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U.S. Department of Health and Human Services—Application of Fiscal Law to Other Transactions

The National Heart, Lung, and Blood Institute (NHLBI) within the National Institutes of Health (NIH) violated the recording statute when it recorded obligations for three Other Transaction Agreements (OTAs) at the time it issued the respective Notices of Award for such agreements. The recording statute requires an agency to record the full amount of its obligation against funds available at the time it incurs the obligation. However, as is the case here, award notices do not establish an obligation if another document has already established the agency’s legal liability for the project or if the notices condition funding on the agency’s approval of the applicant’s plan, the execution of a future agreement, or both. NHLBI also violated the recording statute when it recorded a liability for one of the agreements in an amount that included funds that were not available to the awardee until NHLBI approved their release in the future. An agency may not generally record an obligation if the government’s liability is subject to a precondition, and the satisfaction of the condition is in the government’s control. NHLBI did not violate the bona fide needs statute when it entered into the three OTAs with fiscal year appropriations, even though the agreements covered activities that would be conducted over multiple years, because the purposes of the agreements were to provide federal assistance to facilitate medical research. When the principal purpose of the transaction is to provide federal assistance, then the agency’s need is fulfilled when it awards funds from the currently available appropriation, regardless of when the recipient will expend the awarded funds. NHLBI complied with the bona fide needs statute when it modified one of the agreements but did not alter the agreement’s scope or purpose. A modification is a bona fide need of the year in which the agreement was originally executed when there is a continuing need for the work contemplated in the agreement and the purpose and scope of the agreement remain unchanged.

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