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  • Question

    Can the Government direct the contractor to procure those items that the contractor purposely pushed into the next CY in order to lower service center rates? Or is Government required to return any excess funds to the agency/commend from which they originated. Most of the funds were O&M and are now expired.


    Answer

    As stewards of the taxpayers’ money, Congress has put in place several fiscal laws that govern how the Department of Defense (DoD) can spend funds. The three most significant of these are: the Misappropriation Act, the Anti-Deficiency Act (ADA) and the Bona Fide Need Rule.

    Therefore, it is important that we know what is required by each of these laws. The Misappropriation Act (Title 31, U.S. Code, Sec 1301) requires funds to be used only for the purpose and programs for which the appropriation was made by Congress. The Anti-Deficiency Act (Title 31, U.S. Code, Sec 1341 and 1517) prohibits making or authorizing an obligation in excess of the amount available and forbids obligation to pay money from the U.S. Treasury in advance of an appropriation by Congress. In addition, the ADA requires an agency to fix responsibility for violations of the Act. Finally, the Bona Fide Need Rule (Title 31, U.S. Code, Sec 1502) requires funds to be used for needs or services in the year(s) of the appropriation’s obligation period. Section 1502(a) of Title 31, U.S. Code specifically requires that appropriated funds be used only to obtain: Goods for which a bona fide need arises during the period of the appropriation’s availability for obligation, which in the case of O&M funds is one year.

    From the background that you have given me in your question, I am going to assume that the correct appropriation is being used and that the excess funding would cover the full price of the items. Therefore, there should be no issues with regards to violations of either the Misappropriations or Ant-Deficiency Acts. In addition, I have made the assumption that the funds that you are talking about are, for the most part, FY11 O&M funds.

    O&M appropriations are current for new obligations for one year. So, FY11 O&M funds must be obligated on, or prior to, 30 September 2011. On 01 October 2011, those FY11 O&M funds that are not obligated go into the Expired category for the next five years and will be controlled by the service to pay for upward adjustments only. FY11 O&M funds that are obligated on a contract as of 30 September 2011 can reside on that contract to be expended over the next five years. If excess O&M funds are de-obligated from the contract, since they are not available for new obligations, they would revert to the control of the service and will be lost to the command. However, excess funds that are obligated on a contract can be moved from one Contract Line Item Number (CLIN) to another to pay for cost overruns or procure on the second CLIN.

    So the biggest question is: Are the items that you want to procure a bona fide need of the FY11 O&M funds. Just because it is discovered that there is excess funding, that does not mean that it is alright to buy items or services (even if the excess funding had been discovered in FY11). DoD cannot procure anything for which there is not a bona fide need and more specifically it must be a bona fide need of the period that the funding is available for obligation. Your question states that "the contractor purposely pushed into the next CY." Given that statement, it seems like a reasonable assumption that your intention was to buy those items in FY11 and therefore, they would be a bona fide need of that year.

    Conclusion:

    Suggestion:

    It may be useful to complete DAU course BCF 103 on-line and attend DAU course BCF 211 to get training on budget execution. In addition, we most strongly recommend that you contact your local comptroller organization for more information and their policy interpretation of this issue.
    As long as there is a sufficient amount of the correct appropriation on the contract to pay for the items, and the items were a bona fide need of the FY that corresponds to the excess funding, there should be no reason why that excess funding could not be used to procure the items in question.

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