations were available for new obligations (i.e. in the current phase of their appropriation life-cycle). Since it is a new obligation, only current funds can be obligated on a contract vehicle to cover bills resulting from cancelled funds. 
     
    Conclusion: This scenario appears to be very straightforward.  The $200K obligation increase that has occurred due to a DCMA final rate adjustment against an RDT&E contract that was originally funded with funds that have since entered the cancelled phase of their appropriation life-cycle must be paid using either FY16 or FY17 RDT&E funds.  FY16 and FY17 RDT&E funds are in the current phase of their appropriation life-cycle and as such are currently available for new obligations, which this would be.
     
    Note: Make sure to read the limitations on the amount of current appropriations that can be used to pay obligations arising from cancelled funds that is covered in the DoD Financial Management Regulation (FMR) 7000.14-R, Volume 3, Chapter 10, Paragraph 100302, sections D and E.
     
    Suggestions:  First, I would suggest that you read DoD Financial Management Regulation (FMR) 7000.14-R, Volume 3, Chapter 10, paying particular attention to paragraph 100302. In addition, review the “Funding Execution - Rules” lesson contained in Lesson 7.5 of the on-line DAU BCF-103 course (Fundamentals of Business Financial Management), which discusses a scenario that is very similar to yours.  Second, if you get the opportunity, attend an offering of the DAU BCF 225 course, which is a one week, in-residence course that covers this and many other financial management topics. Finally, it is most strongly recommended that you contact your local comptroller organization, and legal counsel for more information and their policy interpretation of this issue.

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