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    My Navy activity MIPRs funds to another DoD organization who then turns around and cuts a contract from the funds. This activity will not accept a Direct Cite MIPR for contract services. Is this a standard way of operating? Secondly, if we receive a WX document with REIM funds (marked Economy Act) from another DoD activity which we then take THOSE funds and put them on a REIM MIPR to above activity to cut a contract.....still okay?


    Answer

    The most useful guidance concerning Military Interdepartmental Purchase Requests (MIPRs) is contained in the DoD Financial Management Regulation (FMR) 7000.14-R, Volume 11A, Chapters 1 and 3, and Volume 3, Chapter 8.  Volume 11A, Chapter 1 is “General Reimbursement Procedures and Supporting Documentation.”  Chapter 3 “…policies and procedures applicable to transactions where goods and services are procured from other federal agencies under the Economy Act, Title 31, United States Code, sections 1535 and 1536.”  Volume 3, Chapter 8 “…sets forth the basis for determining the amount and accounting period in which commitments and obligations must be recorded under various circumstances.”  Additional guidance on inter, and intra, agency agreements can be found in the Treasury Financial Manual (TFM), Chapter 4700, Section 4706 and Appendix 10, Section 9, DoD Instruction 4000.19, and at the Office of Federal Procurement Policy (OFPP) website.
     
    With regard to the first question, “This activity will not accept a Direct Cite MIPR for contract services. Is this a standard way of operating?”  The answer is a resounding NO, this is NOT a standard way of operating.  While FMR, Volume 11A, Chapter 3, Paragraph 030501 states, “Economy Act orders may be placed on a reimbursable or direct fund citation basis.  Whether the order is on a reimbursable or direct cite basis it should be negotiated between the two parties.”  The focus of these negotiations however should not be on the type of MIPR (reimbursable or direct cite) but rather on the work to be completed, or the supplies that will be procured.  If the work will be accomplished by the servicing agency, or if the servicing agency has procured the supplies on a contract with its funds, a reimbursable MIPR would be required from the requesting agency.  If, on the other hand, the servicing agency will place funds from the requesting agency on an existing contract, a direct cite MIPR would be appropriate.  The accounting procedures for Reimbursable Procurement can be found at Direct Fund Cite Orders is addressed in FMR, Volume 3, Chapter 8, Paragraph 080801.  While the accounting procedures for Direct Citation procurements is addressed in FMR, Volume 3, Chapter 8, Paragraph 080802.
     
    With regard to the second question, “If we receive a WX document with REIM funds (marked Economy Act) from another DoD activity which we then take THOSE funds and put them on a REIM MIPR to above activity to cut a contract.....still okay?” Again, the answer is a resounding NO.  First, in this scenario the second organization is serving no other purpose than being a “pass through” for the first organization on the way to the servicing agency.  This begs the question, why doesn’t the first organization go directly to the servicing organization with their request?  Second, the original organization loses control over those funds that they have issued.  The second organization could use those funds for their own purposes, other than the originator’s intent.  I find it somewhat hard to believe that a comptroller would allow this “pass through” given the Due Diligence requirements of funds holders found at FMR, Volume 3, Chapter 8, Paragraph 080307.
     
    Conclusion: In the end, the FMR rules are in place to ensure funds holders maintain control of their funds as required by FMR, Volume 3, Chapter 8, Paragraph 080307.  If funds are sent to a servicing agency with the expectation that they will be placed on a contract by that agency, but they are sent on a reimbursable MIPR, those funds are obligated as soon as the servicing agency sends back a DD 448-2.  That will be prior to those funds being placed on the anticipated contract.  In theory, the servicing agency could use those funds for whatever it wanted.  The original funds holder has lost control of them.  If those funds had been sent to the servicing agency on a direct cite MIPR, those funds would not be obligated until the servicing agency has sent a copy of the contract document back to the requesting agency.  Thereby, the requesting agency maintains control over those funds for their intended purpose.  The exact same logic applies if a third party sends a reimbursable MIPR to an intermediary organization in anticipation of it sending the funds to the servicing agency.   
     
    Suggestion:  Read the source documents that pertain to your question.  First, read DoD Financial Management Regulation (FMR) 1400-7R Volume 11A, paying particular attention to Chapters 1, and 3, and Volume 3, with emphasis on Chapter 8.  Second, read Title 31, United States Code (USC), sections 1535 and 1536.  Third, it may be helpful to read the Treasury Financial Manual (TFM), Chapter 4700 and DoD Instruction 4000.19, and visit the Office of Federal Procurement Policy (OFPP) website.  Finally, we most strongly recommend that you contact your local comptroller organization, and legal counsel for more information and their policy interpretation of this issue.
     

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