Expired Funds and Interagency Agreements between GovWorks and the Department of Defense
B-308944: Jul 17, 2007
GovWorks, a Department of the Interior franchise fund, entered into four contracts on behalf of the Department of Defense (DOD). With one exception, the Military Interdepartmental Purchase Requests (MIPRs) used to finance these contracts did not identify the specific items or services that DOD wanted GovWorks to acquire on its behalf. Lacking the necessary specificity as to the items or services ordered, these MIPRs did not properly obligate DOD's appropriation. Accordingly, in fiscal year 2005, when GovWorks used these funds for three of the four contracts, GovWorks improperly used prior year funds. One MIPR, for laser printers, described the goods DOD sought with enough specificity to create a valid interagency agreement and to properly obligate DOD's appropriation. Although the laser printers ordered are a readily available commercial item, GovWorks did not use the funds to execute a contract on DOD's behalf until 17 months after the date of the MIPR, and 11 months after the funds expired. Because GovWorks did not use the funds within a reasonable time of their receipt, the contract did not fulfill a bona fide need arising during the funds' period of availability. DOD and GovWorks share responsibility for ensuring the proper use of DOD funds transferred to and "parked" at GovWorks. DOD must adjust its appropriations accounts to record obligations for these four contracts against fiscal year 2005 appropriations. If DOD has insufficient unobligated balances in these appropriations, DOD must report violations of the Antideficiency Act. To prevent future occurrences of the problems associated with the four contracts, GovWorks should examine its accounts to identify interagency agreements that lack the requisite specificity under the recording statute. For those agreements that do not meet the requirements, GovWorks should return the funds advanced by the ordering agency. GovWorks also should develop internal controls to ensure that it does not accept nonspecific, indefinite orders nor use expired funds to enter into contracts on behalf of the ordering agency.
B-308944, Expired Funds and Interagency Agreements between GovWorks and the Department of Defense, July 17, 2007
The Inspector General for the Department of the Interior (Interior) requests our decision under 31 U.S.C. sect. 3529 regarding issues raised by four contracts that GovWorks, an Interior franchise fund, entered into with private vendors in fiscal year 2005 using Department of Defense (DOD) funds. The Inspector General (IG) is concerned that certain Military Interdepartmental Purchase Requests (MIPRs), used to document DOD's interagency agreements with GovWorks, may not have identified DOD's needs with the specificity required to create an obligation under 31 U.S.C. sect. 1501(a). Devaney Letter. The IG expressed concern that most of the DOD funds that GovWorks used to finance the four contracts were no longer available to incur obligations when GovWorks executed the contracts in fiscal year 2005.
For the reasons discussed below, we conclude that, with one exception, the MIPRs between DOD and GovWorks did not identify the specific items or services that GovWorks was to acquire. As a result, the MIPRs did not properly obligate DOD's funds. It was not until fiscal year 2005 that DOD perfected its orders and established valid interagency agreements by asking GovWorks to acquire specific goods or services. Consequently, GovWorks improperly used expired funds, transferred by DOD's MIPRs, to finance these three contracts. DOD may not extend the availability of its appropriated funds by parking funds at GovWorks. DOD and GovWorks should adjust their appropriations accounts, charging the obligations for these three contracts to fiscal year 2005 DOD funds. If there is an insufficient unobligated balance remaining in DOD's fiscal year 2005 expired appropriation, DOD should report a violation of the Antideficiency Act consistent with Office of Management and Budget Circular A-11.
One MIPR, for laser printers, funding one of the four contracts had the requisite specificity to properly obligate DOD's funds. Because laser printers are a readily available commercial item, GovWorks's use of the transferred funds to acquire laser printers almost 17 months after DOD and GovWorks entered into the interagency agreement and transferred the funds to GovWorks, and 11 months after the funds expired, did not fulfill a bona fide need arising during the funds' period of availability. Rather, the contract satisfied a bona fide need of the following fiscal year. DOD and GovWorks should adjust their accounts, deobligating the funds from fiscal year 2004 and obligating instead funds from fiscal year 2005.
Our practice when rendering decisions is to obtain the views of the relevant federal agencies. GAO, Procedures and Practices for Legal Decisions and Opinions, GAO-06-1064SP (
GovWorks is a franchise fund originally established as a pilot program in 1996. Department of the Interior and Related Agencies Appropriations Act, Pub. L. No. 104-208, div. A, title I, sect. 113, 110 Stat. 3009, 3009-200 (
As a franchise fund, GovWorks is a revolving fund designed to provide common administrative services to Interior and other agencies on a competitive basis. Government Management Reform Act of 1994, Pub. L. No. 103-356, title IV, sect. 403, 108 Stat. 3410, 3413 (
An agency wishing to acquire products or services through GovWorks tells GovWorks the goods or services the agency would like GovWorks to acquire on its behalf. GovWorks, Getting Started Details, available at www.govworks.gov/home/getting_started_details.asp (last visited
In January 2007, the Interior IG reported its audit of the GovWorks transactions made using DOD funds in fiscal year 2005, including contracts made with vendors on behalf of DOD. Interior IG Report. The Interior IG determined that in many cases GovWorks had accepted MIPRs from DOD that did not indicate the goods or services sought with the level of specificity necessary to incur an obligation against DOD's funds.
The Interior IG is concerned that these practices may have violated fiscal law and may indicate that DOD parked funds at GovWorks. See Devaney Letter at 1--2. To address these concerns, the Interior IG asked that we examine four contracts that GovWorks entered into in fiscal year 2005 using DOD funds.
Contract 44435 for Laser Printers
Contract 43270 for Body Armor
Contract 41181 for Computer Hardware
DOD made the following funds transfers to GovWorks:
- $50,000 of 2001 Operation and Maintenance Army funds, for the acquisition of toner cartridges. MIPR 1JDIT0N046,
July 10, 2001.
- $70,000 of 2001 Operation and Maintenance Army funds, for the acquisition of [automated data processing] and supply. MIPR 1KINTWS058,
July 24, 2001.
- $40,783 of 2001 Operation and Maintenance Army funds, for the acquisition of [automated data processing] and supplies. MIPR 1MINTPR070,
Sept. 14, 2001.
- $1.8 million of 2004 Operation and Maintenance Army funds, for equipment through the Pentagon IT Store. MIPR 4MINTMM125,
Sept. 17, 2004.
- $3,600 of 2000 Operation and Maintenance Army funds, for the acquisition of [automated data processing] and services. MIPR 0MGSAIT092,
Sept. 29, 2000.
- $94,351 of 2001 Operation and Maintenance Army funds, for the acquisition of [automated data processing] and supplies. MIPR 1MITST0074,
Sept. 24, 2001.
- $158,273.50 of 2004 Operation and Maintenance Army funds, for equipment through the Pentagon IT Store. MIPR 4LINTMM111,
Aug. 18, 2004.
- $1.4 million of 2004 Operation and Maintenance Army funds, for [defense messaging system] equipment. MIPR 4MINTMM130,
Sept. 24, 2004.
The funds GovWorks used to finance this contract expired over 50 months, 38 months, and 2 months, respectively, before GovWorks entered into the contract and were only available to liquidate obligations properly incurred during fiscal years 2000, 2001, and 2004.
Contract 43387 for Telecommunications Support
GovWorks entered into Contract 43387 with Northrop Grumman in the amount of $3,908,420 for technical and functional support to the
The 17 MIPRs used to fund this contract also had four different descriptions of the services DOD wished GovWorks to procure on its behalf:
- [Decision Agent/Defense Messaging System] Core Product, 13 MIPRs. E.g., MIPR 4GINTMM058,
Apr. 26, 2004.
- [S]upport of the Decision Agent, 2 MIPRs. E.g., MIPR 5CINTMM013,
Dec. 15, 2004.
- Secondary site [Defense Messaging System] requirements, MIPR 3LINTMM101,
Aug. 29, 2003.
- Support [for] the [network] Printers, MIPR 4HINTMM069,
May 26, 2004.
GovWorks executed this contract on
The overarching issue presented by the Interior IG is whether DOD and GovWorks used the correct appropriation to finance the four contracts. The IG raises the issue because GovWorks, on behalf of DOD, entered into the four contracts in fiscal year 2005 but used expired DOD funds, not fiscal year 2005 funds, to finance the contracts. Expired funds are only available to liquidate obligations properly incurred during their period of availability. To answer the question, we must first determine when DOD incurred obligations against its appropriations: either when it transferred the funds to GovWorks with the MIPRs or at some later time. Second, having established when DOD incurred an obligation, we must determine whether DOD incurred an obligation within the funds' period of availability and, if so, whether GovWorks promptly used the funds to execute a contract on DOD's behalf. We also respond to the IG's concern that DOD and GovWorks may have improperly parked funds with GovWorks.
An interagency transaction like that authorized by Interior's franchise fund authority is, in some ways, not unlike a contractual transaction.  See, e.g., B-286929,
The specificity requirement is a long-standing principle of appropriations law, supported by decisions of the Comptroller General and by the recording statute, 31 U.S.C. sect. 1501(a). For example, in 44 Comp. Gen. 695 (1965), we considered fiscal year 1964 purchase orders placed by the United States Travel Service (USTS) with the Government Printing Office (GPO) for the printing of sale and promotion materials. 44 Comp. Gen. at 696. The purchase orders stated that manuscripts of the materials to be printed and specifications of the work to be performed by GPO would follow.
The recording statute provides additional support for this proposition. As pertinent here, it requires that an interagency agreement be evidenced by a written document, executed during the period of availability of the appropriation used, for specific goods to be delivered . . . or work . . . to be provided. 31 U.S.C. sect. 1501(a) (emphasis added). The statute's obvious purpose is to ensure that the parties understand and accept their rights and duties under the agreement and that Congress, as part of its oversight role, knows how agencies are obligating their funds. See 71 Comp. Gen. 109, 110 (1991). See generally Senate Committee on Government Operations, Financial Management in the Federal Government, S. Doc. No. 87-11, at 85 (1961). In other words, Congress did not want agencies to record obligations against current appropriations based on inchoate agreements—whether with vendors or other agencies. See 31 U.S.C. sect. 1501(a)(1).
Here, only one MIPR was sufficiently specific to establish an obligation against DOD's appropriation—the April 2004 MIPR for XEROX 3400 Printers that GovWorks used to finance contract 44435. MIPR 4GINTMM054,
Not until DOD e-mailed GovWorks identifying specific items did DOD perfect its orders and incur obligations. 44 Comp. Gen. 695. For Contract 41181, DOD incurred an obligation against its appropriation on
Bona Fide Needs Rule
An appropriation is available for obligation only to fulfill a genuine need of the period of availability for which it was made. B-308010,
In other words, if an agency with an identified bona fide need does not act to fill that need before the end of an appropriation's period of availability, that appropriation is no longer available to fill that need. B-286929,
As discussed above, for Contracts 43270, 41181, and 43387, DOD incurred obligations in fiscal year 2005, but DOD and GovWorks used expired funds to cover these obligations. As previously discussed, although DOD transferred these funds to GovWorks during their period of availability, the MIPRs did not obligate these funds and they were no longer available for obligation at the time they were used. Consequently, GovWorks improperly used the expired funds to enter into these three contracts in violation of the bona fide needs rule.
For Contract 44435, although DOD and GovWorks had entered into a valid interagency agreement obligating funds, DOD and GovWorks improperly used the fiscal year 2004 funds to finance a fiscal year 2005 contract. Like a contract with a private vendor, funds obligated for an interagency agreement with a franchise fund are used to pay for the supplies or services ordered. However, the fact that GovWorks did not execute Contract 44435 until almost 17 months after executing the interagency agreement, and 11 months after the end of fiscal year 2004, indicates that Contract 44435 did not satisfy a bona fide need of fiscal year 2004.
Of course, a performing agency should have a reasonable period of time to use transferred funds, depending on the nature of the order. Here, DOD incurred an obligation against its fiscal year 2004 appropriation on
As with the other three contracts, GovWorks and DOD should adjust their accounts to deobligate DOD's fiscal year 2004 appropriations and record the obligation for Contract 44435 against fiscal year 2005 appropriations. See B-307137,
For almost 4 years, DOD's Comptroller has expressed concern about the possibility of DOD components banking, or parking, DOD funds with other agencies in the course of interagency agreements. In a 2003 memorandum issued departmentwide, the Comptroller alerted DOD to media attention focusing on the impropriety of using interagency agreements to 'bank' funds that would otherwise expire at the end of the fiscal year. Dov S. Zakheim, Office of the Under Secretary of Defense, Comptroller, Memorandum for the Chairman of the Joint Chiefs of Staff, et al., Fiscal Principles and Interagency Agreements,
Distinguishing Economy Act orders from non-Economy Act orders, the Comptroller explained that with some federal agencies, such as GovWorks, who have legal authority separate from the Economy Act, DOD need not retrieve DOD funds advanced to the servicing agency but not yet used by the servicing agency.
The Comptroller's Office reiterated its concern in 2005 and provided additional guidance. Teresa McKay, Deputy Chief Financial Officer, Office of the Under Secretary of Defense, Comptroller, Memorandum for the Assistant Secretary of the Army (Financial Management and Comptroller), et al., Proper Use of Interagency Agreements for
In October 2006, the Comptroller's Office issued detailed policy and procedures, amending the DOD Financial Management Regulation, for non-Economy Act interagency agreements. Robert McNamara, Acting Deputy Chief Financial Officer, Office of the Under Secretary of Defense, Comptroller, Memorandum for the Secretaries of the Military Departments, et al., Non-Economy Act Orders,
Unfortunately, the Comptroller's fears, in this case at least, were realized. Clearly, DOD parked funds at GovWorks. An agency may not extend the availability of its appropriated funds by transferring them to another agency. B-288142,
DOD has already advised GovWorks that any funds in excess of $100,000 provided . . . to GovWorks before [
For the reasons discussed above, DOD and GovWorks should review and adjust their accounts for the four contracts reviewed here. We further suggest that GovWorks examine its accounts to identify interagency agreements that lack the requisite specificity. For those agreements that do not constitute firm and complete orders, GovWorks should so inform the ordering agency and return any funds advanced. GovWorks should also develop adequate internal controls to ensure that it does not accept orders lacking the requisite specificity to constitute firm and complete orders nor use expired funds to enter into contracts on behalf of the ordering agency.
Gary L. Kepplinger
 Letter from Earl E. Devaney, Inspector General, Office of the Inspector General, Department of the Interior, to David M. Walker, Comptroller General of the United States, Jan. 22, 2007 (Devaney Letter). This request arose out of the Inspector General's report on an audit of transactions between DOD and Interior.
 In response to the IG's request, we issued a decision related to obligation of funds under an indefinite delivery, indefinite quantity contract. B-308969,
 The DOD Inspector General reached conclusions similar to those of the Interior IG. DOD IG Report.
 We understand that body armor is used to protect personnel on board ships. Each set of body armor is fitted, front and back, with gamma plates, ceramic plates manufactured to protect personnel from projectiles.
 These instructions did not come from DOD directly, but from John J. McMullen Associates, a private contractor working on DOD's behalf.
 The Decision Agent is a suite of software applications that automatically identifies, filters, and distributes electronic messages. Interior IG Report at 4 n. 3.
 The July 10, 2001, MIPR sought toner cartridges and the GovWorks contracting officer servicing Contract 41181 believed that Contract 41181, for Decision Agent Network Equipment, did not fill this need. Bernhardt Letter at tab 1H.
 DOD originally submitted a Statement of Work to GovWorks on
 We have no documents showing GovWorks's acceptance of the funding instructions in this e-mail. However, we may infer acceptance of these terms, as GovWorks followed them. Contract 43387.
 GovWorks used fiscal year 2005 funds to partially fund Contract 43387.
 Both DOD and GovWorks consider MIPRs to be obligating documents.
 The specificity required of interagency agreements under the recording statute is similar, even if not necessarily identical, to the specificity required of solicitations under the Federal Acquisition Regulation (FAR). For example, the FAR requires that solicitations, even for indefinite-quantity contracts, describe the scope, nature, complexity, and purpose of the supplies or services the Government will acquire. 48 C.F.R. sect. 16.504(a)(4). See also B-277979,
 Neither DOD nor GovWorks provided us with documentation of when DOD transmitted the Statement of Work to GovWorks. It is clear, however, that DOD did this sometime between
 Neither DOD nor Interior provided us with documentation of an exact date that DOD perfected the order that resulted in Contract 43270. Nevertheless, the circumstances surrounding Contract 43270 show that DOD perfected its order sometime between May 11 and
 Under the Economy Act, 31 U.S.C. sect. 1535, an ordering agency must deobligate any fixed year funds at the end of their period of availability to the extent that the performing agency has not performed or incurred valid obligations under the agreement. 31 U.S.C. sect. 1535(d); B-289380,
 In 1984, we concluded that because Army regulations required use of transferred funds within 90 days from receipt of an order, DOD industrial funds had not begun work ordered by other DOD components within a reasonable period of time when work began more than 90 days after receipt. GAO, Improper Use of Industrial Funds by Defense Extended the Life of Appropriations Which Otherwise Would Have Expired, GAO/AFMD-84-34 (Washington, D.C.: June 5, 1984).
 See footnote 15.
 See also 1 TFM Bulletin No. 2007-03, Attachment I, para. III.B.2,