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United States General Accounting Office
GAO: 

Office of the General Counsel: 

January 2004: 

Principles of Federal Appropriations Law: 
Third Edition: 
Volume II: 

This volume supersedes the Volume II, Second Edition of the Principles 
of Federal Appropriations Law, 1992. 

On August 6, 2010, the web versions of the Third Edition of the 
Principles of Federal Appropriations Law, Volumes I, II and III, were 
reposted to include updated active electronic links to GAO decisions. 
Additionally, the Third Edition's web based Index/Table of Authorities 
(Index/T0A) was replaced by an Index/TOA that incorporated information 
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Abbreviations: 

APA: Administrative Procedure Act: 

BLM: Bureau of Land Management: 

CDA: Contract Disputes Act of 1978: 

CCC: Commodity Credit Corporation: 

C.F.R.: Code of Federal Regulations: 

EAJA: Equal Access to Justice Act: 

EEOC: Equal Employment Opportunity Commission: 

FAR: Federal Acquisition Regulation: 

FY: Fiscal Year: 

GAO: Government Accountability Office: 

GSA: General Services Administration: 

HUD: Department of Housing and Urban Development: 

IRS: Internal Revenue Service: 

NRC: Nuclear Regulatory Commission: 

OMB: Office of Management and Budget: 

SBA: Small Business Administration: 

TFM: Treasury Financial Manual: 

U.S.C.: United States Code: 

URA: Uniform Relocation Assistance and Real Property Acquisition 
Policies Act: 

[End of section] 

Foreword: 

This is Volume II of Principles of Federal Appropriations Law, third 
edition. As we explained in the Foreword to the third edition of 
Volume I, publication of this volume continues our process of revising 
and updating the second edition of the "Red Book" and reissuing it in 
what will ultimately be a 3-volume looseleaf set with cumulative 
annual updates. This volume and all other volumes of Principles, 
including the annual updates, are available on GAO's Web site 
[hyperlink, http://www.gao.gov] under "Legal Products." The annual 
updates are only available online. The online updated versions contain 
hyperlinks to the GAO material cited. Check the GAO Web site for other 
interesting information, for example, materials from our annual 
Appropriations Law Forum. 

Our objective in Principles is to present a basic reference work 
covering those areas of law in which the Comptroller General issues 
decisions, using text discussion with specific legal authorities to 
illustrate the principles discussed, their application, and 
exceptions. As we noted in our first volume, Principles should be used 
as a general guide and starting point, not as a substitute for 
original legal research. We measure our success in this endeavor by 
Principles' day-to-day utility to its federal and nonfederal audience. 
In this regard, we appreciate the many comments and suggestions we 
have received to date, and hope that our publication will continue to 
serve as a useful reference. 

Signed by: 

Anthony H. Gamboa: 
General Counsel: 

February 2006: 

[End of Foreword] 

Detailed Table of Contents: Volume II: Chapters 6-11: 

Chapter 6 Availability of Appropriations: Amount: 

A. Introduction: 

B. Types of Appropriation Language: 
1. Lump-Sum Appropriations: 
a. Effect of Budget Estimates: 
b. Restrictions in Legislative History: 
c. "Zero Funding" Under a Lump-Sum Appropriation: 
2. Line-Item Appropriations and Earmarks: 

C. The Antideficiency Act: 
1. Introduction and Overview: 
2. Obligation/Expenditure in Excess or Advance of Appropriations: 
a. Exhaustion of an Appropriation: 
(1) Making further payments: 
(2) Limitations on contractor recovery: 
b. Contracts or Other Obligations in Excess or Advance of 
Appropriations: 
(1) Proper recording of obligations: 
(2) Obligation in excess of appropriations: 
(3) Variable quantity contracts: 
(4) Multiyear or "continuing" contracts: 
c. Indemnification: 
(1) Prohibition against unlimited liability: 
(2) When indemnification may be permissible: 
(3) Statutorily authorized indemnification: 
d. Specific Appropriation Limitations/Purpose Violations: 
e. Amount of Available Appropriation or Fund: 
f. Intent/Factors beyond Agency Control: 
g. Exceptions: 
(1) Contract authority: 
(2) Other obligations "authorized by law": 
3. Voluntary Services Prohibition: 
a. Introduction: 
b. Appointment without Compensation and Waiver of Salary: 
(1) The rules—general discussion: 
(2) Student interns: 
(3) Program beneficiaries: 
(4) Applicability to legislative and judicial branches: 
c. Other Voluntary Services: 
d. Exceptions: 
(1) Safety of human life: 
(2) Protection of property: 
(3) Recent developments: 
e. Voluntary Creditors: 
4. Apportionment of Appropriations: 
a. Statutory Requirement for Apportionment: 
b. Establishing Reserves: 
c. Method of Apportionment: 
d. Control of Apportionments: 
e. Apportionments Requiring Deficiency Estimate: 
f. Exemptions from Apportionment Requirement: 
g. Administrative Division of Apportionments: 
h. Expenditures in Excess of Apportionment: 
5. Penalties and Reporting Requirements: 
a. Administrative and Penal Sanctions: 
b. Reporting Requirements: 
6. Funding Gaps: 

D. Supplemental and Deficiency Appropriations: 

E. Augmentation of Appropriations: 
1. The Augmentation Concept: 
2. Disposition of Moneys Received: Repayments and Miscellaneous 
Receipts: 
a. General Principles: 
(1) The "miscellaneous receipts" statute: 
(2) Exceptions: 
(3) Timing of deposits: 
(4) Money received (or not received) "for the Government": 
b. Contract Matters: 
(1) Excess reprocurement costs: 
(2) Other damage claims: 
(3) Refunds and credits: 
(4) "No-cost" contracts: 
c. Damage to Government Property and Other Tort Liability: 
d. Fees and Commissions: 
e. Economy Act: 
f. Setoff: 
g. Revolving Funds: 
h. Trust Funds: 
i. Fines and Penalties: 
j. Miscellaneous Cases: Money to Treasury: 
k Miscellaneous Cases: Money Retained by Agency: 
L Money Erroneously Deposited as Miscellaneous Receipts: 
3. Gifts and Donations to the Government: 
a Donations to the Government: 
b. Donations to Individual Employees: 
(1) Contributions to salary or expenses: 	
(2) Travel-related promotional items: 
4. Other Augmentation Principles and Cases: 

Chapter 7: Obligation of Appropriations: 

A. Introduction: Nature of an Obligation: 

B. Criteria for Recording Obligations (31 U.S.C. § 1501): 
1. Section 1501(a)(1): Contracts: 
a. Binding Agreement: 
b. Contract "in Writing": 
c. Requirement of Specificity: 
d. Invalid Award/Unauthorized Commitment: 
e. Variations in Quantity to Be Furnished: 
f. Amount to Be Recorded: 
g. Administrative Approval of Payment: 
h. Miscellaneous Contractual Obligations: 
i. Interagency Transactions: 
(1) Economy Act agreements: 
(2) Non-Economy Act agreements: 
(3) "Binding agreement" requirement: 
(4) Orders from stock: 
(5) Project orders: 
2. Section 1501(a)(2): Loans: 
3. Section 1501(a)(3): Interagency Orders Required by Law: 
4. Section 1501(a)(4): Orders without Advertising: 
5. Section 1501(a)(5): Grants and Subsidies: 
a Grants: 
b. Subsidies: 
6. Section 1501(a)(6): Pending Litigation: 
7. Section 1501(a)(7): Employment and Travel: 
a Wages, Salaries, Annual Leave: 
b. Compensation Plans in Foreign Countries: 
c. Training: 
d. Uniform Allowance: 
e. Travel Expenses: 
f. State Department: Travel Outside Continental United States: 
g. Employee Transfer/Relocation Costs: 
8. Section 1501(a)(8): Public Utilities: 
9. Section 1501(a)(9): Other Legal Liabilities: 

C. Contingent Liabilities: 

D. Reporting Requirements: 

E. Deobligation: 

Chapter 8: Continuing Resolutions: 

A. Introduction: 
1. Definition and General Description: 
2. Use of Appropriation Warrants: 

B. Rate for Operations: 
1. Current Rate: 
2. Rate Not Exceeding Current Rate: 
3. Spending Pattern under Continuing Resolution: 
a. Pattern of Obligation: 
b. Apportionment: 
4. Liquidation of Contract Authority: 
5. Rate for Operations Exceeds Final Appropriation: 

C. Projects or Activities: 

D. Relationship to other Legislation: 
1. Not Otherwise Provided For: 
2. Status of Bill or Budget Estimate Used as Reference: 
3. More Restrictive Authority: 
4. Lack of Authorizing Legislation: 

E. Duration: 
1. Duration of Continuing Resolution: 
2. Duration of Appropriations: 
3. Impoundment: 

Chapter 9: Liability and Relief of Accountable Officers: 

A. Introduction: 

B. General Principles: 
1. The Concepts of Liability and Relief: 
a. Liability: 
b. Surety Bonding: 
c. Relief: 
2. Who Is an Accountable Officer? 
a. Certifying Officers: 
b. Disbursing Officers: 
c. Cashiers: 
d. Collecting Officers: 
e. Other Agents and Custodians: 
3. Funds to Which Accountability Attaches: 
a. Appropriated Funds: 
(1) Imprest funds: 
(2) Flash rolls: 
(3) Travel advances: 
b. Receipts: 
c. Funds Held in Trust: 
d. Items Which Are the Equivalent of Cash: 
4. What Kinds of Events Produce Liability? 
5. Amount of Liability: 
6. Effect of Criminal Prosecution: 
a. Acquittal: 
b. Order of Restitution: 

C. Physical Loss or Deficiency: 
1. Statutory Provisions: 
a. Civilian Agencies: 
b. Military Disbursing Officers: 
2. Who Can Grant Relief? 
a. 31 U.S.C. § 3527(a): 
b. 31 U.S.C. § 3527(b): 
c. Role of Administrative Determinations: 
3. Standards for Granting Relief: 
a. Standard of Negligence: 
b. Presumption of Negligence/Burden of Proof: 
c. Actual Negligence: 
d. Proximate Cause: 
e. Unexplained Loss or Shortage: 
f. Compliance with Regulations: 
g. Losses in Shipment: 
h. Fire, Natural Disaster: 
i. Loss by Theft: 
(1) Burglary: forced entry: 
(2) Robbery: 
(3) Riot, public disturbance: 
(4) Evidence less than certain: 
(5) Embezzlement: 
j. Agency Security: 
k. Extenuating Circumstances: 

D. Illegal or Improper Payment: 
1. Disbursement and Accountability: 
a. Statutory Framework: Disbursement Under Executive Order No. 166: 
b. Automated Payment Systems: 
c. Statistical Sampling: 
d. Provisional Vouchers and Related Matters: 
e. Facsimile Signatures and Electronic Certification: 
f. GAO Audit Exceptions: 
2. Certifying Officers: 
a. Duties and Liability: 
b. Applicability of 31 U.S.C. § 3528: 
c. Relief: 
3. Disbursing Officers: 
a. Standards of Liability and Relief: 
b. Some Specific Applications: 
(1) Fraudulent travel claims: 
(2) Other cash payments fraudulently obtained: 
(3) Military separation vouchers: 
(4) Assignment of contract payments: 
(5) Improper purpose/payment beyond scope of legal authority: 
4. Check Losses: 
a Check Cashing Operations: 
b. Duplicate Check Losses: 
c. Errors in Check Issuance Process: 
5. Statute of Limitations: 

E. Other Relief Statutes: 
1. Statutes Requiring Affirmative Action: 
a. United States Court of Federal Claims: 
b. The Legislative and Judicial Branches: 
c. Savings Bond Redemption Losses: 
2. Statutes Providing "Automatic" Relief: 
a. Waiver of Indebtedness: 
b. Compromise of Indebtedness: 
c. Foreign Exchange Transactions: 
d. Check Forgery Insurance Fund: 
e. Secretary of the Treasury: 
f. Other Statutes: 

F. Procedures: 
1. Reporting of Irregularities: 
2. Obtaining Relief: 
3. De Minimis Rule: Payments of $100 or Less: 
4. Relief versus Grievance Procedures: 

G. Collection Action: 
1. Against Recipient: 
2. Against Accountable Officer: 

H. Restitution, Reimbursement, and Restoration: 
1. Restitution and Reimbursement: 
2. Restoration: 
a. Adjustment Incident to Granting of Relief: 
b. Other Situations: 

Chapter 10: Federal Assistance: Grants and Cooperative Agreements: 

A. Introduction: 

B. Grants versus Procurement Contracts: 
1. Judicial and GAO Decisions on the Nature of Grants: 
a. Contractual Aspects of Grants: 
b. Differences between Grants and Contracts: 
c. Grants as "Hybrids": 
2. The Federal Grant and Cooperative Agreement Act: 
a. Purposes and Provisions of the Act: 
b. Agency Implementation of the Act: 
c. Decisions Interpreting the Act: 
3. Competition for Discretionary Grant Awards: 

C. Some Basic Concepts: 
1. The Grant as an Exercise of Congressional Spending Power: 
a. Constitutionality of Grant Conditions: 
(1) Conditions must be in pursuit of the general welfare and related 
to the purpose of the expenditure: 
(2) Conditions must be unambiguous: 
(3) Conditions must be otherwise constitutional: 
b. Effect of Grant Conditions: 
2. Availability of Appropriations: 
a. Purpose: 
b. Time: 
c. Amount: 
3. Agency Regulations: 
a. General principles: 
b. Office of Management and Budget Circulars and the "Common Rules": 
c. The Federal Financial Assistance Management Improvement Act: 
d. The "Cognizant Agency" Concept: 
4. Contracting by Grantees: 
5. Liability for Acts of Grantees: 
a. Liability to Grantee's Contractors: 
b. Liability for Grantee Misconduct: 
6. Types of Grants: Categorical versus Block: 
7. The Single Audit Act: 

D. Funds in Hands of Grantee: Status and Application of Appropriation 
Restrictions: 

E. Grant Funding: 
1. Advances of Grant/Assistance Funds: 
2. Cash Management of Grants: 
a. General Rule on Interest on Grant Advances: 
b. State Governments and Interest on Grant Advances: 
(1) Intergovernmental Cooperation Act: 
(2) Decisions under the Intergovernmental Cooperation Act: 
c. Other Cash Management Requirements: 
3. Program Income: 
4. Cost-Sharing: 
a. Local or Matching Share: 
(1) General principles: 
(2) Hard and soft matches: 
(3) Matching one grant with funds from another: 
(4) Relocation allowances: 
(5) Payments by other than grantor agency: 
b. Maintenance of Effort: 

F. Obligation of Appropriations for Grants: 
1. Requirement for Obligation: 
2. Changes in Grants: 

G. Grant Costs: 
1. Allowable versus Unallowable Costs: 
a. The Concept of Allowable Costs: 
b. Grant Cost Cases: 
(1) Scope of judicial review: 
(2) Court case examples: 
(3) GAO case examples: 
c. Note on Accounting: 
2. Pre-Award Costs (Retroactive Funding): 

H. Recovery of Grantee Indebtedness: 
1. Government's Duty to Recover: 
2. Offset and Withholding of Claims Under Grants: 

Chapter 11: Federal Assistance: Guaranteed and Insured Loans: 

A. Introduction: 
1. General Description: 
2. Sources of Guarantee Authority: 

B. Budgetary and Obligational Treatment: 
1. Prior to Federal Credit Reform Act: 
2. Federal Credit Reform Act of 1990: 
a. Post-1991 Guarantee Commitments: 
b. Pre-1992 Commitments: 
c. Entitlement Programs: 
d. Certain Insurance Programs: 

C. Extension of Guarantees: 
1. Coverage of Lenders (Initial and Subsequent): 
a. Eligibility of Lender/Debt Instrument: 
b. Substitution of Lender: 
c Existence of Valid Guarantee: 
d. Small Business Investment Companies: 
e. The Federal Financing Bank: 
2. Coverage of Borrowers: 
a. Eligibility of Borrowers: 
b. Substitution of Borrowers: 
c. Loan Purpose: 
d. Change in Loan Purpose: 
3. Terms and Conditions of Guarantees: 
a. Introduction: 
b. Property Insurance Programs under the National Housing Act: 
(1) Maximum amount of loan: 
(2) Maximum loan maturity: 
(3) Owner/lessee requirement: 
(4) Execution of the note: 
(5) Reporting requirement: 
(6) Payment of premiums: 
c. Small Business Administration Business Loan Program: 
(1) Payment of guarantee fee: 
(2) Notice of default: 

D. Rights and Obligations of Government upon Default: 
1. Nature of the Government's Obligation: 
2. Scope of the Government's Guarantee: 
3. Amount of Government's Liability: 
4. Liability of the Borrower: 
a. Veterans' Home Loan Guarantee Program: 
(1) Loans closed prior to 1990: 
(2) Loans closed after December 31, 1989: 
b. Debt Collection Procedures: 
5. Collateral Protection: 

[End of Detailed Table of Contents] 

Chapter 6: Availability of Appropriations: Amount: 

A. Introduction: 

The two preceding chapters have discussed the purposes for which 
appropriated funds may be used and the time limits within which they 
may be obligated and expended. This chapter will discuss the third 
major concept of the "legal availability" of appropriations—
restrictions relating to amount. It is not enough to know what you can 
spend appropriated funds for and when you can spend them. You also 
must know how much you have available for a particular object. 

In this respect, the legal restrictions on government expenditures are 
different from those governing your spending as a private individual. 
For example, as an individual, you can buy a house and finance it with 
a mortgage that may run for 25 or 30 years. Since you do not have 
enough money to cover your full legal obligation under the mortgage, 
you sign the mortgage papers on the assumption that you will continue 
to have an income adequate to cover the mortgage. If your income 
diminishes substantially or, heaven forbid, disappears, and you are 
unable to make the payments, you lose the house. A government agency 
cannot operate this way. The main reason why is the Antideficiency 
Act, discussed in section C of this chapter. 

Under the Constitution, Congress makes the laws and provides the money 
to implement them; the executive branch carries out the laws with the 
money Congress provides. Under this system, Congress has the "final 
word" as to how much money can be spent by a given agency or on a 
given program. Congress may give the executive branch considerable 
discretion concerning how to implement the laws and hence how to 
obligate and expend funds appropriated, but it is ultimately up to 
Congress to determine how much the executive branch can spend. In 
applying these concepts to the day-to-day operations of the federal 
government, it should be readily apparent that restrictions on 
purpose, time, and amount are very closely related. Again, the 
Antideficiency Act is one of the primary "enforcement devices." Its 
importance is underscored by the fact that it is the only one of the 
fiscal statutes to include both civil and criminal penalties for 
violation. 

To ensure that the Antideficiency Act's prohibition against 
overobligating or overspending an appropriation remains meaningful, 
agencies must be restricted to the appropriations Congress provides. 
The rule prohibiting the unauthorized "augmentation" of 
appropriations, covered in section E of this chapter, is thus a 
crucial complement to the Antideficiency Act. 

While Congress retains, as it must, ultimate control over how much an 
agency can spend, it does not attempt to control the disposition of 
every dollar. We began our general discussion of administrative 
discretion in Chapter 3 by quoting Justice Holmes' statement that 
"some play must be allowed to the joints if the machine is to work." 
[Footnote 1] This is fully applicable to the expenditure of 
appropriated funds. An agency's discretion under a lump-sum 
appropriation is discussed in section F of this chapter. 

Congress has been making appropriations since the beginning of the 
Republic. In earlier times when the federal government was much 
smaller and federal programs were (or at least seemed) much simpler, 
very specific line-item appropriations were more common.[Footnote 2] 
In recent decades, however, as the federal budget has grown in both 
size and complexity, a lump-sum approach has become a virtual 
necessity.[Footnote 3] For example, an appropriation act for an 
establishment the size of the Defense Department structured solely on 
a line-item basis would rival the telephone directory in bulk.
Over the course of this time, certain forms of appropriation language 
have become standard. This section will point out the more commonly 
used language with respect to amount. 

A lump-sum appropriation is one that is made to cover a number of 
specific programs, projects, or items. (The number may be as small as 
two.) In contrast, a line-item appropriation is available only for the 
specific object described. 

Lump-sum appropriations come in many forms. Many smaller agencies 
receive only a single appropriation, usually termed "Salaries and 
Expenses" or "Operating Expenses." All of the agency's operations must 
be funded from this single appropriation. Cabinet-level departments 
and larger agencies receive several appropriations, often based on 
broad object categories such as "operations and maintenance" or 
"research and development." For purposes of this discussion, a lump-
sum appropriation is simply one that is available for more than one 
specific object. 

The amount of a lump-sum appropriation is not derived through 
guesswork. It is the result of a lengthy budget and appropriation 
process. The agency first submits its appropriation request to 
Congress through the Office of Management and Budget, supported by 
detailed budget justifications. Congress then reviews the request and 
enacts an appropriation which may be more, less, or the same as the 
amount requested. Variations from the amount requested are usually 
explained in the appropriation act's legislative history, most often 
in committee reports.[Footnote 4] 

All of this leads logically to a question which can be phrased in 
various ways: How much flexibility does an agency have in spending a 
lump-sum appropriation? Is it legally bound by its original budget 
estimate or by expressions of intent in legislative history? How is 
the agency's legitimate need for administrative flexibility balanced 
against the constitutional role of the Congress as controller of the 
public purse? 

The answer to these questions is one of the most important principles 
of appropriations law. The rule, simply stated, is this: Restrictions 
on a lump-sum appropriation contained in the agency's budget request 
or in legislative history are not legally binding on the department or 
agency unless they are carried into (specified in) the appropriation 
act itself, or unless some other statute restricts the agency's 
spending flexibility. This is an application of the fundamental 
principle of statutory construction that legislative history is not 
law and carries no legal significance unless "anchored in the text of 
the statute." Shannon v. United States, 512 U.S. 573, 583 (1994). 
[Footnote 5] Of course, the agency cannot exceed the total amount of 
the lump-sum appropriation, and its spending must not violate other 
applicable statutory restrictions.[Footnote 6] The rule applies 
equally whether the legislative history is mere acquiescence in the 
agency's budget request or an affirmative expression of intent. 

The rule recognizes the agency's need for flexibility to meet changing 
or unforeseen circumstances, yet preserves congressional control in 
several ways. First, the rule merely says that the restrictions are 
not legally binding. The practical wisdom of making the expenditure is 
an entirely separate question. An agency that disregards the wishes of 
its oversight or appropriations committees will most likely be called 
upon to answer for its digressions before those committees next year. 
An agency that fails to "keep faith" with the Congress may find its 
next appropriation reduced or limited by line-item restrictions. As 
Professor Schick put it: 

"What gives the appropriations reports special force is not their 
legal status but the fact that the next appropriations cycle is always 
less than one year away. An agency that willfully violates report 
language risks retribution the next time it asks for money. It may 
find this year's report language relocated to the next appropriations 
act, thereby giving it even less leeway than it had before. Or it may 
find the next time that the appropriations committees' guidance is 
more detailed and onerous or that its appropriation has been cut." 
[Footnote 7] 

That Congress is fully aware of these dynamics is evidenced by the 
following statement from a 1973 House Appropriations Committee report: 

"In a strictly legal sense, the Department of Defense could utilize 
the funds appropriated for whatever programs were included under the 
individual appropriation accounts, but the relationship with the 
Congress demands that the detailed justifications which are presented 
in support of budget requests be followed. To do otherwise would cause 
Congress to lose confidence in the requests made and probably result 
in reduced appropriations or line item appropriation bills."[Footnote 
8] 

Justice Souter made the same point, writing for the Court in Lincoln 
v. Vigil, 508 U.S. 182 (1993): 

"Congress may always circumscribe agency discretion to allocate 
resources by putting restrictions in the operative statutes (though 
not, as we have seen, just in the legislative history). And, of 
course, we hardly need to note that an agency's decision to ignore 
congressional expectations may expose it to grave political 
consequences." 

Id. at 193 (citations omitted). 

Second, restrictions on an agency's spending flexibility exist through 
the operation of other laws. For example, a "Salaries and Expenses" 
appropriation may be a large lump sum, but much of it is in fact 
nondiscretionary because the salaries and benefits (e.g., health 
insurance and retirement contributions) of agency employees constitute 
mandatory expenditures once fixed in accordance with the parameters 
established by law.[Footnote 9] Third, reprogramming arrangements with 
the various committees provide another safeguard against abuse. 
[Footnote 10] 

Finally, Congress always holds the ultimate trump card. It has the 
power to make any restriction legally binding simply by including it 
in the appropriation act.[Footnote 11] Thus, the treatment of lump-sum 
appropriations may be regarded as yet another example of the efforts 
of our legal and political systems to balance the conflicting 
objectives of executive flexibility and congressional control.
[Footnote 12] 

Two common examples of devices Congress uses when it wants to restrict 
an agency's spending flexibility are line-item appropriations and 
earmarks. Congress uses other tools as well. The following are just 
two examples taken from the Consolidated Appropriations Resolution, 
2003, Pub. L. No. 108-7, 117 Stat. 11 (Feb. 20, 2003), the omnibus 
appropriation act for fiscal year 2003. The first is an example of a 
notice requirement: 

"Funds made available under this heading [Salaries and Expenses, 
Department of Housing and Urban Development] shall only be allocated 
in the manner specified in the report accompanying this Act unless the 
Committees on Appropriations ... are notified of any changes in an 
operating plan or reprogramming..." 

117 Stat. 499. The second is a proviso that incorporates by reference 
instructions found in a conference report: 

"Provided, That notwithstanding any other provision of law, the Office 
of Economic Adjustment... is authorized to make grants using funds 
made available under the heading `Operation and Maintenance, Defense-
Wide' in accordance with the guidance provided in the Joint 
Explanatory Statement of the Committee of Conference for the 
Conference Report to accompany H.R. 5010... and these projects shall 
hereafter be considered to be authorized by law." 

117 Stat. 533. 

The 1983 appropriation act for the Department of Housing and Urban 
Development contained a restriction incorporating by reference budget 
estimates that the Administration had provided: 

"Where appropriations in titles I and II of this Act are expendable 
for travel expenses and no specific limitation has been placed 
thereon, the expenditures for such travel expenses may not exceed the 
amounts set forth therefor in the budget estimates submitted for the
appropriations...."[Footnote 13] 

A provision prohibiting the use of a construction appropriation to 
start any new project for which an estimate was not included in the 
President's budget submission is discussed in 34 Comp. Gen. 278 (1954). 

Also, the availability of a lump-sum appropriation may be restricted 
by provisions appearing in statutes other than appropriation acts, 
such as authorization acts.[Footnote 14] For example, if an agency 
receives a line-item authorization and a lump-sum appropriation 
pursuant to the authorization, the line-item restrictions and earmarks 
in the authorization act will apply just as if they appeared in the 
appropriation act itself. The topic is discussed in more detail in 
Chapter 2, section C. 

a. Effect of Budget Estimates: 

Perhaps the easiest case is the effect of the agency's own budget 
estimate. The rule here was stated in 17 Comp. Gen. 147, 150 (1937) as 
follows: 

"The amounts of individual items in the estimates presented to the 
Congress on the basis of which a lump-sum appropriation is enacted are 
not binding on administrative officers unless carried into the 
appropriation act itself." 

See also Thompson v. Cherokee Nation of Oklahoma, 334 F.3d 1075, 1085-
86 (Fed. Cir. 2003), aff'd sub nom., 543 U.S._____, 125 S. Ct. 1172
(2005); B-63539, June 6, 1947; B-55277, Jan. 23, 1946; B-35335, July, 
17, 1943; B-48120-0.M., Oct. 21, 1948. This is essentially the same 
rule as applied to allocations of amounts in congressional committee 
reports and other specifications in the legislative history concerning 
the use of lump-sum appropriations, which, as discussed later in this 
section, likewise have no legally binding effect unless tied to the 
appropriation language itself. 

It follows that the lack of a specific budget request will not 
preclude an expenditure from a lump-sum appropriation which is 
otherwise legally available for the item in question. E.g., B-278968, 
May 28, 1998; 72 Comp. Gen. 317, 319 (1993); 71 Comp. Gen. 411, 413 
(1992).[Footnote 15] To illustrate, the Administrative Office of the 
U.S. Courts asked for a supplemental appropriation of $11,000 in 1962 
for necessary salaries and expenses of the Judicial Conference in 
revising and improving the federal rules of practice and procedure. 
The House of Representatives did not allow the increase but the Senate 
included the full amount. The bill went to conference but the 
conference was delayed and the agency needed the money. The 
Administrative Office then asked whether it could take the $11,000 out 
of its regular 1962 appropriation even though it had not specifically 
included this item in its 1962 budget request. Citing 17 Comp. Gen. 
147, and noting that the study of the federal rules was a continuing 
statutory function of the Judicial Conference, the Comptroller General 
concluded as follows: 

"In the absence of a specific limitation or prohibition in the 
appropriation under consideration as to the amount which may be 
expended for revising and improving the Federal Rules of practice and 
procedure, you would not be legally bound by your budget estimates or 
absence thereof. 

"If the Congress desires to restrict the availability of a particular 
appropriation to the several items and amounts thereof submitted in 
the budget estimates, such control may be effected by limiting such 
items in the appropriation act itself. Or, by a general provision of 
law, the availability of appropriations could be limited to the items 
and the amounts contained in the budget estimates. In the absence of 
such limitations an agency's lump-sum appropriation is legally 
available to carry out the functions of the agency." 

B-149163, June 27, 1962. See also 20 Comp. Gen. 631 (1941); B-198234, 
Mar. 25, 1981; B-69238, Sept. 23, 1948. The same principle would apply 
where the budget request was for an amount less than the amount 
appropriated, or for zero. 2 Comp. Gen. 517 (1923); B-126975, Feb. 12, 
1958. 

b. Restrictions in Legislative History: 

Often issues are raised when there are changes to or restrictions on a 
lump-sum appropriation imposed during the legislative process but not 
in the legislation itself. The "leading case" in this area is 55 Comp. 
Gen. 307 (1975), the so-called "LTV case." The Department of the Navy 
had selected the McDonnell Douglas Corporation to develop a new 
fighter aircraft. LTV Aerospace Corporation protested the selection, 
arguing that the aircraft McDonnell Douglas proposed violated the 1975 
Defense Department Appropriation Act. The appropriation in question 
was a lump-sum appropriation of slightly over $3 billion under the 
heading "Research, Development, Test, and Evaluation, Navy." This 
appropriation covered a large number of projects, including the 
fighter aircraft in question. The conference report on the 
appropriation act had stated that $20 million was being provided for a 
Navy combat fighter, but that "adaptation of the selected Air Force 
Air Combat Fighter to be capable of carrier operations is the 
prerequisite for use of the funds provided." The Navy conceded that 
the McDonnell Douglas aircraft was not a derivative of the Air Force 
fighter and that its selection was not in accord with the instructions 
in the conference report. The issue, therefore, was whether the 
conference report was legally binding on the Navy. In other words, did 
the Navy act illegally by not choosing to follow the conference report? 

The ensuing decision is GAO's most comprehensive statement on the 
legal availability of lump-sum appropriations. Pertinent excerpts are 
set forth below: 

"Congress has recognized that in most instances it is desirable to 
maintain executive flexibility to shift around funds within a 
particular lump-sum appropriation account so that agencies can make 
necessary adjustments for `unforeseen developments, changing 
requirements,... and legislation enacted subsequent to 
appropriations.' [Citation omitted.] This is not to say that Congress 
does not expect that funds will be spent in accordance with budget 
estimates or in accordance with restrictions detailed in Committee 
reports. However, in order to preserve spending flexibility, it may 
choose not to impose these particular restrictions as a matter of law, 
but rather to leave it to the agencies to 'keep faith' with the 
Congress.... 

"On the other hand, when Congress does not intend to permit agency 
flexibility, but intends to impose a legally binding restriction on an 
agency's use of funds, it does so by means of explicit statutory 
language.... 

"Accordingly, it is our view that when Congress merely appropriates 
lump-sum amounts without statutorily restricting what can be done with 
those funds, a clear inference arises that it does not intend to 
impose legally binding restrictions, and indicia in committee reports 
and other legislative history as to how the funds should or are 
expected to be spent do not establish any legal requirements on 
Federal agencies.... 

"We further point out that Congress itself has often recognized the 
reprogramming flexibility of executive agencies, and we think it is at 
least implicit in such [recognition] that Congress is well aware that 
agencies are not legally bound to follow what is expressed in 
Committee reports when those expressions are not explicitly carried 
over into the statutory language.... 

"We think it follows from the above discussion that, as a general 
proposition, there is a distinction to be made between utilizing 
legislative history for the purpose of illuminating the intent 
underlying language used in a statute and resorting to that history 
for the purpose of writing into the law that which is not there.... 

"As observed above, this does not mean agencies are free to
ignore clearly expressed legislative history applicable to the use of 
appropriated funds. They ignore such expressions of intent at the 
peril of strained relations with the Congress. The Executive branch... 
has a practical duty to abide by such expressions. This duty, however, 
must be understood to fall short of a statutory requirement giving 
rise to a legal infraction where there is a failure to carry out that 
duty." 

55 Comp. Gen. at 318, 319, 321, 325. Accordingly, GAO concluded that 
Navy's award did not violate the appropriation act and the contract 
therefore was not illegal. 

The same volume of the Decisions of the Comptroller General contains 
another often-cited case, 55 Comp. Gen. 812 (1976), the Newport News 
case. This case also involved the Navy. This time, Navy wanted to 
exercise a contract option for construction of a nuclear powered 
guided missile frigate, designated DLGN 41. The contractor, Newport 
News Shipbuilding and Dry Dock Company, argued that exercising the 
contract option would violate the Antideficiency Act by obligating 
more money than Navy had in its appropriation. 

The appropriation in question, the "Naval Vessels" appropriation, 
provided a lump sum for vessels, much of which was earmarked, 
including an earmark for DLGN: "For Naval vessels: for the Navy, 
$3,156,400,000, of which sum $244,300,000 shall be used only for the 
DLGN nuclear powered guided missile frigate program;..." The committee 
reports on the appropriation act and the related authorization act 
indicated that, out of the $244 million appropriated, $152 million was 
for construction of the DLGN 41 and the remaining $92 million was for 
long lead time activity on the DLGN 42. Clearly, if the $152 million 
specified in the committee reports for the DLGN 41 was legally 
binding, obligations resulting from exercise of the contract option 
would exceed the available appropriation. 

The Comptroller General applied the "LTV principle" and held that the 
$152 million was not a legally binding limit on obligations for the 
DLGN 41. As a matter of law, the entire $244 million was legally 
available for the DLGN 41 because the appropriation act did not 
include any restriction. Therefore, in evaluating potential violations 
of the Antideficiency Act, the relevant appropriation amount is the 
total amount of the lump-sum appropriation minus sums already 
obligated, not the lower figure derived from the legislative history. 
[Footnote 16] As the decision recognized, Congress could have imposed 
a legally binding limit by the very simple device of appropriating a 
specific amount only for the DLGN 41, appropriating a specific amount 
only for the DLGN 42, or by incorporating the committee
reports in the appropriation language. 

This decision illustrates another important point: The terms "lump-
sum" and "line-item" are relative concepts. The $244 million 
appropriation in the Newport News case could be viewed as a line-item 
appropriation in relation to the broader "Shipbuilding and Conversion" 
category, but it was also a lump-sum appropriation in relation to the 
two specific vessels included. This factual distinction does not 
affect the applicable legal principle. As the decision explained: 

"Contractor urges that LW is inapplicable here since LW involved a 
lump-sum appropriation whereas the DLGN appropriation is a more 
specific 'line item' appropriation. While we recognize the factual 
distinction drawn by Contractor, we nevertheless believe that the 
principles set forth in LTV are equally applicable and controlling 
here.... Implicit in our holding in LW and in the other authorities 
cited is the view that dollar amounts in appropriation acts are to be 
interpreted differently from statutory words in general. This view, in 
our opinion, pertains whether the dollar amount is a lump-sum 
appropriation available for a large number of items, as in LTV, or, as 
here, a more specific appropriation available for only two items." 

55 Comp. Gen. at 821-22. 

A precursor of LW and Newport News provides another interesting 
illustration. In 1974, controversy and funding uncertainties 
surrounded the Navy's "Project Sanguine," a communications system for 
sending command and control messages to submerged submarines from a 
single transmitting location in the United States. The Navy had 
requested $16.6 million for Project Sanguine for Fiscal Year 1974. The 
House deleted the request; the Senate restored it; the conference 
committee compromised and approved $8.3 million. The Sanguine funds 
were included in a $2.6 billion lump-sum Research and Development 
appropriation. Navy spent more than $11 million for Project Sanguine 
in Fiscal Year 1974. The question was whether Navy violated the 
Antideficiency Act by spending more than the $8.3 million provided in 
the conference report. GAO found that it did not, because the 
conference committee's action was not specified in the appropriation 
act and was therefore not legally binding. Significantly, the 
appropriation act did include a proviso prohibiting use of the funds 
for "full scale development" of Project Sanguine (not involved in the 
$11 million expenditure), illustrating that Congress knows perfectly 
well how to impose a legally binding restriction when it desires to do 
so. GAO, Legality of the Navy's Expenditures for Project Sanguine 
During Fiscal Year 1974, LCD-75-315 (Washington, D.C.: Jan. 20, 1975). 
See also B-168482-0.M., Aug. 15, 1974. 

Similarly, the Department of Health, Education, and Welfare received a
$12 billion lump-sum appropriation for public assistance in 1975. 
Committee reports indicated that $9.2 million of this amount was being 
provided for research and development activities of the Social and 
Rehabilitation Service. Since this earmarking of the $9.2 million was 
not carried into the appropriation act itself, it did not constitute a 
statutory limit on the amount available for the program. B-164031.3, 
Apr. 16, 1975. 

GAO has applied the rule of the LTV and Newport News decisions in a 
number of additional cases and reports, several of which involve 
variations on the basic theme.[Footnote 17] One variation involves 
something of a reverse LTV theme when agencies attempt to invoke 
legislative history to supply a legal basis for their action that is 
absent from the relevant statutory language. In B-278121, Nov. 7, 
1997, the Library of Congress took the position that appropriation 
language earmarking $9,619,000 for a particular purpose, to remain 
available until expended, did not require the entire amount to be used 
exclusively for that purpose. Rather, the Library maintained, the 
figure constituted merely a "cap" or upper limit on the amount 
available for the stated purpose. The Library pointed to the way in 
which the conference committee described the figures relative to this 
appropriation as implicitly supporting its position. GAO rejected the 
Library's interpretation of the statutory language and, in particular, 
its reliance on implications from the legislative history: 

"Because the language of the law is clear, we have no basis to resort 
to assumptions or inferences drawn from inexplicit statements 
contained in the conference report. When the Congress appropriates 
lump-sum amounts without statutorily restricting what can be done with 
these funds, a clear inference arises that it does not intend to 
impose legally binding restrictions, and indicia in committee reports 
and other legislative history as to how the funds should or are 
expected to be spent do not establish any legal requirements on 
federal agencies. 55 Comp. Gen. 307, 319 (1975). Implicit within this 
holding is the more basic proposition that an existing statutory 
provision cannot be superseded or repealed by statements, 
explanations, recommendations, or tables contained in committee 
reports or in other legislative history. Id. In other words, if 
explanations or other comments in committee reports do not create any 
legally binding restrictions on an agency's discretionary authority to 
spend a lump-sum appropriation as it chooses, such comments certainly 
cannot supersede an existing statutory provision that establishes a 
legally binding amount that the agency may dispose of as an available 
appropriation." 

B-278121, at 2 (emphasis supplied). 

Similarly, the Comptroller General flatly rejected the notion that 
otherwise illegal agency actions could be ratified and thereby 
validated when the agency notified congressional committees of the 
actions and the committees expressed no objection. See B-285725, Sept. 
29, 2000; B-248284, Sept. 1, 1992. The decision in B-285725 observed: 

"Nothing we reviewed clearly communicates to the Congress that the 
District [of Columbia] was requesting that Congress ratify or 
otherwise validate an unauthorized disbursement made by the District 
in excess of an available appropriation let alone that the Congress 
enact legislation that expressly or impliedly authorizes the otherwise 
unauthorized action. While legislative history may be useful to 
clarify an ambiguity in legislative language, one may not refer to the 
legislative history to write into the law that which is not there. 55 
Comp. Gen. 307, 325 (1975). The District would have us write into the 
language of the law something that is not even mentioned in the 
relevant committee reports." 

The treatment of lump-sum appropriations as described above has been 
considered by the courts as well as GAO, and they reached the same 
result.[Footnote 18] The United States Court of Appeals for the 
District of Columbia Circuit noted that lump-sum appropriations have a 
"well understood meaning" and stated the rule as follows: 

"A lump-sum appropriation leaves it to the recipient agency (as a 
matter of law, at least) to distribute the funds among some or all of 
the permissible objects as it sees fit." 

International Union v. Donovan, 746 F.2d 855, 861 (D.C. Cir. 1984), 
cert. denied, 474 U.S. 825 (1985). The court in that case refused to 
impose a "reasonable distribution" requirement on the exercise of the 
agency's discretion, and found that discretion unreviewable. Id. at 
862-63. See also McCarey v. McNamara, 390 F.2d 601 (3rd Cir. 1968); 
Blackhawk Heating & Plumbing Co. v. United States, 622 F.2d 539, 547 
n.6 (Ct. Cl. 1980). 

One court, at odds with the weight of authority, concluded that an 
agency was required by 31 U.S.C. § 1301(a) (purpose statute) to spend 
money in accordance with an earmark appearing only in legislative 
history. Blue Ocean Preservation Society v. Watkins, 767 E Supp. 1518 
(D. Haw. 1991). 

The Supreme Court's 1993 decision in Lincoln v. Vigil, 508 U.S. 182, 
put to rest any lingering uncertainty that might have existed on this 
point. Writing for a unanimous Court, Justice Souter quoted the rule 
stated in the LTV decision and described it as "a fundamental 
principle of appropriations law." Id. at 192. Specifically, the Court 
held that reprogrammings under lump-sum appropriations fall within the 
Administrative Procedure Act's exemption for actions "committed to 
agency discretion" (5 U.S.C. § 701(a)(2)) and, therefore, are not 
subject to judicial review. The Court said that the Administrative 
Procedure Act "makes clear that 'review is not to be had' in these 
rare circumstances where the relevant statute 'is drawn so that a 
court would have no meaningful standard against which to judge the 
agency's exercise of discretion.'" Lincoln, 508 U.S. at 191. 

Lincoln concerned a decision by the Indian Health Service to 
discontinue a health program that had exclusively assisted Indian 
children in the southwestern United States and to channel the funds 
into a nationwide program for similar purposes. While the program had 
been funded for some years under a lump-sum appropriation, it was 
never mentioned in the language of the appropriation acts. The Court 
stated in this regard: 

"The allocation of funds from a lump-sum appropriation is... 
traditionally regarded as committed to agency discretion. After all, 
the very point of a lump-sum appropriation is to give an agency the 
capacity to adapt to changing circumstances and meet its statutory
responsibilities in what it sees as the most effective or desirable 
way. 

"An agency's allocation of funds from a lump-sum appropriation 
requires a complicated balancing of a number of factors which are 
peculiarly within its expertise: whether its resources are best spent 
on one program or another; whether it is likely to succeed in 
fulfilling its statutory mandate; whether a particular program best 
fits the agency's overall policies; and, indeed, whether the agency 
has enough resources to fund a program at all.... The agency is far 
better equipped than the courts to deal with the many variables 
involved in the proper ordering of its priorities. Of course, an 
agency is not free simply to disregard statutory responsibilities: 
Congress may always circumscribe agency discretion to allocate 
resources by putting restrictions in the operative statutes (though 
not, as we have seen, just in the legislative history). And, of 
course, we hardly need to note that an agency's decision to ignore 
congressional expectations may expose it to grave political 
consequences. But as long as the agency allocates funds from a lump-
sum appropriation to meet permissible statutory objectives, [5 U.S.C.] 
§ 701(a)(2) gives the courts no leave to intrude." 

508 U.S. at 192-93 (citations and internal quotations omitted). 

The Court noted that while the agency had repeatedly informed Congress 
about the program in question, "as we have explained, these 
representations do not translate through the medium of legislative 
history into legally binding obligations." Id. at 194. Subsequent 
judicial decisions have, of course, followed this approach. E.g., 
State of California v. United States, 104 F.3d 1086,1093-94 (9th 
Cir.), cert. denied, 522 U.S. 806 (1997); State of New Jersey v. 
United States, 91 F.3d 463,470-71 (3rd Cir. 1996); Vizenor v. Babbitt, 
927 E Supp. 1193 (D. Minn. 1996); Allred v. United States, 33 Fed. CL 
349 (1995). But see Ramah Navajo School Board, Inc. v. Babbitt, 87 
F.3d 1338 (D.C. Cir. 1996).[Footnote 19] 

While Lincoln, LTV, and related decisions clearly affirm that agencies 
have very broad legal discretion when allocating funds under lump-sum 
appropriations, an important caveat must be noted: Such discretion 
obviously does not extend to allowing an agency to avoid contractual 
or other legal obligations imposed upon it. In other words, the agency 
cannot reprogram funds otherwise available for payments under a 
contract and then claim (at least successfully) that its hands are 
tied from malting the contract payments. The Supreme Court's recent 
decision in Cherokee Nation of Oklahoma v. Leavitt, 543 U.S. 631,125 
S. Ct. 1172 (2005), illustrates this point. 

Cherokee Nation of Oklahoma v. Leavitt addressed the Indian Health 
Service's obligation to pay contract support costs under the Indian 
Self-Determination and Education Assistance Act, as amended, 25 U.S.C.
§§ 450-450n.[Footnote 20] The Act requires the Secretary of Health and 
Human Services,[Footnote 21] at the request of Indian tribes, to enter 
into self-determination contracts whereby the tribes agree to 
administer programs and provide services that would otherwise be the 
responsibility of the federal government. See generally 25 U.S.C. § 
450f. The federal government makes contract payments of not less than 
the amounts the government would have incurred in administering the 
programs directly, including, among other things, certain 
administrative contract support costs. Id. § 450j-1(a). With respect 
to contract funding, 25 U.S.C. § 450j-1(b) includes the following 
proviso: 

"Notwithstanding any other provision in this subchapter, the provision 
of funds under this subchapter is subject to the availability of 
appropriations and the Secretary is not required to reduce funding for 
programs, projects, or activities serving a tribe to make funds 
available to another tribe or tribal organization under this 
subchapter." 

The Cherokee Nation litigation grew out of the government's refusal to 
pay the full support cost amounts claimed by the tribes under their 
contracts for certain fiscal years. The government maintained that 
appropriations for those fiscal years were insufficient to fund the 
full amounts. The Court disagreed. The Court noted that the self-
determination contracts were no less legally binding than ordinary 
procurement contracts. Cherokee Nation of Oklahoma v. Leavitt, 125 S. 
Ct. at 1178-79. The contracts for the fiscal years in question were 
funded from lump-sum appropriations to the Indian Health Service that, 
the Court pointed out, far exceeded the total payments due under the 
contracts and contained no restrictions on the amounts of such 
payments. Id. at 1177. The Court then recited two basic propositions 
asserted by the tribes that, it noted, the government had conceded. 

The first was the "fundamental principle of appropriations law" 
recognized in Lincoln that when Congress appropriates lump-sum amounts 
unaccompanied by restrictions, a clear inference arises that it does 
not intend to impose legally binding restrictions and committee 
reports and other legislative history do not establish legally binding 
requirements. Cherokee Nation of Oklahoma v. Leavitt, 125 S. Ct. at 
1177. The second was that: 

"as long as Congress has appropriated sufficient legally unrestricted 
funds to pay the contracts at issue, the Government normally cannot 
back out of a promise to pay on grounds of 'insufficient 
appropriations,' even if the contract uses language such as 'subject 
to the availability of appropriations,' and even if an agency's total 
lump-sum appropriation is insufficient to pay all the contracts the 
agency has made." 

Id. In support of this proposition, the Court cited Ferris v. United 
States, 27 Ct. Cl. 542 (1892), and Blackhawk Heating & Plumbing Co. v. 
United States, 622 F.2d 539 (Ct. CL 1980). To the same effect, the 
Court quoted the following statement from the government's brief on 
the law applicable to ordinary procurement contracts: 

"If the amount of an unrestricted appropriation is sufficient to fund 
the contract, the contractor is entitled to payment even if the agency 
has allocated the funds to another purpose or assumes other 
obligations that exhaust the funds." 

Cherokee Nation of Oklahoma v. Leavitt, 125 S. Ct. at 1179-80 
(emphasis supplied). 

The Court rejected the government's contentions that the provisos in
25 U.S.C. § 450j-1(b), quoted previously, precluded full payment under 
the contracts. The Court observed that the first proviso making 
funding "subject to the availability of appropriations" is frequently 
used language that simply makes clear that contracts cannot become 
binding in advance of appropriations or otherwise without regard to 
the availability of appropriations. Cherokee Nation of Oklahoma v. 
Leavitt, 125 S. Ct. at 1180-81. "Since Congress appropriated adequate 
funds here," said the Court, the first proviso, "if interpreted as 
ordinarily understood, would not help the Government." Id. at 1181. 
The Court concluded that the second proviso, stating that the 
government need not reduce funding benefiting other tribes in order to 
fund self-determination contracts was likewise unavailing to the 
government: 

"The Government argues that these other funds, though legally 
unrestricted (as far as the appropriations statutes' language is 
concerned) were nonetheless unavailable to pay `contract support 
costs' because the Government had to use those funds to satisfy a 
critically important need, namely, to pay the costs of 'inherent 
federal functions,' such as the cost of running the Indian Health 
Service's central Washington office. This argument cannot help the 
Government, however, for it amounts to no more than a claim that the 
agency has allocated the funds to another purpose, albeit potentially 
a very important purpose. If an important alternative need for funds 
cannot rescue the Government from the binding effect of its promises 
where ordinary procurement contracts are at issue, it cannot rescue 
the Government here, for we can find nothing special in the statute's 
language or in the contracts. 

"We recognize that agencies may sometimes find that they must spend 
unrestricted appropriated funds to satisfy needs they believe more 
important than fulfilling a contractual obligation. But the law 
normally expects the Government to avoid such situations, for example, 
by refraining from making less essential contractual commitments; or 
by asking Congress in advance to protect funds needed for more 
essential purposes with statutory earmarks; or by seeking added 
funding from Congress; or, if necessary, by using unrestricted funds 
for the more essential purpose while leaving the contractor free to 
pursue appropriate legal remedies arising because the Government broke 
its contractual promise. The Government, without denying that this is 
so as a general matter of procurement law, says nothing to convince us 
that a different legal rule should apply here." 

Id. at 1180 (citations omitted; emphasis supplied).[Footnote 22] 

Finally, the Court declined to construe an appropriation act provision 
enacted in a subsequent fiscal year as creating a statutory cap on 
funding for the years covered by the litigation. This later-enacted 
provision stated in part: 

"Notwithstanding any other provision of law... amounts appropriated to 
or earmarked in committee reports for the Indian Health Service... 
[for] payments to tribes... for contract support costs... are the 
total amounts available for fiscal years 1994 through 1998 for such 
purposes."[Footnote 23] 

The Court acknowledged that it was reasonable to interpret the 
language as restricting payments for the prior years. However, it 
opted not to do so since such an interpretation would treat the 
language as retroactively repudiating a binding government contract 
and thereby raising constitutional concerns. Cherokee Nation of 
Oklahoma v. Leavitt, 125 S. Ct. at 1182. The Court also rejected the 
government's contention that the language simply clarified that the 
prior ambiguous appropriation language was not unrestricted, 
concluding that there was nothing ambiguous about the prior language. 
Id. Rather, the Court treated the later-enacted language as affecting 
only unobligated carryover balances from the prior year appropriations. 

c. "Zero Funding" Under a Lump-Sum Appropriation: 	 

Does discretion under a lump-sum appropriation extend so far as to 
permit an agency to "zero fund" a particular program? Although there 
are few cases, the answer would appear, for the most part, to be yes, 
as long as the program is not mandatory and the agency uses the funds 
for other authorized purposes to avoid impoundment complications. 
E.g., B-209680, Feb. 24, 1983 (agency could properly decide not to 
fund a program where committee reports on appropriation stated that no 
funds were being provided for that program, although agency would have 
been equally free to fund the program under the lump-sum 
appropriation); B-167656, June 18, 1971 (agency has discretion to 
discontinue a function funded under a lump-sum appropriation to cope 
with a shortfall in appropriations); 4B Op. Off. Legal Counsel 701, 
704 n.7 (1980) (same point). 

The more difficult question is whether the answer is the same where 
there is no shortfall problem and where it is clear that Congress 
wants the program funded. In International Union v. Donovan, 746 F.2d 
855, 861 (D.C. Cir. 1984), cert. denied, 474 U.S. 825 (1985), 
discussed previously, the court upheld an agency's decision to 
allocate no funds to a program otherwise authorized for funding under 
a lump-sum appropriation. Although there was in that case a 
"congressional realization, if not a congressional intent, that 
nothing would be expended" for the program in question, 746 F.2d at 
859, it seems implicit from the court's discussion of applicable law 
that the answer would have been the same if legislative history had 
"directed" that the program be funded. The same result would seem to 
follow from 55 Comp. Gen. 812 (1976), discussed above, holding that 
the entire unobligated balance of a lump-sum appropriation should be 
considered available for one of the objects included in the 
appropriation, at least for purposes of assessing potential violations 
of the Antideficiency Act. 

In B-114833, July 21, 1978, the Department of Agriculture wanted to 
use its 1978 lump-sum Resource Conservation and Development 
appropriation to fund existing projects rather than starting any new 
ones, even though the appropriations committee reports indicated that 
the funds were for certain new projects. Since the language referring 
to new projects was stated in committee reports but not in the statute 
itself, the Department's proposed course of action was legally 
permissible. 

In a very early, 1922 decision, 1 Comp. Gen. 623 (1922), GAO seemed to 
suggest that there are constraints on an agency's discretion. The 
appropriation in question provided for "rent of offices of the 
recorder of deeds, including services of cleaners as necessary, not to 
exceed 30 cents per hour,... $6,000." The Comptroller General held 
that the entire $6,000 could not be spent for rent. The decision stated:
"Since [the appropriation act] provides that the amount appropriated 
shall cover both rent and cleaning services, it must be held that the 
entire amount can not be used for rent alone. 

"...The law leaves to the discretion of the commissioners the question 
as to what portion of the amount appropriated shall be paid for rent 
and what portion shall be paid for services of cleaners, but it does 
not vest in the commissioners the discretion to determine that the 
entire amount shall be paid for rent and that the cleaning services 
shall be left unprovided for, or be provided for from other funds." 

Id. at 624. As a practical matter it would not have been possible to 
rent office space and totally eliminate cleaning services, and the use 
of any other appropriation would have been clearly improper. A factor 
which apparently influenced the decision was that the "regular office 
force" was somehow being coerced to do the cleaning, and these were 
employees paid from a separate appropriation. Id. 

2. Line-Item Appropriations and Earmarks: 

Congress may wish to specifically designate, or "earmark," part of a 
more general lump-sum appropriation for a particular object, as either 
a maximum, a minimum, or both. 

An earmark refers to the portion of a lump-sum appropriation 
designated for a particular purpose.[Footnote 24] The term earmark 
often is used interchangeably with the term "line item." In 
appropriations language, however, a line item is an appropriation that 
is dedicated for a specific purpose, rather than an amount within a 
lump-sum appropriation.[Footnote 25] The following example of 
earmarking language in a lump-sum appropriation can be found in the 
Consolidated Appropriations Act of 2004: 

"For necessary administrative expenses of the domestic nutrition 
assistance programs funded under this Act, $138,304,000, of which 
$5,000,000 shall be available only for simplifying procedures, 
reducing overhead costs,... and prosecution of fraud and other 
violations of law..."[Footnote 26] 

In this example, the $5 million is an earmark. 

Often, cases interpreting earmarks turn on congressional intent. See, 
e.g., B-285794, Dec. 5, 2000 (use of statutory interpretation to 
determine whether the Community Development Block Grant (CDBG) heading 
requiring competition for assistance "under this heading" applied to 
an earmark within the CDBG lump-sum appropriation). 

For simplicity of illustration, let us assume that we have a lump-sum 
appropriation of $1 million for "general construction" and a 
particular object within that appropriation is "renovation of office 
space." If the appropriation specifies "not to exceed" $100,000 for 
renovation of office space or "not more than" $100,000 for renovation 
of office space, then $100,000 is the maximum available for renovation 
of office space. 64 Comp. Gen. 263 (1985).[Footnote 27] A specifically 
earmarked maximum may not be supplemented with funds from the general 
appropriation. 

Statutory authority to transfer funds between appropriations may 
permit the augmentation of a "not to exceed" earmark in some cases. In 
12 Comp. Gen. 168 (1932), it was held that general transfer authority 
could be used to increase maximum earmarks for personal services, 
subject to the percentage limitations specified in the transfer 
statute because, in this case, the transfer authority was remedial 
legislation designed to mitigate the impact of reduced appropriations. 
The decision pointed out that if the personal services earmark had 
been a separate line-item appropriation, the transfer authority would 
clearly apply. Id. at 170. Somewhat similarly, in 36 Comp. Gen. 607 
(1957), funds transferred to an operating appropriation from a civil 
defense appropriation could be used to exceed an administrative 
expense limitation in the operating appropriation. Congress had 
imposed new civil defense functions but had neglected to adjust the 
administrative expenses limitation. However, in 33 Comp. Gen. 214 
(1953), the Comptroller General held that general transfer authority 
could not be used to exceed a maximum earmark on an emergency 
assistance program where it was clear that Congress, aware of the 
emergency, intended that the program be funded only from the earmark. 
See also 18 Comp. Gen. 211 (1938). As in many cases, these decisions 
turned on congressional intent. 

Under a "not to exceed" earmark, the agency is not required to spend 
the entire amount on the object specified. See, e.g., Brown v. 
Ruckelshaus, 364 F. Supp. 258, 266 (C.D. Cal. 1973) ("the phrase 'not 
to exceed' connotes limitation, not disbursement"). If, in our 
hypothetical, the entire $100,000 is not used for renovation of office 
space, unobligated balances may—within the time limits for obligation—
be applied to other unrestricted objects of the appropriation. B-
290659, July 24, 2002; 31 Comp. Gen. 578, 579 (1952); 15 Comp. Dec. 
660 (1909); B-4568, June 27, 1939. 

If later in the fiscal year a supplemental appropriation is made for 
"renovation of office space," the funds provided in the supplemental 
may not be used to increase the $100,000 maximum for general 
construction unless the supplemental appropriation act so specifies. 
See section D of this chapter for a further discussion of supplemental 
appropriations. 

An earmark that authorizes an agency to use a lump-sum appropriation 
for "not more than" a certain dollar amount has the same effect as a 
"not to exceed" earmark. For example, when the Department of State 
received a lump-sum appropriation for "International Organizations and 
Programs" authorizing it to make "not more than" $34 million of that 
lump sum available for the United Nations Population Fund (UNFPA), the 
Comptroller General concluded: 

"While the appropriation limits the State Department's use of the lump-
sum appropriation for 'International Organizations and Programs' for 
UNFPA to no more than $34 million, it does not require by law that any 
amounts be used for UNFPA." 

B-290659, July 24, 2002. In this case, the State Department could use 
the funds for UNFPA only after the Department ensured that UNFPA 
practices satisfied three statutory conditions, one of which was that 
UNFPA would not fund abortions. Pub. L. No. 107-115, § 576, 115 Stat. 
2118, 2168 (Jan. 10, 2002). The Department had delayed obligating 
funds for UNFPA pending an analysis of a report of a team reviewing 
UNFPA's involvement in Chinese family planning practices, including 
the funding of abortions.[Footnote 28] 

Words like "not more than" or "not to exceed" are not the only ways to 
establish a maximum limitation. If the appropriation includes a 
specific amount for a particular object (such as "for renovation of 
office space, $100,000"), then the appropriation establishes a maximum 
that may not be exceeded. 36 Comp. Gen. 526 (1957); 19 Comp. Gen. 892 
(1940); 16 Comp. Gen. 282 (1936). 

Another device Congress has used to designate earmarks as maximum 
limitations is the following general provision: 

"Whenever in this Act, an amount is specified within an appropriation 
for particular purposes or objects of expenditure, such amount, unless 
otherwise specified, shall be considered as the maximum amount that 
may be expended for said purpose or object rather than an amount set 
apart exclusively therefor." (Emphasis added.)[Footnote 29] 

By virtue of the "unless otherwise specified" clause, the provision 
does not apply to amounts within an appropriation which have their own 
specific earmarking "words of limitation," such as "exclusively." 31 
Comp. Gen. 578 (1952). 

If a lump-sum appropriation includes several particular objects and 
provides further that the appropriation "is to be accounted for as one 
fund" or "shall constitute one fund," then the individual amounts are 
not limitations, the only limitation being that the total amount of 
the lump-sum appropriation cannot be exceeded. However, individual 
items within that lump-sum appropriation that include the "not to 
exceed" language will still constitute maximum limitations. 22 Comp. 
Dec. 461 (1916); 3 Comp. Dec. 604 (1897); A-79741, Aug. 7, 1936. The 
"one fund" language is generally used when Congress authorizes an 
agency to transfer unexpended balances of prior appropriations to a 
current appropriation. For example, the Energy and Water Development 
Appropriations Act for 2002 states that: 

"The unexpended balances of prior appropriations provided for 
activities in the Act may be transferred to appropriation accounts for 
such activities established pursuant to the title. Balances so 
transferred may be merged with funds in the applicable established 
accounts and thereafter may be accounted for as one fund for the same 
period as originally enacted."[Footnote 30] 

If Congress wishes to specify a minimum for the particular object but 
not a maximum, the appropriation act may provide "General construction,
$1 million, of which not less than $100,000 shall be available for 
renovation of office space." B-137353, Dec. 3, 1959. See also 64 Comp. 
Gen. 388 (1985); B-131935, Mar. 17, 1986. If the phrase "not less 
than" is used, in contrast with the "not to exceed" language, portions 
of the $100,000 not obligated for renovation of office space may not 
be applied to the other objects of the appropriation. 64 Comp. Gen. at 
394-95; B-128943, Sept. 27, 1956. 

Another phrase Congress often uses to earmark a portion of a lump-sum 
appropriation is "shall be available." There are variations. For 
example, our hypothetical $1 million "renovation of office space" 
appropriation may provide that, out of the $1 million, $100,000 "shall 
be available" or "shall be available only" or "shall be available 
exclusively" for renovation of office space. Still another variation 
is "$1 million, including $100,000 for renovation of office space." 

If the "shall be available" phrase is combined with the maximum or 
minimum language noted above ("not to exceed," "not less than," etc.), 
then the above rules apply and the phrase "shall be available" adds 
little. See, e.g., B-137353, Dec. 3, 1959. However, if the earmarking 
phrase "shall be available" is used without the "not to exceed" or 
"not less than" modifiers, the rules are not quite as firm. 

Cases interpreting the "shall be available" and "shall be available 
only" earmarks are somewhat less than consistent. The earlier 
decisions proclaimed "shall be available" to constitute a maximum but 
not a minimum (B-5526, Sept. 14, 1939), although it could be a minimum 
if Congress clearly expressed that intent (B-128943, Sept. 27, 1956). 
Later cases held the earmark to constitute both a maximum and a 
minimum which could neither be augmented nor diverted to other objects 
within the appropriation. B-137353, Dec. 3, 1959; B-137353-0.M., Oct. 
14, 1958. Another early decision held summarily that "shall be 
available only" results in a maximum which cannot be augmented. 18 
Comp. Gen. 1013 (1939). Later decisions, however, have expressed the 
view that the effect of "shall be available only"—whether it is a 
maximum or a minimum—depends on the underlying congressional intent. 
53 Comp. Gen. 695 (1974); B-142190, Mar. 23, 1960. Applying this test, 
the earmark in 53 Comp. Gen. 695 was found to be a maximum; similar 
language had been found a minimum in B-142190, which could be exceeded. 

If the phrase "shall be available" may be said to contain an element 
of ambiguity, addition of the word "only" does not produce a plain 
meaning. The Claims Court, reviewing an authorization earmark for a 
Navy project known as RACER, commented: 

"It is not apparent from the language of the authorization ($45 
million 'is available only for') that Congress necessarily mandated 
the Navy to spend all $45 million on the RACER system. Rather, 
Congress may have merely intended to preclude the Navy from spending 
that $45 million on any other activities, i.e., the money would be 
forfeited if not spent on the RACER system." 

Solar Turbines, Inc. v. United States, 23 Cl. Ct. 142, 158 (1991). 

Use of the word "exclusively" is somewhat more precise. The earmark 
"shall be available exclusively" is both a maximum which cannot be 
augmented from the general appropriation, and a minimum which cannot 
be diverted to other objects within the appropriation. B-102971, Aug. 
24, 1951. Once again, however, clearly expressed congressional intent 
can produce a different result. B-113272-0.M., May 21, 1953; B-111392-
0.M., Oct. 17, 1952 (earmark held to be a minimum only in both cases). 

Similarly, the term "including" has been held to establish both a 
maximum and a minimum. A-99732, Jan. 13, 1939. As such, it cannot be 
augmented from a more general appropriation (19 Comp. Gen. 892 
(1940)), nor can it be diverted to other uses within the appropriation 
(67 Comp. Gen. 401 (1988)). 

To sum up, the most effective way to establish a maximum (but not 
minimum) earmark is by the words "not to exceed" or "not more than." 
The words "not less than" most effectively establish a minimum (but 
not maximum). These are all phrases with well-settled plain meanings. 
The "shall be available" family of earmarking language presumptively 
"fences in" the earmarked sum (both maximum and minimum), but is more 
subject to variation based upon underlying congressional intent. 

Our discussion thus far has centered on the use of earmarking language 
to prescribe the amount available for a particular object. Earmarking 
language also may be used to vary the period of availability for 
obligation. 

An earmarked amount within a lump-sum appropriation that is available 
without fiscal year limitation is neither a maximum nor a minimum if 
the funds have not been designated for a specific purpose. The earmark 
addresses only the time availability of the earmarked amount. For 
example, in the Legislative Branch Appropriations Act for 2004, the 
Salaries, Officers and Employees appropriations lump-sum account 
contained the following language: 

"For compensation and expenses of officers and employees, as 
authorized by law, $156,896,000, including:... for salaries and 
expenses of the Office of the Chief Administrative Officer, 
$111,141,000, of which $8,400,000 shall remain available until 
expended..."[Footnote 31] 

In this instance, the earmark extended the time period availability of 
$8,400,000 of the $111,141,000 appropriated for salaries and expenses 
but did not prescribe the amount available for a particular object.
In a 1997 decision, GAO determined that an earmark extending the time 
period also constituted a minimum for the purpose for which it was 
earmarked. B-278121, Nov. 7, 1997 (nondecision letter). The Library of 
Congress Salaries and Expenses lump-sum appropriation stated as 
follows: 

"For necessary expenses of the Library of Congress not otherwise 
provided for... $227,016,000... Provided further, That of the total 
amount appropriated, $9,619,000 is to remain available until expended 
for acquisition of books, periodicals, newspapers, and all other 
materials including subscriptions for bibliographic services for the 
Library...[Footnote 32] 

GAO determined that the Library of Congress was required to make the 
entire $9,619,000 available for acquisition of books and materials, 
even if this required reducing other expenditures within the lump-sum 
appropriation.[Footnote 33] 

Finally, earmarking language may be found in authorization acts as 
well as appropriation acts. The same meanings apply. Several of the 
cases cited above involve authorization acts. See, e.g., 64 Comp. Gen. 
388 (1985); B-131935, Mar. 17, 1986. 

C. The Antideficiency Act: 

1. Introduction and Overview: 

The Antideficiency Act is one of the major laws in the statutory 
scheme by which Congress exercises its constitutional control of the 
public purse. It has been termed "the cornerstone of Congressional 
efforts to bind the Executive branch of government to the limits on 
expenditure of appropriated funds."[Footnote 34] 

As with the series of funding statutes as a whole, the Antideficiency 
Act did not hatch fully developed but evolved over a period of time in 
response to various abuses. As we noted in Chapter 1, as late as the 
post-Civil War period, it was not uncommon for agencies to incur 
obligations in excess, or in advance, of appropriations. Perhaps most 
egregious of all, some agencies would spend their entire 
appropriations during the first few months of the fiscal year, 
continue to incur obligations, and then return to Congress for 
appropriations to fund these "coercive deficiencies.[Footnote 35] 
These were obligations to others who had fulfilled their part of the 
bargain with the United States and who now had at least a moral—and in 
some cases also a legal—right to be paid. Congress felt it had no 
choice but to fulfill these commitments, but the frequency of 
deficiency appropriations played havoc with the United States budget.
The congressional response to abuses of this nature was the 
Antideficiency Act. Its history is summarized in the following 
paragraphs:[Footnote 36] 

"Control in the execution of the Government's budgetary and financial 
programs is based on the provisions of section 3679 of the Revised 
Statutes, as amended..., commonly referred to as the Antideficiency 
Act. As the name... implies, one of the principal purposes of the 
legislation was to provide effective control over the use of 
appropriations so as to prevent the incurring of obligations at a rate 
which will lead to deficiency (or supplemental) appropriations and to 
fix responsibility on those officials of Government who incur 
deficiencies or obligate appropriations without proper authorization 
or at an excessive rate. 

"The original section 3679... was derived from legislation enacted in 
1870 [16 Stat. 251] and was designed solely to prevent expenditures in 
excess of amounts appropriated. In 1905 [33 Stat. 1257] and 1906 [34 
Stat. 48], section 3679... was amended to provide specific 
prohibitions regarding the obligation of appropriations and required 
that certain types of appropriations be so apportioned over a fiscal 
year as to `prevent expenditures in one portion of the year which may 
necessitate deficiency or additional appropriations to complete the 
service of the fiscal year for which said appropriations are made.' 
Under the amended section, the authority to make, waive, or modify 
apportionments was vested in the head of the department or agency 
concerned. By Executive Order 6166 of June 10, 1933, this authority 
was transferred to the Director of the [Office of Management and 
Budget].... 

"During and following World War II, with the expansion of Government 
functions and the increase in size and complexities of budgetary and 
operational problems, situations arose highlighting the need for more 
effective control and conservation of funds. In order to effectively 
cope with these conditions it was necessary to seek legislation 
clarifying certain technical aspects of section 3679 of the Revised 
Statutes, and strengthening the apportionment procedures, particularly 
as regards to agency control systems. Section 1211 of the General 
Appropriation Act, 1951 [64 Stat. 765], amended section 3679... to 
provide a basis for more effective control and economical use of 
appropriations. Following a recommendation of the second Hoover 
Commission that agency allotment systems should be simplified, 
Congress passed legislation in 1956 [70 Stat. 783] further amending 
section 3679 to provide that each agency work toward the objective of 
financing each operating unit, at the highest practical level, from 
not more than one administrative subdivision for each appropriation or 
fund affecting such unit. In 1957 [71 Stat. 440] section 3679 was 
further amended, adding a prohibition against the requesting of 
apportionments or reapportionments which indicate the necessity for a 
deficiency or supplemental estimate except on the determination of the 
agency head that such action is within the exceptions expressly set 
out in the law. The revised Antideficiency Act serves as the primary 
foundation for the Government's administrative control of funds 
systems." 

In its current form, the law prohibits: 

* Making or authorizing an expenditure from, or creating or 
authorizing an obligation under, any appropriation or fund in excess 
of the amount available in the appropriation or fund unless authorized 
by law. 31 U.S.C. § 1341(a)(1)(A). 

* Involving the government in any contract or other obligation for the 
payment of money for any purpose in advance of appropriations made for 
such purpose, unless the contract or obligation is authorized by law. 
31 U.S.C. § 1341(a)(1)(B). 

* Accepting voluntary services for the United States, or employing 
personal services in excess of that authorized by law, except in cases 
of emergency involving the safety of human life or the protection of 
property. 31 U.S.C. § 1342. 

* Making obligations or expenditures in excess of an apportionment or 
reapportionment, or in excess of the amount permitted by agency 
regulations. 31 U.S.C. § 1517(a).[Footnote 37] 

Subsequent sections of this chapter will explore these concepts in 
detail. However, the fiscal principles inherent in the Antideficiency 
Act are really quite simple. Government officials may not make 
payments or commit the United States to make payments at some future 
time for goods or services unless there is enough money in the "bank" 
to cover the cost in full. The "bank," of course, is the available 
appropriation. 

The combined effect of the Antideficiency Act, in conjunction with the 
other funding statutes discussed throughout this publication, was 
summarized in a 1962 decision. The summary has been quoted in numerous 
later Antideficiency Act cases and bears repeating here: 

"These statutes evidence a plain intent on the part of the Congress to 
prohibit executive officers, unless otherwise authorized by law, from 
making contracts involving the Government in obligations for 
expenditures or liabilities beyond those contemplated and authorized 
for the period of availability of and within the amount of the 
appropriation under which they are made; to keep all the departments 
of the Government, in the matter of incurring obligations for 
expenditures, within the limits and purposes of appropriations 
annually provided for conducting their lawful functions, and to 
prohibit any officer or employee of the Government from involving the 
Government in any contract or other obligation for the payment of 
money for any purpose, in advance of appropriations made for such 
purpose; and to restrict the use of annual appropriations to 
expenditures required for the service of the particular fiscal year 
for which they are made." 

42 Comp. Gen. 272, 275 (1962). 

To the extent it is possible to summarize appropriations law in a 
single paragraph, this is it. Viewed in the aggregate, the 
Antideficiency Act and related funding statutes "[restrict] in every 
possible way the expenditures and expenses and liabilities of the 
government, so far as executive offices are concerned, to the specific 
appropriations for each fiscal year." Wilder's Case, 16 Ct. CL 528, 
543 (1880). 

2. Obligation/Expenditure in Excess or Advance of Appropriations: 

The key provision of the Antideficiency Act is 31 U.S.C. § 1341(a)(1): 
[Footnote 38] 

"(a)(1) An officer or employee of the United States Government or of 
the District of Columbia government may not: 

"(A) make or authorize an expenditure or obligation exceeding an 
amount available in an appropriation or fund for the expenditure or 
obligation; or; 

"(B) involve either government in a contract or obligation for the 
payment of money before an appropriation is made unless authorized by 
law." 

Not only is section 1341(a)(1) the key provision of the Act, it was 
originally the only provision, the others being added to ensure 
enforcement of the basic prohibitions of section 1341. 

The law is not limited to the executive branch, but applies to any 
"officer or employee of the United States Government" and thus extends 
to all branches. Examples of legislative branch applications are B-
303964, Feb. 3, 2005 (Capitol Police use of the Legislative Branch 
Emergency Response Fund); B-303961, Dec. 6, 2004 (Architect of the 
Capitol); B-107279, Jan. 9, 1952 (Office of Legislative Counsel, House 
of Representatives); B-78217, July 21, 1948 (appropriations to Senate 
for expenses of Office of Vice President); 27 Op. Att'y Gen. 584 
(1909) (Government Printing Office). Within the judicial branch, it 
applies to the Administrative Office of the United States Courts. 
E.g., 50 Comp. Gen. 589 (1971). However, whether a federal judge is an 
officer or employee for purposes of 31 U.S.C. § 1341(a)(1) appears to 
remain an open question, at least in some contexts. See Armster v. 
United States District Court, 792 F.2d 1423, 1427 n.7 (9th Cir. 1986) 
(the Seventh Amendment of the Constitution prohibits suspension of 
civil jury trials for lack of funds, whether or not a judge is 
considered an employee or officer under the Antideficiency Act). The 
Antideficiency Act also applies to officers of the District of 
Columbia Courts. B-284566, Apr. 3, 2000. 

Some government corporations are also classified as agencies of the 
United States Government, and to the extent they operate with funds 
which are regarded as appropriated funds, they too are subject to 31 
U.S.C. § 1341(a)(1). E.g., B-223857, Feb. 27, 1987 (Commodity Credit 
Corporation); B-135075-0.M., Feb. 14, 1975 (Inter-American 
Foundation). It follows that section 1341(a)(1) does not apply to a 
government corporation that is not an agency of the United States 
Government. E.g., B-175155-0.M., July 26, 1976 (Amtrak). These 
principles are, of course, subject to variation if and to the extent 
provided in the relevant organic legislation. 

There are two distinct prohibitions in section 1341(a)(1). Unless 
otherwise authorized by law, no officer or employee of the United 
States may (1) make any expenditure or incur an obligation in excess 
of available appropriations, or (2) make an expenditure or incur an 
obligation in advance of appropriations. 

The distinction between obligating in excess of an appropriation and 
obligating in advance of an appropriation is clear in the majority of 
cases, but can occasionally become blurred. For example, an agency 
which tries to meet a current shortfall by "borrowing" from (i.e., 
obligating against) the unenacted appropriation for the next fiscal 
year is clearly obligating in advance of an appropriation. E.g., B-
236667, Jan. 26, 1990. However, it is also obligating in excess of the 
currently available appropriation. Since both are equally illegal, 
determining precisely which subsection of event, the point to be 
stressed here is that the law is violated not just when there are 
insufficient funds in an account when a payment becomes due. The very 
act of obligating the United States to make a payment when the 
necessary funds are not already in the account is also a violation of
31 U.S.C. § 1341(a). E.g., B-300480, Apr. 9, 2003. 

In B-290600, July 10, 2002, both the Office of Management and Budget 
(OMB) and the Airline Transportation Stabilization Board (ATSB) 
violated the Antideficiency Act when OMB apportioned, and ATSB 
obligated an appropriation, in advance of, and thus in excess of, its 
availability. The Air Transportation Safety and System Stabilization 
Act authorized the President to issue up to $10 billion in loan 
guarantees, and to provide the subsidy amounts necessary for such 
guarantees,[Footnote 39] to assist air carriers who incurred losses 
resulting from the September 11, 2001, terrorist attacks on the United 
States. Pub. L. No. 107-42, title I, § 101(a)(1), 115 Stat. 230 (Sept. 
22, 2001). Congress established the ATSB to review and decide on 
applications for these loan guarantees. The budget authority for the 
guarantees was available only "to the extent that a request, that 
includes designation of such amount as an emergency requirement ... is 
transmitted by the President to Congress." Id. at § 101(b). The 
President had not submitted such a request at the time OMB apportioned 
the funds to ATSB and the ATSB obligated the funds; therefore, both 
OMB and ATSB made funds available in advance of their availability, 
violating the Antideficiency Act. See section C of this chapter for a 
discussion of the apportionment process. 

Note that 31 U.S.C. § 1341(a) refers to overobligating and 
overspending the amount available in an "appropriation or fund." The 
phrase "appropriation or fund" refers to appropriation and fund 
accounts. An appropriation account is the basic unit of an 
appropriation generally reflecting each unnumbered paragraph in an 
appropriation act. Fund accounts include general fund accounts, 
intragovernmental fund accounts, special fund accounts, and trust fund 
accounts.[Footnote 40] See, e.g., 72 Comp. Gen. 59 (1992) (Corps of 
Engineers was prohibited by the Antideficiency Act from overobligating 
its Civil Works Revolving Fund's available budget authority). 

Thus, for example, the Antideficiency Act applies to Indian trust 
funds managed by the Bureau of Indian Affairs However, the investment 
of these funds in certificates of deposit with federally insured banks 
under authority of 25 U.S.C. § 162a does not, in GAO's opinion, 
constitute an obligation or expenditure for purposes of 31 U.S.C. § 
1341. Accordingly, overinvested trust funds do not violate the 
Antideficiency Act unless the overinvested funds, or any attributable 
interest income, are obligated or expended by the Bureau. B-207047-
0.M., June 17, 1983. Cf. B-303413, Nov. 8, 2004 (the Federal 
Communications Commission's (FCC) regulatory action to provide 
spectrum rights through a license modification instead of an auction 
did not violate section 1341; spectrum licenses that impose costs and 
expenses on the licensee do not constitute an obligation and 
expenditure of the FCC). GAO also views the Antideficiency Act as 
applicable to presidential and vice-presidential "unvouchered 
expenditure" accounts. B-239854, June 21, 1990 (internal memorandum). 

a. Exhaustion of an Appropriation: 

When we talk about an appropriation being "exhausted," we are really 
alluding to any of several different but related situations: 

* Depletion of appropriation account (i.e., fully obligated and/or 
expended). 

* Similar depletion of a maximum amount specifically earmarked in a 
lump-sum appropriation.[Footnote 41] 

* Depletion of an amount subject to a monetary ceiling imposed by some 
other statute (usually, but not always, the relevant program 
legislation). 

(1) Making further payments: 

In simple terms, once an appropriation is exhausted, the making of any 
further payments, apart from using expired balances to liquidate or 
make adjustments to valid obligations recorded against that 
appropriation, violates 31 U.S.C. § 1341. When the appropriation is 
fully expended, no further payments may be made in any case. If an 
agency finds itself in this position, unless it has transfer authority 
or other clear statutory basis for making further payments, it has 
little choice but to seek a deficiency[Footnote 42] or supplemental 
appropriation from Congress, and to adjust or curtail operations as 
may be necessary. E.g., B-285725, Sept. 29, 2000; 61 Comp. Gen. 661 
(1982); 38 Comp. Gen. 501 (1959). For example, when the Corporation 
for National and Community Service obligated funds in excess of the 
amount available to it in the National Service Trust, the Corporation 
suspended participant enrollment in the AmeriCorps program and 
requested a deficiency appropriation from Congress.[Footnote 43] 

In many ways, the prohibitions in the Adequacy of Appropriations Act, 
41 U.S.C. § 11, parallel those of 31 U.S.C. § 1341(a). The Adequacy of 
Appropriations Act states in part that: 

"No contract or purchase on behalf of the United States shall be made, 
unless the same is authorized by law or is under an appropriation 
adequate to its fulfillment, except in the Department of Defense and 
in the Department of Transportation with respect to the Coast Guard 
when it is not operating as a service in the Navy, for clothing, 
subsistence, forage, fuel, quarters, transportation, or medical and 
hospital supplies, which, however, shall not exceed the necessities of 
the current year." 

41 U.S.C. § 11(a). For example, a contract in excess of the available 
appropriation violates both statutes. E.g., 9 Comp. Dec. 423 (1903). 
However, a contract in compliance with 41 U.S.C. § 11 can still result 
in a violation of the Antideficiency Act. Assessment of Antideficiency 
Act violations is not frozen at the point when the obligation is 
incurred. Even if the initial obligation was well within available 
funds, the Antideficiency Act can still be violated if upward 
adjustments cause the obligation to exceed available funds. E.g., 55 
Comp. Gen. 812, 826 (1976). 

What one authority termed the "granddaddy of all violations[Footnote 
44] occurred when the Navy overobligated and overspent nearly $110 
million from its "Military Personnel, Navy" appropriation during the 
years 1969-1972. GAO summarized the violation in a letter report, B-
177631, June 7, 1973. While there may have been some concealment, GAO 
concluded that the violation was not the result of some evil scheme; 
rather, the "basic cause of the violation was the separation of the 
authority to create obligations from the responsibility to control 
them." The authority to create obligations had been decentralized 
while control was centralized in the Bureau of Naval Personnel. 

Granddaddy was soon to lose his place of honor on the totem pole. 
Around November of 1975, the Department of the Army discovered that, 
for a variety of reasons, it had overobligated four procurement 
appropriations in the aggregate amount of more than $160 million and 
consequently had to halt payments to some 900 contractors. The Army 
requested the Comptroller General's advice on a number of potential 
courses of action it was considering. The resulting decision was 55 
Comp. Gen. 768 (1976). The Army recognized its duty to mitigate the 
Antideficiency Act violation.[Footnote 45] It was clear that without a 
deficiency appropriation, all the contractors could not be paid. One 
option—to use current appropriations to pay the deficiencies—had to be 
rejected because there is no authority to apply current funds to pay 
off debts incurred in a previous year. Id. at 773. An option GAO 
endorsed was to reduce the amount of the deficiencies by terminating 
some of the contracts for convenience, although the termination costs 
would still have to come from a deficiency appropriation unless there 
was enough left in the appropriation accounts to cover them. Id. 

(2) Limitations on contractor recovery: 

If the Antideficiency Act prohibits any further payments when the 
appropriation is exhausted, where does this leave the contractor? Is 
the contractor expected to know how and at what rate the agency is 
spending its money? There is a small body of judicial case law which 
discusses the effect of the exhaustion of appropriations on government 
obligations. The fate of the contractor seems to depend on the type of 
appropriation involved and the presence or absence of notice, actual 
or constructive, to the contractor on the limitations of the 
appropriation. 

Where a contractor is but one party out of several to be paid from a 
general appropriation, the contractor is under no obligation to know 
the status or condition of the appropriation account on the 
government's books. If the appropriation becomes exhausted, the 
Antideficiency Act may prevent the agency from making any further 
payments, but valid obligations will remain enforceable in the courts. 
For example, in Ferris v. United States, 27 Ct. Cl. 542 (1892), the 
plaintiff had a contract with the government to dredge a channel in 
the Delaware River. The Corps of Engineers made him stop work halfway 
through the job because it had run out of money. In discussing the 
contractor's rights in a breach of contract suit, the court said: 

"A contractor who is one of several persons to be paid out of an 
appropriation is not chargeable with knowledge of its administration, 
nor can his legal rights be affected or impaired by its 
maladministration or by its diversion, whether legal or illegal, to 
other objects. An appropriation per se merely imposes limitations upon 
the Government's own agents; it is a definite amount of money 
entrusted to them for distribution; but its insufficiency does not pay 
the Government's debts, nor cancel its obligations, nor defeat the 
rights of other parties." 

Id. at 546. 

The rationale for this rule is that "a contractor cannot justly be 
expected to keep track of appropriations where he is but one of 
several being paid from the fund." Ross Construction Corp. v. United 
States, 392 F.2d 984, 987 (Ct. Cl. 1968). Other illustrative cases are 
Dougherty ex rel. Slavens v. United States, 18 Ct. Cl. 496 (1883), and 
Joplin v. United States, 89 Ct. Cl. 345 (1939). The Antideficiency Act 
may "apply to the official, but [does] not affect the rights in this 
court of the citizen honestly contracting with the Government." 
Dougherty, 18 Ct. Cl. at 503. Thus, it is settled that contractors 
paid from a general appropriation are not barred from recovering for 
breach of contract even though the appropriation is exhausted. 

However, under a specific line-item appropriation, the answer is 
different. The contractor in this situation is deemed to have notice 
of the limits on the spending power of the government official with 
whom he contracts. A contract under these circumstances is valid only 
up to the amount of the available appropriation Exhaustion of the 
appropriation will generally bar any further recovery beyond that 
limit. E.g., Sutton v. United States, 256 U.S. 575 (1921); Hooe v. 
United States, 218 U.S. 322 (1910); Shipman v. United States, 18 Ct. 
Cl. 138 (1883); Dougherty, 18 Ct. Cl. at 503. 

The distinction between the Ferris and Sutton lines of cases follows 
logically from the old maxim that ignorance of the law is no excuse. 
If Congress appropriates a specific dollar amount for a particular 
contract, that amount is specified in the appropriation act and the 
contractor is deemed to know it. It is certainly not difficult to 
locate. If, on the other hand, a contract is but one activity under a 
larger appropriation, it is not reasonable to expect the contractor to 
know how much of that appropriation remains available for it at any 
given time. A requirement to obtain this information would place an 
unreasonable burden on the contractor, not to mention a nuisance for 
the government as well. 

In two cases in the 1960s, the Court of Claims permitted recovery on 
contractor claims in excess of a specific monetary ceiling. See 
Anthony P Miller, Inc. v. United States, 348 F.2d 475 (Ct. Cl. 1965) 
(claim by Capehart Housing Act contractor); Ross Construction Corp. v. 
United States, 392 F.2d 984 (Ct. Cl. 1968) (claim by contractor for 
"off-site" construction ancillary to Capehart Act housing). The court 
distinguished between matters not the fault or responsibility of the 
contractor (for example, defective plans or specifications or changed 
conditions under the "changed conditions" clause), in which case above-
ceiling claims are allowable, and excess costs resulting from what it 
termed "simple extras," in which case they are not. Without attempting 
to detail the fairly complex Capehart legislation here, we note merely 
that Ross is more closely analogous to the Ferris situation (392 F.2d 
at 986), while Anthony P Miller is more closely analogous to the 
Sutton situation (392 F.2d at 987). The extent to which the approach 
reflected in these cases will be applied to the more traditional form 
of exhaustion of appropriations remains to be developed, although the 
Ross court intimated that it saw no real distinction for these 
purposes between a specific appropriation and a specific monetary 
ceiling imposed by other legislation (id.). 

b. Contracts or Other Obligations in Excess or Advance of 
Appropriations: 

It is easy enough to say that the Antideficiency Act prohibits you 
from obligating a million dollars when you have only half a million 
left in the account, or that it prohibits you from entering into a 
contract in September purporting to obligate funds for the next fiscal 
year that have not yet been appropriated. Many of the situations that 
actually arise from day to day, however, are not quite that simple. A 
useful starting point is the relationship of the Antideficiency Act to 
the recording of obligations under 31 U.S.C. § 1501. 

(1) Proper recording of obligations: 

Proper recording practices are essential to sound funds control. An 
amount of recorded obligations in excess of the available 
appropriation is prima facie evidence of a violation of the 
Antideficiency Act, but is not conclusive. B-134474-0.M., Dec. 18, 
1957.[Footnote 46] 

An example of this is B-300480, Apr. 9, 2003, in which the Corporation 
for National and Community Services failed to recognize and record 
obligations for national service educational benefits of AmeriCorps 
participants when it incurred that obligation. In that case, the 
Corporation made grant awards to state corporations, who, in turn, 
made subgrants to nonprofit entities, who enrolled participants. In 
its grant awards to the state corporations, the Corporation approved 
the enrollment of a specified number of new program participants. 
Because the Corporation in the grant agreement had committed to a 
specified number of new participants, the Corporation incurred an 
obligation for the participants' educational benefits at that time; 
without further action by the Corporation, the Corporation was legally 
required to pay education benefits of all participants, up to the 
number the Corporation had specified in the grant agreement, if the 
grantee and subgrantee, who needed no further approval from the 
Corporation, enrolled that number of new participants, and if they 
satisfied the criteria for benefits. The Corporation's failure to 
recognize and record its obligation did not ameliorate its violation 
of the Act. See also B-300480.2, June 6, 2003. 

Also, in many situations, the amount of the government's liability is 
not definitely fixed at the time the obligation is incurred. An 
example is a contract with price escalation provisions. A violation 
would occur if sufficient budget authority is not available when an 
agency must adjust a recorded obligation. See, e.g., B-240264, Feb. 7, 
1994 (an agency would incur an Antideficiency Act violation if it must 
adjust an obligation for an incrementally funded contract to fully 
reflect the extent of the bona fide need contracted for and sufficient 
appropriations are not available to support the adjustment). 

This is illustrated in B-289209, May 31, 2002. After holding that the 
Coast Guard had wrongly used no-year funds from the Oil Spill 
Liability Trust Fund for administrative expenses, GAO concluded that 
the agency should adjust its accounting records by deobligating the 
incorrectly charged expenses and charging them instead to the proper 
appropriation. GAO advised the Coast Guard that these adjustments 
could result in a violation of the Antideficiency Act to the extent 
that there was insufficient budget authority, and that the agency 
should report any deficiency in accordance with the Antideficiency Act.
The incurring of an obligation in excess or advance of appropriations 
violates the Act, and this is not affected by the agency's failure to 
record the obligation. E.g., 71 Comp. Gen. 502, 509 (1992); 65 Comp. 
Gen. 4, 9 (1985); 62 Comp. Gen. 692, 700 (1983); 55 Comp. Gen. 812, 
824 (1976); B-245856.7, Aug. 11, 1992. 

(2) Obligation in excess of appropriations: 

Incurring an obligation in excess of the available appropriation 
violates 31 U.S.C. § 1341(a)(1).[Footnote 47] As the Comptroller of 
the Treasury advised an agency head many years ago, "your authority in 
the matter was strictly limited by the amount of the appropriation; 
otherwise there would be no limit to your power to incur expenses for 
the service of a particular fiscal year." 9 Comp. Dec. 423, 425 
(1903). If you want higher authority, the Supreme Court has stated 
that, absent statutory authorization, "it is clear that the head of 
the department cannot involve the government in an obligation to pay 
any thing in excess of the appropriation." Bradley v. United States, 
98 U.S. 104, 114 (1878). 

To take a fairly simple illustration, the statute was violated by an 
agency's acceptance of an offer to install automatic telephone 
equipment for $40,000 when the unobligated balance in the relevant 
appropriation was only $20,000. 35 Comp. Gen. 356 (1955). 

In a 1969 case, the Air Force wanted to purchase computer equipment 
but did not have sufficient funds available. It attempted an 
arrangement whereby it made an initial down payment, with the balance 
of the purchase price to be paid in installments over a period of 
years, the contract to continue unless the government took affirmative 
action to terminate. This was nothing more than a sale on credit, and 
since the contract constituted an obligation in excess of available 
funds, it violated the Antideficiency Act. 48 Comp. Gen. 494 (1969). 

(3) Variable quantity contracts: 

A leading case discussing the Antideficiency Act ramifications of 
"variable quantity" contracts (requirements contracts, indefinite 
quantity contracts, and similar arrangements) is 42 Comp. Gen. 272 
(1962).[Footnote 48] That decision considered a 3-year contract the 
Air Force had awarded to a firm to provide any service or maintenance 
work necessary for government aircraft landing on Wake Island. GAO 
questioned the legality of entering into a contract of more than 1 
year since the Air Force had only a 1-year appropriation available. 
The Air Force argued that it was a "requirements" contract, that no 
obligation would arise unless or until some maintenance work was 
ordered, and that the only obligation was a negative one—not to buy 
service from anyone else but the contractor should the services be 
needed. GAO disagreed. The services covered were "automatic incidents 
of the use of the air field." There was no place for a true 
administrative determination that the services were or were not 
needed. There was no true "contingency" as the services would almost 
certainly be needed if the base were to remain operational. 
Accordingly, the contract was not a true requirements contract but 
amounted to a firm obligation for the needs of future years, and was 
therefore an unauthorized multiyear contract. As such, it violated the 
Antideficiency Act. The solution was to contract on an annual basis 
with renewal options from year to year, and, if that did not meet the 
Air Force's needs, then ask Congress for multiyear procurement 
authority.[Footnote 49] 

The Wake Island decision noted that the contract contained no 
provision permitting the Air Force to reduce or eliminate requirements 
short of a termination for convenience. Id. at 277. If the contract 
had included such a provision—and in the unlikely event that, given 
the nature of the contract, such a provision could have been 
meaningful—a somewhat different analysis might have resulted. Compare, 
for example, the situation in 55 Comp. Gen. 812 (1976). The exercise 
of a contract option required the Navy to furnish various items of 
government-furnished property (GFP), but another contract clause 
authorized the Navy to unilaterally delete items of GFP. If the entire 
quantity of GFP had to be treated as a firm obligation at the time the 
option was exercised, the obligation would have exceeded available 
appropriations, resulting in an Antideficiency Act violation. However, 
since the Navy was not absolutely obligated to furnish all the GFP 
items at the time the option was exercised, the Navy could avert a 
violation if it were able to delete enough GFP to stay within the 
available appropriation; if it found that it could not do so, the 
violation would then exist.[Footnote 50] See also B-134474-0.M., Dec. 
18, 1957. 

In 47 Comp. Gen. 155 (1967), GAO considered an Air Force contract for 
mobile generator sets which specified minimum and maximum quantities 
to be purchased over a 12-month period. Since the contract committed 
the Air Force to purchase only the minimum quantity, it was necessary 
to obligate only sufficient funds to cover that minimum. See also B-
287619, July 5, 2001. Subsequent orders for additional quantities up 
to the maximum were not legally objectionable as long as the Air Force 
had sufficient funds to cover the cost when it placed those orders. 
See also 19 Comp. Gen. 980 (1940). The fact that the Air Force, at the 
time it entered into the contract, did not have sufficient funds 
available to cover the maximum quantity was, for Antideficiency Act 
purposes, irrelevant. The decision distinguished the Wake Island case 
on the basis that nothing in the mobile generator contract purported 
to commit the Air Force to obtain any requirements over and above the 
specified minimum from the contractor. 

In 63 Comp. Gen. 129 (1983), GAO found no Antideficiency Act problems 
with a General Services Administration "Multiple Award Schedule" 
contract under which no minimum purchases were guaranteed and no 
binding obligation would arise unless and until a using agency made an 
administrative determination that it had a requirement for a scheduled 
item. 

Regardless of whether we are dealing with a requirements contract, 
indefinite quantity contract, or some variation, two points apply as 
far as the Antideficiency Act is concerned: 

* Whether or not there is a violation at the time the contract is 
entered into depends on exactly what the government is obligated to do 
under the contract. 

* Even if there is no violation at the time the contract is entered 
into, a violation may occur later if the government subsequently 
incurs an obligation under the contract in excess of available funds, 
for example, by electing to order a maximum quantity without 
sufficient funds to cover the quantity ordered. 

A conceptually related situation is a contract that gives the 
government the option of two performances at different prices. The 
government can enter into such a contract without violating the 
Antideficiency Act as long as it has sufficient appropriations 
available at the time the contract is entered into to pay the lesser 
amount. For example, the Defense Production Act of 1950 authorizes the 
President to contract for synthetic fuels, but the contract must give 
the President the option to refuse delivery and instead pay the 
contractor the amount by which the contract price exceeds the 
prevalent market price at the time of the delivery. Such a contract 
would not violate the Antideficiency Act at the time it is entered 
into as long as sufficient appropriations are available to pay any 
anticipated difference between the contract price and the estimated 
market price at the time of performance. 60 Comp. Gen. 86 (1980). Of 
course, the government could choose not to accept delivery unless 
there were sufficient appropriations available at that time to cover 
the full cost of the fuel under the contract. 

An agreement to pay "special termination" costs under an incrementally 
funded contract creates a firm obligation, not a contingent liability, 
to pay the contractor because the contracting agency remains liable 
for the costs even if it decides not to fund the contract further. B-
238581, Oct. 31, 1990. 

(4) Multiyear or "continuing" contracts: 

A multiyear contract is a contract covering the needs or requirements 
of more than one fiscal year. Our discussion here presupposes a 
general familiarity with relevant portions of Chapter 5, primarily the 
nature of a fixed-term appropriation and the bona fide needs rule as 
it applies to multiyear contracts. 

We start with some very basic propositions: 

* A fixed-term appropriation (fiscal year or multiple year) may be 
obligated only during its period of availability. 

* A fixed-term appropriation may be validly obligated only for the 
bona fide needs of that fixed term. 

* The Antideficiency Act prohibits the making of contracts which 
exceed currently available appropriations or which purport to obligate 
appropriations not yet made. 

As we have seen in Chapter 5, performance may extend into a subsequent 
fiscal year in certain situations. Also, as long as a contract is 
properly obligated against funds for the year in which it was made, 
actual payment can extend into subsequent years. Apart from these 
situations, and unless the agency either has specific multiyear 
contracting authority (e.g., 62 Comp. Gen. 569 (1983)), is contracting 
in compliance with the multiyear contracting provisions of the Federal 
Acquisition Streamlining Act of 1994 (discussed below and in Chapter 5 
in relation to the bona fide needs rule), or is operating under a no-
year appropriation (e.g., 43 Comp. Gen. 657 (1964)), the 
Antideficiency Act, together with the bona fide needs rule, prohibits 
contracts purporting to bind the government beyond the obligational 
duration of the appropriation.[Footnote 51] This is because the 
current appropriation is not available for future needs, and 
appropriations for those future needs have not yet been made. 
Citations to support this proposition are numerous.[Footnote 52] The 
rule applies to any attempt to obligate the government beyond the end 
of the fiscal year, even where the contract covers a period of only a 
few months. 24 Comp. Gen. 195 (1944). 

An understanding of the principles applicable to multiyear contracting 
begins with a discussion of a 1926 decision of the United States 
Supreme Court. An agency had entered into a long-term lease for office 
space with 1-year (i.e., fiscal year) funds, but its contract 
specifically provided that payment for periods after the first year 
was subject to the availability of future appropriations. In Leiter v. 
United States, 271 U.S. 204 (1926), the Supreme Court specifically 
rejected that theory. The Court held that the lease was binding on the 
government only for one fiscal year, and it ceased to exist at the end 
of the fiscal year in which the obligation was incurred. It takes 
affirmative action to bring the obligation back to life. The Court 
stated its position as follows: 

"It is not alleged or claimed that these leases were made under any 
specific authority of law. And since at the time they were made there 
was no appropriation available for the payment of rent after the first 
fiscal year, it is clear that in so far as their terms extended beyond 
that year they were in violation of the express provisions of the 
[Antideficiency Act]; and, being to that extent executed without 
authority of law, they created no binding obligation against the 
United States after the first year. [Citations omitted.] A lease to 
the Government for a term of years, when entered into under an 
appropriation available for but one fiscal year, is binding on the 
Government only for that year. [Citations omitted.] And it is plain 
that, to make it binding for any subsequent year, it is necessary, not 
only that an appropriation be made available for the payment of the 
rent, but that the Government, by its duly authorized officers, 
affirmatively continue the lease for such subsequent year; thereby, in 
effect, by the adoption of the original lease, making a new lease 
under the authority of such appropriation for the subsequent year." 

Id. at 206-07. 

The Federal Acquisition Streamlining Act of 1994 (FASA) supplied the 
"specific authority of law" missing in Leiter to enable agencies to 
enter into multiyear contracts using fiscal year funds.[Footnote 53] 
The multiyear contracts provision, codified at 41 U.S.C. § 254c, 
authorizes executive agencies, using fiscal year funds, to enter into 
multiyear contracts (defined as contracts for more than 1 but not more 
than 5 years) for the acquisition of property or services. 

To take advantage of FASA, the agency must either (1) obligate the 
full amount of the contract to the appropriation current at the time 
it enters into the contract, or (2) obligate the costs of the first 
year of the contract plus termination costs. Of course, if the agency 
elects to obligate only the costs of the individual years for each 
year of the contract, the agency needs to obligate the costs of each 
such year against the appropriation current for that year. Contracts 
relying on FASA must provide that the contract will be terminated if 
funds are not made available for the continuation of the contract in 
any fiscal year covered by the contract. Funds available for 
termination costs remain available for such costs until the obligation 
for termination costs has been satisfied. 41 U.S.C. § 254c(b). 

Importantly, FASA does not apply to all contracts that are intended to 
meet the needs of more than one fiscal year. Obviously, if multiple 
year or no-year appropriations are legally available for the full 
contract period, an agency need not rely on FASA. Also, certain 
contract forms do not constitute multiyear contracts within the scope 
of FASA. For example, in B-302358, Dec. 27, 2004, GAO determined that 
a Bureau of Customs and Border Protection procurement constituted an 
"indefinite-delivery, indefinite-quantity" (IDIQ) contract that was 
not subject to FASA. The decision explained that, unlike a contract 
covered by FASA, an IDIQ contract does not obligate the government 
beyond its initial year. Rather, it obligates the government only to 
order a minimum amount of supplies or services. The cost of that 
minimum amount is recorded as an obligation against the appropriation 
current when the contract is entered into.[Footnote 54] 

Leiter provides the general framework governing the legality of 
contracts carrying potential liabilities beyond the fiscal year 
availability of the appropriations that funded them. While FASA 
provides the necessary authority to avoid the Leiter problems, the 
Leiter analysis remains relevant to the extent that FASA does not 
apply. Thus, GAO decisions interpreting Leiter before enactment of 
FASA still need to be considered. For example, GAO refused to approve 
an automatic, annual renewal of a contract for repair and storage of 
automotive equipment, even though the contract provided that the 
government had a right to terminate. The reservation of a right to 
terminate does not save the contract from the prohibition against 
binding the government in advance of appropriations. 28 Comp. Gen. 553 
(1949). 

The Post Office wanted to enter into a contract for services and 
storage of government-owned highway vehicles for periods up to 4 years 
because it could obtain a more favorable flat rate per mile of 
operations instead of an item by item charge required if the contract 
was for 1 year only. GAO held that any contract for continuous 
maintenance and storage of the vehicles would be prohibited by 31 
U.S.C. § 1341 because it would obligate the government beyond the 
extent of the existing appropriation. However, there would be no legal 
objection to including a provision that gave the government an 
affirmative option to renew the contract from year to year, not to 
exceed 4 years as specified in the statute authorizing the Postmaster 
to enter into these types of contracts. 29 Comp. Gen. 451 (1950). 
[Footnote 55] 

Where a contract gives the government a renewal option, it may not be 
exercised until appropriations for the subsequent fiscal year actually 
become available. 61 Comp. Gen. 184, 187 (1981). Under a 1-year 
contract with renewal options, the fact that funds become available in 
subsequent years does not place the government under an obligation to 
exercise the renewal option. Government Systems Advisors, Inc. v. 
United States, 13 Cl. Ct. 470 (1987), aff'd, 847 F.2d 811 (Fed. Cir. 
1988).[Footnote 56] 

Note that, in Leiter, the inclusion of a contract provision 
conditioning the government's obligation on the subsequent 
availability of funds was to no avail. In this regard, see also 67 
Comp. Gen. 190, 194 (1988); 42 Comp. Gen. 272, 276 (1962); 36 Comp. 
Gen. 683 (1957). If a "subject to availability" clause were sufficient 
to permit multiyear contracting, the effect would be automatic 
continuation from year to year unless the government terminated. If 
funds were not available and the government nevertheless permitted or 
acquiesced in the continuation of performance, the contractor would 
obviously be performing in the expectation of being paid.[Footnote 57] 
Apart from questions of legal liability, the failure by Congress to 
appropriate the money might be viewed as a serious breach of faith. 
Congress, as a practical if not a legal matter, would have little real 
choice but to appropriate funds to pay the contractor. This is another 
example of a type of "coercive deficiency" the Antideficiency Act was 
intended to prohibit.[Footnote 58] Thus, it is not enough for the 
government to retain the option to terminate at any time if sufficient 
funds are not available. Under Leiter and its progeny, the contract 
"dies" at the end of the fiscal year, and may be revived only by 
affirmative action by the government. This "new" contract is then 
chargeable to appropriations for the subsequent year. 

Although today FASA and the Federal Acquisition Regulation recognize 
"subject to availability" clauses, such a clause, by itself, is not 
sufficient. FASA provides that a multiyear contract for purposes of 
FASA: 

"may provide that performance under the contract during the second and 
subsequent years of the contract is contingent upon the appropriation 
of funds and (if it does so provide) may provide for a cancellation 
payment to be made to the contractor if such appropriations are not 
made." 

41 U.S.C. § 254c(d). If an agency decides to include a "subject to 
availability" clause for the second and subsequent years, the agency 
also has to provide for possible termination. Availability clauses are 
required by the Federal Acquisition Regulation in several situations. 
While the prescribed contract clauses vary in complexity, they all 
have one thing in common—each requires the contracting officer to 
specifically notify the contractor in writing that the contractor may 
resume performance. For example: (1) contract actions initiated prior 
to the availability of funds;[Footnote 59] (2) certain requirements 
and indefinite-quantity contracts:[Footnote 60](3) fully funded cost-
reimbursement contracts;[Footnote 61] (4) facilities acquisition and 
use;[Footnote 62] and (5) incrementally funded cost-reimbursement 
contracts.[Footnote 63] See 48 C.F.R. subpt. 32.7. The objective of 
these clauses is compliance with the Antideficiency Act and other 
fiscal statutes. See ITT Federal Laboratories, ASBCA No. 12987, 69-2 
BCA ¶ 7,849 (1969), rev'd and remanded on other grounds, ITT v. United 
States, 453 F.2d 1283 (1972). What is not sufficient is a simple 
"subject to availability" clause which would permit automatic 
continuation subject to the government's right to terminate. 

In B-259274, May 22, 1996, the Air Force exercised an option to a 
severable service contract that extended the contract from September 
1, 1994, to August 31, 1995, using fiscal year 1994 funds.[Footnote 
64] However, the Air Force only had enough fiscal year 1994 budget 
authority to finance 4 months of the option period, leaving the 
remaining 8 months unfunded. The Air Force modified the agreement by 
adding a clause stating that the government's obligation beyond 
December 31, 1994, was subject to the availability of appropriations. 
Significantly, however, the clause further stated that no legal 
liability on the part of the government would arise for contract 
performance beyond December 31, 1994, unless and until the contractor 
received notice in writing from the Air Force contracting officer that 
the contractor could continue work. GAO held that this clause 
converted the government's obligation for the remaining 8 months to no 
more than a negative obligation not to procure services elsewhere 
should such services be needed. Since this contractual obligation 
created no financial exposure on the part of the government, the Air 
Force had not violated the Antideficiency Act. 

It may be useful at this point to reiterate the basic principle that, 
in the context of contractual obligations, compliance with the 
Antideficiency Act is determined first on the basis of when an 
obligation occurs, not when actual payment is scheduled to be made. In 
the case of a contract with an option to renew, for example, as long 
as sufficient funds are available to cover the initial contract, there 
is no violation at the time the contract is made. No obligation 
accrues for future option years unless and until the government 
exercises its option. 

Another issue to consider with respect to multiyear contracts is the 
relationship between termination charges and the Antideficiency Act. 
As a general proposition, the government has the right to terminate a 
contract "for the convenience of the government" if that action is 
determined to be in the government's best interests. The Federal 
Acquisition Regulation prescribes the required contract clauses. 48 
C.F.R. subpt. 49.5.[Footnote 65] Under a termination for convenience, 
the contractor is entitled to be compensated, including a reasonable 
profit, for the performed portion of the contract, but may not recover 
anticipatory profits on the terminated portion. E.g.,
48 C.F.R. §§ 49.201, 49.202. Total recovery may not exceed the 
contract price. Id. § 49.207. 

In the typical contract covering the needs of only one fiscal year, 
termination does not pose a problem. Under 48 C.F.R. § 49.207, the 
contractor's recovery cannot exceed the contract price; thus, the 
basic contract obligation will be sufficient to cover potential 
termination costs. Under a contract with options to renew, however, 
the situation may differ. A contractor who must incur substantial 
capital costs at the outset has a legitimate concern over recovering 
these costs if the government does not renew. A device sometimes used 
to address this problem, albeit with limited success, is a clause 
requiring the government to pay termination charges or "separate 
charges" upon early termination. As discussed in Chapter 5, section 
B.8.c, separate charges have been found to violate the bona fide needs 
rule to the extent they do not reasonably relate to the value of 
current fiscal year requirements. E.g., 36 Comp. Gen. 683 (1957), 
affd, 37 Comp. Gen. 155 (1957). 

Separate charges also have been held to violate the Antideficiency 
Act. The leading case in this area is 56 Comp. Gen. 142 (1976), affil, 
56 Comp. Gen. 505 (1977). The Burroughs Corporation protested the 
award of a contract to the Honeywell Corporation to provide automatic 
data processing (ADP) equipment to the Mine Enforcement and Safety 
Administration. If all renewal options were exercised, the contract 
would run for 60 months after equipment installation. The contract 
included a "separate charges" provision under which, if the government 
failed to exercise any renewal option or otherwise terminated prior to 
the end of the 60-month systems life, the government would pay a 
percentage of all future years' rentals based on Honeywell's "list 
prices" at the time of failure to renew or of termination. This 
provision violated the Antideficiency Act for two reasons. First, it 
would amount to an obligation of fiscal year funds for the 
requirements of future years. And second, it would commit the 
government to indeterminate liability because the contractor could 
raise its list or catalog prices at any time. The government had no 
way of knowing the amount of its commitment. Similar cases involving 
separate charges are 56 Comp. Gen. 167 (1976); B-216718.2, Nov. 14, 
1984; and B-190659, Oct. 23, 1978.[Footnote 66] 

The Burroughs decision also offers guidance on when separate charges 
may be acceptable. One instance is where it is the only way the 
government can obtain its needs. Cited in this regard was 8 Comp. Gen. 
654 (1929), a case involving the installation of equipment and the 
procurement of a water supply from a town. There, however, the town 
was the only source of a water supply, a situation clearly 
inapplicable to a competitive industry like ADP. 56 Comp. Gen. at 157. 
In addition, separate charges are permissible if they, together with 
payments already made, reasonably represent the value of requirements 
actually performed. Thus, where the contractor has discounted its 
price based on the government's stated intent to exercise all renewal 
options, separate charges may be based on the "reasonable value (e.g., 
ADP schedule price) of the actually performed work at termination 
based upon the shortened term." Id. at 158. However, termination 
charges may not be inconsistent with the termination for convenience 
clause remedy; for example, they may not exceed the value of the 
contract or include costs not cognizable under a "T for C." Id. at 157. 

Where termination charges are otherwise proper, the Antideficiency Act 
also requires that the agency have sufficient funds available to pay 
them if and when the contingency materializes. E.g., 62 Comp. Gen. 143 
(1983); 8 Comp. Gen. 654, 657 (1929). See also Aerolease Long Beach v. 
United States, 31 Fed. Cl. 342, 362 (1994), aff'd, 39 F.3d 1198 (Fed. 
Cir. 1994) (agency complied with Antideficiency Act requirements by 
including termination costs as current obligations). This requirement 
is sometimes specified in multiyear contracting legislation. An 
example is 40 U.S.C. § 322, the Information Technology Fund. In 
operating the Fund, the General Services Administration is authorized 
to enter into information technology multiyear contracts if "amounts 
are available and adequate to pay the costs of the contract for the 
first fiscal year and any costs of cancellation or termination." Id. § 
322(e)(1)(A). Congress may also, of course, provide exceptions. E.g.,B-
174839, Mar. 20, 1984. 

c. Indemnification: 

Under an indemnification agreement, one party promises, in effect, to 
cover another party's losses. It is no surprise that the government is 
often asked to enter into indemnification agreements. The problem is 
that such agreements create a risk that the government, at some point 
in the future, may have to pay amounts in excess of available funds. 
Consequently, with one very limited exception discussed below, GAO and 
numerous courts have adhered to the rule that, absent express 
statutory authority, the government may not enter into an agreement to 
indemnify where the amount of the government's liability is 
indefinite, indeterminate, or potentially unlimited.[Footnote 67] Such 
an agreement would violate both the Antideficiency Act, 31 U.S.C. § 
1341, and the Adequacy of Appropriations Act, 41 U.S.C. § 11, since it 
can never be said that sufficient funds have been appropriated to 
cover the government's indemnification exposure. As discussed in this 
section, indemnity clauses have been upheld under certain conditions: 

* where the potential liability of the government was limited to a 
definite amount known at the time of the agreement, was within the 
amount of available appropriations, and was not otherwise prohibited 
by statute; 

* where the indemnification agreement is a legitimate object of an 
appropriation, the agreement specifically provides that the amount of 
liability is limited to available appropriations, and there is no 
implication that Congress will, at a later date, appropriate funds to 
meet deficiencies; or; 

* where Congress has specifically authorized the agency to indemnify. 

Although a provision limiting liability to appropriations available at 
the time a loss arises would prevent any overt Antideficiency Act or 
Adequacy of Appropriations Act violation by removing the "unlimited 
liability" objection, it could have disastrous fiscal consequences for 
the agency as well as present other, practical problems. For example, 
payment of an especially large indemnity obligation at the beginning 
of a fiscal year could wipe out the entire unobligated balance of the 
agency's appropriation for the rest of the fiscal year, forcing the 
agency to seek a supplemental appropriation to finance basic program 
activities. Conversely, if a liability arises toward the end of the 
fiscal year it is quite possible that no unobligated balance would be 
available for an indemnity payment, which means indemnification could 
prove largely illusory from the standpoint of the contractor or other 
"beneficiary." 

Another practical problem concerns recording the obligations that may 
arise under indemnity clauses. The indemnity is a potential liability 
that may become an actual liability when some event outside of the 
government's control is triggered, at which point the liability 
becomes a recordable obligation. This creates a fiscal dilemma, 
however. While the liability is not sufficiently definite at the time 
the indemnity agreement is made to formally record an obligation, good 
financial management requires that the agency recognize its contingent 
liability.[Footnote 68] Although most of our cases do not directly 
address this issue, the ones that do, discussed below, have 
recommended either the obligation or administrative reservation 
[Footnote 69] of sufficient funds to cover the potential liability. 
Clearly, however, this could create a fiscal nightmare where an 
estimate of potential liability could encompass the entire 
appropriation for the agency for that fiscal year, and tying up that 
entire sum would prevent the agency from meeting its mission. 

What follows is a discussion of indemnification proposals in decisions 
issued over the years. As you will see, we have struggled with the 
practical problems posed by the inclusion of indemnity clauses in 
government contracts and agreements. For the past several years it has 
been our view that even if indemnification clauses are rewritten to 
meet the minimum requirements of the Antideficiency Act or Adequacy of 
Appropriations Act, there should be a clear governmentwide policy 
restricting their use. Given the potential liability of the government 
created by such clauses, exceptions to this policy should not be made 
without express congressional acquiescence, as has been done whenever 
Congress has decided that it was in the best interests of the 
government to assume the risks of having to pay off on an indemnity 
obligation. See, for example, 10 U.S.C. § 2354, 42 U.S.C. § 2210, and 
other examples given below. 

(1) Prohibition against unlimited liability: 

As noted above, absent specific statutory authority, the government 
generally may not enter into an indemnification agreement which would 
impose an indefinite or potentially unlimited liability on the 
government. In plain English, you cannot purport to bind the 
government to unlimited liability. The rule is not some arcane GAO 
concoction. The Court of Claims stated in California-Pacific Utilities 
Co. v. United States, 194 Ct. Cl. 703, 715 (1971)): 

"The United States Supreme Court, the Court of Claims, and the 
Comptroller General have consistently held that absent an express 
provision in an appropriation for reimbursement adequate to make such 
payment, [the Antideficiency Act, 31 U.S.C. § 1341] proscribes 
indemnification on the grounds that it would constitute the obligation 
of funds not yet appropriated. [Citations omitted.]" 

For example, in an early case, the Interior Department, as licensee, 
entered into an agreement with the Southern Pacific Company under 
which the Department was to lay telephone and telegraph wires on 
property owned by the licensor in New Mexico. The agreement included a 
provision that the Department was to indemnify the Company against any 
liability resulting from the operation. Upon reviewing the indemnity 
provision, the Comptroller General found that it purported to impose 
indeterminate contingent liability on the government in violation of 
Revised Statutes § 3732, the predecessor to the Adequacy of 
Appropriations Act, 41 U.S.C. § 11. By including the indemnity 
provision, the contracting officer had exceeded his authority, and the 
provision was held void. 16 Comp. Gen. 803 (1937). 

Similarly, an indefinite and unlimited indemnification provision in a 
lease entered into by the General Services Administration without 
statutory authority was held to impose no legal liability on the 
government since it violated the provisions of 31 U.S.C. § 1341 and 41 
U.S.C. § 11. 35 Comp. Gen. 85 (1955). 

In 59 Comp. Gen. 369 (1980), the National Oceanic and Atmospheric 
Administration (NOAA) desired to undertake a series of hurricane 
seeding experiments off the coast of Australia in cooperation with its 
Australian counterpart. The State Department, as negotiator, sought 
GAO's opinion on an Australian proposal under which the United States 
would agree to indemnify Australia against all damages arising from 
the activities. State recognized that an unlimited agreement would 
violate the Antideficiency Act and asked whether the proposal would be 
acceptable if it specified that the government's liability would be 
subject to the appropriation of funds by Congress for that purpose. 
GAO expressed dissatisfaction with this proposal because, even though 
it would impose no legal obligation unless or until funds are 
appropriated, it would impose a moral obligation on the United States 
to make good on its promise.[Footnote 70] There was a way out, however—
insurance. Ordinarily, appropriations are not available to acquire 
insurance,[Footnote 71] but GAO concluded that the government's policy 
of self-insurance did not apply here since the insurance would not be 
for the purpose of protecting against a risk to which the United 
States would be exposed but rather is the price exacted by Australia, 
as the United States' partner in an international venture, to protect 
Australia's interests. GAO said that NOAA could therefore purchase 
private insurance, with the premiums to be shared by the government of 
Australia, provided that the United States' liability under the 
agreement was limited to its share of the insurance premiums. NOAA's 
use of its appropriation for the United States' share of the insurance 
premium would simply be a necessary expense of the project. 

Another decision applying the general rule held that the Federal 
Emergency Management Agency[Footnote 72] could not agree to provide 
indeterminate indemnification to agents and brokers under the National 
Flood Insurance Act. B-201394, Apr. 23, 1981. If the agency considered 
indemnification necessary to the success of its program, it could 
either insert a provision limiting the government's liability to 
available appropriations or seek broader authority from Congress. 

In B-201072, May 3, 1982, the Department of Health and Human Services 
questioned the use of a contract clause entitled "Insurance—Liability 
to Third Persons," found in the Federal Procurement Regulations 
(predecessor to the Federal Acquisition Regulation). The clause 
purported to permit federal agencies to agree to reimburse 
contractors, without limit, for liabilities to third persons for 
death, personal injury, or property damage, arising out of performance 
of the contract and not compensated by insurance, whether or not 
caused by the contractor's negligence. Since the clause purported to 
commit the government to an indefinite liability which could exceed 
available appropriations, the Comptroller General found it in 
violation of the Antideficiency Act and the Adequacy of Appropriations 
Act. This decision was affirmed upon reconsideration in 62 Comp. Gen. 
361 (1983), one of GAO's more comprehensive discussions of the 
indemnification problem. 

For other cases applying or discussing the general rule, see B-260063, 
June 30, 1995; 35 Comp. Gen. 85 (1955); 20 Comp. Gen. 95, 100 (1940); 
7 Comp. Gen. 507 (1928); 15 Comp. Dec. 405 (1909); B-242146, Aug. 16, 
1991; B-117057, Dec. 27, 1957; A-95749, Oct. 14, 1938; 8 Op. Off. 
Legal Counsel 94 (1984); 2 Op. Off. Legal Counsel 219, 223-24 (1978). 
A brief letter report making the same point is GAO, Agreements 
Describing Liability in Undercover Operations Should Limit the 
Government's Liability, GGD-83-53 (Washington, D.C.: Mar. 15, 1983). 

In some of the earlier GAO cases-—for example, 7 Comp. Gen. 507 and 16 
Comp. Gen. 803 (1937)-—the Comptroller General offered as further
support for the indemnification prohibition the then-existing 
principle that the United States was not liable for the tortious 
conduct of its employees. Of course, since the enactment of the 
Federal Tort Claims Act in 1946,[Footnote 73] this is no longer true. 
Thus, the reader should disregard any discussion of the government's 
lack of tort liability appearing in the earlier cases. The thrust of 
those cases, namely, the prohibition against open-ended liability, 
remains valid. 

The Comptroller General recognized a limited exception to the rule in
59 Comp. Gen. 705 (1980). In that decision, the Comptroller General 
held that the General Services Administration could agree to certain 
indemnity provisions in procuring public utility services for 
government agencies under the Federal Property and Administrative 
Services Act, 40 U.S.C. § 501. To apply the general rule against 
indemnification in this situation, the Comptroller General suggested, 
would constitute "an overly technical and literal reading of the Anti-
Deficiency Act." Id. at 707. The decision reasoned as follows: 

"The procurement of goods or services from state-regulated utilities 
which are virtually monopolies is unique in important ways. As a 
practical matter, there is no other source for the needed goods or 
services. Moreover, the tariff requirements, such as this 
indemnification undertaking, are applicable generally to all of the 
same class of customers of the utility, and are included in the tariff 
only after administrative proceedings in which the government has the 
opportunity to participate. The United States is not being singled out 
for discriminatory treatment nor, presumably, can it complain that the 
objectionable provision was imposed without notice and the opportunity 
for a hearing. 

"Under the circumstances, we have not objected in the past to the 
procurement of power by GSA under tariffs containing the indemnity 
clause and there is no reason to object to the purchase of power under 
contracts containing essentially the same indemnity clause. As noted 
already, this has of necessity been the practice in the past. The 
possibility of liability under the clause is in our judgment remote. 
In any event, we see little purpose to be served by a rule which 
prevents the United States from procuring a vital commodity under the 
same restrictions as other customers are subject to under the tariff 
if the utility insists that the restrictions are non-negotiable. 
However, because the possibility exists, however remote, that these 
agreements could result in future liability in excess of available 
appropriations, GSA should inform the Congress of the situation." 

Id. 

Subsequent decisions emphasize that the extent of the exception carved 
out by 59 Comp. Gen. 705 is limited to its facts. See, e.g., B-260063, 
June 30, 1995; 62 Comp. Gen. 361 (1983); B-242146, Aug. 16, 1991. In B-
197583, Jan. 19, 1981, GAO once again applied the general rule and 
held that the Architect of the Capitol could not agree to indemnify 
the Potomac Electric Power Company (PEPCO) for loss or damages 
resulting from PEPCO's performance of tests on equipment installed in 
government buildings or from certain other equipment owned by PEPCO 
which could be installed in government buildings to monitor 
electricity use for conservation purposes. GAO pointed to two 
distinguishing factors that justified—and limited—the exception in 59 
Comp. Gen. 705. First, in 59 Comp. Gen. 705, there was no other source 
from which the government could obtain the needed utility services. 
Here, the testing and monitoring could be performed by government 
employees. The second factor is summarized in the following excerpt 
from B-197583, Jan. 19, 1981: 

"An even more important distinction, though, is that unlike the 
situation in the GSA case [59 Comp. Gen. 705], the Architect has not 
previously been accepting the testing services or using the impulse 
device from PEPCO and has therefore not previously agreed to the 
liability represented by the proposed indemnity agreements. In the GSA 
case, GSA merely sought to enter a contract accepting the same service 
and attendant liability, previously secured under a non-negotiable 
tariff, at a rate more advantageous to the Government. Here, however, 
the Government has other means available to provide the testing and 
monitoring desired." 

Thus, the case did not fall within the "narrow exception created by 
the GSA decision," and the proposed indemnity agreement was improper. 

More recent decisions likewise reaffirm the general rule against open-
ended indemnification agreements and reemphasize the limited 
application of the exception in 59 Comp. Gen. 705. In B-242146, Aug. 
16, 1991, GAO held that the United States Park Police could not 
include in mutual assistance agreements with local law enforcement 
agencies a clause that the United States would indemnify the latter 
agencies against claims arising from police actions they took in 
national parks. Citing 62 Comp. Gen. 361 (1983) and other cases, the 
decision observed: 

"This Office has long held that absent statutory authority, indemnity 
provisions which subject the United States to indefinite or 
potentially unlimited contingent liability contravene the 
Antideficiency Act, 31 U.S.C. § 1341(a) ...since it can never be said 
that sufficient funds have been appropriated to cover the contingency. 

"Here, the potential liability of the Park Police is unknown because 
the clause in question provides an indemnity for property damage and 
personal injury. There is no possible way to know at the time the 
[mutual assistance] memoranda are signed whether there are sufficient 
funds in the appropriation to cover a liability or when it arises 
under the indemnification clause because no one knows in advance how 
much the liability may be." (Footnote omitted.) 

The decision rejected the argument that 59 Comp. Gen. 705 supported 
the indemnification clause in this case, stating: 

"We were careful to point out in 62 Comp. Gen. at 364 ... that 59 
Comp. Gen. 705 should not serve as a precedent. Indeed, except for 59 
Comp. Gen. 705, the accounting officers of the Government have never 
issued a decision sanctioning the incurring of an obligation for an 
open-ended indemnity in the absence of statutory authority to the 
contrary.' 62 Comp. Gen. 364-365." 

In B-260063, June 30, 1995, GAO again distinguished 59 Comp. Gen. 705 
in holding that a federal agency should not agree to indemnify a 
utility company for providing electricity to one of the agency's 
remote facilities. The decision pointed out that, unlike the situation 
in 59 Comp. Gen. 705, the indemnity clause proposed here was not part 
of a generally applicable tariff but would discriminate against the 
agency. 

As indicated previously, the general rule against open-ended indemnity 
agreements has received consistent acceptance by the courts. Examples 
of court cases endorsing the general rule against open-ended 
indemnification are Frank v. United States, 797 F.2d 724, 727 (9th 
Cir. 1986); Union Pacific Railroad Corp. v. United States, 52 Fed. Cl. 
730, 732-735 (2002); Lopez v. Johns Manville, 649 F. Supp. 149 (WD. 
Wash. 1986), aff'd on other grounds, 858 F.2d 712 (Fed. Cir. 1988); In 
re All Asbestos Cases, 603 F. Supp. 599 (D. Hawaii 1984); Johns-
Manville Corp. v. United States, 12 Cl. Ct. 1 (1987). Several of these 
are asbestos cases in which the courts rejected claims of an implied 
agreement to indemnify. In Johns-Manville Corp., the court stated: 

"Contractual agreements that create contingent liabilities for the 
Government serve to create obligations of funds just as much as do 
agreements creating definite or certain liabilities. The contingent 
nature of the liability created by an indemnity agreement does not so 
lessen its effect on appropriations as to make it immune to the 
limitations of [the Antideficiency Act]." 

12 Cl. Ct. at 25. 

In Hercules, Inc. v. United States, 516 U.S. 417 (1996), the Supreme 
Court rejected the argument by a manufacturer of the Vietnam War-era 
defoliant "Agent Orange" that it had an implied-in-fact contract with 
the United States to indemnify it for tort damages arising from third-
party claims against it. The Court noted that an implied-in-fact 
contract depends upon a meeting of the minds, and that such a meeting 
of the minds was unlikely given the rule against open-ended indemnity 
contracts: 

"There is ... reason to think that a contracting officer would not 
agree to the open-ended indemnification alleged here. The Anti-
Deficiency Act bars a federal employee or agency from entering into a 
contract for future payment of money in advance of, or in excess of, 
an existing appropriation. 31 U.S.C. § 1341. Ordinarily no federal 
appropriation covers contractors' payments to third-party tort 
claimants in these circumstances, and the Comptroller General has 
repeatedly ruled that Government procurement agencies may not enter 
into the type of open-ended indemnity for third-party liability that 
petitioner Thompson claims to have implicitly received under the Agent 
Orange contracts. We view the Anti-Deficiency Act, and the contracting 
officer's presumed knowledge of its prohibition, as strong evidence 
that the officer would not have provided, in fact, the contractual 
indemnification [petitioner] claims." 

516 U.S. at 426-427 (footnotes omitted). 

The Court cited several instances in which Congress had enacted 
statutory authorizations for indemnification, and noted that the 
existence of these statutory authorizations further militated against 
finding an implied contract to indemnify in this case: 

"These statutes [authorizing indemnification], set out in meticulous 
detail and each supported by a panoply of implementing regulations, 
... would be entirely unnecessary if an implied agreement to indemnify 
could arise from the circumstances of contracting. We will not 
interpret the [Agent Orange] contracts so as to render these statutes 
and regulations superfluous." 

Id. at 429.[Footnote 74] 

The Federal Circuit's recent decision in E.I. DuPont De Nemours & 
Company, Inc. v. United States, 365 F.3d 1367 (Fed. Cir. 2004), 
provides an interesting twist. The issue in that case was whether an 
indemnity clause contained in a World War II-era contract required the 
United States to reimburse the contractor for environmental cleanup 
costs it incurred at the contract site as a result of liability 
imposed on it under the Comprehensive Environmental Response, 
Compensation, and Liability Act of 1980 (popularly known as "CERCLA" 
or the "Superfund" law), 42 U.S.C. §§ 9601-9675.[Footnote 75] The 
Court of Federal Claims had viewed the contract's indemnity clause as 
extending to CERCLA liability, but concluded that the general rule 
against open-ended indemnification applied to invalidate the clause 
under the Antideficiency Act: 

"Even though the Indemnification Clause was included in this contract 
and it is quite reasonable to assume that both the contracting officer 
and the contractor believed this Clause to place the risk of virtually 
all liabilities on the government rather than the contractor, the 
state of the law compels us to hold this clause to be void and
unenforceable.... 

"Although we are of the opinion that the current state of the law 
compels the result expressed, this result is so totally at odds with 
the agreement the parties clearly made concerning reimbursement and 
indemnity, and plaintiff is so clearly entitled to the indemnity it 
seeks under the plain language of the contract it had with the 
government, made during truly emergency, wartime conditions, we 
suggest that plaintiff may want to consider the avenue for potential 
relief available in a Congressional Reference case pursuant to 28 
U.S.C. §§ 1492 & 2509." 

E.I. DuPont De Nemours & Company, Inc. v. United States, 54 Fed. Cl. 
361, 372-373 (2002). 

The Federal Circuit reversed in E.I. DuPont De Nemours & Company, 
Inc., 365 F.3d 1367. The court did not question the general rule 
against open-ended indemnity provisions; nor did it dispute the lower 
court's conclusion that the indemnity clause in the DuPont contract 
was originally invalid under that rule. However, the court concluded 
that the government in effect ratified the clause through actions 
taken under a subsequent statute—the Contract Settlement Act of 1944, 
at 41 U.S.C. §§ 101, 120(a)—that did permit such indemnity provisions. 
Thus, the court reasoned, the indemnity clause in this case satisfied 
the "otherwise authorized by law" exception in the Antideficiency Act, 
31 U.S.C. § 1341(a)(1)(B). E.I. DuPont De Nemours & Company, Inc., 365 
F.3d at 1375-80. 

Executive branch adjudicative bodies such as boards of contract 
appeals and the Federal Labor Relations Authority have also applied 
the general anti-indemnity rule. See Appeals of National Gypsum Co., 
ASBCA No. 53259, 03-1 B.C.A. ¶ 32,054 (2002) (indemnity provision of 
World War II contract unenforceable because in violation of the 
Antideficiency Act and the Executive Order under which the contract 
was entered into); KMS Development Co. v. General Services 
Administration, GSBCA No. 12584, 95-2 B.C.A. ¶ 27, 663 (1995) (no 
implied-in-fact contract of indemnity since such a contract would be 
ultra vires as a violation of the Antideficiency Act); National 
Federation of Federal Employees and U.S. Department of the Interior, 
35 F.L.R.A. 1034 (1990) (proposal to indemnify union against judgments 
and litigation expenses resulting from drug testing program held 
contrary to law and therefore nonnegotiable); American Federation of 
State, County and Municipal Employees and U.S. Department of Justice, 
42 F.L.R.A. 412, 515-17 (1991) (similar proposal for drug testing 
indemnification). 

In sum, the GAO decisions, court cases, and other administrative 
decisions reflect a clear rule against open-ended indemnification 
agreements (absent statutory authority). Indeed, the Supreme Court's 
opinion in Hercules, Inc. v. United States, 516 U.S. 417 (1996), 
discussed previously, commented upon the nearly uniform line of 
Comptroller General decisions on this point, noting that 59 Comp. Gen. 
705 stood as the "one peculiar exception." 516 U.S. at 428. 

(2) When indemnification may be permissible: 

Indemnification agreements may be proper if they are limited to 
available appropriations and are otherwise authorized. Before ever 
getting to the question of amount, for an indemnity agreement to be 
permissible in the first place, it must be authorized either expressly 
or under a necessary expense theory. 59 Comp. Gen. 369 (1980). The 
determination as to whether an expense is necessary as incident to the 
object of the applicable funding source is determined on a case-by-
case basis.[Footnote 76] Although GAO generally affords agencies broad 
discretion in determining whether a specific expenditure is reasonably 
related to the accomplishment of an authorized purpose, an agency's 
discretion in such matters is not unlimited. 18 Comp. Gen. 285, 292 
(1938). GAO has had occasion both to approve and to disapprove 
contract indemnification provisions as necessary or incident to the 
object of the applicable funding source. See, e.g., 63 Comp. Gen. 145, 
150 (1984) (all but one indemnity provision in contracts for vessels 
were approved as incidental expenses under the Navy's authorized 
prepositioning ship chartering program); 59 Comp. Gen. 369 
(disapproved—general statutory authority to carry out international 
programs did not provide authority for the United States to agree to 
provide complete indemnification of another country for all damages 
resulting from an international weather modification project); 42 
Comp. Gen. 708, 712 (1963) (approved—obligation of an agency for 
damage or destruction that might arise under an indemnity clause in an 
aircraft rental contract was a necessary expense incident to the 
hiring of aircraft for which the agency's appropriation was expressly 
available); B-201394, Apr. 23, 1981 (disapproved—no specific 
appropriation was available to pay costs arising under a clause 
indemnifying agents and brokers under the National Flood Insurance 
program); B-137976, Dec. 4, 1958 (disapproved—an obligation arising 
under an indemnity provision in an agency's agreement for training 
with a nongovernment facility was not a necessary expense under the 
statute authorizing such training agreements). 

Once you cross the purpose hurdle—that is, once you determine that the 
indemnification proposal you are considering is a legitimate object on 
which to spend your appropriations—you are ready to grapple with the 
unlimited liability issue. 

One way to deal with this issue is to specifically limit the amount of 
the liability assumed. Such a limitation of an indemnity agreement may 
come about in either of two ways: it may follow necessarily from the 
nature of the agreement itself or it may be expressly written into the 
agreement, coupled with an appropriate obligation or administrative 
reservation of funds. The latter alternative is the only acceptable 
one where the government's liability would otherwise be potentially 
unlimited. 

For example, where the government rented buses to transport Selective 
Service registrants for physical examination or induction, there was 
no objection to the inclusion of an indemnity provision for damage to 
the buses caused by the registrants. This was a standard provision in 
the applicable motor carrier charter coach tariff. 48 Comp. Gen. 361 
(1968). Potential liability was not indefinite since it was 
necessarily limited to the value of the motor carrier's equipment. 

Similarly, under a contract for the lease of aircraft, the Federal 
Aviation Administration (FAA) could agree to indemnify the owner for 
loss or damage to the aircraft in order to eliminate the need to 
reimburse the owner for the cost of "hull insurance" and thereby 
secure a lower rental rate. The liability could properly be viewed as 
a necessary expense incident to hiring the aircraft, FAA had no-year 
appropriations available to pay for any such liability, and, as in the 
Selective Service case, the agreement was not indefinite because 
maximum liability was measurable by the fair market value of the 
aircraft. 42 Comp. Gen. 708 (1963). See also 22 Comp. Gen. 892 (1943) 
(Maritime Commission could amend contract to agree to indemnify 
contractor against liability to third parties, in lieu of reimbursing 
contractor for cost of liability insurance premiums, to the extent of 
available appropriations and provided liability was limited to the 
amount of coverage of the discontinued insurance policies replaced by 
the indemnity agreement).[Footnote 77] 

In B-114860, Dec. 19, 1979, the Farmers Home Administration asked 
whether it could purchase surety bonds or enter into an indemnity 
agreement in order to obtain the release of deeds of trust for 
borrowers in Colorado where the original promissory notes had been 
lost while in the Administration's custody. Colorado law required one 
or the other where the canceled original note could not be delivered 
to the Colorado public trustee. GAO concluded that the indemnity 
agreement was permissible as long as it was limited to an amount not 
to exceed the original principal amount of the trust deed. The 
decision further advised that the Administration should reserve 
sufficient funds to cover its potential liability. The latter aspect 
of the decision was reconsidered in B-198161, Nov. 25, 1980. Reviewing 
the particular circumstances involved, GAO was unable to foresee 
situations in which the government might be required to indemnify the 
public trustee, and accordingly advised the Administration that the 
reservation of funds would not be necessary. While reservation of the 
funds may not have been necessary, GAO did state: "Although the 
liability which arises from an indemnity agreement to secure the 
release of a trust deed may be contingent, the maximum cost of 
liquidating that liability would normally be a recordable expense 
limited by the administration's annual budget authority." 

In 63 Comp. Gen. 145 (1984), certain indemnification provisions in a 
ship-chartering agreement were found not to impose indefinite or 
potentially unlimited contingent liability because liability could be 
avoided by certain separate actions solely under the government's 
control. 

In cases like the Selective Service bus case (48 Comp. Gen. 361) and 
the FAA aircraft case (42 Comp. Gen. 708), even though the 
government's potential liability is limited and determinable, this 
fact alone does not guarantee that the agency will have sufficient 
funds available should the contingency ripen into an obligation. This 
concern is met in one of two ways. The first is either to obligate or 
to reserve administratively sufficient funds to cover the potential 
liability, although this point has not been completely explored in 
past decisions. In particular cases, reservation may be determined 
unnecessary, as in B-198161, Nov. 25, 1980, discussed above. Also, 
naturally, a specific directive from Congress will render reservation 
of funds unnecessary. See B-159141, Aug. 18, 1967 (reservation of 
termination costs for supersonic aircraft contract). The second way is 
for the agreement to expressly limit the government's liability to 
appropriations available at the time of the loss with no implication 
that Congress will appropriate funds to make up any deficiency. 

This second device—the express limitation of the government's 
liability to available appropriations—is sufficient to cure an 
otherwise fatally defective (i.e., unlimited) indemnity proposal. For 
example, the government may in limited circumstances assume the risk 
of loss to contractor-owned property. While the maximum potential 
liability would be determinable, it could be very large and the 
administrative reservation of funds is not feasible. Thus, without 
some form of limitation, such an agreement could result in obligations 
in excess of available appropriations. The rules concerning the 
government's assumption of risk on property owned by contractors and 
used in the performance of their contracts are set forth in 54 Comp. 
Gen. 824 (1975), modifying B-168106, July 3, 1974. The rules are 
summarized below:[Footnote 78] 

* If administratively determined to be in the best interest of the 
government, the government may assume the risk for contractor-owned 
property which is used solely in the performance of government 
contracts. 

* The government may not assume the risk for contractor-owned property 
which is used solely for nongovernment work. If the property is used 
for both government and nongovernment work and the nongovernment 
portion is separable, the government may not assume the risk relating 
to the nongovernment work. 

* Where the amount of a contractor's commercial work is so 
insignificant when compared to the amount of the contractor's 
government work that the government is effectively bearing the entire 
risk of loss by in essence paying the full insurance premiums, the 
government may assume the risk if administratively determined to be in 
the best interest of the government. 

Any agreement for the assumption of risk by the government under the 
above rules must contain a clause to clearly provide that, in the 
event the government has to pay for losses, payments may not exceed 
appropriations available at the time of the losses, and that nothing 
in the contract may be considered as implying that Congress will at a 
later date appropriate funds sufficient to meet deficiencies. 54 Comp. 
Gen. at 827. 

A somewhat different situation was discussed in 60 Comp. Gen. 584 
(1981), involving an "installment purchase plan" for automatic data 
processing equipment. Under the plan, the General Services 
Administration would make monthly payments until the entire purchase 
price was paid, at which time GSA would acquire unencumbered ownership 
of the equipment. GSM obligation was conditioned on its exercising an 
option at the end of each fiscal year to continue payments for the 
next year. The contract contained a risk of loss provision under which 
GSA would be required to pay the full price for any equipment lost or 
damaged during the term of the contract. GAO concluded that the 
equipment should be treated as contractor-owned property for purposes 
of the risk of loss provision, and that the provision would be 
improper unless one of the following conditions were met: 

* The contract includes the clause specified in 54 Comp. Gen. 824 
limiting GSA's liability to appropriations available at the time of 
the loss and expressly precluding any inference that Congress would 
appropriate sufficient funds to meet any deficiency; or; 

* If the contract does not include these restrictions, then GSA must 
obligate sufficient funds to cover its possible liability under the 
risk of loss provision. 

If neither of these conditions is met, the assumption of risk clause 
could violate the Antideficiency Act by creating an obligation in 
excess of available appropriations if any equipment is lost or damaged 
during the term of the contract. 

In 1982, the Defense Department and the state of New York entered into 
a contract for New York to provide certain support functions for the 
1980 Winter Olympic Games at Lake Placid. The contract provided for 
federal reimbursement of any disability benefits which New York might 
be required to pay in case of death or injury of persons participating 
in the operation. The contract specified that the government's 
liability could not exceed appropriations for assistance to the Games 
available at the time of a disabling event, and that the contract did 
not imply that Congress would appropriate funds sufficient to meet any 
deficiencies. Since these provisions satisfied the test of 54 Comp. 
Gen. 824, the indemnity agreement was not legally objectionable. B-
202518, Jan. 8, 1982. Under this type of arrangement, GAO noted that 
an estimated amount should have been recorded as an obligation when 
the agency was notified that a disabling event had occurred. However, 
no violation of the Antideficiency Act actually occurred in this case 
because sufficient funds remained available for obligation at the time 
New York filed its claim for indemnification under the contract. 

Also, the decision in the National Flood Insurance Act case mentioned 
above (B-201394, Apr. 23, 1981) noted that the defect could have been 
cured by inserting a clause along the lines of the clause in 54 Comp. 
Gen. 824. The same point was made in B-201072, May 3, 1982, also
discussed earlier. See also National Railroad Passenger Corp. v. 
United States, 3 CL Ct. 516, 521 (1983) (indemnification agreement 
between the Federal Railroad Administration and Amtrak did not violate 
Antideficiency Act where liability was limited to amount of 
appropriation). 

However, as noted in the introduction to this section, over the years 
GAO has expressed the view that indemnity agreements, even with 
limiting language, should not be entered into without congressional 
approval in view of their potentially disruptive fiscal consequences 
to the agency.[Footnote 79] 63 Comp. Gen. 145, 147 (1984); 62 Comp. 
Gen. 361, 368 (1983); B-242146, Aug. 16, 1991. If an agency thinks 
that indemnification agreements in a particular context are 
sufficiently in the government's interest, the preferable approach is 
for the agency to go to Congress and seek specific statutory 
authority. See B-201394, Apr. 23, 1981. 

As discussed below, Congress has seen fit to enact legislation 
authorizing indemnification agreements when warranted by the 
circumstances. In 1986, the Chairman of the Subcommittee on Nuclear 
Regulation, Senate Committee on Environment and Public Works, in 
connection with proposed Price-Anderson Act amendments the committee 
was considering, asked GAO to identify possible funding options for a 
statutory indemnification provision. GAO's response, B-197742, Aug. 1, 
1986, listed several options and noted the benefits and drawbacks of 
each from the perspective of congressional flexibility. The options 
ranged from creating a statutory entitlement with a permanent 
indefinite appropriation for payment (indemnity guaranteed but no 
congressional flexibility), to making payment fully dependent on the 
appropriations process (full congressional flexibility but no 
guarantee of payment). In between were various other devices such as 
contract authority, use of contract provisions such as those in 54 
Comp. Gen. 824, and various forms of limited funding 
authority.[Footnote 80] 

The discussion in B-197742 highlights the essence of the 
indemnification funding problem: 

"An indemnity statute should generally include two features—the 
indemnification provisions and a funding mechanism. Indemnification 
provisions can range from a legally binding guarantee to a mere 
authorization. Funding mechanisms can similarly vary in terms of the 
degree of congressional control and flexibility retained. It is 
impossible to maximize both the assurance of payment and congressional 
flexibility. Either objective is enhanced only at the expense of the 
other.... 

"If payment is to be assured, Congress must yield control over 
funding, either in whole or up to specified ceilings .... Conversely, 
if Congress is to retain funding control, payment cannot be assured in 
any legally binding form and the indemnification becomes less than an 
entitlement." 

B-197742 at 9, 11. 

(3) Statutorily authorized indemnification: 

When we first stated the anti-indemnity rule at the outset of this 
discussion, we noted that the rule applies in the absence of express 
statutory authority to the contrary. Naturally, an indemnification 
agreement, however open-ended it may be, will be "legal" if it is 
expressly authorized by statute. 

One statutory exception to the indemnification rules exists for 
certain defense-related contracts by virtue of 50 U.S.C. § 1431, often 
referred to by its Public Law designation, Public Law 85-804.[Footnote 
81[ The statute evolved from a temporary wartime measure, section 201 
of the First War Powers Act, 1941, ch. 493, 55 Stat. 838, 839 (Dec. 
18, 1941). The implementing details on indemnification are found in 
Executive Order No. 10789, as amended,[Footnote 82] and Federal 
Acquisition Regulation (FAR), 48 C.F.R. part 50 (2005). For example, 
while the decision to indemnify under Public Law 85-804 is 
discretionary, B-287121, Mar. 20, 2001, such discretion must be 
exercised by the agency head and cannot be delegated. B-257139, Aug. 
30, 1994, citing FAR, 48 C.F.R. § 50.201(d). 

Other examples of statutory exceptions are: 

* section 4 of the Price-Anderson Act, 42 U.S.C. § 2210, which 
provides contract authority permitting, among other things, 
indemnification agreements with Nuclear Regulatory Commission 
licensees and Department of Energy contractors to pay claims resulting 
from nuclear accidents; 

* section 119 of the Comprehensive Environmental Response, 
Compensation, and Liability Act, 42 U.S.C. § 9619, which authorizes 
indemnification of certain Superfund cleanup contractors against 
negligence (but not gross negligence or intentional misconduct); 

* section 308 of the National Aeronautics and Space Act, 42 U.S.C. § 
2458b, which authorizes the Administrator of the National Aeronautics 
and Space Administration (NASA) to indemnify users of NASA space 
vehicles against third party claims that are not covered by insurance; 

* section 2354 of title 10, United States Code, which authorizes the 
military departments to indemnify research and development contractors 
against liability not covered by insurance; and; 

* section 7423(2) of title 26, United States Code, which authorizes 
indemnification of federal employees for damages awarded in suits 
involving their performance of duties under the Internal Revenue Code. 

Congress also may enact legislation to provide indemnification for a 
specific or one-time event. For example, Congress specifically 
indemnified the manufacturers, distributors, and those who 
administered the swine flu vaccine purchased and used as part of the 
National Swine Flu Immunization Program of 1976 against liability for 
other than their own negligence to persons alleging personal injury or 
death arising out of the administration of such vaccine. Pub. L. No. 
94-380, 90 Stat. 1113 (Aug. 12, 1976). 

d. Specific Appropriation Limitations/Purpose Violations: 	 

In Chapter 4 we covered in some detail 31 U.S.C. § 1301(a), which 
prohibits the use of appropriations for purposes other than those for 
which they were appropriated. As seen in that chapter, violations of 
purpose availability can arise in a wide variety of contexts—charging 
an obligation or expenditure to the wrong appropriation, making an 
obligation or expenditure for an unauthorized purpose, violating a 
statutory prohibition or restriction, etc. The question we explore in 
this section is the relationship of purpose availability to the 
Antideficiency Act. In other words, when and to what extent does a 
purpose violation also violate the Antideficiency Act? 

Why does it matter whether you have violated one statute or two 
statutes? One reason is that, if the second statute is the 
Antideficiency Act, there are statutory reporting requirements and 
potential penalties to consider in addition to any administrative 
sanctions that agencies may impose through internal processes for 
violations of section 1301 alone. 

A useful starting point is the following excerpt from 63 Comp. Gen. 
422, 424 (1984): 

"Not every violation of 31 U.S.C. § 1301(a) also constitutes a 
violation of the Antideficiency Act.... Even though an expenditure may 
have been charged to an improper source, the Antideficiency Act's 
prohibition against incurring obligations in excess or in advance of 
available appropriations is not also violated unless no other funds 
were available for that expenditure. Where, however, no other funds 
were authorized to be used for the purpose in question (or where those 
authorized were already obligated), both 31 U.S.C. § 1301(a) and § 
1341(a) have been violated. In addition, we would consider an 
Antideficiency Act violation to have occurred where an expenditure was 
improperly charged and the appropriate fund source, although available 
at the time, was subsequently obligated, malting readjustment of 
accounts impossible." 

First, suppose an agency charges an obligation or expenditure to the 
wrong appropriation account, either charging the wrong appropriation 
for the same time period, or charging the wrong fiscal year. The above 
passage from 63 Comp. Gen. 422 provides the answer—if the 
appropriation that should have been charged in the first place has 
sufficient available funds to enable the adjustment of accounts, there 
is no Antideficiency Act violation. The decision in 73 Comp. Gen. 259 
(1994) illustrates this point. In that case, an agency had erroneously 
charged a furniture order to the wrong appropriation account, but had 
sufficient funds in the proper account to support an adjustment 
correcting the error. Thus, GAO concluded, there was no violation of 
the Antideficiency Act. Id. at 261. On the other hand, a violation 
exists if the proper account does not have enough money to permit the 
adjustment, and this includes cases where sufficient funds existed at 
the time of the error but have since been obligated or expended. See 
also 70 Comp. Gen. 592 (1991); B-222048, Feb. 10, 1987; B-95136, Aug. 
8, 1979. 

Other cases illustrating or applying this principle are 57 Comp. Gen. 
459 (1978) (grant funds charged to wrong fiscal year); B-224702, Aug. 
5, 1987 (contract modifications charged to expired accounts rather 
than current appropriations); and B-208697, Sept. 28, 1983 (items 
charged to General Services Administration Working Capital Fund which 
should have been charged to other operating appropriations). Actually, 
the concept of "curing" a violation by malting an appropriate 
adjustment of accounts is not new See, e.g., 16 Comp. Dec. 750 (1910); 
4 Comp. Dec. 314, 317 (1897). The Armed Services Board of Contract 
Appeals also has followed this principle. New England Tank Industries 
of New Hampshire, Inc., ASBCA No. 26474, 88-1 BCA ¶ 20,395 (1987). 
[Footnote 83] 

The next situation to consider is an obligation or expenditure in 
excess of a statutory ceiling. This may be an earmarked maximum in a 
more general appropriation or a monetary ceiling imposed by some other 
legislation. An obligation or expenditure in excess of the ceiling 
violates 31 U.S.C. § 1341(a). See, for example, the following: 

* Monetary ceilings on minor military construction (10 U.S.C. § 2805): 
63 Comp. Gen. 422 (1984); GAO, Continuing Inadequate Control Over 
Programming and Financing of Construction, B-133316 (Washington, D.C.: 
July 23, 1964); Review of Programming and Financing of Selected 
Facilities Constructed at Army, Navy, and Air Force Installations, B-
133316 (Washington, D.C.: Jan. 24, 1961).[Footnote 84] 

* Monetary ceiling on lease payments for family housing units in 
foreign countries (10 U.S.C. § 2828(e)): 66 Comp. Gen. 176 (1986); B-
227527, B-227325, Oct. 21, 1987 (nondecision letter); GAO, Leased 
Military Housing Costs in Europe Can Be Reduced by Improving 
Acquisition Practices and Using Purchase Contracts, GAO/NSIAD-85-113 
(Washington, D.C.: July 24, 1985), at 7-8. 

* Ceiling in supplemental appropriation: B-204270, Oct. 13, 1981 
(dollar limit on Standard Level User Charge payable by agency to 
General Services Administration).[Footnote 85] 

* Ceiling in authorizing legislation: 64 Comp. Gen. 282 (1985) (dollar
limit on two Small Business Administration direct loan programs). 

In a statutory ceiling case, the account adjustment concept described 
above may or may not come into play. If the ceiling represents a limit 
on the amount available for a particular object, then there generally 
will be no other funds available for that object and hence no 
"correct" funding source from which to reimburse the account charged. 
If, however, the ceiling represents only a limit on the amount 
available from a particular appropriation and not an absolute limit on 
expenditures for the object, as in the minor military construction 
cases, for example, then it may be possible to cure violations by an 
appropriate adjustment. 63 Comp. Gen. at 424. 

The final situation is an obligation or expenditure for an object that 
is prohibited or simply unauthorized. In 60 Comp. Gen. 440 (1981), a 
proviso in the Customs Service's 1980 appropriation expressly 
prohibited the use of the appropriation for administrative expenses to 
pay any employee overtime pay in an amount in excess of $20,000. By 
allowing employees to earn overtime pay in excess of that amount, the 
Customs Service violated 31 U.S.C. § 1341. The Comptroller General 
explained the violation as follows: 

"When an appropriation act specifies that an agency's appropriation is 
not available for a designated purpose, and the agency has no other 
funds available for that purpose, any officer of the agency who 
authorizes an obligation or expenditure of agency funds for that 
purpose violates the Antideficiency Act. Since the Congress has not
appropriated funds for the designated purpose, the obligation may be 
viewed either as being in excess of the amount (zero) available for 
that purpose or as in advance of appropriations made for that purpose. 
In either case the Antideficiency Act is violated." 

Id. at 441. 

In B-201260, Sept. 11, 1984, the Comptroller General advised that 
expenditures in contravention of the Boland Amendment would violate 
the Antideficiency Act (although none were found in that case). The 
Boland Amendment, an appropriation rider, provided that "[n]one of the 
funds provided in this Act may be used" for certain activities in 
Central America. In B-229732, Dec. 22, 1988, GAO found the 
Antideficiency Act violated when the Department of Housing and Urban 
Development used its funds for commercial trade promotion activities 
in the Soviet Union, an activity beyond its statutory authority. 
Similarly, a nonreimbursable interagency detail of an employee, 
contrary to a specific statutory prohibition, produced a violation in 
B-247348, June 22, 1992 (letter to Public Printer). All three cases 
also involved purpose violations and are consistent with 60 Comp. Gen. 
440, the rationale being that expenditures would be in excess of 
available appropriations, which were zero.[Footnote 86] 

More recent GAO decisions likewise consistently apply the principle 
that the use of appropriated funds for unauthorized or prohibited 
purposes violates the Antideficiency Act (absent an alternative 
funding source) since zero funds are available for that purpose. B-
302710, May 19, 2004 (use of funds in violation of statutory 
prohibition against publicity or propaganda); B-300325, Dec. 13, 2002 
(appropriations used for unauthorized technical assistance purposes); 
B-300192, Nov. 13, 2002 (violation of appropriation rider prohibiting 
use of funds to implement an Office of Management and Budget 
memorandum); B-290005, July 1, 2002 (appropriation used to procure 
unauthorized legal services); 71 Comp. Gen. 402, 406 (1992) 
(unauthorized use of Training and Employment Services appropriation); 
B-246304, July 31, 1992 (potential violation of appropriation act "Buy 
American" provision); B-248284, Sept. 1, 1992 (nondecision letter) 
(reprogramming of funds to an unauthorized purpose). 

One court reached a result that appears to interpret the 
Antideficiency Act somewhat differently. In Southern Packaging and 
Storage Co. v. United States, 588 E Supp. 532 (D.S.C. 1984), the court 
found that the Defense Department had purchased certain combat meal 
products ("MRE") in violation of a "Buy American" appropriation rider, 
which provided that "no part of any appropriation contained in this 
Act ... shall be available" to procure items not grown or produced in 
the United States. The court rejected the contention that the 
violation also contravened the Antideficiency Act, stating: 

"There is no evidence in this case to show that [the Defense Personnel 
Supply Center] authorized expenditures beyond the amount appropriated 
by Congress for the procurement of the MRE rations and the component 
foods thereof." 

Id. at 550. 

Given the sparse discussion in the decision, the fact that Congress 
does not make specific appropriations for MRE rations, and the fact 
that the Antideficiency Act regulates both obligations and 
expenditures in excess of available authority, it is difficult to 
discern precisely how the Southern Packaging court would apply the 
Antideficiency Act. In any event, we have found no subsequent judicial 
or administrative decision that cites this aspect of the Southern 
Packaging opinion. 

e. Amount of Available Appropriation or Fund: 

Questions occasionally arise over precisely what assets an agency may 
count for purposes of determining the amount of available resources 
against which it may incur obligations. 

The starting point, of course, is the unobligated balance of the 
relevant appropriation. In section F of this chapter, we discuss the 
rule that subdivisions of a lump-sum appropriation appearing in 
legislative history are not legally binding on the agency. They are 
binding only if carried into the appropriation act itself, or are made 
binding by some other statute. Thus, the entire unobligated balance of 
an unrestricted lump-sum appropriation is available for Antideficiency 
Act purposes. 55 Comp. Gen. 812 (1976). 

Where an agency is authorized to retain certain receipts or 
collections for credit to an appropriation or fund under that agency's 
control, those receipts are treated the same as direct appropriations 
for purposes of obligation and the Antideficiency Act, subject to any 
applicable statutory restrictions. E.g., 71 Comp. Gen. 224 (1992) 
(National Technical Information Service may use subscription payments 
to defray its operating expenses but, under governing legislation, may 
use customer advances only for costs directly related to firm orders). 

In addition, certain other assets may be "counted" as available budget 
authority, that is, obligated against. For example, OMB Circular No. A-
11 includes certain spending authority from offsetting collections as 
a form of "budget authority."[Footnote 87] See also B-134474-0.M., 
Dec. 18, 1957. This does not mean anticipated receipts from 
transactions that have not yet occurred or orders that have not yet 
been placed. Thus, the Library of Congress could not retain in a 
revolving fund advances from federal agencies in excess of amounts 
needed to cover current orders in anticipation of applying the excess 
amounts to future orders. B-288142, Sept. 6, 2001. Obligations cannot 
be charged against anticipated proceeds from an anticipated sale of 
property. See, e.g., B-209758, Sept. 29, 1983 (nondecision memorandum) 
(sale of assets seized from embezzler). Thus, the Customs Service 
violated the Antideficiency Act by obligating against anticipated 
receipts from future sales of seized property unless it had sufficient 
funds available from other sources to cover the obligation. B-237135, 
Dec. 21, 1989. Similarly, the Comptroller General found that the Air 
Force violated the Antideficiency Act by overobligating its Industrial 
Fund based on estimated or anticipated customer orders. See GAO, The 
Air Force Has Incurred Numerous Overobligations in its Industrial 
Fund, AFMD-81-53 (Washington, D.C.: Aug. 14, 1981); 62 Comp. Gen. 143, 
147 (1983). Even where receivables are properly included as budgetary 
resources, an agency may not incur obligations against receipts 
expected to be received after the end of the current fiscal year 
without specific statutory authority. 51 Comp. Gen. 598, 605 (1972). 

In 60 Comp. Gen. 520 (1981), GAO considered whether the General 
Services Administration (GSA) could obligate against the value of 
inventory in the General Supply Fund. GSA buys furniture and other 
equipment for other agencies through the General Supply Fund, a 
revolving fund established by statute. Agencies pay GSA either in 
advance or by reimbursement. For reasons of economy, GSA normally 
makes consolidated and bulk purchases of commonly used items. Concern 
over the application of the Antideficiency Act arose when, for several 
reasons, the Fund began experiencing cash flow problems. To help 
remedy its "cash flow" problems GSA wanted to consider the amount of 
available budget authority to include inventory as well as cash assets 
and advances. 

The Comptroller General held that inventory in the General Supply Fund 
did not constitute a budgetary resource against which obligations 
could be incurred. The items in the inventory had already been 
purchased and could not be counted again as a new budgetary resource. 
Thus, for Antideficiency Act purposes, GSA could not incur obligations 
using the value of inventory as an available "budgetary resource." 

Supplemental appropriations requested but not yet enacted obviously 
may not be counted as a budgetary resource. B-230117-0.M., Feb. 8, 
1989. 

f. Intent/Factors beyond Agency Control: 

A violation of the Antideficiency Act does not depend on intent or 
lack of good faith on the part of contracting or other officials who 
obligate or pay in advance or in excess of appropriations. Although 
these factors may influence the applicable penalty, they do not affect 
the basic determination of whether a violation has occurred. 64 Comp. 
Gen. 282, 289 (1985). The Comptroller General once expressed the 
principle in the following passage which, although stated in a 
slightly different context, is equally applicable here: 

"Where a payment is prohibited by law, the utmost good faith on the 
part of the officer, either in ignorance of the facts or in disregard 
of the facts, in purporting to authorize the incurring of an 
obligation the payment of which is so prohibited, cannot take the case 
out of the statute, otherwise the purported good faith of an officer 
could be used to nullify the law." 

A-86742, June 17, 1937. 

To illustrate, a contracting officer at the United States Mission to 
the North Atlantic Treaty Organization accepted an offer for 
installation of automatic telephone equipment at twice the amount of 
the unobligated balance remaining in the applicable account. The 
Department of State explained that the contracting officer had 
misinterpreted GAO regulations and implementing State Department 
procedures. But for this misinterpretation, additional funds could 
have been placed in the account. State therefore felt that the 
transaction should not be considered in violation of the Act. GAO did 
not agree and held that the overobligation must be immediately 
reported as required by 31 U.S.C. § 1517(b). The official's state of 
mind was not relevant in deciding whether a violation had occurred. 35 
Comp. Gen. 356 (1955). 

An overobligation may result from external factors beyond the agency's 
control. Whether this will produce an Antideficiency Act violation 
depends on the particular circumstances. In 58 Comp. Gen. 46 (1978), 
the Army asked whether it could make payments to a contractor under a 
contract requiring payment in local (foreign) currency where the 
original dollar obligation was well within applicable funding 
limitations but, due to subsequent exchange rate fluctuations, payment 
would exceed those limitations. The Army argued that a payment under 
these circumstances should not be considered a violation of the Act 
because currency fluctuations are totally beyond the control of the 
contracting officer or any other agency official. GAO disagreed. The 
fact that the contracting officer was a victim of circumstances does 
not make a payment in excess of available appropriations any less 
illegal. (It is, of course, as with state of mind, relevant in 
assessing penalties for the violation.) See also 38 Comp. Gen. 501 
(1959) (severe adverse weather conditions or prolonged employee 
strikes generally are not sufficient to justify overobligation by 
former Post Office Department, but facts in a particular case could 
justify deficiency apportionment). 

In apparent contrast, the Comptroller General stated in 62 Comp. Gen. 
692, 700 (1983) that an overobligation resulting from a judicial award 
of attorney's fees under 28 U.S.C. § 2412(d), the Equal Access to 
Justice Act, would not violate the Antideficiency Act. See also 63 
Comp. Gen. 308, 312 (1984) (judgments or board of contract appeals 
awards under Contract Disputes Act, same answer); B-227527, B-227325, 
Oct. 21, 1987 (nondecision letter) (amounts awarded by court judgment 
not counted in determining whether statutory ceiling on lease payments 
has been exceeded and Antideficiency Act thereby violated). 

The distinction is based on the extent to which the agency can act to 
avoid the overobligation even though it is imposed by some external 
force beyond its control. Thus, the currency fluctuation decision 
stated: 

"When a contracting officer finds that the dollars required to 
continue or make final payment on a contract will exceed a statutory 
limitation he may terminate the contract, provided the termination 
costs will not exceed the statutory limitations. Alternatively, the 
contracting officer may issue a stop work order and the agency may ask 
Congress for a deficiency appropriation citing the currency 
fluctuation as the reason for its request." 

58 Comp. Gen. at 48. Similarly, the Postmaster General could curtail 
operations if necessary. 38 Comp. Gen. 501, 504 (1959). See also 66 
Comp. Gen. 176 (1986) (Antideficiency Act would not preclude Air Force 
from entering into lease for overseas family housing without provision 
limiting annual payments to statutory ceiling, even though certain 
costs could conceivably escalate above ceiling, where good faith cost 
estimates were well below ceiling and lease included termination for 
convenience clause). Where the agency could have acted to avert the 
overobligation but did not, there will be a violation. In contrast, in 
the case of a payment ordered by a court, comparable options (apart 
from seeking a deficiency appropriation) are not available. 
(Curtailing activities after the overobligation has occurred to avoid 
compounding the violation is a separate question.) 

g. Exceptions: 

The Antideficiency Act by its own terms recognizes that Congress can 
and may grant exceptions. 31 U.S.C. § 1341(a). The statute prohibits 
contracts or other obligations in advance or excess of available 
appropriations, "unless authorized by law." This is nothing more than 
the recognition that Congress can authorize exceptions to the statutes 
it enacts. 

(1) Contract authority: 

At the outset, it is necessary to distinguish between "contract 
authority" and the "authority to enter into contracts." A contract is 
simply a legal device employed by two or more parties to create 
binding and legally enforceable obligations in furtherance of some 
objective. The federal government uses contracts every day to procure 
a wide variety of goods and services. An agency does not need specific 
statutory authority to enter into contracts. It has long been 
established that a government agency has the inherent authority to 
enter into binding contracts in the execution of its duties. Van 
Brocklin v. Tennessee, 117 U.S. 151, 154 (1886); United States v. 
Maurice, 26 F. Case 1211, 1216-17 (No. 15,747) (C.C.D. Va. 1823). It 
should be apparent that these contracts, "authorized by law" though 
they may be, are not sufficient to constitute exceptions to the 
Antideficiency Act, else the Act would be meaningless. 

For purposes of the Antideficiency Act exception, a contract 
authorized by law requires not only authority to enter into a 
contract, but authority to do so without regard to the availability of 
appropriations. While the former may be inherent, the latter must be 
conferred by statute. The most common example of this is "contract 
authority" as that term is defined and described in Chapter 2—
statutory authority to enter into binding contracts without the funds 
adequate to make payments under them. 

In some cases, the "exception" language will be unmistakably explicit. 
An example is the Price-Anderson Act, which provides authority to 
"make contracts in advance of appropriations and incur obligations 
without regard to" the Antideficiency Act. 42 U.S.C. § 2210(j). Other 
examples of clear authority, although perhaps not as explicit as the 
Price-Anderson Act, are discussed in 27 Comp. Gen. 452 (1948) (long-
term operating-differential subsidy agreements under the Merchant 
Marine Act); B-211190, Apr. 5, 1983 (contracts with states under the 
Federal Boat Safety Act); B-164497.3, June 6, 1979 (certain provisions 
of the Federal-Aid Highway Act of 1973); and B-168313, Nov. 21, 1969 
(interest subsidy agreements with educations institutions under the 
Housing Act of 1950). 

In an earlier case involving contract authority, GAO insisted that the 
Corps of Engineers had to include a "no liability unless funds are 
later made available" clause for any work done in excess of available 
funds. 2 Comp. Gen. 477 (1923). The Corps later had trouble with this 
clause because a Court of Claims decision, C.H. Leavell & Co. v. 
United States, 530 F.2d 878 (Ct. Cl. 1976), allowed the contractor an 
equitable adjustment for suspension of work due to a delay in enacting 
an appropriation to pay him, notwithstanding the "availability of 
funds" clause. In 56 Comp. Gen. 437 (1977), GAO overruled 2 Comp. Gen. 
477, deciding that section 10 of the River and Harbor Act of 1922, 33 
U.S.C. § 621, by expressly authorizing the Corps to enter into large 
multiyear civil works projects without seeking a full appropriation in 
the first year, constituted the necessary exception to the 
Antideficiency Act and a "funds available" clause was not necessary. 
This applies as well to contracts financed from the Corps' Civil Works 
Revolving Fund. B-242974.6, Nov. 26, 1991 (internal memorandum). The 
rationale of 56 Comp. Gen. 437 also has been applied to long-term fuel 
storage facilities contracts authorized by 10 U.S.C. § 2388. New 
England Tank Industries of New Hampshire, Inc., ASBCA No. 26474, 88-1 
BCA ¶ 20,395 (1987), vacated on other grounds, New England Tank 
Industries of New Hampshire v. United States, 861 F.2d 685 (Fed. Cir. 
1988). 

In 28 Comp. Gen. 163 (1948), the Comptroller General considered 
whether the Commissioner of Reclamation had budget authority to enter 
into certain contracts in advance of appropriations (contract 
authority). Congress had authorized the contract authority in an 
appropriation act but made it subject to a monetary ceiling. Since the 
contract authority was explicit, with no language making it contingent 
on appropriations being made at some later date, the Comptroller 
General concluded that the statute authorized the Commissioner to 
enter into a firm and binding contract. 

The Bureau of Mines was authorized to enter into a contract (in 
advance of the appropriation) to construct and equip an anthracite 
research laboratory. The Bureau asked the General Services 
Administration (GSA) to enter into the contract on its behalf pursuant 
to section 103 of the Federal Property and Administrative Services Act 
of 1949, ch. 288, 63 Stat. 377, 380 (June 30, 1949), which provided 
that "funds appropriated to ...other Federal agencies for the 
foregoing purposes [execution of contracts and supervision of 
construction] shall be available for transfer to and expenditure by 
the [GSA]." GAO held that the Bureau's contract authority provided a 
sufficient legal basis for GSA to enter into contracts for 
construction of the laboratory pursuant to section 103. 29 Comp. Gen. 
504 (1950).[Footnote 88] 

A somewhat different kind of contract authority is found in 41 U.S.C. 
§ 11, the so-called Adequacy of Appropriations Act. An exception to 
the requirement to have adequate appropriations—or any appropriation 
at all—is made for procurements by the military departments for 
"clothing, subsistence, forage, fuel, quarters, transportation, or 
medical and hospital supplies, which, however, shall not exceed the 
necessities of the current year." By administrative interpretation, 
the Defense Department has limited this authority to emergency 
circumstances where immediate action is necessary. Department of 
Defense Financial Management Regulation 7000.14-R, vol. 3, ch. 12, ¶ 
120201 (Jan. 31, 2001). 

It should again be emphasized that to constitute an exception to 31 
U.S.C. § 1341(a), the "contract authority" must be specific authority 
to incur the obligation in excess or advance of appropriations, not 
merely the general authority any agency has to enter into contracts to 
carry out its functions. Also, an appropriation obviously is needed to 
liquidate the contract obligation. 

Congress may grant authority to contract beyond the fiscal year in 
terms which amount to considerably less than the type of contract 
authority described above. An example is 43 U.S.C. § 388, which 
authorizes the Secretary of the Interior to enter into certain 
contracts relating to reclamation projects "which may cover such 
periods of time as the Secretary may consider necessary but in which 
the liability of the United States shall be contingent upon 
appropriations being made therefore." See PCL Construction Services, 
Inc. v. United States, 41 Fed. Cl. 242, 257 (1998), aff'd, 96 Fed. 
Appx. 672 (Fed. Cir. 2004) (pursuant to 43 U.S.C. § 388, firm fixed-
price contract awarded by the Bureau of Reclamation to construct a 
visitors center and parking structure at Hoover Dam could be 
incrementally funded without violating the Antideficiency Act). While 
this provision has been referred to as an exception to the 
Antideficiency Act (B-72020, Jan. 9, 1948), it authorizes only 
"contingent contracts" under which there is no legal obligation to pay 
unless and until appropriations are provided. 28 Comp. Gen. 163 
(1948). A similar example, discussed in B-239435, Aug. 24, 1990, is 38 
U.S.C. § 230(c) (Supp. II 1990) (subsequently recodified at 38 U.S.C. 
§ 316) which authorized the Department of Veterans Affairs to enter 
into certain leases for periods of up to 35 years but further provided 
that the government's obligation to make payments was "subject to the 
availability of appropriations for that purpose." For another example, 
see B-248647.2, Apr. 24, 1995, which discussed the Federal Triangle 
Development Act, 40 U.S.C. §§ 1101-1109. This act directed GSA to 
enter into a long-term lease and required the lease agreement to 
recognize that GSA could obligate funds for lease payments only on an 
annual basis. 40 U.S.C. § 1105. Therefore, the GSA multiyear lease 
agreement at issue was specifically "authorized by law" and did not 
violate the Antideficiency Act. B-248647.2 at fn. 3. 

(2) Other obligations "authorized by law:" 

The "authorized by law" exception in 31 U.S.C. § 1341(a) applies to 
noncontractual obligations as well as to contracts. The basic approach 
is the same. The statutory authority must be more than just authority 
to undertake the particular activity. For example, statutory authority 
to acquire land and to pay for it from a specified fund is not an 
exception to the Antideficiency Act. 15 Comp. Gen. 662 (1921). It 
merely authorizes acquisitions to the extent of funds available in the 
specified source at the time of purchase. Id. Similarly, the authority 
to conduct hearings, without more, does not confer authority to do so 
without regard to available appropriations. 16 Comp. Dec. 750 (1910). 
Provisions in the District of Columbia Code requiring Saint 
Elizabeth's Hospital to treat all patients who meet admission 
eligibility requirements were held not to authorize the Hospital to 
operate beyond the level of its appropriations. If mandatory 
expenditures, together with nonmandatory expenditures, would cause a 
deficiency, the Hospital would have to reduce nonmandatory 
expenditures. 61 Comp. Gen. 661 (1982). 

Congress may expressly state that an agency may obligate in excess of 
the amounts appropriated, or it may implicitly authorize an agency to 
do so by virtue of a law that necessarily requires such obligations. 
See B-262069, Aug. 1, 1995. Several cases have considered the effect 
of various statutory salary or compensation increases. If a statutory 
increase is mandatory and does not vest discretion in an 
administrative office to determine the amount, or if it gives some 
administrative body discretion to determine the amount, payment of 
which then becomes mandatory, the obligation is deemed "authorized by 
law" for Antideficiency Act purposes. See, e.g., 39 Comp. Gen. 422 
(1959) (salary increases for Wage Board employees); B-168796, Feb. 2, 
1970 (mandatory statutory increase in retired pay for Tax Court 
judges); B-107279, Jan. 9, 1952 (mandatory increases for certain 
legislative personnel). GAO has not treated the granting of increases 
retroactively to correct past administrative errors as creating the 
same type of exception. See 24 Comp. Gen. 676 (1945). Increases which 
are discretionary do not permit the incurring of obligations in excess 
or advance of appropriations. 31 Comp. Gen. 238 (1951) (discretionary 
pension increases); 28 Comp. Gen. 300 (1948).[Footnote 89] 

Some other examples of obligations authorized by law for 
Antideficiency Act purposes are: 

* Defense Health Program obligations for medical services. B-287619, 
July 5, 2001. 

* Mandatory pilot program in Vermont under Farms for the Future Act of 
1990 (loan guarantees and interest assistance). B-244093, July 19, 
1991. 

* Mandatory transfer from one appropriation account to another where 
"donor" account contained insufficient unobligated funds. 38 Comp. 
Gen. 93 (1958). 

* Provision in Criminal Justice Act of 1964 imposing unequivocal 
legislative directive for commencement of certain programs which would 
necessarily involve creation of financial obligations. B-156932, Aug. 
17, 1965. 

* Provision in District of Columbia Criminal Justice Act of 1974 
(CJA), as amended, malting attorney representation in CJA cases a 
mandatory expense. B-283599, Sept. 15, 1999. See also B-284566, Apr. 
3, 2000. 

* Statute authorizing Interstate Commerce Commission to order a 
substitute rail carrier to serve shippers abandoned by their primary 
carrier in emergency situations, and to reimburse certain costs of the 
substitute carrier. B-196132, Oct. 11, 1979. 

What are perhaps the outer limits of the "authorized by law" exception 
are illustrated in B-159141, Aug. 18, 1967. The Federal Aviation 
Administration (FAA) had entered into long-term, incrementally funded 
contracts for the development of a civil supersonic aircraft (SST). To 
ensure compliance with the Antideficiency Act, the FAA each year 
budgeted for, and obligated, sufficient funds to cover potential 
termination liability. The appropriations committees became concerned 
that unnecessarily large amounts were being tied up this way, 
especially in light of the highly remote possibility that the SST 
contracts would be terminated. In considering the FAA's 1968 
appropriation, the House Appropriations Committee reduced the FAA's 
request by the amount of the termination reserve, and in its report 
directed the FAA not to obligate for potential termination costs. The 
Comptroller General advised that if the Senate Appropriations 
Committee did the same thing—a specific reduction tied to the amount 
requested for the reserve, coupled with clear direction in the 
legislative history—then an overobligation resulting from a 
termination would be regarded as authorized by law and not in 
violation of the Antideficiency Act. 

3. Voluntary Services Prohibition: 

a. Introduction: 

We previously discussed the Antideficiency Act prohibitions contained 
in section 1341 of title 31, United States Code. The next section of the
Antideficiency Act is 31 U.S.C. § 1342: 

"An officer or employee of the United States Government or of the 
District of Columbia government may not accept voluntary services for 
either government or employ personal services exceeding that 
authorized by law except for emergencies involving the safety of human 
life or the protection of property...." 

This provision first appeared, in almost identical form, in a 
deficiency appropriation act enacted in 1884.[Footnote 90] Although 
the original prohibition read "hereafter, no department or officer of 
the United States shall accept ...," it was included in an 
appropriation for the then Indian Office of the Interior Department, 
and the Court of Claims held that it was applicable only to the Indian 
Office. Glavey v. United States, 35 Ct. Cl. 242, 256 (1900), rev'd on 
other grounds, 182 U.S. 595 (1901). The Comptroller of the Treasury 
continued to apply it across the board. See, e.g., 9 Comp. Dec. 181 
(1902). In any event, the applicability of the 1884 statute soon 
became moot because Congress reenacted it as part of the 
Antideficiency Act in 1905[Footnote 91] and again in 1906.[Footnote 92] 

Prior to the 1982 recodification of title 31, section 1342 was 
subsection (b) of the Antideficiency Act, while the basic prohibitions 
of section 1341, previously discussed, constituted subsection (a). The 
proximity of the two provisions in the United States Code reflects 
their relationship, as section 1342 supplements and is a logical 
extension of section 1341. If an agency cannot directly obligate in 
excess or advance of its appropriations, it should not be able to 
accomplish the same thing indirectly by accepting ostensibly 
"voluntary" services and then presenting Congress with the bill, in 
the hope that Congress will recognize a "moral obligation" to pay for 
the benefits conferred—another example of the so-called "coercive 
deficiency.[Footnote 93] In this connection, the chairman of the House 
committee responsible for what became the 1906 reenactment of the 
voluntary services prohibition stated: 

"It is a hard matter to deal with. We give to Departments what we 
think is ample, but they come back with a deficiency. Under the law 
they can [not] make these deficiencies, and Congress can refuse to 
allow them; but after they are made it is very hard to refuse to allow 
them ...."[Footnote 94] 

In addition, as we have noted previously, the Antideficiency Act was 
intended to keep an agency's level of operations within the amounts 
Congress appropriates for that purpose. The unrestricted ability to 
use voluntary services would permit circumvention of that objective. 
Thus, without section 1342, section 1341 could not be fully effective. 
Note that 31 U.S.C. § 1342 contains two distinct although closely 
related prohibitions: It bans, first, the acceptance of any type of 
voluntary services for the United States, and second, the employment 
of personal services "exceeding that authorized by law." 

b. Appointment without Compensation and Waiver of Salary: 

(1) The rules—general discussion: 

One of the evils that the "personal services" prohibition was designed 
to correct was a practice existing in 1884, whereby lower-grade 
government employees were being asked to "volunteer" their services 
for overtime periods in excess of the periods allowed by law. This 
enabled the agency to economize at the employees' expense but 
nevertheless generated claims by the employees.[Footnote 95] 
Currently, 31 U.S.C. § 1342 serves a number of other purposes and is 
relevant in a number of contexts involving services by government 
employees or services which would otherwise have to be performed by 
government employees. For example, one court suggested that 31 U.S.C. 
§ 1342 also is based in part on the principle that only public 
officials should be allowed to perform governmental functions. See 
Suss v. American Society for the Prevention of Cruelty to Animals, 823 
F. Supp. 181, 189 (S.D.N.Y. 1993) ("The risks of abuse of power by 
private parties exercising functions involving [the] exercise of 
sovereign compulsion is one reason for the limitations imposed by 
federal law on the use of volunteers in implementing public sector 
programs."). However, as mentioned previously, the fundamental 
purposes embodied in section 1342 are to preserve the integrity of the 
appropriations process by avoiding "coercive deficiencies" and 
augmentations. 

One of the earliest questions to arise under 31 U.S.C. § 1342—and an 
issue that has generated many cases—was whether a government officer 
or employee, or an individual about to be appointed to a government 
position, could voluntarily work for nothing or for a reduced salary. 
Initially, the Comptroller of the Treasury ducked the question on the 
grounds that it did not involve a payment from the Treasury, and 
suggested that the question was appropriate to take to the Attorney 
General. 19 Comp. Dec. 160, 163 (1912). 

The very next year, the Attorney General tackled the question when 
asked whether a retired Army officer could be employed as 
superintendent of an Indian school without additional compensation. In 
what has become the leading case construing 31 U.S.C. § 1342, the 
Attorney General replied that the appointment would not violate the 
voluntary services prohibition. 30 Op. Att'y Gen. 51 (1913). In 
reaching this conclusion, the Attorney General drew a distinction that 
the Comptroller of the Treasury thereafter adopted, and that GAO and 
the Justice Department continue to follow to this day—the distinction 
between "voluntary services" and "gratuitous services." The key 
passages from the Attorney General's opinion are set forth below: 

"It seems plain that the words 'voluntary service' were not intended 
to be synonymous with 'gratuitous service' and were not intended to 
cover services rendered in an official capacity under regular 
appointment to an office otherwise permitted by law to be non-
salaried. In their ordinary and normal meaning these words refer to 
service intruded by a private person as a 'volunteer' and not rendered 
pursuant to any prior contract or obligation .... It would be 
stretching the language a good deal to extend it so far as to prohibit 
official services without compensation in those instances in which 
Congress has not required even a minimum salary for the office. 

"The context corroborates the view that the ordinary meaning of 
'voluntary services' was intended. The very next words 'or employ 
personal service in excess of that authorized by law' deal with 
contractual services, thus making a balance between 'acceptance' of 
'voluntary service' (i.e., the cases where there is no prior contract) 
and `employment' of 'personal service' (i.e., the cases where there is 
such prior contract, though unauthorized by law). 

"Thus it is evident that the evil at which Congress was aiming was not 
appointment or employment for authorized services without 
compensation, but the acceptance of unauthorized services not intended 
or agreed to be gratuitous and therefore likely to afford a basis for 
a future claim upon Congress...." 

Id. at 52-53, 55. 

The Comptroller of the Treasury agreed with this interpretation: 

"[The statute] was intended to guard against claims for compensation. 
A service offered clearly and distinctly as gratuitous with a proper 
record made of that fact does not violate this statute against 
acceptance of voluntary service. An appointment to serve without 
compensation which is accepted and properly recorded is not a 
violation of [31 U.S.C. § 1342], and is valid if otherwise lawful." 

27 Comp. Dec. 131, 132-33 (1920). 

Two main rules emerge from 30 Op. Att'y Gen. 51 and its progeny. 
First, if compensation for a position is fixed by law, an appointee 
may not agree to serve without compensation or to waive that 
compensation in whole or in part. Id. at 56. This portion of the 
opinion did not break any new ground. The courts had already held, 
based on public policy, that compensation fixed by law could not be 
waived.[Footnote 96] Second, and this is really just a corollary to 
the rule just stated, if the level of compensation is discretionary, 
or if the relevant statute prescribes only a maximum (but not a 
minimum), the compensation can be set at zero, and an appointment 
without compensation or a waiver, entire or partial, is permissible. 
Id.; 27 Comp. Dec. at 133. 

Both GAO and the Justice Department have had frequent occasion to 
address these issues, and there are numerous decisions illustrating 
and applying the rules.[Footnote 97] 

In a 1988 opinion, the Justice Department's Office of Legal Counsel 
considered whether the Iran-Contra Independent Counsel could appoint 
Professor Laurence Tribe as Special Counsel under an agreement to 
serve without compensation. Applying the rules set forth in 30 Op. 
Att'y Gen. 51, the Office of Legal Counsel concluded that the 
appointment would not contravene the Antideficiency Act since the 
statute governing the appointment set a maximum salary but no minimum. 
Memorandum Opinion for the Acting Associate Attorney General, 
Independent Counsel's Authority to Accept Voluntary Services—
Appointment of Laurence H. Tribe, OLC Opinion, May 19, 1988. 

Similarly, the Comptroller General held in 58 Comp. Gen. 383 (1979) 
that members of the United States Metric Board could waive their 
salaries since the relevant statute merely prescribed a maximum rate 
of pay. In addition, since the Board had statutory authority to accept 
gifts, a member who chose to do so could accept compensation and then 
return it to the Board as a gift. Both cases make the point that 
compensation is not "fixed by law" for purposes of the "no waiver" 
rule where the statute merely sets a maximum limit for the salary. 

A good illustration of the kind of situation 31 U.S.C. § 1342 is 
designed to prevent is 54 Comp. Gen. 393 (1974). Members of the 
Commission on Marihuana and Drug Abuse had, apparently at the 
chairman's urging, agreed to waive their statutory entitlement to $100 
per day while engaged in Commission business. The year after the 
Commission ceased to exist, one of the former members changed his mind 
and filed a claim for a portion of the compensation he would have 
received but for the waiver. Since the $100 per day had been a 
statutory entitlement, the purported waiver was invalid and the former 
commissioner was entitled to be paid. Similar claims by any or all of 
the other former members would also have to be allowed. If 
insufficient funds remained in the Commission's now-expired 
appropriation, a deficiency appropriation would be necessary. 

A few earlier cases deal with fact situations similar to that 
considered in 30 Op. Att'y Gen. 51—the acceptance by someone already 
on the federal payroll of additional duties without additional 
compensation. In 23 Comp. Gen. 272 (1943), for example, GAO concluded 
that a retired Army officer could serve, without additional 
compensation, as a courier for the State Department. The voluntary 
services prohibition, said the decision, does not preclude "the 
assignment of persons holding office under the Government to the 
performance of additional duties or the duties of another position 
without additional compensation." Id. at 274. Another World War II era 
decision held that American Red Cross Volunteer Nurses' Aides who also 
happened to be full-time federal employees could perform volunteer 
nursing services at Veterans Administration hospitals. 23 Comp. Gen. 
900 (1944). 

One thing the various cases discussed above have in common is that 
they involve the appointment of an individual to an official 
government position, permanent or temporary. Services rendered prior 
to appointment are considered purely voluntary and, by virtue of 31 
U.S.C. § 1342, cannot be compensated. Lee v. United States, 45 Ct. Cl. 
57, 62 (1910); B-181934, Oct. 7, 1974.[Footnote 98] It also follows 
that post-retirement services, apart from appointment as a reemployed 
annuitant, are not compensable. 65 Comp. Gen. 21 (1985). In that case, 
an alleged agreement to the contrary by the individual's supervisor 
was held unauthorized and therefore invalid. 

It also has been held that experts and consultants employed under 
authority of 5 U.S.C. § 3109 (the basic governmentwide authority for 
procuring expert and consultant services) may serve without 
compensation without violating the Antideficiency Act as long as it is 
clearly understood and agreed that no compensation is expected.
27 Comp. Gen. 194 (1947); 6 Op. Off. Legal Counsel 160 (1982). Cf. B-
185952, Aug. 18, 1976 (uncompensated participation in pre-bid 
conference, on-site inspection, and bid opening by contractor engineer 
who had prepared specifications regarded as "technical violation" of 
31 U.S.C. § 1342). 

Several of the decisions note the requirement for a written record of 
the agreement to serve without compensation. Proper documentation is 
important for evidentiary purposes should a claim subsequently be 
attempted. E.g., 27 Comp. Gen. at 195; 26 Comp. Gen. 956, 958 (1947);
27 Comp. Dec. 131, 132-33 (1920); 2 Op. Off. Legal Counsel 322, 323 
(1977). Specifically, the decisions state that the individuals should 
acknowledge in writing and in advance that they will receive no 
compensation and that they should explicitly waive any and all claims 
against the government on account of their service. 

The rule that compensation fixed by statute may not be waived does not 
apply if the waiver or appointment without compensation is itself 
authorized by statute. The Comptroller General stated the principle as 
follows in 27 Comp. Gen. at 195: 

"Even where the compensation for a particular position is fixed by or 
pursuant to law, the occupant of the position may waive his ordinary 
right to the compensation fixed for the position and thereafter 
forever be estopped from claiming and receiving the salary previously 
waived, if there be some applicable provision of law authorizing the 
acceptance of services without compensation." (Emphasis in original.) 

As noted above, the decision in 27 Comp. Gen. 194 cited as the 
provision authorizing the acceptance of services without compensation 
in that case what is now section 3109(b) of title 5, United States 
Code. Under section 3109(b), agencies may, when authorized by an 
appropriation or other act, procure the services of experts or 
consultants for up to 1 year without regard to other provisions of 
title 5 governing appointment and compensation. This authority is 
subject to a maximum rate of compensation in some cases, but there is 
no minimum rate. 

In B-139261, June 26, 1959, GAO reiterated the above principle, and 
gave several additional examples of statutes sufficient for this 
purpose. The examples included the following statutory provisions that 
remain essentially the same in substance as they were in 1959: 

* section 204(b) of title 29, United States Code, which authorizes the 
Administrator of the Labor Department's Wage and Hour Division to 
utilize voluntary and uncompensated services; 

* section 401(7) of title 39, United States Code, which authorizes the 
Postal Service to accept gifts or donations of services or property; 
and; 

* section 210(b) of title 47, United States Code, which states that no 
provision of law shall be construed to prohibit common carriers from 
rendering free service to any agency of the government in connection 
with preparation for the national defense, subject to rules prescribed 
by the Federal Communications Commission. 

At this point a 1978 case, 57 Comp. Gen. 423, should be noted. The 
decision held that a statute authorizing the Agency for International 
Development (MD) to accept gifts of "services of any kind" (22 U.S.C. 
§ 2395(d)) did not permit waiver of salary by MD employees whose 
compensation was fixed by statute. Section 2395(d) is very similar to 
one of the examples given in B-139261, June 26, 1959, discussed above, 
of statutes that would authorize the acceptance of voluntary services. 
See 39 U.S.C. § 401(7). However, 57 Comp. Gen. 423 is distinguishable 
from B-139261, 27 Comp. Gen. 194, and the other voluntary services 
cases discussed previously. The question in 57 Comp. Gen. 423 was 
whether MD could invoke its gift-acceptance authority to justify 
paying regular federal employees less than the salaries prescribed by 
law. The decision held that it did not: 

"Section 2395(d) ... authorizes the acceptance of gifts. Therefore, MD 
may accept services from private sources either gratuitously or at a 
fraction of their value. However, section 2395(d) does not authorize 
individuals to be appointed to regular positions having compensation 
rates fixed by or pursuant to statute at rates less than those 
specified. It, therefore, differs from the statute, which was the 
subject of 27 Comp. Gen. 194, supra, and accordingly is not a 
provision of law authorizing employees whose compensation is fixed by 
or pursuant to statute to waive any part of such compensation." 

57 Comp. Gen. at 424-25.[Footnote 99] 

As noted earlier, 27 Comp. Gen. 194 concerned temporary experts or 
consultants. B-139261 concerned civilian volunteers who sought to 
provide services for an Air Force reserve center. Likewise, the other 
statutory examples cited in B-139261 clearly were aimed at individuals 
other than regular federal employees. Thus, 57 Comp. Gen. 423 appears 
to represent the sensible caveat that general statutory authorities to 
accept voluntary services or "gifts" of services do not supersede 
statutes providing for the compensation of federal employees and 
cannot be invoked to avoid the consequences of those statutes.
The rules for waiver of salary or appointment without compensation may 
be summarized as follows: 

* If compensation is not fixed by statute, that is, if it is fixed 
administratively or if the statute merely prescribes a maximum but no 
minimum, it may be waived as long as the waiver qualifies as 
"gratuitous." There should be an advance written agreement waiving all 
claims. 

* If compensation is fixed by statute, it may not be waived, the 
voluntary versus gratuitous distinction notwithstanding, without 
specific statutory authority. This authority generally may take the 
form of authority to accept donations of services or to employ persons 
without compensation. 

* If the employing agency has statutory authority to accept gifts, the 
employee can accept the compensation and return it to the agency as a 
gift. Even if the agency has no such authority, the employee can still 
accept the compensation and donate it to the United States Treasury. 

(2) Student interns: 

In 26 Comp. Gen. 956 (1947), the then Civil Service Commission asked 
whether an agency could accept the uncompensated services of college 
students as part of a college's internship program. The students 
"would be assigned to productive work, that is, to the regular work of 
the agency in a position which would ordinarily fall in the 
competitive civil service." The answer was no. Since the students 
would be used in positions the compensation for which was fixed by 
law, and since compensation fixed by law cannot be waived, the 
proposal would require legislative authority. 

Thirty years later, the Justice Department's Office of Legal Counsel 
considered another internship program and provided similar advice. 
Without statutory authority, uncompensated student services that 
furthered the agency's mission, that is, "productive work," could not 
be accepted. 2 Op. Off. Legal Counsel 185 (1978). 

In view of the long-standing rule, supported by decisions of the 
Supreme Court,[Footnote 100] prohibiting the waiver of compensation 
for positions required by law to be salaried, GAO and Justice had 
little choice but to respond as they did. Clearly, however, this 
answer had its downside. It meant that uncompensated student interns 
could be used only for essentially "make-work" tasks, a benefit to 
neither the students nor the agencies. 

The solution, apparent from both cases, was legislative authority, 
which Congress provided later in 1978 by the enactment of 5 U.S.C. § 
3111. The statute authorizes agencies, subject to regulations of the 
Office of Personnel Management, to accept the uncompensated services 
of high school and college students, "notwithstanding section 1342 of 
title 31," if the services are part of an agency program designed to 
provide educational experience for the student, if the student's 
educational institution gives permission, and if the services will not 
be used to displace any employee. 5 U.S.C. § 3111(b). 

A paper entitled A Part-Time Clerkship Program in Federal Courts for 
Law Students by the Honorable Jack B. Weinstein and William B. 
Bonvillian, written in 1975 and printed at 68 F.R.D. 265, considered 
the use of law students as part-time law clerks, without pay, to 
mostly supplement the work of the regular law clerks in furtherance of 
the official duties of the courts. Based on the statute's legislative 
history and 30 Op. Att'y Gen. 51 (1913), previously discussed, Judge 
Weinstein concluded that the program did not violate the 
Antideficiency Act. Although this aspect of the issue is not 
explicitly discussed in the paper, it appears that the compensation of 
regular law clerks is fixed administratively. See 28 U.S.C. § 
604(a)(5). In any event, the Administrative Office of the United 
States Courts was given authority in 1978 to "accept and utilize 
voluntary and incompensated (gratuitous) services." 28 U.S.C. § 
604(a)(17). 

(3) Program beneficiaries: 

Programs are enacted from time to time to provide job training 
assistance to various classes of individuals. The training is 
intended, among other things, to enable participants to enter the 
labor market at a higher level of skill. Questions have arisen under 
programs of this nature as to the authority of federal agencies to 
serve as employers. 

A 1944 case, 24 Comp. Gen. 314, considered a vocational rehabilitation 
program for disabled war veterans. GAO concluded that 31 U.S.C. § 1342 
did not preclude federal agencies from providing on-the-job training, 
without payment of salary, to program participants. The decision is 
further discussed in 26 Comp. Gen. 956, 959 (1947). 

In 51 Comp. Gen. 152 (1971), GAO concluded that 31 U.S.C. § 1342 
precluded federal agencies from accepting work by persons hired by 
local governments for public service employment under the Emergency 
Employment Act of 1971.[Footnote 101] Four years later, GAO modified 
the 1971 decision, holding that a federal agency could provide work 
without payment of compensation to (i.e., accept the free services of) 
trainees sponsored and paid by nonfederal organizations from federal 
grant funds under the Comprehensive Employment and Training Act of 
1973.[Footnote 102] 

54 Comp. Gen. 560 (1975). The decision stated: 

"Considering that the services in question will arise out of a program 
initiated by the Federal Government, it would be anomalous to conclude 
that such services are proscribed as being voluntary within the 
meaning of 31 U.S.C. § [1342]. That is to say, it is our opinion that 
the utilization of enrollees or trainees by a Federal agency under the 
circumstances here involved need not be considered the acceptance of 
'voluntary services' within the meaning of that phrase as used in 31 
U.S.C. § [1342]." 

Id. at 561. 

In B-211079.2, Jan. 2, 1987, the relevant program legislation 
expressly authorized program participants to perform work for federal 
agencies "notwithstanding section 1342 of title 31." The decision 
suggests that the statutory authority was necessary not because of the 
Antideficiency Act but to avoid an impermissible augmentation of 
appropriations. It is in any event consistent in result with 24 Comp. 
Gen. 314 and 54 Comp. Gen. 560. The relationship between voluntary 
service and the augmentation concept is explored later in this chapter 
in our discussion of augmentation of appropriations. 

(4) Applicability to legislative and judicial branches: 

The applicability of 31 U.S.C. § 1342 to the legislative and judicial 
branches of the federal government does not appear to have been 
seriously questioned. 

The salary of a Member of Congress is fixed by statute and therefore 
cannot be waived without specific statutory authority. B-159835, Apr. 
22, 1975; B-123424, Mar. 7, 1975; B-123424, Apr. 15, 1955; A-8427, 
Mar. 19, 1925; B-206396.2, Nov. 15, 1988 (nondecision letter). 
However, as each of these cases points out, nothing prevents a Senator 
or Representative from accepting the salary and then, as several have 
done, donate part or all of it back to the United States Treasury. 

In 1977, GAO was asked by a congressional committee chairman whether 
section 1342 applies to Members of Congress who use volunteers to 
perform official office functions. GAO responded, first, that section 
1342 seems clearly to apply to the legislative branch. GAO then 
summarized the rules for appointment without compensation and advised 
that, to the extent that a particular employee's salary could be fixed 
administratively by the Member in any amount he or she chooses to set, 
that employee's salary could be fixed at zero. This once again was 
essentially an application of the rules set down decades earlier in 30 
Op. Att'y Gen. 51 (1913) and 27 Comp. Dec. 131 (1920). See also B-
69907, Feb. 11, 1977. 

The salary of a federal judge is also "fixed by law"—even more so 
because of the constitutional prohibition against diminishing the 
compensation of a federal judge while in office. U.S. Const. art III, 
§ 1. A case applying the standard "no waiver" rules to a federal judge 
is B-157469, July 24, 1974. 

c. Other Voluntary Services: 

Before entering the mainstream of the modern case law, two very early
decisions should be noted. In 12 Comp. Dec. 244 (1905), the 
Comptroller of the Treasury held that an offer by a meat-packing firm 
to pay the salaries of Department of Agriculture employees to conduct 
a pre-export pork inspection could not be accepted because of the 
voluntary services prohibition.[Footnote 103] Similar cases have since 
come up, but they have been decided under the augmentation theory 
without reference to 31 U.S.C. § 1342. See 59 Comp. Gen. 294 (1980) 
and 2 Comp. Gen. 775 (1923), discussed later in section E of this 
chapter. 

To restate, apart from the 1905 decision, which has not been followed 
since, the voluntary services prohibition has not been applied to 
donations of money. In another 1905 decision, a vendor asked 
permission to install an appliance on Navy property for trial purposes 
at no expense to the government. Presumably, if the Navy liked the 
appliance, it would then buy it. The Comptroller of the Treasury 
pointed out an easily overlooked phrase in the voluntary service 
prohibition—the services that are prohibited are voluntary services 
"for the United States." Here, temporary installation by the vendor 
for trial purposes amounted to service for his own benefit and on his 
own behalf, "as an incident to or necessary concomitant of a proper 
exhibition of his appliance for sale." Therefore, the Navy could grant 
permission without violating the Antideficiency Act as long as the 
vendor agreed to remove the appliance at his own expense if the Navy 
chose not to buy it. 11 Comp. Dec. 622 (1905). This case has not been 
cited since. 

For the most part, the subsequent cases have been resolved by applying 
the "voluntary versus gratuitous" distinction first enunciated by the 
Attorney General in 1913 in 30 Op. Att'y Gen. 51, discussed above. The 
underlying philosophy is perhaps best conveyed in the following 
statement by the Justice Department's Office of Legal Counsel: 

"Although the interpretation of § [1342] has not been entirely 
consistent over the years, the weight of authority does support the 
view that the section was intended to eliminate subsequent claims 
against the United States for compensation of the 'volunteer,' rather 
than to deprive the government of the benefit of truly gratuitous 
services." 

6 Op. Off. Legal Counsel 160, 162 (1982). 

In an early formulation that has often been quoted since, the 
Comptroller General noted that: 

"The voluntary service referred to in [31 U.S.C. § 1342] is not 
necessarily synonymous with gratuitous service, but contemplates 
service furnished on the initiative of the party rendering the same 
without request from, or agreement with, the United States therefor. 
Services furnished pursuant to a formal contract are not voluntary 
within the meaning of said section." 

7 Comp. Gen. 810, 811 (1928). 

In 7 Comp. Gen. 810, a contractor had agreed to prepare stenographic 
transcripts of Federal Trade Commission public proceedings and to 
furnish copies to the Commission without cost, in exchange for the 
exclusive right to report the proceedings and to sell transcripts to 
the public. The decision noted that consideration under a contract 
does not have to be monetary consideration, and held that the contract 
in question was supported by sufficient legal consideration. While the 
case is thus arguably not a true "voluntary services" case, it has 
often been cited since, not so much for the actual holding but for the 
above-quoted statement of the rule. 

For example, in B-13378, Nov. 20, 1940, the Comptroller General held 
that the Secretary of Commerce could accept gratuitous services from a 
private agency, created by various social science associations, which 
had offered to assist in the preparation of official monographs 
analyzing census data. The services were to be rendered under a 
cooperative agreement which specified that they would be free of cost 
to the government. The Commerce Department agreed to furnish space and 
equipment, but the monographs would not otherwise have been prepared. 

Applying the same approach, GAO found no violation of 31 U.S.C. § 1342 
for the Commerce Department to accept services by the Business 
Advisory Council, which were agreed in advance to be gratuitous. B-
125406, Nov. 4, 1955. Likewise, the Commission on Federal Paperwork 
could accept free services from the private sector as long as they 
were agreed in advance to be gratuitous. B-182087-0.M., Nov. 26, 1975. 

In a 1982 decision, the American Association of Retired Persons wanted 
to volunteer services to assist in crime prevention activities 
(distribute literature, give lectures, etc.) on Army installations. 
GAO found no Antideficiency Act problem as long as the services were 
agreed in advance, and so documented, as gratuitous. B-204326, July 
26, 1982. 

In B-177836, Apr. 24, 1973, the Army had entered into a contract with 
a landowner under which it acquired the right to remove trees and 
other shrubs from portions of the landowner's property incident to an 
easement. A subsequent purchaser of the property complained that some 
tree stumps had not been removed, and the Army proceeded to contract 
to have the work done. The landowner then submitted a claim for 
certain costs he had incurred incident to some preliminary work he had 
done prior to the Army's contract. Since the landowner's actions had 
been purely voluntary and had been taken without the knowledge or 
consent of the government, 31 U.S.C. § 1342 prohibited payment. 

In 7 Comp. Gen. 167 (1927), a customs official had stored, in his own 
private boathouse, a boat which had been seized for smuggling whiskey. 
The customs official later filed a claim for storage charges. Noting 
that "the United States did not expressly or impliedly request the use 
of the premises and therefore did not by implication promise to pay 
therefor," GAO concluded that the storage had been purely a voluntary 
service, payment for which would violate 31 U.S.C. § 1342. 

As if to prove the adage that there is nothing new under the sun, GAO 
considered another storage case over 50 years later, B-194294, July 
12, 1979. There, an Agriculture Department employee had an accident 
while driving a government-owned vehicle assigned to him for his work. 
A Department official ordered the damaged vehicle towed to the 
employee's driveway, to be held there until it could be sold. Since 
the government did have a role in the employee's assumption of 
responsibility for the wreck, GAO found no violation of 31 U.S.C. § 
1342 and allowed the employee's claim for reasonable storage charges 
on a quantum meruit basis.[Footnote 104] 

Section 1342 covers any type of service which has the effect of 
creating a legal or moral obligation to pay the person rendering the 
service. Naturally, this includes government contractors. See PCL 
Construction Services, Inc. v. United States, 41 Fed. CL 242, 257-260 
(1998), quoting with approval from the second edition of Principles of 
Federal Appropriations Law on this point. The prohibition includes 
arrangements in which government contracting officers solicit or 
permit—tacitly or otherwise—a contractor to continue performance on a 
"temporarily unfunded" basis while the agency, which has exhausted its 
appropriations and cannot pay the contractor immediately, seeks 
additional appropriations. This was one of the options considered in 
55 Comp. Gen. 768 (1976), discussed previously in connection with 31 
U.S.C. § 1341(a). The Army proposed a contract modification which 
would explicitly recognize the government's obligation to pay for any 
work performed under the contract, possibly including reasonable 
interest, subject to subsequent availability of funds. The government 
would use its best efforts to obtain a deficiency appropriation. 
Certificates to this effect would be issued to the contractor, 
including a statement that any additional work performed would be done 
at the contractor's own risk. In return, the contractor would be asked 
to defer any action for breach of contract. 

GAO found this proposal "of dubious validity at best." Although the 
certificate given to the contractor would say that continued 
performance was at the contractor's own risk, it was clear that both 
parties expected the contract to continue. The government expected to 
accept the benefits of the contractor's performance and the contractor 
expected to be paid--eventually-—for it. This is certainly not an 
example of a clear written understanding that work for the government 
is to be performed gratuitously. Also, the proposal to pay interest 
was improper as it would compound the Antideficiency Act violation. 
Although 55 Comp. Gen. 768 does not specifically discuss 31 U.S.C. § 
1342, the relationship should be apparent. 

GAO's opinion in B-302811, July 12, 2004, provides a recent example of 
an appropriate "gratuitous services" type contract that did not run 
afoul of the 31 U.S.C. § 1342 prohibition against voluntary services. 
This decision concerned the General Services Administration's (GSA) 
proposed National Brokers Contract, under which GSA would award four 
real estate brokers exclusive rights to represent the United States 
with respect to all GSA real property leases. The brokers would be 
required to provide a range of services commonly offered in commercial 
leasing transactions such as assisting federal agencies in developing 
their space requirements, surveying the rental market, and negotiating 
and preparing leases. The proposal took the form of a "no-cost" 
contract in which GSA would make no payments to the brokers for their 
services. Rather, the brokers would collect commissions from the 
landlords who leased property to the federal agencies. In approving 
the legality of this proposed arrangement, the decision observed: 

"Because the contract was constructed as a no cost contract, GSA will 
have no financial liability to brokers, and brokers will have no 
expectation of a payment from GSA. The acceptance of services without 
payment pursuant to a valid, binding no-cost contract does not augment 
an agency's appropriation nor does it violate the voluntary services 
prohibition. Although the brokers contract clearly expects that 
brokers will be remunerated by commissions from landlords, as is a 
common practice in the real estate industry, GSA does not require 
landlords to pay commissions. If a landlord were to fail to pay a 
broker, the broker would have no claim against GSA." 

Id. at 7.[Footnote 105] 

d. Exceptions: 

Two kinds of exceptions to 31 U.S.C. § 1342 have already been 
discussed—where acceptance of services without compensation is 
specifically authorized by law, and where the government and the 
volunteer have a written agreement that the services are to be 
rendered gratuitously with no expectation of future payment. 

There is a third exception, written into the statute itself: 
"emergencies involving the safety of human life or the protection of 
property." The cases dealing with this statutory exception have arisen 
in a variety of contexts and are discussed below, along with recent 
developments. 

(1) Safety of human life: 

In order to invoke this exception, the services provided to protect 
human life must have been rendered in a true emergency situation. What 
constitutes an emergency was discussed in several early decisions.
In 12 Comp. Dec. 155 (1905), a municipal health officer disinfected 
several government buildings to prevent the further spread of 
diphtheria. Several cases of diphtheria had already occurred at the 
government compound, including four that resulted in deaths. The 
Comptroller of the Treasury found that the services had been rendered 
in an emergency involving the loss of human life, and held accordingly 
that the doctor could be reimbursed for the cost of materials used and 
the fair value of his services. 

In another case, the S.S. Rexmore, a British vessel, deviated from its 
course to London to answer a call for help from an Army transport ship 
carrying over 1,000 troops. The ship had sprung a leak and appeared to 
be in danger of sinking. The Comptroller General allowed a claim for 
the vessel's actual operating costs plus lost profits attributable to 
the services performed. The Rexmore had rendered a tangible service to 
save the lives of the people aboard the Army transport, as well as the 
transport vessel itself. 2 Comp. Gen. 799 (1923). 

On the other hand, GAO denied payment to a man who was boating in the 
Florida Keys and saw a Navy seaplane make a forced landing. He offered 
to tow the aircraft over two miles to the nearest island, and did so. 
His claim for expenses was denied. The aircraft had landed intact and 
the pilot was in no immediate danger. Rendering service to overcome 
mere inconvenience or even to avoid a potential future emergency is 
not enough to overcome the statutory prohibition. 10 Comp. Gen. 248 
(1930). 

(2) Protection of property: 

The main thing to remember here is that the property must be either 
government-owned property or property for which the government has 
some responsibility. The standard was established by the Comptroller 
of the Treasury in 9 Comp. Dec. 182, 185 (1902) as follows: 

"I think it is clear that the statute does not contemplate property in 
which the Government has no immediate interest or concern; but I do 
not think it was intended to apply exclusively to property owned by 
the Government. 

The term 'property' is used in the statute without any qualifying 
words, but it is used in connection with the rendition of services for 
the Government. The implication is, therefore, clear that the property 
in contemplation is property in which the Government has an immediate 
interest or in connection with which it has some duty to perform." 

In the cited decision, an individual had gathered up mail scattered in 
a train wreck and delivered it to a nearby town. The government did 
not "own" the mail but had a responsibility to deliver it. Therefore, 
the services came within the statutory exception and the individual 
could be paid for the value of his services. 

Applying the approach of 9 Comp. Dec. 182, the Comptroller General 
held in B-152554, Feb. 24, 1975, that section 1342 did not permit the 
Agency for International Development to make expenditures in excess of 
available funds for disaster relief in foreign countries. A case 
clearly within the exception is 3 Comp. Gen. 979 (1924), allowing 
reimbursement to a municipality which had rendered firefighting 
assistance to prevent the destruction of federal property where the 
federal property was not within the territory for which the municipal 
fire department was responsible. 

An exception was also recognized in 53 Comp. Gen. 71 (1973), where a 
government employee brought in food for other government employees in 
circumstances which would justify a determination that the expenditure 
was incidental to the protection of government property in an extreme 
emergency. In this case, the General Services Administration had to 
assemble and maintain for 5 days a cadre of approximately 175 special 
police in connection with the unauthorized occupation of a Bureau of 
Indian Affairs building. The police officers were required to perform 
tours of duty that sometimes extended to 24 hours. They were kept at 
the ready to reoccupy the building and they were not permitted to 
leave the marshaling area because of the imminence of court orders and 
administrative directives. 

(3) Recent developments: 

During the past two decades, cases addressing the "emergencies 
involving the safety of human life or the protection of property" 
exception to 31 U.S.C. § 1342 have arisen primarily in the context of 
"funding gaps" where an agency is faced with an appropriations lapse 
(or potential lapse) usually at the outset of a fiscal year. These 
cases are discussed in detail in section C.6 of this chapter. However, 
several points from that discussion are also relevant here. Most 
notably, in 1990, Congress amended 31 U.S.C. § 1342 by adding the 
following language: 

"As used in this section, the term 'emergencies involving the safety 
of human life or the protection of property' does not include ongoing, 
regular functions of government the suspension of which would not 
imminently threaten the safety of human life or the protection of 
property."[Footnote 106] 

Two recent GAO decisions have considered the emergency exception to 31 
U.S.C. § 1342 (including its 1990 amendment) in a context other than a 
funding gap. The question in B-262069, Aug. 1, 1995, was whether the 
District of Columbia could exceed its appropriation for certain 
programs, including Aid to Families with Dependent Children and 
Medicaid, without violating the Antideficiency Act. The main issue in 
that decision was whether the "unless authorized by law exception" to 
the Antideficiency Act in 31 U.S.C. § 1341(a)(1)(A) applied. GAO held 
that it did not. The decision also noted the existence of the 
emergencies exception to 31 U.S.C. § 1342, but held that it was 
likewise inapplicable: 

"An 'emergency' under section 1342 'does not include ongoing, regular 
functions of government the suspension of which would not imminently 
threaten the safety of human life or the protection of property.' We 
are not presently aware of any facts or circumstances that would make 
this limited exception available to the District. See, 5 Op.
O.L.C. 1, 7-11 (1981)." 

B-262069 at 3, fn. 1. 

The decision in B-262069 addressed a hypothetical situation; the 
District had not actually exceeded its appropriation there. 
Unfortunately, a subsequent opinion, B-285725, Sept. 29, 2000, 
involved the real thing. In that case, the District of Columbia Health 
and Hospitals Public Benefit Corporation (PBC) had incurred 
obligations and made payments in excess of its appropriations. The PBC 
maintained that the emergency exception to 31 U.S.C. § 1342 as 
construed by the Attorney General applied; thus, there was no 
violation. GAO disagreed: 

"The funding gap situations discussed by the Attorney General arise 
typically at the beginning of a fiscal year because of the absence or 
expiration of budget authority under circumstances that are beyond an 
agency's control. In the present situation, the exhaustion of 
appropriations occurred during the fiscal year because of a rate of 
operations and obligations in excess of available resources. Viewed in 
this light, PBC's failure to regulate its activities and spending so 
as to operate within its available budget resources is not the type of 
'emergency' covered either by the Attorney General's earlier opinions 
or 31 U.S.C. § 1342." 

B-285725, Enclosure at 9. 

The opinion acknowledged that PBC's ongoing functions of operating a 
hospital and clinics involved the provision of services essential to 
the protection of human life. However, the opinion observed that PBC, 
like many federal agencies engaged in protecting human life and 
safety, requested and received appropriations to cover these 
functions. It added: 

"Once the Congress enacts appropriation[s], it is incumbent on the PBC 
(and similarly situated federal agencies) to manage its resources to 
stay within the authorized level. Nothing in the District's Submission 
demonstrates that the PBC's exhaustion of appropriations prior to the 
end of the fiscal year was caused by some unanticipated event or 
events (e.g., mass injuries resulting from hurricane, flood or other 
natural disasters) requiring PBC to provide services for the 
protection of life beyond the level it should have reasonably been 
expected to anticipate when it prepared its budget." 

Id. By way of summary, the opinion observed: 

"While the failure of Congress to enact appropriations at the 
beginning of the fiscal year may qualify as an emergency event for 
purposes of section 1342, it would be a novel proposition, one that we 
are unwilling to endorse, to conclude that an agency's failure to 
manage and live within the resources provided for an activity involved 
in protecting human life permits it to incur obligations in excess of 
amounts provided. Nothing that we have been provided warrants the 
conclusion that the overobligations resulted from an unanticipated 
emergency rather than from the PBC's failure to manage and live within 
its budgetary resources during the fiscal year."[Footnote 107] 

B-285725 at 3. 

In essence, B-285725 held that the emergencies exception to 31 U.S.C.
§ 1342 does not apply where an agency exceeds its appropriations—at 
least absent events beyond the agency's control that the agency (and 
presumably the Congress) could not have foreseen in determining the 
agency's funding levels. 

In two opinions to the United States Marshals Service (USMS) in 1999 
and 2000, the Office of Legal Counsel addressed a potential exhaustion 
of USMS appropriations, which never materialized: Memorandum Opinion 
for the General Counsel, United States Marshals Service, USMS 
Obligation To Take Steps To Avoid Anticipated Appropriations 
Deficiency, OLC Opinion, May 11, 1999, and Memorandum Opinion for the 
General Counsel, United States Marshals Service, Continuation of 
Federal Prisoner Detention Efforts in the Face of a USMS 
Appropriations Deficiency, OLC Opinion, Apr. 5, 2000. The opinions 
dealt with a potential exhaustion of appropriations for USMS prisoner-
detention functions, but did not describe the circumstances giving 
rise to the potential exhaustion. While these opinions recognized the 
"affirmative obligation" on the part of agencies to manage available 
appropriations in order to avoid deficiencies, they did not address 
the important distinction between an exhaustion of appropriations (or 
funding gap) resulting from unforeseen circumstances and an exhaustion 
of appropriations resulting from the agency's failure to manage its 
operations within the limits of enacted appropriations. We would 
disagree with the Office of Legal Counsel opinions to the extent they 
could be read to suggest that regardless of the reasons for the 
exhaustion of appropriations, whenever an agency like USMS, whose 
statutory mission involves the protection of life and property, runs 
out of money, it has open-ended authority to continue to incur 
obligations under the Antideficiency Act's emergencies exception. 
[Footnote 108] This is exactly the "coercive deficiency" that the 
Congress legislated against in enacting the Antideficiency Act. 
[Footnote 109] See B-285725, Sept. 29, 2000. The Antideficiency Act 
was intended to keep agency operations at a level within the amounts 
that Congress appropriates for that purpose. If an agency concludes 
that it needs more funds than Congress has appropriated for a fiscal 
year, the agency should ask Congress to enact a supplemental 
appropriation; it should not continue operations without regard to the 
Antideficiency Act. 

e. Voluntary Creditors: 

A related line of decisions are the so-called "voluntary creditor" 
cases. A voluntary creditor is an individual, government or private, 
who pays what he or she perceives to be a government obligation from 
personal funds. The rule is that the voluntary creditor cannot be 
reimbursed, although there are significant exceptions. For the most 
part, the decisions have not related the voluntary creditor 
prohibition to the Antideficiency Act, with the exception of one very 
early case (17 Comp. Dec. 353 (1910)) and two more recent ones (53 
Comp. Gen. 71 (1973) and 42 Comp. Gen. 149 (1962)). The voluntary 
creditor cases are discussed in detail in Chapter 12, section C.4.c in 
volume III of the second edition of Principles of Federal 
Appropriations Law, dealing with claims against the United States. 

4. Apportionment of Appropriations: 

Because of the apportionment and related provisions of the 
Antideficiency Act, 31 U.S.C. §§ 1511-1519, an agency generally does 
not have the full amount of its appropriations available to it at the 
beginning of the fiscal year. Apportionment is an administrative 
process by which, as its name suggests, appropriated funds are 
distributed to agencies in portions over the period of their 
availability. The Office of Management and Budget (OMB) apportions 
funds for executive branch agencies. 31 U.S.C. § 1513(b); Exec. Order 
No. 6166, § 16 (June 10, 1933), at 5 U.S.C. § 901 note. Appropriations 
for legislative branch agencies, the judicial branch, the District of 
Columbia, and the International Trade Commission are apportioned by 
officials having administrative control of those funds. 31 U.S.C. § 
1513(a). In addition to apportionment, appropriations are subject to 
further administrative subdivision by the heads of the agencies to 
which the appropriations are made. 31 U.S.C. § 1514. 

Section 1517(a) of title 31 prohibits officers and employees of the 
federal and District of Columbia governments from making or 
authorizing an expenditure or obligation that exceeds an apportionment 
or the amount permitted under certain other subdivisions of 
appropriated funds. Agencies must report violations of section 1517(a) 
to the Congress and the President. Those who violate section 1517(a) 
are subject to administrative discipline as well as criminal penalties 
in the case of willful violations. See 31 U.S.C. §§ 1517(b), 1518, and 
1519. 

a. Statutory Requirement for Apportionment: 

Subsection (a) of section 1512 establishes the basic requirement for 
the apportionment of appropriations: 

"(a) Except as provided in this subchapter, an appropriation available 
for obligation for a definite period shall be apportioned to prevent 
obligation or expenditure at a rate that would indicate a necessity 
for a deficiency or supplemental appropriation for the period. An
appropriation for an indefinite period and authority to make 
obligations by contract before appropriations shall be apportioned to 
achieve the most effective and economical use. An apportionment may be 
reapportioned under this section." 

Although apportionment was first required legislatively in 1905, 
[Footnote 110] the current form of the statute derives from a revision 
enacted in 1950 in section 1211 of the General Appropriation Act, 
1951.[Footnote 111] The 1950 revision was part of an overall effort by 
Congress to amplify and enforce the basic restrictions against 
incurring deficiencies in violation of the Antideficiency Act, 31 
U.S.C. § 1341. 

Section 1512(a) requires that all appropriations be administratively 
apportioned so as to ensure their obligation and expenditure at a 
controlled rate which will prevent deficiencies from arising before 
the end of a fiscal year. Although section 1512 does not tell you who 
is to make the apportionment, section 1513 names the President as the 
apportioning official for most executive branch agencies. The 
President delegated the function to the Director of the Bureau of the 
Budget in 1933,[Footnote 112] and it now reposes in the successor to 
that office, the Director of the Office of Management and Budget 
(OMB).[Footnote 113] Legislative and judicial branch appropriations 
are apportioned by officials in those branches. 31 U.S.C. § 1513(a). 

The term "apportionment" may be defined as follows: 

"The action by which [the apportioning official] distributes amounts 
available for obligation, including budgetary reserves established 
pursuant to law, in an appropriation or fund account. An apportionment 
divides amounts available for obligation by specific time periods 
(usually quarters), activities, projects, objects, or a combination 
thereof. The amounts so apportioned limit the amount of obligations 
that may be incurred. An apportionment may be further subdivided by an 
agency into allotments, suballotments, and allocations. In 
apportioning any account, some funds may be reserved to provide for 
contingencies or to effect savings made possible pursuant to the 
Antideficiency Act. Funds apportioned to establish a reserve must be 
proposed for deferral or rescission pursuant to the Impoundment 
Control Act of 1974 (2 U.S.C. §§ 681-688). 

"The apportionment process is intended to (1) prevent the obligation 
of amounts available within an appropriation or fund account in a 
manner that would require deficiency or supplemental appropriations 
and (2) achieve the most effective and economical use of amounts made 
available for obligation.[Footnote 114] 

Apportionment is required not only to prevent the need for deficiency 
or supplemental appropriations, but also to ensure that there is no 
drastic curtailment of the activity for which the appropriation is 
made. 36 Comp. Gen. 699 (1957). See also 38 Comp. Gen. 501 (1959). In 
other words, the apportionment requirement is designed to prevent an 
agency from spending its entire appropriation before the end of the 
fiscal year and then putting Congress in a position in which it must 
either enact an additional appropriation or allow the entire activity 
to come to a halt. 64 Comp. 

Gen. 728, 735 (1985). See also Memorandum Opinion for the General 
Counsel, United States Marshals Service, USMS Obligation To Take Steps 
To Avoid Anticipated Appropriations Deficiency, OLC Opinion, May 11, 
1999 (opining that 31 U.S.C. § 1512(a) imposes "an affirmative 
obligation" on federal agencies to take steps to use their available 
funds in a way that will avoid the need for a deficiency or 
supplemental appropriations, citing 64 Comp. Gen. 728 and 36 Comp. 
Gen. 699). In 36 Comp. Gen. 699, Post Office funds had been 
reapportioned in such a way that the fourth quarter funds were 
substantially less than those for the third quarter. The Comptroller 
General stated: 

"A drastic curtailment toward the close of a fiscal year of operations 
carried on under a fiscal year appropriation is a prima facie 
indication of a failure to so apportion an appropriation 'as to 
prevent obligation or expenditure thereof in a manner which would 
indicate a necessity for deficiency or supplemental appropriations for 
such period.' In our view, this is the very situation the amendment of 
the law in 1950 was intended to remedy." 

36 Comp. Gen. at 703. See also 64 Comp. Gen. 728, 735-36 (1985). 
However, the mere fact that an agency faces a severe lack of funds and 
needs to curtail services late in a fiscal year does not necessarily 
mean that the apportioning authority has violated 31 U.S.C. § 1512(a). 
Programmatic factors that could not reasonably be foreseen at the time 
of an apportionment or reapportionment may affect the pattern or pace 
of spending over the course of the year. Also, as discussed hereafter 
in section C.4.e, the statute itself permits apportionments indicating 
the need for a deficiency or supplemental appropriation in certain 
limited circumstances. 

A 1979 decision involved the Department of Agriculture's Food Stamp 
Program. The program was subject to certain spending ceilings which it 
seemed certain, given the rate at which the Department was incurring 
expenditures, that the Department was going to exceed. The Department 
feared that, if it was bound by a formula in a different section of 
its authorizing act to pay the mandated amount to each eligible 
recipient, it would have to stop the whole program when the funds were 
exhausted. Based on both the Antideficiency Act and the program 
legislation, GAO concluded that there had to be an immediate pro rata 
reduction for all participants. Discontinuance of the program when the 
funds ran out would violate the purpose of the apportionment 
requirement. A-51604, Mar. 28, 1979. 

This is not to say that every subactivity or project must be carried 
out for the full fiscal year, on a reduced basis, if necessary. 
Section 1512(a) applies to amounts made available in an appropriation 
or fund. Where, for example, the then Veterans Administration (VA) 
nursing home program was funded from moneys made available in a 
general, lump-sum VA medical care appropriation, the agency was free 
to discontinue the nursing home program and reprogram the balance of 
its funds to other programs also funded under that heading. B-167656, 
June 18, 1971. (The result would be different if the nursing home 
program had received a line-item appropriation.) 

The general rule against apportionments that indicate the need for a 
deficiency or supplemental appropriation does not preclude an agency 
from requesting an apportionment of all or most of its existing 
appropriations at the same time that it is seeking a supplemental so 
long as the agency has in place a plan that would enable it to 
function through the end of the fiscal year should Congress not enact 
the supplemental. 64 Comp. Gen. 728, 735 (1985). See also B-255529, 
Jan. 10, 1994. In 64 Comp. Gen. 728, the former Interstate Commerce 
Commission (ICC) had requested an apportionment of the full annual 
amount available to it under a continuing resolution at the outset of 
fiscal year 1985. At the same time, the ICC voted to seek a 
supplemental appropriation in order to avoid severe staffing cuts that 
would have been required without it. The Comptroller General held that 
the apportionment was not improper: 

"As we have indicated, at the recommendation of its Managing Director 
the ICC adopted an operating plan for fiscal year 1985 which included 
a request for a supplemental appropriation. However, part of that 
operating plan was an emergency plan which would enable the ICC to 
operate for the entire fiscal year even without a supplemental. Under 
the plan, if the Congress did not enact a supplemental appropriation 
by the end of March, the Commission was to furlough all its employees 
for 1 day per week for the remainder of the year. This would allow the 
Commission to operate through the end of the fiscal year within the
$48 million already appropriated. In fact a supplemental was not 
passed by the end of March and the furlough was implemented.... 

"The actions taken by the ICC ...demonstrate that from the time at 
which the Congress and the President approved legislation reducing 
ICC's funding below the requested level, every decision related to 
expenditures was made to avoid violation of the Antideficiency Act." 

64 Comp. Gen. at 735. 

The requirement to apportion applies not only to 1-year appropriations 
and other appropriations limited to a fixed period of time, but also 
to "no-year" money and even to contract authority (authority to 
contract in advance of appropriations). 31 U.S.C. §§ 1511(a), 1512(a). 
In the case of indefinite appropriations and contract authority, the 
requirement states only that the apportionment is to be made in such a 
way as "to achieve the most effective and economical use" of the 
budget authority. Id. § 1512(a). 

Prior to the 1982 recodification of title 31 of the United States 
Code, the apportionment requirement applied explicitly to government 
corporations which are instrumentalities of the United States. 
[Footnote 115] While the applicability of the requirement has not 
changed, the recodification dropped the explicit language, viewing it 
as covered by the broad definition of "executive agency" in 31 U.S.C. 
§ 102.[Footnote 116] The authority of some government corporations to 
determine the necessity of their expenditures and the manner in which 
they shall be incurred is not sufficient to exempt a corporation from 
the apportionment requirement. 43 Comp. Gen. 759 (1964). 

The apportionment process provides a set of administrative controls 
over the use of appropriations in addition to those Congress has 
imposed through the appropriations act itself. The apportionment 
process cannot alter or otherwise affect the operation of statutory 
requirements concerning the availability or use of appropriated funds. 
In this regard, OMB's guidance on apportionments states: 

"... The apportionment of funds should not be used as a means of 
resolving any question dealing with the legality of using funds for 
the purposes for which they are appropriated. Any questions as to the 
legality of using funds for a particular purpose must be resolved 
through legal channels." 

OMB Circ. No. A-11, pt. 4, § 120.17.[Footnote 117] 

Furthermore, an apportioning official cannot apportion funds in 
advance of their availability for obligation or expenditure. In B-
290600, July 10, 2002, OMB had apportioned certain budget authority 
for loan guarantees to the Air Transportation Stabilization Board 
pursuant to the Board's request. The statute enacting this budget 
authority had conditioned its availability such that the budget 
authority "shall be available only to the extent that a request... 
that includes designation of such amount as an emergency 
requirement... is transmitted by the President to Congress." The 
President had not transmitted this designation at the time of the 
apportionment. Therefore, GAO concluded that OMB and the Board had 
violated the Antideficiency Act. OMB and the Board recognized the 
violation and had already taken steps to avoid a recurrence. 

b. Establishing Reserves: 

Section 1512(c) of 31 U.S.C. provides as follows: 

"(c)(1) In apportioning or reapportioning an appropriation, a reserve 
may be established only: 

"(A) to provide for contingencies; 

"(B) to achieve savings made possible by or through changes in 
requirements or greater efficiency of operations; or; 

"(C) as specifically provided by law. 

"(2) A reserve established under this subsection may be changed as 
necessary to carry out the scope and objectives of the appropriation 
concerned. When an official designated in section 1513 of this title 
to make apportionments decides that an amount reserved will not be 
required to carry out the objectives and scope of the appropriation 
concerned, the official shall recommend the rescission of the amount 
in the way provided in chapter 11 of this title for appropriation 
requests. Reserves established under this section shall be reported to 
Congress as provided in the Impoundment Control Act of 1974 (2 U.S.C. 
681 et seq.)." 

Section 1512(c) seeks to limit the circumstances in which the full 
appropriation is not apportioned or utilized and a reserve fund is 
established. Under this provision, the apportioning official is 
authorized to establish reserves only to provide for contingencies or 
to effect savings, unless the reserve is specifically authorized by 
statute. 

At one time, this section was a battleground between the executive and 
legislative branches. The executive branch had relied on this portion 
of the Antideficiency Act to impound funds for general fiscal or 
economic policy reasons such as containment of federal spending and 
executive judgment of the relative merits, effectiveness, and 
desirability of competing federal programs (often referred to as 
"policy impoundments"). See 54 Comp. Gen. 453, 458 (1974); B-135564, 
July 26, 1973. 

Prior to 1974, the predecessor of 31 U.S.C. § 1512(c) contained rather 
expansive language to the effect that a reserve fund could be 
established pursuant to "other developments subsequent to the date on 
which [the] appropriation was made available." 31 U.S.C. § 665(c)(2) 
(1970 ed.). 

Despite this expansive language, the Comptroller General's position 
had been that the authority to establish reserves under the 
Antideficiency Act was limited to providing for contingencies or 
effecting savings which are in furtherance of, or at least consistent 
with, the purposes of an appropriation. B-130515, July 10, 1973. The 
Comptroller General did not interpret the law as authorizing a reserve 
of funds (i.e., an impoundment) based upon general economic, fiscal, 
or policy considerations that were extraneous to the individual 
appropriation or were in derogation of the appropriation's purpose. B-
125187, Sept. 11, 1973; B-130515, July 10, 1973. See also State 
Highway Commission of Missouri v. Volpe, 479 F.2d 1099, 1118 (8th Cir. 
1973), which held that the right to reserve funds in order to "effect 
savings" or due to "subsequent events," etc., must be considered in 
the context of the applicable appropriation statute. 

The Impoundment Control Act of 1974[Footnote 118] amended section 
1512(c) by eliminating the "other developments" clause and by 
prohibiting the establishment of appropriation reserves except as 
provided under the Antideficiency Act for contingencies or savings, or 
as provided in other specific statutory authority. The intent was to 
preclude reliance on section 1512(c) as authority for "policy 
impoundments." City of New Haven v. United States, 809 F.2d 900, 906 
(D.C. Cir. 1987); 54 Comp. Gen. 453 (1974); B-148898-0.M., Aug. 28, 
1974. 

The executive branch, however, continued to defer for policy reasons, 
arguing that section 1013 of the Impoundment Control Act provided 
authority, independent of the Antideficiency Act, to withhold funds 
from obligation temporarily for fiscal policy reasons. GAO agreed that 
this interpretation was consistent with the language of the 
Impoundment Control Act and with the statutory scheme, pointing out 
that Congress had reserved the power under the Impoundment Control Act 
to disapprove any deferral, particularly deferrals for fiscal policy 
reasons, as a counterweight to the President's power to defer. 54 
Comp. Gen. at 455. At that time, the Impoundment Control Act provided 
for disapproval using a one-house veto. This counterweight vanished 
when the Supreme Court held one-house legislative veto provisions 
unconstitutional. Immigration & Naturalization Service v. Chadha, 462 
U.S. 919 (1983). Accordingly, in a decision issued on January 20, 
1987, the U.S. Court of Appeals for the District of Columbia 
invalidated section 1013, which was the sole general legislative 
authority for policy deferrals.[Footnote 119] City of New Haven, 809 
F.2d at 902, 905-09. In September of 1987, Congress reenacted section 
1013(b) of the Impoundment Control Act, 2 U.S.C. § 684(b), without the 
unconstitutional legislative veto provision and reiterated that the 
same limits on appropriation reserves that appear in 31 U.S.C. § 
1512(c) are the sole justifications for deferrals. See Pub. L. No. 100-
119, § 206, 101 Stat. 754, 785 (Sept. 29, 1987). See Chapter 1, 
section D.3.b for a general discussion of impoundments and the 
Impoundment Control Act. 

The Comptroller General discussed examples of permissible (i.e., 
nonpolicy) reserves in 51 Comp. Gen. 598 (1972) and 51 Comp. Gen. 251 
(1971). The first decision concerned the provisions of a long-term 
charter of several tankers for the Navy. The contract contained 
options to renew the charter for periods of 15 years. In the event 
that the Navy declined to renew the charter short of a full 15-year 
period, the vessels were to be sold by a Board of Trustees, acting for 
the owners and bondholders. Any shortfall in the proceeds over the 
termination value was to be unconditionally guaranteed by the Navy. 
GAO held that it would not violate the Antideficiency Act to cover 
this contingent liability by setting up a reserve. 51 Comp. Gen. 598 
(1972). In 51 Comp. Gen. 251 (1971), GAO said that it was permissible 
to provide in regulations for a clause to be inserted in future 
contracts for payment of interest on delayed payments of a 
contractor's claim. Reserving sufficient funds from the appropriation 
used to support the contract to cover these potential interest costs 
would protect against potential Antideficiency Act violations. 

In 1981, the Community Services Administration established a reserve 
as a cushion against Antideficiency Act violations while the agency 
was terminating its operations. Grantees argued that the reserve 
improperly reduced amounts available for discretionary grants. In 
Rogers v. United States, 14 Cl. Ct. 39, 46-47 (1987), aff'd, 801 F.2d 
729 (Fed. Cir. 1988), cert. denied, 490 U.S. 1034 (1989), the court 
held that a reasonable reserve for contingencies was properly within 
the agency's discretion. 

c. Method of Apportionment: 

The remaining portions of 31 U.S.C. § 1512 are subsections (b) and 
(d), set forth below: 

"(b)(1) An appropriation subject to apportionment is apportioned by: 

"(A) months, calendar quarters, operating seasons, or other time 
periods; 

"(B) activities, functions, projects, or objects; or; 

"(C) a combination of the ways referred to in clauses (A) and (B) of 
this paragraph. 

"(d) An apportionment or reapportionment shall be reviewed at least 4 
times a year by the official designated in section 1513 of this title 
to make apportionments." 

Subsection (b) and (d) are largely technical, implementing the basic 
apportionment requirement of 31 U.S.C. § 1512(a). Section 1512(b) 
makes it clear that apportionments need not be made strictly on a 
monthly, quarterly, or other fixed time basis, nor must they be for 
equal amounts in each time period. The apportioning officer is free to 
take into account the "activities, functions, projects, or objects" of 
the program being funded and the usual pattern of spending for such 
programs in deciding how to apportion the funds. Absent some statutory 
provision to the contrary, OMB's determination is controlling. Thus, 
in Maryland Department of Human Resources v. United States Department 
of Health & Human Services, 854 F.2d 40 (4th Cir. 1988), the court 
upheld OMB's quarterly apportionment of social services block grant 
funds, rejecting the state's contention that it should receive its 
entire annual allotment at the beginning of the fiscal year. Section 
1512(d) requires a minimum of four reviews each year to enable the 
apportioning officer to make reapportionments or other adjustments as 
necessary. 

Conversely, OMB may decide to apportion all or most of an available 
appropriation at the outset of a fiscal year. In B-255529, Jan. 10, 
1994, GAO held that OMB's apportionments at the beginning of the 
fiscal year of the full amounts available for two State Department 
appropriation ("Contributions to International Organizations" and 
"Contributions for International Peacekeeping Activities") constituted 
an appropriate exercise of OMB's discretion. Quoting from an earlier 
opinion, B-152554, Feb. 17, 1972, the decision then observed that the 
amounts to be apportioned depended on the needs of the programs as 
determined by OMB: 

"It must be recognized that, with respect to a number of programs, 
particularly where grant or other assistance funds are involved, a 
large portion of the funds normally are obligated during the early 
part of the fiscal year. The pattern of obligations is much different 
than where, for example, an appropriation is primarily available for 
salaries and administrative expenses. In such case the expenditures 
would be comparatively constant throughout the year. The pattern of 
obligations, however, is primarily an administrative matter ... [for 
resolution through] the apportionment process." 

The decision pointed out that, according to the State Department, 
payments under the Contributions to International Organizations 
account traditionally were made in the first quarter of the fiscal 
year. Payments under the Peacekeeping account usually occurred as 
bills were received and funds were available, but the Department 
advised GAO that there was a large backlog of bills at the time funds 
became available, thereby justifying immediate apportionment of the 
entire annual appropriation.[Footnote 120] 

d. Control of Apportionments: 

Section 1513 of title 31, United States Code, specifies the 
authorities and timetables for making the apportionments or 
reapportionments of appropriations required by section 1512. Section 
1513(a) applies to appropriations of the legislative and judicial 
branches of the federal government, as well as appropriations of the 
International Trade Commission and the District of Columbia 
government.[Footnote 121] It assigns authority to apportion to the 
"official having administrative control" of the appropriation. 
[Footnote 122] Apportionment must be made 30 days before the start of 
the fiscal year for which the appropriation is made, or within 30 days 
after the enactment of the appropriation, whichever is later. The 
apportionment must be in writing. 

Section 1513(b) deals with apportionments for the executive branch. 
The President is designated as the apportioning authority. As we have 
seen, the function has been delegated to the Director, Office of 
Management and Budget (OMB).[Footnote 123] The Director of OMB has up 
to 20 days before the start of the fiscal year or 30 days after 
enactment of the appropriation act, whichever is later, to make the 
actual apportionment and notify the agency of the action taken. 31 
U.S.C. § 1513(b)(2). Again, the apportionments must be in writing. 
Although primary responsibility for a violation of section 1512 lies 
with the Director of OMB, the head of the agency concerned also may be 
found responsible if he or she fails to send the Director accurate 
information on which to base an apportionment. 

In B-163628, Jan. 4, 1974, GAO responded to a question from the 
chairman of a congressional committee about the power of OMB to 
apportion the funds of independent regulatory agencies, such as the 
Securities and Exchange Commission (SEC). The Comptroller General 
agreed with the chairman that independent agencies should generally be 
free from executive control or interference. The response then stated: 

"The apportionment power may not lawfully be used as a form of 
executive control or influence over agency functions. Rather, it may 
only be exercised by OMB in the manner and for the purposes prescribed 
in 31 U.S.C. § [1512]—i.e., to prevent obligation or expenditure in a 
manner which would give rise to a need for deficiency or supplemental 
appropriations, to achieve the most effective and economical use of 
appropriations and to establish reserves either to provide for 
contingencies or to effect savings which are in furtherance of or at 
least consistent with, the purposes of an appropriation. 

"As thus limited, the apportionment process serves a necessary 
purpose—-the promotion of economy and efficiency in the use of 
appropriations. 

"Since a useful purpose is served by OMB's proper exercise of the 
apportionment power, we do not believe that the potential for abuse of 
the power is sufficient to justify removing it from OMB."
Thus, the appropriations of independent regulatory agencies like the 
Securities and Exchange Commission (SEC) are subject to apportionment 
by OMB, but OMB may not lawfully use its apportionment power to 
compromise the independence of those agencies. 

The Impoundment Control Act may permit OMB, in effect, to delay the 
apportionment deadlines prescribed in 31 U.S.C. § 1513(b). For 
example, when the President sends a rescission message to Congress, 
the budget authority proposed to be rescinded may be withheld for up 
to 45 days pending congressional action on a rescission bill. 2 U.S.C. 
§§ 682(3), 683(b). In B-115398.33, Aug. 12, 1976, GAO responded to a 
congressional request to review a situation in which an apportionment 
had been withheld for more than 30 days after enactment of the 
appropriation act. The President had planned to submit a rescission 
message for some of the funds but was late in drafting and 
transmitting his message. If the full amount contained in the 
rescission message could be withheld for the entire 45-day period, and 
Congress ultimately declined to enact the full rescission, release of 
the funds for obligation would occur only a few days before the budget 
authority expired. The Comptroller General suggested that, where 
Congress has completed action on a rescission bill rescinding only a 
part of the amount proposed, OMB should immediately apportion the 
amounts not included in the rescission bill without awaiting the 
expiration of the 45-day period. See also B-115398.33, Mar. 5, 1976. 

e. Apportionments Requiring Deficiency Estimate: 

In our discussion of the basic requirement for apportionment, we quoted
31 U.S.C. § 1512(a) to the effect that appropriations must be 
apportioned "to prevent obligation or expenditure at a rate that would 
indicate a necessity for a deficiency or supplemental appropriation." 
The requirement that appropriations be apportioned so as to avoid the 
need for deficiency or supplemental appropriations is fleshed out in 
31 U.S.C. § 1515 (formerly subsection (e) of the Antideficiency Act): 

"(a) An appropriation required to be apportioned under section 1512 of 
this title may be apportioned on a basis that indicates the need for a 
deficiency or supplemental appropriation to the extent necessary to 
permit payment of such pay increases as may be granted pursuant to law 
to civilian officers and employees (including prevailing rate 
employees whose pay is fixed and adjusted under subchapter IV of 
chapter 53 of title 5) and to retired and active military personnel. 

"(b)(1) Except as provided in subsection (a) of this section, an 
official may make, and the head of an executive agency may request, an 
apportionment under section 1512 of this title that would indicate a 
necessity for a deficiency or supplemental appropriation only when the 
official or agency head decides that the action is required because of: 

"(A) a law enacted after submission to Congress of the estimates for 
an appropriation that requires an expenditure beyond administrative 
control; or; 

"(B) an emergency involving the safety of human life, the protection 
of property, or the immediate welfare of individuals when an 
appropriation that would allow the United States Government to pay, or 
contribute to, amounts required to be paid to individuals in specific 
amounts fixed by law or under formulas prescribed by law, is 
insufficient. 

"(2) If an official making an apportionment decides that an 
apportionment would indicate a necessity for a deficiency or 
supplemental appropriation, the official shall submit immediately a 
detailed report of the facts to Congress. The report shall be referred 
to in submitting a proposed deficiency or supplemental appropriation." 

Section 1515 thus provides certain exceptions to the requirement of 
section 1512(a) that apportionments be made in such manner as to 
assure that the funds will last throughout the fiscal year and there 
will be no necessity for a deficiency appropriation. Under subsection 
1515(a), deficiency apportionments are permissible if necessary to pay 
salary increases granted pursuant to law to federal civilian and 
military personnel. Under subsection 1515(b), apportionments can be 
made in an unbalanced manner (e.g., an entire appropriation could be 
obligated by the end of the second quarter) if the apportioning 
officer determines that (1) a law enacted subsequent to the 
transmission of budget estimates for the appropriation requires 
expenditures beyond administrative control, or (2) there is an 
emergency involving safety of human life, protection of property, or 
immediate welfare of individuals in cases where an appropriation for 
mandatory payments to those individuals is insufficient. 

Prior to 1957, what is now subsection 1515(b) prohibited only the 
making of an apportionment indicating the need for a deficiency or 
supplemental appropriation, so the only person who could violate this 
subsection was the Director of OMB. An amendment in 1957 made it 
equally a violation for an agency to request such an apportionment. 
See 38 Comp. Gen. 501 (1959). The exception in subsection 
1515(b)(1)(A) for expenditures "beyond administrative control" 
required by a statute enacted after submission of the budget estimate 
may be illustrated by statutory increases in compensation, although 
many of the cases would now be covered by subsection (a). We noted 
several of the cases in our consideration of when an obligation or 
expenditure is "authorized by law" for purposes of 31 U.S.C. § 
1341.[Footnote 124] Those cases established the rule that a mandatory 
increase is regarded as "authorized by law" so as to permit 
overobligation, whereas a discretionary increase is not. The same rule 
applies in determining when an expenditure is "beyond administrative 
control" for purposes of 31 U.S.C. § 1515(b). Thus, statutory pay 
increases for Wage Board employees granted pursuant to a wage survey 
meet the test. 39 Comp. Gen. 422 (1959); 38 Comp. Gen. 538, 542 
(1959). See also 45 Comp. Gen. 584, 587 (1966) (severance pay in 
fiscal year 1966).[Footnote 125] Discretionary increases, just as they 
are not "authorized by law" for purposes of 31 U.S.C. § 1341, are not 
"beyond administrative control" for purposes of section 1515(b). 44 
Comp. Gen. 89 (1964) (salary increases to Central Intelligence Agency 
employees); 31 Comp. Gen. 238 (1951) (pension increases to retired 
District of Columbia police and firefighters). 

The Wage Board exception was separately codified in 1957 and now 
appears at 31 U.S.C. § 1515(a), quoted above. Subsection 1515(a) 
reached its present form in 1987 when Congress expanded it to include 
pay increases granted pursuant to law to non-Wage Board civilian 
officers and employees and to retired and active military personnel. 
[Footnote 126] 

The "emergency" exceptions in subsection 1515(b)(1)(B) have not been 
discussed in GAO decisions, although a 1989 internal memorandum 
suggested that the exception would apply to Forest Service 
appropriations for fighting forest fires. B-230117-0.M., Feb. 8, 1989. 
The exceptions for safety of human life and protection of property 
appear to be patterned after identical exceptions in 31 U.S.C. § 1342 
(acceptance of voluntary services), so the case law under that section 
would likely be relevant for construing the scope of the exceptions 
under section 1515(b). See 43 Op. Att'y Gen. 293, 5 Op. Off. Legal 
Counsel 1, 9-10 (1981) ("as provisions containing the same language, 
enacted at the same time, and aimed at related purposes, the emergency 
provisions or sections 1342 and 1515(b)(1)(B) "should be deemed in 
pari materia and given a like construction"); Memorandum for the 
General Counsel, United States Marshals Service, Continuation of 
Federal Prisoner Detention Efforts in the Face of a USMS Appropriation 
Deficiency, OLC Opinion, Apr. 5, 2000 ("we think it clear that, if an 
agency's functions fall within § 1342's exception for emergency 
situations, the standard for the 'emergency' exception under
§ [1515(b)(1)(B)] also will be met"). See also Memorandum for the 
Director, Office of Management and Budget, Government Operations in 
the Event of a Lapse in Appropriations, OLC Opinion, Aug. 16, 1995, at 
7, fn. 6. 

It is less obvious that the converse would necessarily be true—that 
is, that an "emergency" for purposes of subsection 1515(b)(1)(B) 
automatically qualifies as an "emergency" for purposes of section 
1342. As we pointed out in discussing section 1342, this section was 
amended in 1990 to add the following language: 

"As used in this section, the term 'emergencies involving the safety 
of human life or the protection of property' does not include ongoing, 
regular functions of government the suspension of which would not 
imminently threaten the safety of human life or the protection of 
property." 

Such language was not added to subsection 1515(b)(1)(B). Thus, on its 
face, subsection 1515(b)(1)(B) may embody at least a slightly more 
flexible standard of "emergency" than section 1342, although we have 
found no cases addressing this point. 

Importantly, the exceptions in 31 U.S.C. § 1515(b) are exceptions only 
to the prohibition against malting or requesting apportionments 
requiring deficiency estimates; they are not exceptions to the basic 
prohibitions in 31 U.S.C. § 1341 against obligating or spending in 
excess or advance of appropriations. The point was discussed at some 
length in B-167034, Sept. 1, 1976. Legislation had been proposed in 
the Senate to repeal 41 U.S.C. § 11 (the Adequacy of Appropriations 
Act),[Footnote 127] which prohibits the malting of a contract, not 
otherwise authorized by law, unless there is an appropriation 
"adequate to its fulfillment," except in the case of contracts made by 
a military department for "clothing, subsistence, forage, fuel, 
quarters, transportation, or medical and hospital supplies." The 
question was whether, if 41 U.S.C. § 11 were repealed, the military 
departments would have essentially the same authority under section 
1515(b). 

The Defense Department expressed the view that section 1515(b) would 
not be an adequate substitute for the 41 U.S.C. § 11 exception which 
allows the incurring of obligations for limited purposes even though 
the applicable appropriation is insufficient to cover the expenses at 
the time the commitment is made. Defense commented as follows:
"The authority to apportion funds on a deficiency basis in [31 U.S.C. 
§ 1515(b)] does not, as alleged, provide authority to incur a 
deficiency. It merely authorizes obligating funds at a deficiency rate 
under certain circumstances, e.g., a $2,000,000 appropriation can be 
obligated in its entirety at the end of the third quarter, but it does 
not provide authority to obligate one dollar more than $2,000,000." 

Letter from the Deputy Secretary of Defense to the Chairman, House 
Armed Services Committee, Apr. 2, 1976 (quoted in B-167034, Sept. 1, 
1976). 

The Comptroller General agreed with the Deputy Secretary, stating: 

"[Section 1515(b)] in no way authorizes an agency of the Government 
actually to incur obligations in excess of the total amount of money 
appropriated for a period. It only provides an exception to the 
general apportionment rule set out in [31 U.S.C. § 1512(a)] that an 
appropriation be allocated so as to insure that it is not exhausted
prematurely. [Section 1515(b)] says nothing about increasing the total 
amount of the appropriation itself or authorizing the incurring of 
obligations in excess of the total amount appropriated. On the 
contrary, as noted above, apportionment only involves the subdivision of
appropriations already enacted by Congress. It necessarily follows 
that the sum of the parts, as apportioned, could not exceed the total 
amount of the appropriations being apportioned. 

"Any deficiency that an agency incurs where obligations exceed total 
amounts appropriated, including a deficiency that arises in a 
situation where it was determined that one of the exceptions set forth 
in [section 1515(b)] was applicable, would constitute a violation of 
31 U.S.C. § [1341(a)] ...." 

B-167034, Sept. 1, 1976. 

f. Exemptions from Apportionment Requirement: 

A number of exemptions from the apportionment requirement, formerly 
found in subsection (f) of the Antideficiency Act, are now gathered in 
31 U.S.C. § 1516: 

"An official designated in section 1513 of this title to make 
apportionments may exempt from apportionment: 

"(1) a trust fund or working fund if an expenditure from the fund has 
no significant effect on the financial operations of the United States 
Government; 

"(2) a working capital fund or a revolving fund established for 
intragovernmental operations; 

"(3) receipts from industrial and power operations available under 
law; and; 

"(4) appropriations made specifically for: 

"(A) interest on, or retirement of, the public debt; 

"(B) payment of claims, judgments, refunds, and drawbacks; 

"(C) items the President decides are of a confidential nature; 

"(D) payment under a law requiring payment of the total amount of the 
appropriation to a designated payee; and; 

"(E) grants to the States under the Social Security Act (42 U.S.C. 301 
et seq.)." 

Section 1516 is largely self-explanatory and the various enumerated 
exceptions appear to be readily understood. Note that the statute does 
not make the exemptions mandatory. It merely authorizes them, within 
the discretion of the apportioning authority (OMB). OMB's implementing 
instructions, OMB Circular No. A-11, Preparation, Submission, and 
Execution of the Budget, part 4, § 120 (June 21, 2005), have not 
adopted all of the exemptions permitted under the statute. For 
example, the Circular's list of funds exempted from apportionment 
pursuant to 31 U.S.C. § 1516 does not include trust funds or 
intragovernmental revolving funds. See OMB Cir. No. A-11, at § 120.7. 

In addition, 10 U.S.C. § 2201(a) authorizes the President to exempt 
appropriations for military functions of the Defense Department from 
apportionment upon determining "such action to be necessary in the 
interest of national defense." 

Another exemption, this one mandatory, is contained in 31 U.S.C.
§ 1511(b)(3): appropriations for "the Senate, the House of 
Representatives, a committee of Congress, a member, officer, employee, 
or office of either House of Congress, or the Office of the Architect 
of the Capitol or an officer or employee of that Office" are exempt 
from the apportionment requirement. The remainder of the legislative 
branch along with the judicial branch are subject to apportionment. 
See 31 U.S.C. § 1513(a). 

g. Administrative Division of Apportionments: 

Thus far, we have reviewed the provisions of the Antideficiency Act 
directed at the appropriation level and the apportionment level. The 
law also addresses agency subdivisions. 

The first provision to note is 31 U.S.C. § 1513(d): 

"An appropriation apportioned under this subchapter may
be divided and subdivided administratively within the limits of the 
apportionment." 

Thus, administrative subdivisions are expressly authorized. The 
precise pattern of subdivisions will vary based on the nature and 
scope of activities funded under the apportionment and, to some 
extent, agency preference. The levels of subdivision below the 
apportionment level are, in descending order, allotment, suballotment, 
and allocation. See OMB Circular No. A-11, Preparation, Submission, 
and Execution of the Budget, § 20.3 (June 21, 2005), which notes under 
its definition of apportionment: "An apportionment may be further 
subdivided by an agency into allotments, suballotments, and 
allocations." As we will see later in our discussion of 31 U.S.C. § 
1517(a), there are definite Antideficiency Act implications flowing 
from how an agency structures its fund control system. 

The next relevant statute is 31 U.S.C. § 1514:[Footnote 128] 

"(a) The official having administrative control of an
appropriation available to the legislative branch, the judicial 
branch, the United States International Trade Commission, or the 
District of Columbia government, and, subject to the approval of the 
President, the head of each executive agency (except the Commission) 
shall prescribe by regulation a system of administrative control not
inconsistent with accounting procedures prescribed under law. The 
system shall be designed to: 

"(1) restrict obligations or expenditures from each appropriation to 
the amount of apportionments or reapportionments of the appropriation; 
and; 

"(2) enable the official or the head of the executive agency to fix 
responsibility for an obligation or expenditure exceeding an 
apportionment or reapportionment. 

"(b) To have a simplified system for administratively dividing 
appropriations, the head of each executive agency (except the 
Commission) shall work toward the objective of financing each 
operating unit, at the highest practical level, from not more than one 
administrative division for each appropriation affecting the unit." 

Section 1514 is designed to ensure that the agencies in each branch of 
the government keep their obligations and expenditures within the 
bounds of each apportionment or reapportionment. The official in each 
agency who has administrative control of the apportioned funds is 
required to set up, by regulation, a system of administrative controls 
to implement this objective. The system must be consistent with any 
accounting procedures prescribed by or pursuant to law, and must be 
designed to (1) prevent obligations and expenditures in excess of 
apportionments or reapportionments, and (2) fix responsibility for any 
obligation or expenditure in excess of an apportionment or 
reapportionment.[Footnote 129] Agency fund control regulations in the 
executive branch must be approved by OMB. See OMB Cir. No. A-11, pt. 
4, § 150.7. 

Subsection (b) of 31 U.S.C. § 1514 was added in 1956[Footnote 130] and 
was intended to simplify agency allotment systems. Prior to 1956, it 
was not uncommon for agencies to divide and subdivide their 
apportionments into numerous "pockets" of obligational authority 
called "allowances." Obligating or spending more than the amount of 
each allowance was a violation of the Antideficiency Act as it then 
existed. The Second Hoover Commission (Commission on Organization of 
the Executive Branch of the Government) had recommended simplification 
in 1955. The Senate and House Committees on Government Operations 
agreed. Both committees reported as follows: 

"The making of numerous allotments which are further divided and 
suballotted to lower levels leads to much confusion and inflexibility 
in the financial control of appropriations or funds as well as 
numerous minor violations of [the Antideficiency Act]." 

S. Rep. No. 84-2265, at 9 (1956); H.R. Rep. No. 84-2734, at 7 (1956). 
The result was what is now 31 U.S.C. § 1514(b).[Footnote 131] 

As noted, one of the objectives of 31 U.S.C. § 1514 is to enable the 
agency head to fix responsibility for obligations or expenditures in 
excess of apportionments. The statute encourages agencies to fix 
responsibility at the highest practical level, but does not otherwise 
prescribe precisely how this is to be done. Apart from subsection (b), 
the substance of section 1514 derives from a 1950 amendment to the 
Antideficiency Act.[Footnote 132] In testimony on that legislation, 
the Director of the then Bureau of the Budget stated: 

"At the present time, theoretically, I presume the agency head is 
about the only one that you could really hold responsible for 
exceeding [an] apportionment. The revised section provides for going 
down the line to the person who creates the obligation against the 
fund and fixes the responsibility on the bureau head or the division 
head, if he is the one who creates the obligation."[Footnote 133] 

Thus, depending on the agency regulations and the level at which 
administrative responsibility is fixed, the violating individual could 
be the person in charge of a major agency bureau or operating unit, or 
it could be a contracting officer or finance officer. 

Identifying the person responsible for a violation will be easy in 
probably the majority of cases. However, where there are many 
individuals involved in a complex transaction, and particularly where 
the actions producing the violation occurred over a long period of 
time, pinpointing responsibility can be much more difficult. Hopkins 
and Nutt, in their study of the Antideficiency Act, present the 
following as a sensible approach: 

"Generally, [the individual to be held responsible] will be the 
highest ranking official in the decision-making process who had 
knowledge, either actual or constructive, of (1) precisely what 
actions were taken and (2) the impropriety or at least 
questionableness of such actions. There will be officials who had 
knowledge of either factor. But the person in the best and perhaps 
only position to prevent the ultimate error—and thus the one who must 
be held accountable—is the highest one who is aware of both.[Footnote 
134] 

Thus, Hopkins and Nutt conclude, where multiple individuals are 
involved in a violation, the individual to be held responsible "must 
not be too remote from the cause of the violation and must be in a 
position to have prevented the violation from occurring."[Footnote 135] 

h. Expenditures in Excess of Apportionment: 

The former subsection (h) of the Antideficiency Act, now 31 U.S.C. § 
1517(a), provides: 

"(a) An officer or employee of the United States Government or of the 
District of Columbia government may not make or authorize an 
expenditure or obligation exceeding: 

"(1) an apportionment; or; 

"(2) the amount permitted by regulations prescribed under section 
1514(a) of this title." 

Section 1517(a) must be read in conjunction with sections 1341, 1512, 
and 1514, previously discussed. 

Subsection 1517(a)(1) prohibits obligations or expenditures in excess 
of an apportionment. Thus, an agency must observe the limits of its 
apportionments just as it must observe the limits of its 
appropriations. It follows that an agency cannot obligate or expend 
appropriations before they have been apportioned. Thus, GAO stated in 
B-290600, July 10, 2002: 

"The Antideficiency Act prohibits ... the making or the authorizing of 
obligations or expenditures in advance of, or in excess of, available 
appropriations. 31 U.S.C. § 1341. An agency may obligate an 
appropriation only after OMB has apportioned it to the agency." 

Since the Antideficiency Act requires an apportionment before an 
agency can obligate the appropriation, 31 U.S.C. § 1512(a), an 
obligation in advance of an apportionment violates the Act. See B-
255529, Jan. 10, 1994. In other words, if zero has been apportioned, 
zero is available for obligation or expenditure.[Footnote 136] When an 
agency anticipates a need to obligate appropriations upon their 
enactment, it may request (but not receive) an apportionment before a 
regular appropriation or continuing resolution has been enacted. 
Typically, for regular appropriation acts, agencies submit their 
apportionment requests to OMB by August 21 or within 10 calendar days 
after enactment of the appropriation, whichever is later. See OMB 
Circular No. A-11, Preparation, Submission, and Execution of the 
Budget, § 120.30 (June 21, 2005). OMB permits agencies to submit 
requests on the day Congress completes action on the appropriation 
bill. Id. § 120.34. OMB encourages agencies to begin their preparation 
of apportionment requests as soon as the House and Senate have reached 
agreement on funding levels (id. § 120.30) and to discuss the proposed 
request with OMB representatives (id. § 120.34). OMB will entertain 
expedited requests and, for emergency funding needs, may approve the 
apportionment request by telephone or fax Id. For continuing 
resolutions, OMB typically expedites the process by malting 
"automatic" apportionments under continuing resolutions. See B-255529, 
Jan. 10, 1994; OMB Cir. No. A-11, § 123.5. 

Under some circumstances, an agency may have a legal duty to seek an 
additional apportionment from OMB. Blackhawk Heating & Plumbing Co. v. 
United States, 622 F.2d 539, 552 n.9 (Ct. Cl. 1980); Berends v. Butz, 
357 E Supp. 143, 155-56 (D. Minn. 1973). In Berends v. Butz, the 
Secretary of Agriculture had terminated an emergency farm loan 
program, allegedly due to a shortage of funds. The court found the 
termination improper and directed reinstatement of the program. Since 
the shortage of funds related to the amount apportioned and not the 
amount available under the appropriation, the court found that the 
Secretary had a duty to request an additional apportionment in order 
to continue implementing the program. The case does not address the 
nature and extent of any duty OMB might have in response to such a 
request. 

Subsection 1517(a)(2) makes it a violation to obligate or expend in 
excess of an administrative subdivision of an apportionment to the 
extent provided in the agency's fund control regulations prescribed 
under section 1514. The importance of 31 U.S.C. § 1514 becomes much 
clearer when it is read in conjunction with 31 U.S.C. § 1517(a)(2). 
Section 1514 does not prescribe the level of fiscal responsibility for 
violations below the apportionment level. It merely recommends that 
the agency set the level at the highest practical point and suggests 
no more than one subdivision below the apportionment level. The agency 
thus, under the statute, has a measure of discretion. If it chooses to 
elevate overobligations or overexpenditures of lower-tier subdivisions 
to the level of Antideficiency Act violations, it is free to do so in 
its fund control regulations. 

At this point, it is important to return to OMB Circular No. A-11. 
Since agency fund control regulations must be approved by OMB (id. § 
150.7), OMB has a role in determining what levels of administrative 
subdivision should constitute Antideficiency Act violations. Under OMB 
Circular No. A-11, § 145.2, overobligation or overexpenditure of an 
allotment or suballotment are always violations. Overobligation or 
overexpenditure of other administrative subdivisions are violations 
only if and to the extent specified in the agency's fund control 
regulations. See 31 U.S.C. §§ 1514(a), 1517(a)(2). 

In 37 Comp. Gen. 220 (1957), GAO considered proposed fund control 
regulations of the Public Housing Administration. The regulations 
provided for allotments as the first subdivision below the 
apportionment level. They then authorized the further subdivision of 
allotments into "allowances," but retained responsibility at the 
allotment level. The "allowances" were intended as a means of meeting 
operational needs rather than an apportionment control device. GAO 
advised that this proposed structure conformed to the purposes of 31 
U.S.C. § 1514, particularly in light of the 1956 addition of section 
1514(b), and that expenditures in excess of an "allowance" would not 
constitute Antideficiency Act violations. 

For further illustration, see 35 Comp. Gen. 356 (1955) (overobligation 
of allotment stemming from misinterpretation of regulations); B-95136, 
Aug. 8, 1979 (overobligation of regional allotments would constitute
reportable violation unless sufficient unobligated balance existed at 
central account level to adjust the allotments); B-179849, Dec. 31, 
1974 (overobligation of allotment held a violation of section 1517(a) 
where agency regulations specified that allotment process was the 
"principal means whereby responsibility is fixed for the conduct of 
program activities within the funds available"); B-114841.2-0.M., Jan. 
23, 1986 (no violation in exceeding allotment subdivisions termed 
"work plans"); B-242974.6, Nov. 26, 1991 (nondecision memorandum) 
(under Defense Department regulations, overobligations of 
administrative subdivisions of funds that are exempt from 
apportionment do not constitute Antideficiency Act violations.). 

5. Penalties and Reporting Requirements: 

a. Administrative and Penal Sanctions: 

Violations of the Antideficiency Act are subject to sanctions of two 
types, administrative and penal. The Antideficiency Act is the only 
one of the title 31, United States Code, fiscal statutes to prescribe 
penalties of both types, a fact which says something about 
congressional perception of the Act's importance. 

An officer or employee who violates 31 U.S.C. § 1341(a) 
(obligate/expend in excess or advance of appropriation), section 1342 
(voluntary services prohibition), or section 1517(a) (obligate/expend 
in excess of an apportionment or administrative subdivision as 
specified by regulation) "shall be subject to appropriate 
administrative discipline including, when circumstances warrant, 
suspension from duty without pay or removal from office." 31 U.S.C. §§ 
1349(a), 1518. For a case in which an official was reduced in grade 
and reassigned to other duties, see Duggar v. Thomas, 550 F. Supp. 498 
(D.D.C. 1982) (upholding the agency's action against a charge of 
discrimination). 

In addition, an officer or employee who "knowingly and willfully" 
violates any of the three provisions cited above "shall be fined not 
more than $5,000, imprisoned for not more than 2 years, or both." 31 
U.S.C. §§ 1350, 1519. As far as GAO is aware, it appears that no 
officer or employee has ever been prosecuted, much less convicted, for 
a violation of the Antideficiency Act as of this writing. The knowing 
and willful failure to record an overobligation in order to conceal an 
Antideficiency Act violation is also a criminal offense. See 71 Comp. 
Gen. 502, 509-10 (1992) (discussing several relevant criminal 
provisions in title 18, United States Code). 

Earlier in this chapter, we pointed out that factors such as the 
absence of bad faith or the lack of intent to commit a violation are 
irrelevant for purposes of determining whether a violation has 
occurred. However, intent is relevant in evaluating the assessment of 
penalties. Note that the criminal penalties are linked to a 
determination that the law was "knowingly and willfully" violated, but 
the administrative sanction provisions do not contain similar 
language. Thus, intent or state of mind may (and probably should) be 
taken into consideration when evaluating potential administrative 
sanctions (whether to assess them and, if so, what type), but must be 
taken into consideration in determining applicability of the criminal 
sanctions. Understandably, the provisions for fines and/or jail are 
intended to be reserved for particularly flagrant violations. 

Finally, the administrative and penal sanctions apply only to 
violations of the three provisions cited-31 U.S.C. §§ 1341(a), 1342, 
and 1517(a). They do not, for example, apply to violations of 31 
U.S.C. § 1512 (requiring that all appropriations be administratively 
apportioned so as to ensure obligation and expenditure at a controlled 
rate which will prevent deficiencies from arising before the end of a 
fiscal year). 36 Comp. Gen. 699 (1957). 

b. Reporting Requirements: 

Once it is determined that there has been a violation of 31 U.S.C. § 
1341(a), 1342, or 1517(a), the agency head "shall report immediately 
to the President and Congress all relevant facts and a statement of 
actions taken." 31 U.S.C. §§ 1351, 1517(b). Further instructions on 
preparing the reports may be found in OMB Circular No. A-11, 
Preparation, Submission, and Execution of the Budget, § 145 (June 21, 
2005). The reports are to be signed by the agency head. Id. § 145.7. 
The report to the President is to be forwarded through the Director of 
OMB. Id. 

In the Consolidated Appropriations Act, 2005, Congress amended the 
Antideficiency Act to add that the heads of executive branch agencies 
and the Mayor of the District of Columbia shall also transmit "[a] 
copy of each report ... to the Comptroller General on the same date 
the report is transmitted to the President and Congress."[Footnote 137] 

The report is to include all pertinent facts and a statement of all 
actions taken to address and correct the Antideficiency Act violation 
(any administrative discipline imposed, referral to the Justice 
Department where appropriate, new safeguards imposed, etc.). An agency 
also should include a request for a supplemental or deficiency 
appropriation when needed. It is also understood that the agency will 
do everything it can lawfully do to correct or mitigate the financial 
effects of the violation. For example, when the Fish and Wildlife 
Service improperly entered into contracts for legal services, we 
explained that there were a number of ways the Department of Interior 
could correct the Service's Antideficiency Act violations if unable to 
obtain a deficiency appropriation of the budget authority needed to 
cover amounts the Service paid to these contractors, including 
ratifying the contracts and covering their costs out of unobligated 
balances of the applicable fiscal year appropriation, or paying the 
contractors on a quantum meruit basis[Footnote 138] out of unobligated 
balances. B-290005, July 1, 2002. See also B-255831, July 7, 1995; 55 
Comp. Gen. 768, 772 (1976); B-223857, Feb. 27, 1987; B-114841.2-0.M., 
Jan. 23, 1986. In view of the explicit provisions of 31 U.S.C. § 1351, 
there is no private right of action for declaratory, mandatory, or 
injunctive relief under the Antideficiency Act. Thurston v. United 
States, 696 E Supp. 680 (D.D.C. 1988). 

Factors such as mistake, inadvertence, lack of intent, or the minor 
nature of a violation do not affect the duty to report. For example, 
the Office of Management and Budget (OMB) and the Air Transportation 
Stabilization Board (ATSB) were required to report an Antideficiency 
Act violation when, as discussed in section C.2 above, OMB erroneously 
apportioned, and ATSB erroneously obligated, funds to cover the 
subsidy cost of a loan guarantee prior to the availability of budget 
authority. B-290600, July 10, 2001. Of course, if the agency feels 
there are extenuating circumstances, it is entirely appropriate to 
include them in the report. 35 Comp. Gen. 356 (1955). 

What if GAO uncovers a violation but the agency thinks GAO is wrong? 
The agency must still make the required reports, and must include an 
explanation of its disagreement. OMB Cir. No. A-11, § 145. See also 
GAO, Anti-Deficiency Act: Agriculture's Food and Nutrition Service 
Violates the Anti-Deficiency Act, GAO/AFMD-87-20 (Washington, D.C.: 
Mar. 17, 1987). 

6. Funding Gaps: 

The term "funding gap" refers to a period of time between the 
expiration of an appropriation and the enactment of a new one. A 
funding gap is one of the most difficult fiscal problems a federal 
agency may have to face. As our discussion here will demonstrate, the 
case law reflects an attempt to forge a workable solution to a bad 
situation. 

Funding gaps occur most commonly at the end of a fiscal year when new 
appropriations, or a continuing resolution, have not yet been enacted. 
In this context, a gap may affect only a few agencies (if, for 
example, only one appropriation act remains unenacted as of October 
1), or the entire federal government. A funding gap may also occur if 
a particular appropriation becomes exhausted before the end of the 
fiscal year, in which event it may affect only a single agency or a 
single program, depending on the scope of the appropriation. In the 
latter case the lack of funds occurs as a consequence of unforeseen 
circumstances beyond the agency's control as opposed to the exhaustion 
of appropriations as a result of poor management. 

Funding gaps occur for a variety of reasons. For one thing, the 
complexity of the budget and appropriations process makes it difficult 
at best for Congress and the President to get everything done on time. 
Add to this the enormity of some programs and the need to address 
budget deficits, and the scope of the problem becomes more apparent. 
Also, funding gaps are perhaps an inevitable reflection of the 
political process. 

As GAO has pointed out, funding gaps, actual or threatened, are both 
disruptive and costly.[Footnote 139] They also produce difficult legal 
problems under the Antideficiency Act. The basic question, easy to 
state but not quite as easy to answer, is—what is an agency permitted 
or required to do when faced with a funding gap? Can it continue with 
"business as usual," must it lock up and go home, or is there some 
acceptable middle ground? 

In 1980, a congressional subcommittee asked GAO whether agency heads 
could legally permit employees to come to work when the applicable 
appropriation for salaries had expired and Congress had not yet 
enacted either a regular appropriation or a continuing resolution for 
the next fiscal year. The Comptroller General replied in B-197841, 
Mar. 3, 1980, that 31 U.S.C. §§ 1341(a) and 1342 were both violated if 
agency employees reported for work under those circumstances. 
Permitting the employees to come to work would result in an obligation 
to pay salary for the time worked, an obligation in advance of 
appropriations in violation of section 1341(a). With respect to 
section 1342, no one was suggesting that the employees were offering 
to work gratuitously, even assuming they could lawfully do so, which 
for the most part they cannot. The fact that employees were willing to 
take the risk that the necessary appropriation would eventually be 
enacted did not avoid the violation. Clearly, the employees still 
expected to be paid eventually. "During a period of expired 
appropriations," the Comptroller General stated, "the only way the 
head of an agency can avoid violating the Antideficiency Act is to 
suspend the operations of the agency and instruct employees not to 
report to work until an appropriation is enacted." B-197841, at 3. 

Notwithstanding the literal effect of the Antideficiency Act, however, 
the Comptroller General went on to observe in B-197841, "[W]e do not 
believe that the Congress intends that federal agencies be closed 
during periods of expired appropriations." In this regard, the opinion 
pointed out that at the beginning of fiscal year 1980, GAO had 
prepared an internal memorandum to address its own operations in the 
event of a funding gap. The memorandum said, in effect, that employees 
could continue to come to work, but that operations would have to be 
severely restricted. No new obligations could be incurred for 
contracts or small purchases of any kind, and of course the employees 
could not actually be paid until appropriations were enacted. The 
opinion further noted that the then chairman of the Senate 
Appropriations Committee had placed the 1980 GAO memorandum in the 
Congressional Record, and had described it as providing "common sense 
guidelines."[Footnote 140] The opinion also pointed to the fact that 
when Congress enacted appropriations following a funding gap, it 
generally made the appropriations retroactive to the beginning of the 
fiscal year and included language ratifying obligations incurred 
during the funding gap. 

"It thus appears," the opinion concluded, "that the Congress expects 
that the various agencies of the Government will continue to operate 
and incur obligations during a period of expired appropriations." 
Nevertheless, the opinion conceded that this approach would "legally 
produce widespread violations of the Antideficiency Act." B-197841, at 
4. Therefore, the opinion reiterated GAO's support at that time for 
legislation then pending that would provide permanent statutory 
authority to continue the pay of federal employees during funding 
gaps. Id.[Footnote 141] 

Less than two months after GAO issued B-197841, the Attorney General 
issued his opinion to the President. The Attorney General essentially 
agreed with GAO's analysis that permitting employees to work during a 
funding gap would violate the Antideficiency Act, but concluded 
further that the approach outlined in the GAO internal memorandum went 
beyond what the Act permitted. 43 Op. Att'y Gen. 224, 4A Op. Off. 
Legal Counsel 16 (1980). The opinion stated: 

"There is nothing in the language of the Antideficiency Act or in its 
long history from which any exception to its terms during a period of 
lapsed appropriations may be inferred.... 

"First of all ..., on a lapse in appropriations, federal agencies may 
incur no obligations that cannot lawfully be funded from prior 
appropriations unless such obligations are otherwise authorized by 
law. There are no exceptions to this rule under current law, even 
where obligations incurred earlier would avoid greater costs to the 
agencies should appropriations later be enacted. 

"Second, the Department of Justice will take actions to enforce the 
criminal provisions of the Act in appropriate cases in the future when 
violations of the Antideficiency Act are alleged. This does not mean 
that departments and agencies, upon a lapse in appropriations, will be 
unable logistically to terminate functions in an orderly way.... 
Authority may be inferred from the Antideficiency Act itself for 
federal officers to incur those minimal obligations necessary to 
closing their agencies." 

4A Op. Off. Legal Counsel at 19, 20. 

This opinion stands for the proposition that agencies had little 
choice but to lock up and go home. A second opinion, 43 Op. Att'y Gen. 
293, 5 Op. Off. Legal Counsel 1 (1981), went into much more detail on 
possible exceptions and should be read in conjunction with the 1980 
opinion. 

As set forth in the 1981 Attorney General opinion, the exceptions fall 
into two broad categories. The first category is obligations 
"authorized by law." Within this category, there are four types of 
exceptions: 

* Activities funded with appropriations that do not expire at the end of
the fiscal year, that is, multiple year and no-year appropriations. 
[Footnote 142] 

* Activities authorized by statutes that expressly permit obligations 
in advance of appropriations, such as contract authority (see section 
C.2.g of this chapter). 

* Activities "authorized by necessary implication from the specific 
terms of duties that have been imposed on, or of authorities that have 
been invested in, the agency." To take the example given in the 
opinion, there will be cases where benefit payments under an 
entitlement program are funded from other than 1-year appropriations 
(e.g., a trust fund), but the salaries of personnel who administer the 
program are funded by 1-year money. As long as money for the benefit 
payments remains available, administration of the program is, by 
necessary implication, "authorized by law," unless the entitlement 
legislation or its legislative history provides otherwise or Congress 
takes affirmative measures to suspend or terminate the program. 

* Obligations "necessarily incident to presidential initiatives 
undertaken within his constitutional powers," for example, the power 
to grant pardons and reprieves. This same rationale would apply to 
legislative branch agencies that incur obligations "necessary to 
assist the Congress in the performance of its constitutional duties." 
B-241911, Oct. 23, 1990 (nondecision letter). 

The second broad category reflected the exceptions authorized under 31 
U.S.C. § 1342—emergencies involving the safety of human life or the 
protection of property (see also the discussion of this provision in 
section C.3.d of this chapter). The Attorney General suggested the 
following rules for interpreting the scope of this exception:
"First, there must be some reasonable and articulable connection 
between the function to be performed and the safety of human life or 
the protection of property. Second, there must be some reasonable 
likelihood that the safety of human life or the protection of property 
would be compromised, in some degree, by delay in the performance of 
the function in question." 

5 Op. Off. Legal Counsel at 8. 

The Attorney General then cited the identical exception language in 
the deficiency apportionment prohibition of 31 U.S.C. § 1515, and 
noted that the Office of Management and Budget followed a similar 
approach in granting deficiency apportionments over the 
years.[Footnote 143] Given the wide variations in agency activities, 
it would not be feasible to attempt an advance listing of functions or 
activities that might qualify under this exception. Accordingly, the 
Attorney General made the following recommendation: 

"To erect the most solid foundation for the Executive Branch's 
practice in this regard, I would recommend that, in preparing 
contingency plans for periods of lapsed appropriations, each 
government department or agency provide for the Director of the Office 
of Management and Budget some written description, that could be 
transmitted to Congress, of what the head of the agency, assisted by 
its general counsel, considers to be the agency's emergency functions." 

5 Op. Off. Legal Counsel at 11. 

Lest this approach be taken too far, Congress added the following 
sentence to 31 U.S.C. § 1342: 

"As used in this section, the term 'emergencies involving the safety 
of human life or the protection of property' does not include ongoing, 
regular functions of government the suspension of which would not 
imminently threaten the safety of human life or the protection of 
property." 

Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, § 
13213(b), 104 Stat. 1388, 1388-621 (Nov. 5, 1990). 

The conference report on the 1990 legislation explained the intent:
"The conference report also makes conforming changes to title 31 of 
the United States Code to make clear that... ongoing, regular 
operations of the Government cannot be sustained in the absence of 
appropriations, except in limited circumstances. These changes guard 
against what the conferees believe might be an overly broad 
interpretation of an opinion of the Attorney General issued on January 
16, 1981, regarding the authority for the continuance of Government 
functions during the temporary lapse of appropriations, and affirm 
that the constitutional power of the purse resides with Congress." 

H.R. Conf. Rep. No. 101-964, at 1170 (1990). 

The Ninth Circuit Court of Appeals added to the list of exceptions, 
holding the suspension of the civil jury trial system for lack of 
funds unconstitutional. Armster v. United States District Court, 792 
F.2d 1423 (9th Cir. 1986). Faced with the potential exhaustion of 
appropriations for juror fees, the Administrative Office of the United 
States Courts, at the direction of the Judicial Conference of the 
United States, had sent a memorandum to all district court judges 
advising that civil jury trials would have to be suspended until more 
money was available.[Footnote 144] Basing its holding on the 
Constitution and expressly declining to rule on the Antideficiency 
Act, the court held that a suspension for more than a "most minimal" 
time violated the seventh amendment. Id. at 1430. See also Hobson v. 
Brennan, 637 E Supp. 173 (D.D.C. 1986). The court said that "we do not 
hold that the Anti-Deficiency Act requires the result suggested by the 
Administrative Office. If it did, its commands would, of course, have 
to yield to those of the Constitution."[Footnote 145] Armster, 792 
F.2d at 1430 n.13. 

Since the appropriation was not yet actually exhausted, and since 
there was still ample time for Congress to provide additional funds, 
the court noted that its decision did not amount to ordering Congress 
to appropriate money. The court noted, but did not address, the far 
more difficult question of what would happen if the appropriation 
became exhausted and Congress refused to appropriate additional funds. 
Armster, 792 F.2d at 1430-31 and 1431 n.14. 

This, then, is the basic framework. There are a number of exceptions 
to the Antideficiency Act which would permit certain activities to 
continue during a funding gap. For activities not covered by any of 
the exceptions, however, the agency must proceed with prompt and 
orderly termination or violate the Act and risk invocation of the 
criminal sanctions. A very brief restatement may be found in 6 Op. 
Off. Legal Counsel 555 (1982). 

Within this framework, GAO and the Justice Department addressed a 
number of specific problems agencies encountered in coming to grips 
with funding gaps during the 1980s and early 1990s. For example, 
toward the end of fiscal year 1982, the President vetoed a 
supplemental appropriations bill. As a result, the Defense Department 
did not have sufficient funds to meet the military payroll. The total 
payroll obligation consisted of (1) the take-home pay of the 
individuals, and (2) various items the employing agency was required 
to withhold and transfer to someone else, such as federal income tax 
and Social Security contributions. The Treasury Department published a 
change to its regulations permitting a temporary deferral of the due 
date for payment of the withheld items, and the Defense Department, 
relying on the "safety of human life or protection of property" 
exception, used the funds it had available to pay military personnel 
their full take-home pay. The Attorney General upheld the legality of 
this action. 43 Op. Att'y Gen. 369, 6 Op. Off. Legal Counsel 27 
(1982). The Comptroller General agreed, but questioned the blanket 
assumption that all military personnel fit within the exception. B-
208985, Oct. 29, 1982; B-208951, Oct. 5, 1982. The extent to which 
this device might be available to civilian agencies would depend on 
(1) Treasury's willingness to grant a similar deferral, and (2) the 
extent to which the agency could legitimately invoke the emergency 
exception. 

Additional cases dealing with funding gap problems are: 

* Salaries of commissioners of Copyright Royalty Tribunal attach by 
virtue of their status as officers without regard to availability of 
funds. Salary obligation is therefore viewed as "authorized by law" 
for purposes of Antideficiency Act, and commissioners could be 
retroactively compensated for periods worked without pay during a 
funding gap. 61 Comp. Gen. 586 (1982). 

* Richmond district office of Internal Revenue Service shut down for 
half a day in October 1986 due to a funding gap. Subsequent 
legislation authorized retroactive compensation of employees affected. 
GAO concluded that the legislation applied to intermittent as well as 
regular full-time employees, and held that the intermittent employees 
could be compensated in the form of administrative leave for time lost 
during the half-day furlough. B-233656, June 19, 1989. 

* Witness who had been ordered to appear in federal court was stranded 
without money to return home when court did not convene due to funding 
gap. Cash disbursement to permit witness to return home or secure 
overnight lodging was held permissible since hardship circumstances 
indicated reasonable likelihood that safety of witness would be 
jeopardized. 5 Op. Off. Legal Counsel 429 (1981). 

There are also a few cases addressing actions an agency has taken to 
forestall the effects of a funding gap. In 62 Comp. Gen. 1 (1982), the 
Merit Systems Protection Board, faced with a substantial cut in its 
appropriation, placed most of its employees on half-time, half-pay 
status in an attempt to stretch its appropriation through the end of 
the fiscal year. A subsequent supplemental appropriation provided the 
necessary operating funds. GAO advised that it was within the Board's 
discretion, assuming the availability of sufficient funds, to grant 
retroactive administrative leave to the employees who had been 
affected by the partial shutdown. 

GAO reviewed another furlough plan in 64 Comp. Gen. 728 (1985). The 
Interstate Commerce Commission had determined that if it continued its 
normal rate of operations, it would exhaust its appropriation six 
weeks before the end of the fiscal year. To prevent this from 
happening, it furloughed its employees for one day per week. GAO found 
that the Commission's actions were in compliance with the 
Antideficiency Act. While the ICC was thus able to continue essential 
services, the price was financial hardship for its employees, plus 
"serious backlogs, missed deadlines and reduced efficiency." Id. at 
732. 

During the 1980s and early 1990s, GAO also issued several reports on 
funding gaps. The first was Funding Gaps Jeopardize Federal Government 
Operations, PAD-81-31 (Washington, D.C.: Mar. 3, 1981). In that 
report, GAO noted the costly and disruptive effects of funding gaps, 
and recommended the enactment of permanent legislation to permit 
federal agencies to incur obligations, but not disburse funds, during 
a funding gap. In the second report, Continuing Resolutions and an 
Assessment of Automatic Funding Approaches, GAO/AFMD-86-16 
(Washington, D.C.: Jan. 29, 1986), GAO compared several possible 
options but this time made no specific recommendation. The Office of 
Management and Budget had pointed out, and GAO agreed, that automatic 
funding legislation could have the undesirable effects of (1) reducing 
pressure on Congress to make timely funding decisions, and (2) 
permitting major portions of the government to operate for extended 
periods without action by either House of Congress or the President. 
The ideal solution, both agencies agreed, is the timely enactment of 
the regular appropriation bills. 

In Managing the Cost of Government: Proposals for Reforming Federal 
Budgeting Practices, GAO/AFMD-90-1 (Washington, D.C.: Oct. 1, 1989) at 
28-29, GAO reiterated its support for the concept of an automatic 
continuing resolution in a form that does not reduce the incentive to 
complete action on the regular appropriation bills. A 1991 GAO report 
analyzed the impact of a funding gap which occurred over the 1990 
Columbus Day weekend and again renewed the recommendation for 
permanent legislation to, at a minimum, allow agencies to incur 
obligations to compensate employees during temporary funding gaps but 
not pay them until enactment of the appropriation. Government 
Shutdown: Permanent Funding Lapse Legislation Needed, GAO/GGD-91-76 
(Washington, D.C.: June 6, 1991). The report stated: 

"In our opinion, shutting down the government during temporary funding 
gaps is an inappropriate way to encourage compromise on the budget. 
Beyond being counterproductive from a financial standpoint, a shutdown 
disrupts government services. In addition, forcing agency managers to 
choose who will and will not be furloughed during these temporary 
funding lapses severely tests agency management's ability to treat its 
employees fairly." 

Id. at 9. 

The history of funding gaps over recent decades reveals several 
distinct phases, which were captured in an analysis by a Congressional 
Research Service report to Congress entitled Preventing Federal 
Government Shutdowns: Proposals for an Automatic Continuing Resolution,
No. RL30339 (Washington, D.C.: May 19, 2000) (hereafter "CRS Report"). 
The first phase, covering fiscal years 1977 through 1980, was a period 
in which agencies reacted to funding gaps along the lines suggested in 
GAO's opinion in B-197841, Mar. 3, 1980, described previously, by 
curtailing operations but not shutting down. During this period, there 
were 6 funding gaps that lasted from 8 to 17 days. See the CRS Report 
at 4, Table 1. The second phase, covering fiscal years 1981 through 
1995, occurred under the stricter approach to funding gaps reflected 
in the Attorney General opinions described above. As the CRS Report 
notes, funding gaps during this period were less frequent and shorter. 
There were 11 funding gaps in all over this period, many of which took 
place over weekends. None lasted more than 3 days. Id. 

The string of shorter funding gaps came to an abrupt halt in fiscal 
year 1996. As CRS reported, the unusually difficult and acrimonious 
budget negotiations for that year led to two funding gaps: the first 
was 5 days and the second, the longest in history, lasted for 21 days. 
Id. at 3, 5. Both of these funding gaps resulted in widespread 
shutdowns of government operations. During the first funding gap, an 
estimated 800,000 federal employees were furloughed. During the 
second, about 284,000 employees were furloughed and another 475,000 
continued to work in a nonpay status under the emergency exception to 
the Antideficiency Act.[Footnote 146] 

Not surprisingly, the events of 1995-1996 spawned additional legal 
opinions from the Office of Legal Counsel. These opinions essentially 
followed the legal framework described previously and did not break 
much new ground. However, they do illustrate the scope and application 
of the Antideficiency Act in different funding gap contexts. See, 
e.g., Memorandum for the Attorney General, Effect of Appropriations 
for Other Agencies and Branches on the Authority To Continue 
Department of Justice Functions During the Lapse in the Department's 
Appropriations, OLC Opinion, Dec. 13, 1995 (if a suspension of the 
Justice Department's functions during the period of anticipated 
funding lapse would prevent or significantly damage the execution of 
those functions, the Department's functions and activities may 
continue); Memorandum for the Attorney General, Participation in 
Congressional Hearings During An Appropriations Lapse, OLC Opinion, 
Nov. 16, 1995 (Justice Department officials may testify at 
congressional hearings during a lapse in funding for the Department); 
Memorandum for the Counsel to the President, Authority To Employ the 
Services of White House Office Employees During An Appropriations 
Lapse, OLC Opinion, Sept. 13, 1995 (outlined the authorities that 
permitted White House employees to continue to work, but not actually 
be paid, during a funding gap); Memorandum for the Director of the 
Office of Management and Budget, Government Operations in the Event of 
a Lapse in Appropriations, OLC Opinion, Aug. 16, 1995 (reinforced the 
Justice Department's existing narrow interpretation that the emergency 
exception applied only in the case of an imminent threat or set of 
circumstances requiring immediate action).[Footnote 147] 

The 1995-1996 funding gaps also produced at least one lawsuit, 
although it did not reach a final decision on the merits. In American 
Federation of Government Employees v. Rivlin, Civ. A. No. 95-2115 
(EGS) (D.D.C. Nov. 17, 1995), the plaintiffs sought a temporary 
restraining order to prevent the executive branch from requiring 
federal employees who had been designated "emergency" personnel to 
work during the funding gap. They contended that forcing employees to 
work without pay violated several personnel statutes and also 
constituted a misapplication of 31 U.S.C. § 1342 since many of the 
employees did not meet the emergency criteria under section 1342. The 
court denied the requested relief, observing: 

"The court is not convinced at this juncture that plaintiffs will 
either suffer irreparable harm in the event a temporary restraining 
order is not issued or that the interests of the public will be best 
served by the issuance of a temporary restraining order. Plaintiffs 
essentially concede that if the court were to issue a TRO, the 
government would indeed be shut down, because the Executive Branch 
could not require its employees to work without compensation. Although 
undoubtedly the public has an interest in having the budget impasse 
resolved and indeed has an interest in the outcome of this judicial 
proceeding, one could easily imagine the chaos that would be attendant 
to a complete governmental shutdown. It is inconceivable, by any 
stretch of the imagination, that the best interests of the public at 
large would somehow be served by the creation of that chaos." 

American Federation of Government Employees, slip. op. at 4. 

The court further observed that it was "purely speculative" whether 
any employees would actually go without pay since Congress had always 
appropriated funds to compensate employees for services rendered 
during a government shutdown. Id. The lawsuit was eventually dismissed 
as moot following resolution of the budget impasse. American 
Federation of Government Employees v. Rivlin, 995 F. Supp. 165 (D.D.C. 
1998). 

The current phase in the history of funding gaps commenced on the 
heels of the 1995-1996 government shutdowns and has featured, thus 
far, the total absence of funding gaps. While there have been delays 
in the enactment of regular appropriations, there has been no funding 
gap since 1996. 

Of course, the potential for future funding gaps still exists and 
proposals for legislation to cushion their impact have been raised 
again in recent years. However, such proposals have met with little 
enthusiasm. GAO was more cautionary in its most recent comments on 
this subject. See GAO, Budget Process: Considerations for Updating the 
Budget Enforcement Act, GAO-01-991T (Washington, D.C.: July 19, 2001), 
at 12: 

"The periodic experience of government `shutdowns'—or partial 
shutdowns when appropriations bills have not been enacted—has led to 
proposals for an automatic continuing resolution. The automatic 
continuing resolution, however, is an idea for which the details are 
critically important. Depending on the detailed structure of such a 
continuing resolution, the incentive for policymakers—some in the 
Congress and the President—to negotiate seriously and reach agreement 
may be lessened." 

For example, GAO pointed out that some negotiators might find the 
"default position" specified in an automatic continuing resolution to be
preferable to proposals on the table. 

Likewise, several efforts to enact an automatic continuing resolution 
in recent years have been unsuccessful. In 1997, President Clinton 
vetoed a supplemental appropriations bill that contained such a 
provision. In 2000, the House of Representatives rejected such a 
proposal in a floor vote.[Footnote 148] 

D. Supplemental and Deficiency Appropriations: 

A supplemental appropriation may be defined as "an act appropriating 
funds in addition to those already enacted in an annual appropriation 
act." GAO, A Glossary of Terms Used in the Federal Budget Process, GA0-
05-734SP (Washington, D.C.: September 2005) (Glossary), at 93. The 
Glossary adds that: 

"Supplemental appropriations provide additional budget authority 
usually in cases where the need for funds is too urgent to be 
postponed until enactment of the regular appropriation bill. 
Supplementals may sometimes include items not appropriated in the 
regular bills for lack of timely authorizations." 

Id. 

The Glossary, at 43, defines a deficiency appropriation as "[a]n 
appropriation made to pay obligations for which sufficient funds are 
not available." 

There is an important distinction between supplemental appropriations 
and deficiency appropriations. A supplemental appropriation 
"supplements the original appropriation," 4 Comp. Dec. 61 (1897); that 
is, it provides additional appropriations to cover additional 
obligations to meet needs identified by the executive branch and 
concurred in by Congress in advance of the obligational event. A 
deficiency appropriation is an appropriation made to pay obligations 
for which sufficient funds were not available at the time the 
obligations were incurred. 27 Comp. Gen. 96 (1947); 25 Comp. Gen. 601, 
604 (1946); 4 Comp. Dec. 61, 62 (1897). The need for deficiency 
appropriations often results from violations of the Antideficiency 
Act, and they can be made in the same fiscal year as the overobligated 
appropriation or in a later year. Notwithstanding the distinctions 
between supplemental and deficiency appropriations, Congress often 
will use supplemental appropriations bills as the legislative vehicle 
for enacting deficiency appropriations, just as Congress may use a 
supplemental appropriations bill as the legislative vehicle to enact 
new appropriations in addition to those supplementing appropriations 
already enacted. 

Because a supplemental appropriation "supplements the original 
appropriation," it "partakes of its nature, and is subject to the same 
limitations as to the expenses for which it can be used as attach by 
law to the original appropriation" unless otherwise provided. 4 Comp. 
Dec. 61. See also 27 Comp. Gen. 96 (1947); 25 Comp. Gen. 601 (1946); 
20 Comp. Gen. 769 (1941). This means that a supplemental appropriation 
is subject to the purpose and time limitations, plus any other 
applicable restrictions, of the appropriation being supplemented. 

Thus, an appropriation made to supplement the regular annual 
appropriation of a given fiscal year is available beyond the 
expiration of that fiscal year only to liquidate obligations incurred 
within the fiscal year. The unobligated balance of a supplemental 
appropriation will expire at the end of the fiscal year in the same 
manner as the regular annual appropriation. See 27 Comp. Gen. 96; 4 
Comp. Dec. 61; 3 Comp. Dec. 72 (1896). Of course, Congress can enact a 
supplemental appropriation, just like any other appropriation, to be 
available until expended (no-year). E.g., 36 Comp. Gen. 526 (1957); B-
72020, Jan. 9, 1948. 

Unless otherwise provided, a restriction contained in an annual 
appropriation act will apply to funds provided in a supplemental 
appropriation act even though the restriction is not repeated in the 
supplemental. For example, a restriction in a foreign assistance 
appropriation act prohibiting the use of funds for assistance to 
certain countries would apply equally to funds provided in a 
supplemental appropriation for foreign assistance for the same fiscal 
year. B-158575, Feb. 24, 1966. Similarly, a provision in an annual 
appropriation act that "no part of any appropriation for the Bureau of 
Reclamation contained in this Act shall be used for the salaries and 
expenses" (emphasis added) of certain officials who were not qualified 
engineers would apply as well to Bureau funds appropriated in 
supplemental appropriation acts for the same fiscal year, so long as 
the supplemental appropriation adds funds to amounts already enacted 
in the regular appropriation, but not to any new appropriations 
enacted in the supplemental appropriation act. B-86056, May 11, 1949. 
The rule applies to supplemental authorizations as well as 
supplemental appropriations. B-106323, Nov. 27, 1951. If a 
supplemental appropriation act includes a new appropriation which is 
separate and distinct from the appropriations being supplemented, 
restrictions contained in the original appropriation act will not 
apply to the new appropriation unless specifically provided. Id. The 
fiscal year limitations of the original appropriation, however, would 
still apply. 

The rule that supplemental appropriations are subject to restrictions 
contained in the regular appropriation act being supplemented applies 
equally to specific dollar limitations. Thus, if a regular annual 
appropriation act specifies a maximum limitation for a particular 
object, either by using the words "not to exceed" or otherwise, a more 
general supplemental appropriation for the same fiscal year does not 
authorize an increase in that limitation. 19 Comp. Gen. 324 (1939); 4 
Comp. Gen. 642 (1925); B-71583, Feb. 20, 1948; B-66030, May 9, 1947. 
Naturally, this principle will not apply if the supplemental 
appropriation specifically provides for the object in question. 19 
Comp. Gen. 832 (1940). 

New restrictions appearing in a supplemental appropriation act may or 
may not reach back and apply to balances remaining in the original 
annual appropriation, depending on the precise statutory language 
used. Thus, without more, a restriction in a supplemental applicable 
by its terms to "this appropriation" would apply only to the 
supplemental funds. B-31546, Jan. 12, 1943. See also 31 Comp. Gen. 543 
(1952). 

At one time, supplemental appropriation acts specified that the funds 
were for the same objects and subject to the same limitations as the 
appropriations being supplemented. The then Bureau of the Budget 
wanted to delete this language pursuant to its mandate to eliminate 
unnecessary words in appropriations.[Footnote 149] The Comptroller 
General agreed that the language was unnecessary, pointing out that 
these conditions would apply even without being explicitly stated in 
the supplemental appropriation acts themselves. B-13900, Dec. 17, 1940.
In addition to supplementing prior appropriations, a supplemental 
appropriation act may make entirely new appropriations and enact new 
legislative provisions which are separate and distinct from those made 
by an earlier appropriation act. Where a supplemental appropriation 
act contains new legislation, whether permanent or temporary, the new 
legislation will take effect on the date the supplemental is enacted 
absent a clear intent to make it retroactive. 20 Comp. Gen. 769 
(1941). In the cited decision, a supplemental appropriation enacted 
late in fiscal year 1941 for the first time permitted payment of 
transportation expenses of certain military dependents. The provision 
was held effective on the date of enactment of the supplemental act 
and not on the first day of fiscal year 1941. 

A supplemental appropriation also may add funds to a lump-sum 
appropriation for a new object. If the original appropriation was not 
available for that object, then the supplemental amounts to a new 
appropriation that is, in effect, distinct from the lump-sum 
appropriation. For example, a fiscal year 1957 supplemental 
appropriation for the Maritime Administration provided $18 million for 
a nuclear-powered merchant ship under the heading "ship construction." 
Funds for the nuclear-powered ship had been sought under the regular 
"ship construction" lump-sum appropriation for fiscal year 1957, but 
had been denied. Under the circumstances, the Comptroller General 
found that the supplemental appropriation amounted to a specifically 
earmarked maximum for the vessel, and that the agency could not exceed 
the $18 million by using funds from the regular appropriation. 36 
Comp. Gen. 526 (1957). 

E. Augmentation of Appropriations: 

1. The Augmentation Concept: 

As a general proposition, an agency may not augment its appropriations 
from outside sources without specific statutory authority. When 
Congress makes an appropriation, it also is establishing an authorized 
program level. In other words, it is telling the agency that it cannot 
operate beyond the level that it can finance under its appropriation. 
To permit an agency to operate beyond this level with funds derived 
from some other source without specific congressional sanction would 
amount to a usurpation of the congressional prerogative. Restated, the 
objective of the rule against augmentation of appropriations is to 
prevent a government agency from undercutting the congressional power 
of the purse by circuitously exceeding the amount Congress has 
appropriated for that activity. As one recent decision put it: 

"When Congress establishes a new program or activity, it also must 
decide how to finance it. Typically it does this by appropriating 
funds from the U.S. Treasury. In addition to providing necessary 
funds, a congressional appropriation establishes a maximum authorized 
program level, meaning that an agency cannot, absent statutory 
authorization, operate beyond the level that can be paid for by its 
appropriations. An agency may not circumvent these limitations by 
augmenting its appropriations from sources outside the government. One 
of the objectives of these limitations is to prevent agencies from 
avoiding or usurping Congress' power of the purse." 

B-300248, Jan. 15, 2004 (citations omitted). 

There is no statute which, in those precise terms, prohibits the 
augmentation of appropriated funds. The concept does nevertheless have 
an adequate statutory basis, although it must be derived from several 
separate enactments. Specifically: 

* 31 U.S.C. § 3302(b), the "miscellaneous receipts" statute. 

* 31 U.S.C. § 1301(a), restricting the use of appropriated funds to 
their intended purposes. Early Comptroller of the Treasury decisions 
often based the augmentation prohibition on the combined effect of 31 
U.S.C. §§ 3302(b) and 1301(a). See, e.g., 17 Comp. Dec. 712 (1911); 9 
Comp. Dec. 174 (1902). 

* 18 U.S.C. § 209, which prohibits the payment of, contribution to, or 
supplementation of the salary of a government officer or employee as 
compensation for his or her official duties from any source other than 
the government of the United States. 

The augmentation concept manifests itself in a wide variety of 
contexts. One application is the prohibition against transfers between 
appropriations without specific statutory authority. An unauthorized 
transfer is an improper augmentation of the receiving appropriation. 
E.g., 23 Comp. Gen. 694 (1944); B-206668, Mar. 15, 1982. In B-206668, 
a department received a General Administration appropriation plus 
separate appropriations for the administration of its component 
bureaus. The unauthorized transfer of funds from the bureau 
appropriations to the General Administration appropriation was held to 
be an improper augmentation of the latter appropriation. Likewise, the 
Department of Labor illegally augmented its departmental management 
account by "pooling" funds from component appropriations in order to 
purchase computer equipment where the costs borne by the components 
far exceeded the value of the equipment they received. 70 Comp. Gen. 
592 (1991). The Comptroller General rejected the Department's 
characterization of this transaction as a "reprogramming," viewing it 
instead as an unauthorized transfer among appropriations. 

As with the transfer prohibition itself, however, the augmentation 
rule has no application at the agency allotment level within the same 
appropriation account. 70 Comp. Gen. 601 (1991). It also should be 
apparent that the augmentation rule is related to the concept of 
purpose availability. A very early case pointed out that charging a 
general appropriation when a specific appropriation is exhausted not 
only violates 31 U.S.C. § 1301(a) by using the general appropriation 
for an unauthorized purpose, but also improperly augments the specific 
appropriation. [1] Bowler, First Comp. Dec. 257, 258 (1894). However, 
the augmentation rule is most closely related to the subject of this 
chapter—availability as to amount—because it has the effect of 
restricting executive spending to the amounts appropriated by 
Congress. In this respect, it is a logical, perhaps indispensable, 
complement to the Antideficiency Act. 

For the most part, although the cases are not entirely consistent, GAO 
has distinguished between receipts of money and receipts of services, 
dealing with the former under the augmentation rule and the latter 
under the voluntary services prohibition (31 U.S.C. § 1342).[Footnote 
150] For example, in B-13378, Nov. 20, 1940, a private organization 
was willing to donate either funds or services. Since the agency 
lacked statutory authority to accept gifts, acceptance of a cash 
donation would improperly augment its appropriations. Acceptance of 
services was distinguished, however, and addressed in relation to the 
limits on acceptance of voluntary services set forth in 31 U.S.C. § 
1342. GAO drew the same distinction in B-125406, Nov. 4, 1955. See 
also B-287738, May 16, 2002, distinguishing between agency acceptance 
of money as compensation for damage to government property, which 
would constitute an augmentation if retained in agency appropriations, 
and acceptance of actual repairs to the property, which would be 
permissible.[Footnote 151] 

In apparent conflict with these cases, however, is B-211079.2, Jan. 2, 
1987, which stated that, without statutory authority, an agency would 
improperly augment its appropriations by accepting the uncompensated 
services of "workfare" participants to do work which would normally be 
done by the agency with its own personnel and funds. Logic would seem 
to support the formulation in B-211079.2. Certainly, if I wash your 
car without charge or if I give you money to have it washed, the 
result is the same—the car gets washed and your own money is free to 
be used for something else. Be that as it may, the majority of the 
cases support limiting the augmentation rule to the receipt of money. 
In the final analysis, the distinction probably makes little practical 
difference. In view of 31 U.S.C. § 1342, limiting the augmentation 
rule to the receipt of funds does not mean that the rule can be 
negated by the unrestricted acceptance of services.[Footnote 152] 

In a 1991 case, 70 Comp. Gen. 597, GAO concluded that the then 
Interstate Commerce Commission (ICC) would not improperly augment its 
appropriations by permitting private carriers to install computer 
equipment at the ICC headquarters, to facilitate access to 
electronically filed rate tariffs. Installation was viewed as a 
reasonable exercise of the ICC's statutory authority to prescribe the 
form and manner of tariff filing by those over whom the agency has 
regulatory authority. Somewhat similar in concept to the workfare 
case, however, the decision suggests that use of the equipment for 
other purposes, such as word processing by ICC staff, would be an 
improper augmentation, and advised the ICC to establish controls to 
prevent this. See also B-277521, July 31, 1997 (granting the Radio and 
TV Correspondents Association a permit to locate equipment in the 
Capitol in order to broadcast events would not constitute an 
augmentation of congressional appropriations since the equipment is 
not for official business use of the government). 

2. Disposition of Moneys Received: Repayments and Miscellaneous
Receipts: 

a. General Principles: 

(1) The "miscellaneous receipts" statute: 

A very important statute in the overall scheme of government fiscal 
operations is 31 U.S.C. § 3302(b), known as the "miscellaneous 
receipts" statute. Originally enacted on March 3, 1849 (ch. 110, 9 
Stat. 398), 31 U.S.C. § 3302(b) states: 

"Except as provided in section 3718(b) of this title, an official or 
agent of the Government receiving money for the Government from any 
source shall deposit the money in the Treasury as soon as practicable 
without deduction for any charge or claim."[Footnote 153] 

Penalties for violating 31 U.S.C. § 3302(b) are found in 31 U.S.C. § 
3302(d), and include the possibility of removal from office. In 
addition, if funds which should have been deposited in the Treasury 
(but were not) are lost or stolen, the official may be personally 
liable. E.g., 20 Op. Att'y Gen. 24 (1891) (liability would attach 
where funds, which disbursing agent had placed in bank which was not 
an authorized depositary, were lost due to bank failure). 

"It is difficult to see," said an early decision, "how a legislative 
prohibition could be more clearly expressed." 10 Comp. Gen. 382, 384 
(1931). Simply stated, any money an agency receives for the government 
from a source outside of the agency must be deposited into the 
Treasury. This means deposited into the general fund ("miscellaneous 
receipts") of the Treasury,not into the agency's own appropriations, 
even though the agency's appropriations may be technically still "in 
the Treasury" until the agency actually spends them.[Footnote 154] The 
Comptroller of the Treasury explained the distinction in the following 
terms: 

"It [31 U.S.C. § 3302(b)] could hardly be made more comprehensive as 
to the moneys that are meant and these moneys are required to be paid 
'into the Treasury.' This does not mean that the moneys are to be 
added to a fund that has been appropriated from the Treasury and may 
be in the Treasury or outside. [Emphasis in original.] It seems to me 
that it can only mean that they shall go into the general fund of the 
Treasury which is subject to any disposition which Congress might 
choose to make of it. This has been the holding of the accounting 
officers for many years ... [citations omitted]. If Congress intended 
that these moneys should be returned to the appropriation from which a 
similar amount had once been expended it could have been readily so 
stated, and it was not." 

22 Comp. Dec. 379, 381 (1916). See also 5 Comp. Gen. 289 (1925). 

The term "miscellaneous receipts" does not refer to any single account 
in the Treasury. Rather, it refers to a number of receipt accounts 
under the heading "General Fund." These are all listed in the Treasury 
Department's Federal Account Symbols and Titles Book, recently revised 
according to the Treasury Financial Manual Announcement No. A-2005-04, 
May 2005. The revised version can be accessed at [hyperlink, 
http://www.fmstreas.gov/fastbook] (last visited September 15, 2005). 

In addition to 31 U.S.C. § 3302(b), several other statutes require 
that moneys received in various specific contexts be deposited as 
miscellaneous receipts.[Footnote 155] Examples are: 

* 7 U.S.C. §§ 384, 2241, 2246, 2247 (proceeds from sale of various 
products by Secretary of Agriculture); 

* 16 U.S.C. § 499 (revenue from the national forests, such as timber 
sales and proceeds from hunting, fishing, and camping permits, subject 
to the deductions specified in 16 U.S.C. §§ 500 and 501); 

* 19 U.S.C. § 527 (customs fines, penalties, and forfeitures); 

* 40 U.S.C. § 571 (proceeds from the transfer of excess property or 
the sale of surplus public property, except as otherwise provided in 
subchapter IV of chapter 5 of title 40).[Footnote 156] 

Although it is preferable, it is not necessary that the statute use 
the words "miscellaneous receipts." A statute requiring the deposit of 
funds "into the Treasury of the United States" will be construed as 
meaning the general fund of the Treasury. 27 Comp. Dec. 1003 (1921). 

To understand the significance of 31 U.S.C. § 3302(b) and related 
statutes, it is necessary to recall the provision in article I, 
section 9, clause 7 of the U.S. Constitution, the so-called 
"Appropriations Clause," directing that "No Money shall be drawn from 
the Treasury but in Consequence of Appropriations made by Law." Once 
money is deposited into a "miscellaneous receipts" account, it takes 
an appropriation to get it out. E.g., 3 Comp. Gen. 296 (1923); 2 Comp. 
Gen. 599, 600 (1923); 13 Comp. Dec. 700, 703 (1907). Thus, the effect 
of 31 U.S.C. § 3302(b) is to ensure that the executive branch remains 
dependent upon the congressional appropriation process. Viewed from 
this perspective, 31 U.S.C. § 3302(b) emerges as another element in 
the statutory pattern by which Congress retains control of the public 
purse under the separation of powers doctrine. See B-302825, Dec. 22, 
2004; B-303413, Nov. 8, 2004, at 9; B-287738, May 16, 2002; 51 Comp. 
Gen. 506, 507 (1972); 11 Comp. Gen. 281, 283 (1932). See also 10 Comp. 
Gen. 382, 383 (1931) (the intent is that "all the public moneys shall 
go into the Treasury; appropriations then follow"). 

As the court observed in Scheduled Airlines Traffic Offices v. 
Department of Defense, 87 F.3d 1356, 1361 (D.C. Cir. 1996), the 
miscellaneous receipts statute "derives from and safeguards a 
principle fundamental to our constitutional structure, the separation-
of-powers precept embedded in the Appropriations Clause" (U.S. Const. 
art I, § 9, cl. 7). See also Kate Stith, Congress' Power of the Purse, 
97 Yale L. J. 1343 (1988). Professor Stith notes that the 
miscellaneous receipts statute "articulates the Principle of the 
Public Fisc: All monies of the federal government must be claimed as 
public revenues, subject to public control through constitutional 
processes." Id. at 1364. This is indeed an important role for a 
statute that she describes as having such an "unfortunately bland and 
unrevealing name." Id. at 1365. 

Accordingly, for an agency to retain and credit to its own 
appropriation moneys which it should have deposited into the general 
fund of the Treasury is an improper augmentation of the agency's 
appropriation. This applies even though the appropriation is a no-year 
appropriation. 46 Comp. Gen. 31 (1966). (No-year status relates to 
duration, not amount.) 

Receipts in the form of "monetary credits" are treated for deposit and 
augmentation purposes the same as cash. 28 Comp. Gen. 38 (1948) (use 
by government of monetary credits received as payment for sale of 
excess electric power held unauthorized unless agency transfers 
corresponding amount from its appropriated funds to miscellaneous 
receipts). This will not apply, however, where it is clear that the 
appropriation or other legislation involved contemplates a different 
treatment. B-125127, Feb. 14, 1956 (transfer to miscellaneous receipts 
not required where settlement of accounts was to be made on "net 
balance" basis). See also B-283731, Dec. 21, 1999 (Defense Department 
has specific statutory authority to accept credits under contracts for 
travel-related services); 62 Comp. Gen. 70, 74-75 (1982) (credit 
procedure which would differ from treatment of cash receipts 
recognized in legislative history). When an agency is entitled to 
retain a fund in its appropriations (see section E.2.a, below), it may 
accept the refund in the form of a credit against future payments due 
to the party owing the refund instead of requiring the party to issue 
a separate refund check. 72 Comp. Gen. 63, 64 (1992). 

(2) Exceptions: 

Exceptions to the miscellaneous receipts requirement fall into two 
broad categories, statutory and nonstatutory: 

* An agency may retain moneys it receives if it has statutory 
authority to do so. In other words, 31 U.S.C. § 3302(b) will not apply 
if there is specific statutory authority for the agency to retain the 
funds. E.g., 72 Comp. Gen. 164, 165-66 (1993) and cases cited.
[Footnote 157] 

* Receipts that qualify as "repayments" to an appropriation may be 
retained to the credit of that appropriation and are not required to 
be deposited into the General Fund. B-302366, July 12, 2004; 6 Comp. 
Gen. 337 (1926); 5 Comp. Gen. 734, 736 (1926); B-138942-0.M., Aug. 26, 
1976. 

Repayments falling within the above nonstatutory exception may be 
further defined in terms of two general classes, reimbursements and 
refunds, as follows: 

* Reimbursements are sums received as a result of commodities sold or 
services furnished either to the public or to another government 
account, which are authorized by law to be credited directly to a 
specific appropriation. 

* Refunds are repayments for excess payments and are to be credited to 
the appropriation or fund accounts from which the excess payments were 
made. They must be directly related to previously recorded 
expenditures and are reductions of those expenditures. Refunds to 
appropriations represent amounts collected from outside sources for 
payments made in error, overpayments, or adjustments for previous 
amounts disbursed. 

See, e.g., 62 Comp. Gen. 70, 73 (1982); see also, GAO, Policy and 
Procedures Manual for the Guidance of Federal Agencies, title 7, § 5.4 
(Washington, D.C.: May 18, 1993). 

As used in the above definitions, the term "reimbursement" generally 
refers to situations in which retention by the agency is authorized by 
statute. The term "refund" embraces a category of mostly nonstatutory 
exceptions in which the receipt is directly related to, and is a 
direct reduction of, a previously recorded expenditure. Thus, the 
recovery of an erroneous payment or overpayment which was erroneous at 
the time it was made qualifies as a refund to the appropriation 
originally charged. E.g., B-139348, May 12, 1959 (utility overcharge 
refund); B-138942-0.M., Aug. 26, 1976 (collections resulting from 
disallowances by GAO under the "Fly America Act"). Also, the return of 
an authorized advance, such as a travel advance, is a refund. 

At this point, an important distinction must be made. Moneys collected 
to reimburse the government for expenditures previously made are not 
automatically the same as "adjustments for previous amounts 
disbursed." Reimbursements must generally, absent statutory authority 
to the contrary, be deposited as miscellaneous receipts. The mere fact 
that the reimbursement is related to the prior expenditure—although 
this is an indispensable element of an authorized refund—is not in 
itself sufficient to remove the transaction from the scope of 31 
U.S.C. § 3302(b). See, e.g., 16 Comp. Gen. 195 (1936); 24 Comp. Dec. 
694 (1918); 22 Comp. Dec. 253 (1915); B-45198, Oct. 27, 1944. The 
controlling principles were stated as follows in two early decisions: 

"The question as to whether moneys collected to reimburse the 
Government for expenditures previously made should be used to 
reimburse the appropriations from which the expenditures were made or 
should be covered into the general fund of the Treasury has often been 
before the accounting officers of the Treasury and this office, and it 
has been uniformly held that in the absence of an express provision in 
the statute to the contrary, such funds should be covered in as 
miscellaneous receipts." 

5 Comp. Gen. 289, 290 (1925). 

"On the other hand, if the collection involves a refund or repayment 
of moneys paid from an appropriation in excess of what was actually 
due such refund has been held to be properly for credit to the 
appropriation originally charged ...." 

5 Comp. Gen. 734, 736 (1926). 

The key language in the above passage is "in excess of what was 
actually due." Apart from the more obvious situations—refunds of 
overpayments, erroneous payments, unused portions of authorized 
advances—the type of situation contemplated by the "adjustments for 
previous amounts disbursed" portion of the definition is illustrated 
by 23 Comp. Gen. 652 (1944). The Agriculture Department was authorized 
to enter into cooperative agreements with states for soil conservation 
projects. Some states were prohibited by state law from making 
advances and were limited to making reimbursements after the work was 
performed. In these cases, Agriculture initially put up the state's 
share and was later reimbursed. The Comptroller General held that 
Agriculture could credit the reimbursements to the appropriation 
charged for the project. The distinction between this type of 
situation and the simpler "related to a previous expenditure" 
situation in which the money must go to miscellaneous receipts lies in 
the nature of the agency's obligation. Here, Agriculture was not 
required to contribute the state's share; it could simply have 
foregone the projects in those states which could not advance the 
funds. This is different from a situation in which the agency is 
required to make a given expenditure in any event, subject to later 
reimbursement. In 23 Comp. Gen. 652, the agency made payments larger 
than it was required to make, knowing that the "excess" of what it 
paid over what it had to pay would (or at least was required to) be 
returned. See also 64 Comp. Gen. 431 (1985); 61 Comp. Gen. 537 (1982); 
B-69813, Dec. 8, 1947; B-220911.2-0.M., Apr. 13, 1988. For more recent 
decisions dealing with an agency's authority to retain "excess" 
payments, see B-271127.2, Jan. 30, 1997; 73 Comp. Gen. 321 (1994). 

The rationale for crediting refunds to an appropriation account is to 
enable the account to be made whole for the overpayment that gave rise 
to the refund. As a recent decision pointed out, the refund exception 
to the general requirement of section 3302(b) "simply restores to the 
appropriation amounts that should not have been paid from the 
appropriation." B-302366, July 12, 2004. It follows that the exception 
does not permit crediting refunds to appropriations in amounts greater 
than the overpayment. The decision in B-302366 illustrates this point. 
In that case, a Department of Energy contractor turned over to the 
department a refund it had received from the State of Washington for 
taxes which the contractor had previously paid and for which it had 
been reimbursed by the department. Along with the tax refund, the 
contractor also turned over to the department an additional amount it 
had received from the state as interest on the refunded taxes. GAO 
agreed with the department that the tax refund itself could be 
credited to the appropriation originally used to reimburse the 
contractor for the tax payment. However, the decision held that the 
additional amount representing interest could not be credited to the 
appropriation but must be returned to the Treasury as miscellaneous 
receipts pursuant to 31 U.S.C. § 3302(b): 

"The nonstatutory refund exception ... does not allow the department 
to retain the interest paid by the state. Because the nonstatutory 
exception operates simply and solely to restore to an appropriation 
amounts that should not have been paid from the appropriation, 
crediting an amount in excess of that paid from the appropriation 
would improperly augment the appropriation." 

In this regard, the decision rejected the department's suggestion that 
the interest payment could be regarded as merely restoring the 
appropriation to an amount adjusted for inflation. The decision noted 
that Congress does not appropriate on a net present value basis. 
Likewise, GAO has held that agencies may retain and credit to their 
appropriations refunds in the form of recoveries under the False 
Claims Act (31 U.S.C. § 3729) to the extent that they represent 
compensatory damages to reimburse erroneous payments, but not 
"exemplary" damages in the nature of penalties. B-281064, Feb. 14, 
2000; 69 Comp. Gen. 260 (1990). 

For other examples of refunds that may be retained to the credit of an 
appropriation, see 65 Comp. Gen. 600 (1986) (rebates from Travel 
Management Center contractors); 62 Comp. Gen. 70 (1982) (partial 
repayment of contribution to International Natural Rubber Organization 
occasioned by addition of new members); B-139348, May 12, 1959 (refund 
of overcharge by public utility); and B-209650-0.M., July 20, 1983 
(same). 

It should be noted that crediting refunds to agency appropriations is 
permissive, not mandatory. Thus, the Comptroller General advised the 
General Services Administration that rebates received from travel 
management contractors could be deposited to the general fund of the 
Treasury if the small amounts involved did not justify the cost of 
processing these payments to the credit of the agency appropriation 
accounts that "earned" them. 73 Comp. Gen. 210 (1994). The Comptroller 
General also approved crediting de minimis ($100 or less) rebates to 
currently available accounts rather than the prior year accounts that 
earned them. 72 Comp. Gen. 63 (1992). However, the Comptroller General 
refused to extend this de minimis exception to rebates that could 
aggregate $1,000 or more. 

72 Comp. Gen. 109 (1993). 

A repayment is credited to the appropriation initially charged with 
the related expenditure, whether current or expired. If the 
appropriation is still current, then the funds remain available for 
further obligation within the time and purpose limits of the 
appropriation. However, if the appropriation has expired for 
obligational purposes (but has not yet been closed), the repayment 
must be credited to the expired account, not to current funds. See 23 
Comp. Gen. 648 (1944); 6 Comp. Gen. 337 (1926); B-138942-0.M., Aug. 
26, 1976. If the repayment relates to an expired appropriation, 
crediting the repayment to current funds is an improper augmentation 
of the current appropriation unless authorized by statute. B-114088, 
Apr. 29, 1953. These same principles apply to a refund in the form of 
a credit, such as a credit for utility overcharges. B-139348, May 12, 
1959; B-209650-0.M., July 20, 1983.[Footnote 158] Cf. B-260063, June 
30, 1995, fn. 3 (there is no authority for an agency to hold refunds 
of erroneous payments in an interest bearing account pending final 
payment to a contractor since such refunds should be credited to the 
appropriation account initially charged with the erroneous payment). 
Once an appropriation account has been closed in accordance with 31 
U.S.C. §§ 1552(a) or 1555, repayments must be deposited as 
miscellaneous receipts regardless of how they would have been treated 
prior to closing. 31 U.S.C. § 1552(b). See also B-260993, June 26, 
1996; B-257905, Dec. 26, 1995; 73 Comp. Gen. 210, 211 (1994). 

Where funds are authorized to be credited to an appropriation, 
restrictions on the basic appropriation apply to the credits as well 
as to the amount originally appropriated. A-95083, June 18, 1938. 

The fact that some particular reimbursement is authorized or even 
required by law is not, standing alone, sufficient to overcome 31 
U.S.C. § 3302(b). E.g., 67 Comp. Gen. 443 (1988); 22 Comp. Dec. 60 
(1915); 1 Comp. Dec. 568 (1895). The accounting for that reimbursement—
whether it may be retained by the agency and, if so, how it is to be 
credited—will depend on the terms of the statute. Some statutes, for 
example, permit reimbursements to be credited to current 
appropriations regardless of which appropriation "earned" the 
reimbursement. See, e.g., 10 U.S.C. § 2208(g); 10 U.S.C. § 2210(a)(1); 
22 U.S.C. § 2392(c); 22 U.S.C. § 2509(g). As a general proposition, 
however, this practice, GAO has pointed out, diminishes congressional 
control.[Footnote 159] 

As might be expected, there have been a great many decisions involving 
the miscellaneous receipts requirement. It is virtually impossible to 
draw further generalizations from the decisions other than to restate 
the basic rule: An agency must deposit into the General Fund of the 
Treasury any funds it receives from sources outside of the agency 
unless the receipt constitutes an authorized repayment or unless the 
agency has statutory authority to retain the funds for credit to its 
own appropriations. 

(3) Timing of deposits: 

As to the timing of the deposit in the Treasury, 31 U.S.C. § 3302(b) 
says merely "as soon as practicable." There is another statute, 
however, now found at 31 U.S.C. § 3302(c), which provides in relevant 
part: 

"(1) A person having custody or possession of public money, including 
a disbursing official having public money not for current expenditure, 
shall deposit the money without delay in the Treasury or with a 
depositary designated by the Secretary of the Treasury under law. 
Except as provided in paragraph (2), money required to be deposited 
pursuant to this subsection shall be deposited not later than the 
third day after the custodian receives the money.... 

"(2) The Secretary of the Treasury may by regulation prescribe that a 
person having custody or possession of money required by this 
subsection to be deposited shall deposit such money during a period of 
time that is greater or lesser than the period of time specified by 
the second sentence of paragraph (1)." 

This statute, formerly designated as Revised Statutes § 3621, 
originated on March 3, 1857 (ch. 114, 11 Stat. 249). It was amended on 
May 28, 1896 (ch. 252, § 5, 29 Stat. 179), to specify a deadline of 30 
days. The time limit was reduced to 3 days by section 2652(b)(1) of 
the Deficit Reduction Act of 1984, Pub. L. No. 98-369, thy. B. title 
VI, 98 Stat. 494, 1152 (July 18, 1984). 

A Treasury Department regulation urges agencies to "achieve same day 
deposit of money." When same day deposit is not cost-effective or is 
impracticable, the regulation generally requires next-day deposit. 31 
C.F.R. § 206.5 (2005).[Footnote 160] 

As a general proposition, section 3302(c) and the Treasury regulations 
place an outer limit on what is practicable under section 3302(b). 11 
Comp. Gen. 281, 283-84 (1932); 10 Comp. Gen. 382, 385 (1931). The 
deadline applies to all receipts, including those to be credited to an 
appropriation account (which, of course, is "in the Treasury"), not 
just those for deposit as miscellaneous receipts. E.g., 10 Comp. Gen. 
382. 

The deposit timing requirements of 31 U.S.C. § 3302(c) and the 
implementing Treasury regulations apply as well when public moneys are 
held by nonfederal custodians. Thus, GAO found that these requirements 
were violated where the Department of Veterans Affairs (VA) allowed 
contractors to hold payments it collected on VA loans in an interest-
bearing account for 30 days or more before transferring the payments 
to the Treasury. See GAO, Internal Controls: VA Lacked Accountability 
Over Its Direct Loan and Loan Sale Activities, GAO/AIMD-99-24 
(Washington, D.C.: Mar. 24, 1999), at 16-18. 

(4) Money received (or not received) "for the Government:" 

As originally enacted, 31 U.S.C. § 3302(b) required deposit into the 
Treasury of moneys received "for the use of the United States. 
[Footnote 161] The 1982 codification of title 31 changed this language 
to moneys received "for the Government."[Footnote 162] The meaning, of 
course, is the same. There is no distinction between money received 
for the use of the United States and money received for the use of a 
particular agency; such a distinction would largely nullify the statute.
Although the concept of money received "for the use of the United 
States" or "for the Government" does not lend itself to precise 
definition, both the Comptroller General and the courts have applied 
this concept broadly, consistent with the key role and purpose of 
section 3302(b), in preserving Congress's constitutional power of the 
purse. For example, as one recent decision observed: 

"The miscellaneous receipts statute ... requires that money received 
for the use of the United States be deposited in the Treasury unless 
otherwise authorized by law. Court cases and decisions of this Office 
make clear that an agency cannot avoid the miscellaneous receipts 
statute simply by changing the form of its transactions to avoid the 
receipt of money otherwise owed to it." 

B-303413, Nov. 8, 2004. See also B-300826, Mar. 3, 2005, at 6, noting 
that an agency cannot avoid section 3302(b) by authorizing a 
contractor to charge fees to outside parties and keep the payments in 
order to offset costs that would otherwise be borne by agency 
appropriations. 

Neither of the above-cited decisions actually involved transactions 
that violated section 3302(b). However, another recent Comptroller 
General opinion held that a fee arrangement between the Small Business 
Administration (SBA) and a contractor did violate 31 U.S.C. § 3302(b) 
and constituted an improper augmentation of SBA's appropriations. B-
300248, Jan. 15, 2004.[Footnote 163] This case concerned SBA's 
"Preferred Lender Program" (PLP). Lenders in this program, so-called 
"PLP lenders," had authority to make loans without prior SBA approval; 
however, the law specifically required SBA to conduct assessments of 
these lenders at least annually. SBA contracted with a firm to assist 
in conducting the required assessments. Under the contract, 
assessments were conducted by a review team consisting of an SBA 
employee and one or more employees of the contractor. The SBA 
employees, of course, were paid from agency appropriations. However, 
the contractor was compensated from fees that SBA imposed on the PLP 
lenders and that the lenders paid directly to the contractor. 

SBA maintained that the fee proceeds did not constitute "money for the 
Government" within the application of 31 U.S.C. § 3302(b) since they 
were paid directly to the contractor as compensation for the 
contractor's work. The agency also argued that "no-cost" contracts 
such as this were largely beyond the reach of the augmentation rule or 
section 3302(b). The Comptroller General rejected these arguments, 
holding that SBA had "effectively retained and used the fees without 
specific authorization" and that the agency's "constructive 
disposition" of the fees violated section 3302(b). In essence, the 
opinion reasoned that the fee arrangement amounted to shifting to PFP 
lenders an expense imposed upon SBA incident to carrying out its 
statutory duties that should be borne by the agency's appropriations: 

"SBA's position ... is in conflict with our prior decisions and not 
supported by the courts. A government official or agent is deemed to 
receive money for the government under the Miscellaneous Receipts 
Statute if the money is to be used to bear the expenses of the 
government or pay the government obligations.... SBA's functions 
clearly include conducting oversight of PLP lenders, whether the 
review is conducted by SBA's own employees or with the assistance of a 
contractor. These functions are among the purposes for which Congress 
appropriates funds to SBA ... Thus the fees paid by PLP lenders 
represent expenses SBA would have to pay from its appropriations 
regardless of whether the expenses were for actions performed by SBA 
employees or by a contractor's employees. SBA has devised an
arrangement by which another party incurs these expenses, in effect 
using the PLP review fees to substitute for appropriated funds in 
paying the cost of the PLP reviews." 

B-300248 at 7. 

The courts also have given broad application to the section 3302(b) 
concept of money received "for the Government." In Reeve Aleutian 
Airways, Inc. v. Rice, 789 F. Supp. 417 (D.D.C. 1992), the Air Force 
had awarded a contract to a commercial air carrier (MarkAir) to 
provide passenger and cargo service to a remote base in the Aleutian 
Islands. The carrier's revenue would be derived almost entirely from 
fares either purchased directly or reimbursed by the United States 
(military personnel, their dependents, and government contractor 
employees). The contract granted the carrier landing rights and ground 
support at the base, and the contractor agreed to return a specified 
portion of its receipts as a "concession fee," to be deposited in the 
base morale, welfare, and recreation fund. In upholding a disappointed 
bidder's challenge to the award, the court stated: 

"The so-called concession fees to be paid by MarkAir were `public 
monies' both in the sense that they would be paid by MarkAir 
exclusively to purchase the use of property of the United States and 
in the sense that the funds were or were derived directly from public 
sources—United States taxpayers and the creditors of the United States 
who have lent it funds to cover expenses which exceed its revenue. 
Obviously, innovation consistent with the law should be encouraged but 
this transaction so plainly violates the express terms of 31 U.S.C. § 
3302(b) ... that it should be nipped in the bud." 

Reeve Aleutian Airways, 789 F. Supp. at 421. 

Since there was no authority to divert the funds from the Treasury to 
the welfare fund, and since the diversion would actually increase the 
cost to the government, the court found the contract award to be 
arbitrary and capricious and declared the contract "null, void and of 
no force and effect." Id. at 423. 

In a case it regarded as "virtually identical" to Reeve Aleutian 
Airways, the United States Court of Appeals for the District of 
Columbia held that a Department of Defense contract solicitation 
requiring payment of the portion of concession fees derived from 
unofficial travel to a morale fund rather than to the Treasury 
violated 31 U.S.C. § 3302(b). Scheduled Airlines Traffic Offices, Inc. 
v. Department of Defense, 87 F.3d 1356, 1363 (D.C. Cir. 1996). 
[Footnote 164] The court stated: 

"Mindful of both the plain language of the Miscellaneous Receipts 
statute and its underlying purpose to preserve congressional control 
of the appropriations power, we have no doubt that concession fees for 
unofficial travel constitute 'money for the Government' within the 
meaning of the statute. Travel agents pay the fees pursuant to 
contracts awarded by agencies of the United States, doing so in 
consideration for government resources—the right to occupy agency 
office space, to utilize government services associated with that 
space, and to serve as the exclusive on-site travel agent."
Id. at 1362. The court was not persuaded by the argument that the 
required payments to the morale fund did not violate 31 U.S.C. § 
3302(b) since they were attributable entirely to commissions on 
unofficial travel purchased with private funds: 

"This argument is inconsistent with the statute's
unequivocal language. Government officials must deposit in the 
Treasury 'money for the Government from any source.' 31 U.S.C. § 
3302(b) (emphasis added). The original source of the money—whether 
from private parties or the government—is thus irrelevant." 

Id.[Footnote 165] 

In two decisions, GAO found that the Environmental Protection Agency 
(EPA) and the Federal Election Commission did not violate the 
miscellaneous receipts statute when they engaged contractors to 
respond to public requests for information and to charge, and retain, 
fees for the service. In B-166506, Oct. 20, 1975, the Environmental 
Protection Agency (EPA) had a number of contracts with private firms 
for the processing, storage, and retrieval of various kinds of 
recorded environmental information. Much of this information was of 
value to private parties and available under the Freedom of 
Information Act (FOIA), 5 U.S.C. § 552. Fees collected by an agency 
under FOIA must be deposited as miscellaneous receipts. Here, however, 
EPA proposed advising requesting parties to deal directly with the 
contractors, who would charge and retain fees for providing the data, 
although the requestors would retain the right to deal with EPA. GAO 
approved the proposal, concluding that fees charged by the contractors 
in these circumstances did not constitute money received for the 
government. 

The EPA decision viewed the contract arrangement as an alternative to 
the FOIA process for satisfying information requests and reasoned that 
the contractors acted as "independent entrepreneurs" rather than as 
agents of EPA in providing such information. The decision cautioned, 
however, that the fees charged and retained by the contractors could 
not exceed the fees which EPA could charge if it provided the services 
directly. Thus, the fees could include the direct costs of document 
search and duplication, but not costs associated with developing the 
information. In 61 Comp. Gen. 285 (1982), GAO provided similar advice 
to the Federal Election Commission in connection with requests from 
the public for microfilm copies of its reports, citing B-166506, Oct. 
20, 1975. 

It may be hard to reconcile the EPA and Federal Election Commission 
decisions with more recent decisions, and they should be approached 
with caution. The contractor fee arrangements in both of these cases 
clearly had at least the indirect effect of relieving the agencies of 
expenses incident to the performance of their statutory obligations 
that otherwise would have been paid from their appropriations. 

In a recent decision, GAO considered whether an agency improperly 
avoided the miscellaneous receipts statute by structuring a regulatory 
action so that money would not be owed to the government. B-303413, 
Nov. 8, 2004. The Federal Communications Commission proposed to 
provide spectrum rights to a private company through a "license 
modification" in which the company would not pay the government for the 
spectrum but would pay certain costs incurred by it and other spectrum 
users. If the Federal Communications Act of 1934, as amended, at 47 
U.S.C. § 309(j), required the Commission to license the spectrum 
through auction instead of a license modification, then the 
Commission's proposed regulatory action would improperly avoid the 
government's receipt of money otherwise owed to it and thus would 
violate the miscellaneous receipts statute. GAO found the Commission's 
proposed regulatory action to be within the scope of its authority 
under the Federal Communications Act, at 47 U.S.C. § 316(a)(1), and 
concluded that the license modification did not violate the 
miscellaneous receipts statute. 

Both the Comptroller General and the courts have on occasion held that 
certain receipts of money did not constitute the receipt of moneys 
within the scope of 31 U.S.C. § 3302(b). In B-205901, May 19, 1982, a 
railroad had furnished 15,000 gallons of fuel to the Federal Bureau of 
Investigation (FBI) for use in an undercover investigation of thefts 
of diesel fuel from the railroad. The railroad and FBI agreed that the 
fuel or the proceeds from its sale would be returned upon completion 
of the investigation. In view of 31 U.S.C. § 3302(b), the FBI then 
asked whether money generated from the sale of the fuel had to be 
deposited in the Treasury as miscellaneous receipts. In one sense, it 
could be argued that the money was received "for the use of the United 
States," in that the FBI planned to use it as evidence. However, the 
Comptroller General pointed out, this is not the kind of receipt 
contemplated by 31 U.S.C. § 3302(b). The decision concluded that 
"funds are received for the use of the United States only if they are 
to be used to bear the expenses of the Government or to pay the 
obligations of the United States." Therefore, there was no legal 
barrier to returning the funds to the railroad. 

In another case, GAO held that misconduct fines levied on Job Corps 
participants by the Labor Department need not be treated as money 
received for the Government for purposes of 31 U.S.C. § 3302(b). The 
governing legislation specifically authorized "reductions of 
allowances" as a disciplinary measure. Labor felt that, in some cases, 
immediate collection of a cash fine from the individual's pocket would 
be more effective. Finding a legislative intent to confer broad 
discretion in matters of enrollee discipline, GAO agreed that the cash 
fines could be regarded as a form of disciplinary allowance reduction, 
and accordingly credited to Job Corps appropriations. B-130515, Aug. 
18, 1970. GAO followed the same approach in a similar question several 
years later in 65 Comp. Gen. 666, 671 (1986). The two Job Corps 
decisions relied heavily on the language of the program statute 
involved in those cases and appear to have little, if any, application 
beyond that statute. 

In 64 Comp. Gen. 217 (1985), a food service concession contract 
required the contractor to reserve a percentage of income to be used 
for the replacement of government-owned equipment. The reserve was 
found not to constitute money for the Government within the meaning of 
31 U.S.C. § 3302(b). GAO distinguished an earlier decision, 35 Comp. 
Gen. 113 (1955), on the basis that the reserve here constituted "a 
mere bookkeeping entry" whereas the proposal in the 1955 case would 
have required the actual transfer of funds to a bank account. 64 Comp. 
Gen. at 219. 

In Thomas v. Network Solutions, Inc., 176 F.3d 500 (D.C. Cir. 1999), 
cert. denied, 528 U.S. 1115 (2000), the court concluded that fees 
charged by a party to a cooperative agreement did not constitute money 
for the government and thus were not subject to deposit into the 
Treasury under 31 U.S.C. § 3302(b). In Thomas, the National Science 
Foundation (NSF) entered into a cooperative agreement with Network 
Solutions to register Internet domain names and provide related 
services to the registrants. In return, Network Solutions was 
permitted to charge registrants a fee and to retain the fee as payment 
for its services. The plaintiff domain registrants challenged the 
legality of the registration fees. Relying in part on the above-cited 
Comptroller General decisions dealing with EPA and the Federal 
Election Commission, the plaintiffs asserted, among other things, that 
the fees exceeded the amount that NSF itself could have imposed under 
the user charges statute, 31 U.S.C. § 9701, had the agency provided 
domain registration services directly. The court rejected this 
argument and distinguished the Comptroller General decisions on the 
basis that Network Solutions was not assisting NSF in performing a 
statutory duty imposed upon it. Since Congress did not require NSF or 
any other federal agency to register Internet domain names, the 
registration was not a government service. Thus, neither 31 U.S.C. § 
9701 nor 31 U.S.C. § 3302(b) applied. Thomas, 176 F.3d at 510-12. 

Finally, several of the trust fund cases discussed hereafter in 
section E.2.h of this chapter also address the money received "for the 
Government" concept. As explained in section E.2.h, the general rule 
is that funds properly received by an agency in a trust capacity are 
not subject to section 3302(b); however, there are exceptions and 
limits to this general rule. 

b. Contract Matters: 

(1) Excess reprocurement costs: 

We use the term "excess reprocurement costs" here to include two 
factually different but conceptually related situations: 

* Original contractor defaults. Agency still needs the work done and 
contracts with someone else to complete the work, almost invariably at 
a cost higher than the original contract price. Original contractor is 
liable to the government for these "excess reprocurement costs." 

* Defective work by original contractor. Agency incurs additional 
expense to correct defective work. Contractor is liable for the amount 
of this additional expense. 

Disposition of amounts recovered in these situations has generated 
numerous cases. Generally, the answer depends on the timing of the 
recovery in relation to the agency's reprocurement or corrective 
action and the status of the applicable appropriation. The objective 
is to avoid the depletion of currently available appropriations to get 
what the government was supposed to get under the original obligation. 
The rules were summarized, and the case law reviewed, in 65 Comp. Gen. 
838 (1986). 

The rules are as follows: 

* If, at the time of the recovery from the original contractor, the 
agency has not yet incurred the additional expense, the agency may 
retain the amount recovered to the extent necessary to fund the 
reprocurement or corrective measures. The collection is credited to 
the appropriation obligated for the original contract, without regard 
to the status of that appropriation. Even if that appropriation has 
expired and is generally no longer available for obligation, it 
usually can still be used to fund the reprocurement or corrective 
measures under the "replacement contract" theory until it closes.
[Footnote 166] 

* If, at the time of recovery from the original contractor, the agency 
has already incurred the additional reprocurement or corrective 
expense, the agency may retain the recovery for credit to the 
applicable appropriation, to the extent necessary to reimburse itself, 
if that appropriation is still available for obligation. 

* If the appropriation has expired and is no longer available for 
obligation, the recovery should go to miscellaneous receipts. 
[Footnote 167] 

These rules apply equally to default and defective work situations but 
vary with the type and status of the appropriation involved. If the 
appropriation used to fund the original contract is a no year 
appropriation, the recovery may be credited to that appropriation 
regardless of whether the agency has or has not yet actually incurred 
the additional costs. If the appropriation is an annual or multiple 
year appropriation and the agency has not yet incurred the additional 
costs as of the time of recovery, the agency may credit the collection 
to the appropriation regardless of whether it is still current or 
expired up until the time the account closes. In the case of an annual 
or multiple year appropriation, where the agency has already incurred 
the reprocurement or corrective costs as of the time of recovery, the 
agency may retain the recovery if the appropriation is still available 
for obligation, but not if it has expired. (Where the excess costs 
have already been incurred and the appropriation has expired at the 
time of recovery, it is too late to avoid a depletion of currently 
available funds.) 

Prior to 1983, essentially two separate lines of cases dealt with 
defective work and default. The defective work cases had always 
applied the above principles, although not necessarily in those terms. 
Some illustrative cases are summarized below: 

* Supplies delivered by a contractor were found upon inspection to be 
unsatisfactory for use, that is, not in accordance with the terms of 
the contract. A refund by the contractor could be credited to the 
appropriation originally charged, on the theory that the payment was 
improperly made from the appropriation in the first instance. The 
appropriation involved was an annual appropriation, and the corrective 
costs had not been paid as of the time of the recovery 8 Comp.
Gen. 103 (1928). 

* An amount recovered from a contractor's surety because the work 
failed to meet specifications, after the contractor had received final 
payment, was regarded as in the nature of a reduction in contract 
price representing the value of unfinished work, and therefore 
amounted to the recovery of an unauthorized overpayment. It could thus 
be deposited in the appropriation charged with the contract and 
expended for completion of the work. The appropriation involved was a 
no-year appropriation. 34 Comp. Gen. 577 (1955). 

* Recovery for defective work could be credited to an expired annual 
appropriation. Because the corrective work had not yet been 
undertaken, the funds would remain available for that corrective work 
under the "replacement contract" theory. 44 Comp. Gen. 623 (1965). 

In default cases, however, the decisions had consistently held for 
several decades that excess reprocurement costs recovered from 
defaulting contractors had to be deposited as miscellaneous receipts. 
[Footnote 168] 

The two lines of cases met in a 1983 decision, 62 Comp. Gen. 678. That 
decision recognized that there was no real reason to distinguish 
between default and defective work for purposes of accounting for 
recoveries. The rules should be the same in both situations. 
Accordingly, 62 Comp. Gen. 678 modified the prior default cases and 
held, in effect, that the rules previously applied in the defective 
work cases should be applied in the future to all excess reprocurement 
cost cases "without reference to the event that gave rise to the need 
for the replacement contract—that is, whether occasioned by a default 
or by defective workmanship." Id. at 681. The decision further held 
that the Bureau of Prisons could retain damages recovered from a 
contractor charged with defective work, for credit to the 
appropriation which had been used to replace the defective work. 

The 1983 decision added another new element: Where the recovery, by 
virtue of factors such as inflation or underbidding, exceeds the 
amount paid to the original contractor, any amounts recovered over and 
above what is actually necessary to fund the reprocurement or 
corrective work (or to reimburse the appropriation charged with that 
work, if it is still currently available) must be deposited in the 
Treasury as miscellaneous receipts. Authority to retain funds enables 
the agency to get what it originally bargained for, not to make a 
"profit" on the transaction. 62 Comp. Gen. at 683. 

Logically, the proceeds of a forfeited performance bond should be 
available to the contracting agency if and to the extent necessary to 
fund a replacement contract to complete the work of the original 
contract, and this was the holding in 64 Comp. Gen. 625 (1985). 

In 65 Comp. Gen. 838 (1986), GAO reviewed the evolution of the case 
law on excess reprocurement costs, restated the rules, and pointed out 
that in no case had GAO approved agency retention of recovered funds 
where the reprocurement or corrective costs "had already been paid 
from an appropriation which, at the time of the recovery, was no 
longer available for obligation." Id. at 841 n.5. 

Before leaving the subject, it may be helpful to again summarize the 
rules in a slightly different manner. Considering the status and the 
timing of agency action, in the following five categories, an agency 
may retain amounts recovered to the extent necessary to fund the 
reprocurement or corrective work, or to reimburse itself for costs 
already incurred: 

* No-year appropriation where recovery was made before agency incurs 
additional costs. 

* No-year appropriation where additional costs were incurred prior to 
recovery. 

* Annual or multiple year appropriation where recovery is made before 
the agency incurs additional costs and the appropriation is still 
current at time of recovery. 

* Annual or multiple year appropriation where additional costs were 
incurred prior to recovery and the appropriation is still current at 
time of recovery. 

* Annual or multiple year appropriation where recovery is made before 
the agency incurs additional costs and the appropriation expired at 
time of recovery. 

Finally, the recovery goes to the Treasury as miscellaneous receipts 
when an agency has annual or multiple year appropriations where 
additional costs were incurred prior to recovery and the appropriation 
had expired at time of recovery. 

(2) Other damage claims: 

One form of other damage claims is liquidated damages. Liquidated 
damages constitute a specific amount of money stipulated in advance by 
the contracting parties as the measure of damages for certain breaches 
of the contract, such as failure to meet applicable performance 
deadlines. See B-148493, Mar. 25, 1963. See also 44 Comp. Gen. 623 
(1965). The traditional rule for liquidated damages is that they may 
be credited to the appropriation originally charged in circumstances 
similar to those applicable to excess reprocurement costs, as 
discussed above. 44 Comp. Gen. 623; 23 Comp. Gen. 365 (1943); 9 Comp. 
Gen. 398 (1930); 18 Comp. Dec. 430 (1911). See also B-237421, Sept. 
11, 1991. The rationale for retaining liquidated damages in the 
appropriation account rather than depositing them in the Treasury as 
miscellaneous receipts is that liquidated damages effect an authorized 
reduction in the price of the individual contract concerned, and also 
that this would make the damages available for return to the 
contractor should the liability subsequently be relieved. B-242274, 
Aug. 27, 1991. However, where this rationale does not apply—for 
example, in a case where the contractor did nothing and therefore 
earned nothing and remission of liquidated damages under 41 U.S.C. § 
256a[Footnote 169] had been denied—the liquidated damages should be 
deposited in the Treasury as miscellaneous receipts. 46 Comp. Gen. 554 
(1966). Likewise, as in B-242274, Aug. 27, 1991, liquidated damages 
cannot be retained and used to fund reprocurements that do not 
constitute "replacement contracts" for the contract that gave rise to 
the liquidated damages. 

In some liquidated damage situations, the agency will not have 
incurred any additional reprocurement or corrective costs. This might 
happen in a case where an agency received liquidated damages for delay 
in performance but the contractor's performance, though late, was 
otherwise satisfactory. In other cases, however, the agency will incur 
additional costs. In the situation described in 46 Comp. Gen. 554, for 
example, the agency would presumably need to reprocure, in which event 
it could retain the liquidated damages in accordance with the rules 
for excess reprocurement costs just discussed. 64 Comp. Gen. 625 
(1985) (modifying 46 Comp. Gen. 554 to that extent). Consistent with 
these rules, liquidated damages credited to an expired appropriation 
may not be used for work which is not part of a legitimate replacement 
contract. B-242274, Aug. 27, 1991. 

(3) Refunds and credits: 

As discussed previously, the general rule is that refunds, which 
include returns of erroneous or excess contract payments as well as 
adjustments to previous contract payments, represent an exception to 
the miscellaneous receipts deposit requirement of 31 U.S.C. § 3302(b) 
and are to be credited to the appropriation or fund accounts from 
which the original payments were made.[Footnote 170] Thus, refunds 
received by the government under a price redetermination clause may be 
credited to the appropriation from which the contract was funded. 33 
Comp. Gen. 176 (1953). Contra 24 Comp. Gen. 847, 851 (1945).[Footnote 
171] 

Refunds received by the government under a warranty clause may be 
considered as an adjustment in the contract price and therefore 
credited to the appropriation originally charged under the contract. 
34 Comp. Gen. 145 (1954). The same result applies where the warranty 
refund is in the form of a replacement purchase credit. 27 Comp. Gen. 
384 (1948). (These cases are conceptually related to the "defective 
work" cases discussed earlier, and the result follows logically from 
the result in those cases.) 

Not all contract adjustments qualify as "refunds" for purposes of the 
section 3302(b) exception. In B-265727, July 19, 1996, the Securities 
and Exchange Commission (SEC) asked whether it could reduce its 
obligation of appropriated funds for its building lease to reflect the 
reduced rent SEC paid as a result of a sublease. Under the arrangement 
in question, an SEC employee group subleased parking in the building 
from the SEC but paid the landlord directly for this sublease. SEC 
deducted these payments under the sublease from its own lease 
payments. Relying on the two cases cited above-34 Comp. Gen. 145 and 
27 Comp. Gen. 384—SEC argued that the sublease payment was a "refund" 
that it could use to reduce the rental payments from its 
appropriations. GAO rejected this argument, holding that SEC's use of 
amounts paid by the sublessee to reduce the obligation created by 
SEC's own lease with the landlord constituted an improper augmentation 
of its appropriations. The decision stated: 

"In situations where we treated a contract adjustment or price 
renegotiation as a refund that could be credited to an appropriation 
like those cited by the SEC ... the 'refund' reflected a change in the 
amount the government owed its contractor based on the contractor's 
performance or a change in the government's requirements." 

It went on to point out that neither of these factors was present in 
the SEC case. 

A different type of credit was discussed in 53 Comp. Gen. 872 (1974). 
Prospective timber sale purchasers were to be required to make certain 
property surveys, the cost of which would be credited against the sale 
price. Forest Service appropriations had previously financed the 
surveys. GAO viewed the proposal as an unauthorized augmentation of 
those appropriations. Similarly, the Department of Agriculture could 
not apply savings in the form of credits accrued under a contract for 
the handling of food stamp sales receipts to offset the cost of a 
separate data collection contract, even though both contracts were 
necessary to the same program objective. A-51604, May 31, 1977. 

Credits in the form of rebates may be credited to agency accounts 
where they meet the criteria for refunds, that is, they represent 
adjustments to previous expenditures from those accounts and thus 
serve to make the accounts whole. In 65 Comp. Gen. 600 (1986), GAO 
held that agencies could credit rebates of travel agent commissions to 
the appropriations charged with the costs of federal employee travel 
that included those commissions. See also 73 Comp. Gen. 210 (1994); 72 
Comp. Gen. 109 (1993); 72 Comp. Gen. 63 (1992). On the other hand, 
rebates that do not meet these criteria must be deposited into the 
Treasury pursuant to 31 U.S.C. § 3302(b) unless the agency has 
specific statutory authority to retain them. Thus, in a 1996 decision, 
GAO observed that energy efficiency rebates received by the SEC from a 
local utility company did not meet the criteria for refunds. B-265734, 
Feb. 13, 1996, at fn. 1. Nevertheless, GAO held that, because SEC had 
the necessary specific statutory authority,[Footnote 172] it could 
credit half of an energy efficiency rebate to the accounts that funded 
its energy and water conservation activities. 

Recoveries of amounts paid under fraudulent contracts constitute 
"refunds" that may be deposited to the credit of the appropriation 
charged with the payments until the appropriation account is closed. 
Once the account is closed, the recoveries should be deposited to the 
general fund of the Treasury to the credit of the appropriate receipt 
account. B-257905, Dec. 26, 1995. 

If a contract requires the government to pay a deposit on containers 
and provides for a refund by the contractor of the deposit upon return 
of the empty containers by the government, the refund may be credited 
to the appropriation from which the deposit was paid. B-8121, Jan. 30, 
1940. However, if the contract establishes a time limit for the 
government to return the empty containers and provides further that 
thereafter title to the containers shall be deemed to pass to the 
government, a refund received from the contractor after expiration of 
the time limit is treated as a sale of surplus property and must be 
deposited as miscellaneous receipts. 23 Comp. Gen. 462 (1943). 

(4) "No-cost" contracts: 

The federal government sometimes enters into so-called "no-cost" 
contracts to obtain services. Typically, the contractor receives no 
compensation from the government. B-300248, Jan. 15, 2004. In 63 Comp. 
Gen. 459 (1984), GAO considered whether the Federal Communications 
Commission could accept offers from industry trade show promoters of 
"rent-free" exhibition space and "other free services" intended to 
entice the Commission to participate in industry trade shows. The 
Commission's participation in a trade show entailed erecting an 
exhibition booth and placing staff members and equipment there for the 
duration of the show in order to educate the public and respond to 
questions about the Commission and its activities. Id. at 459-60. The 
Commission felt that it could not afford to rent space from the 
promoters; the promoters, realizing that the Commission's presence at 
their show would be a "drawing card," offered the Commission rent-free 
space, as well as free electricity and other services necessary to 
support the Commission's display. Id. GAO found a "mutually beneficial 
arrangement" between the Commission and the promoters, although it did 
not refer to the mutually beneficial arrangement as a no-cost contract: 

"It is to the advantage of the promoters to solicit the Commission's 
participation and to waive the usual fees. [At the same time,] 
acceptance of the free space and services affords [the Commission] 
with an additional opportunity to inform the public ... at no 
increased cost to the agency." 

Id. 

Several recent GAO decisions have addressed no-cost contracts in 
relation to the miscellaneous receipts statue, 31 U.S.C. § 3302(b). As 
a study of these decisions will show, an agency considering a no-cost 
contract should approach the proposed contract with a great deal of 
care lest the agency find that it has incurred a constructive 
augmentation. 

In one case, a no-cost contract arrangement was specifically 
authorized by law and thus obviously did not violate section 3302(b). 
See B-283731, Dec. 21, 1999 (no-cost contract for travel services 
authorized by 10 U.S.C. § 2646). In two related decisions, GAO also 
held that the General Services Administration's proposed no-cost 
national real estate brokers contract would not violate section 
3302(b). B-302811, July 12, 2004; B-291947, Aug. 15, 2003. Under the 
proposed contract, real estate brokers would provide lease acquisition 
and related services to federal agencies without cost to the 
government. Rather, consistent with industry practice, their 
compensation would take the form of commissions paid by the lessors. 
In affirming the legality of this arrangement, the decision in B-
302811 observed: 

"Because the contract was constructed as a no cost contract, GSA will 
have no financial liability to brokers, and brokers will have no 
expectation of a payment from GSA. The acceptance of services without 
payment pursuant to a valid, binding no-cost contract does not augment 
an agency's appropriation nor does it violate the voluntary services 
prohibition. Although the brokers contract clearly expects that 
brokers will be remunerated by commissions from landlords, as is a 
common practice in the real estate industry, GSA does not require 
landlords to pay commissions. If a landlord were to fail to pay a 
broker, the broker would have no claim against GSA." 

However, the fact that an agency makes no direct payment for 
contractor services does not necessarily mean that arrangement 
constitutes a no-cost contract with no implications under 31 U.S.C. § 
3302(b). In B-300248, Jan. 15, 2004, discussed at length in section 
E.2 of this chapter, the contractor was compensated from fees that the 
Small Business Administration (SBA) imposed on lenders and that the 
lenders paid directly to the contractor. The opinion rejected SBA's 
argument that the "no-cost" nature of the contract took it outside the 
application of the normal augmentation and miscellaneous receipts 
principles: 

"SBA's assertion regarding no-cost contracts ... is misplaced. 
Although we have observed that no-cost contracts do not per se violate 
the prohibition against augmentation, we have neither applied nor 
endorsed the principle that an agency may avoid the prohibition merely 
by requiring third parties to pay for an agency's contractual 
commitment." 

GAO's opinion in B-302811, July 12, 2004, elaborated on the 
distinction between the SBA contract, which was found to be a 
"constructive augmentation" in violation of section 3302(b), and the 
GSA contract, which did not constitute an illegal augmentation: 

"The important difference between the GSA and SBA contracts is that 
under GSA's contract with brokers, brokers offer their services 
without any expectation of payment from GSA, whereas under SBA's 
contract, the contractor offered its services only after SBA agreed to 
impose a fee on its preferred lenders to cover the contractor's costs 
and to require the lenders to pay that fee to the contractor." 

c. Damage to Government	Property and Other Tort Liability: 

As a general proposition, amounts recovered by the government for loss 
or damage to government property cannot be credited to the 
appropriation available to repair or replace the property, but must be 
deposited in the Treasury as miscellaneous receipts. B-287738, May 16, 
2002 (damage to government buildings); 64 Comp. Gen. 431 (1985) 
(damage to government motor vehicle); 26 Comp. Gen. 618 (1947) 
(recovery from insurance company for damage to government vehicle); 3 
Comp. Gen. 808 (1924) (loss of Coast Guard vessel resulting from 
collision).[Footnote 173] While the recovery may well be "related" to 
a prior expenditure for repair of the property, it does not constitute 
a refund in the form of an "adjustment" of a previous disbursement 
that would qualify for crediting to agency accounts. 64 Comp. Gen. 
431, 433 (1985). 

There are statutory exceptions to this general proposition. One 
involves property purchased and maintained by the General Services 
Administration from the General Supply Fund, a revolving fund 
established by 40 U.S.C. § 321. By virtue of 40 U.S.C. § 321(b)(2), 
recoveries for loss or damage to General Supply Fund property are 
credited to the General Supply Fund. This includes recoveries from 
other federal agencies for damage to GSA motor pool vehicles. 59 Comp. 
Gen. 515 (1980). 

Another is 16 U.S.C. § 579c, which authorizes the Forest Service to 
retain the proceeds of bond forfeitures resulting from failure to 
complete performance under a permit or timber sale contract, and money 
received from a judgment, compromise, or settlement of a government 
claim for present or potential damage to lands or improvements under 
the administration of the Forest Service. If the receipt exceeds the 
amount necessary to complete the required work or make the needed 
repairs, the excess must be transferred to miscellaneous receipts. 
This provision is discussed in 67 Comp. Gen. 276 (1988), holding that 
the proceeds of a bond forfeiture could be used to reimburse a general 
Forest Service appropriation which had been charged with the cost of 
repairs. 

In addition, where an agency has statutory authority to retain income 
derived from the use or sale of certain property, and the governing 
legislation evinces an intent for the particular program or activity 
to be self-sustaining, the agency may also retain recoveries for loss 
or damage to that property 27 Comp. Gen. 352 (1947) (recovery from 
party responsible for loss or damage); 24 Comp. Gen. 847 (1945) 
(recovery from insurer); 22 Comp. Gen. 1133 (1943) (same). 

There is also a nonstatutory exception to the general proposition. 
Where a private party responsible for loss or damage to government 
property agrees to replace it in kind or to have it repaired to the 
satisfaction of the proper government officials and to make payment 
directly to the party making the repairs, the arrangement is 
permissible and the agency is not required to transfer an amount equal 
to the cost of the repair or replacement to miscellaneous receipts. 
[Footnote 174] This principle was first recognized in 14 Comp. Dec. 
310 (1907) and has been followed, either explicitly or implicitly, 
ever since. E.g., B-287738, May 16, 2002; 67 Comp. Gen. 510 (1988); B-
87636, Aug. 4, 1949; B-128209-0.M., July 12, 1956. The exception 
applies even though the money would have to go to miscellaneous 
receipts if the responsible party paid it directly to the government. 
67 Comp. Gen. at 511; B-87636, Aug. 4, 1949. For an apparent 
"exception to the exception" based on the specific legislation 
involved, see 28 Comp. Gen. 476 (1949). 

Logically, the nonstatutory exception in 14 Comp. Dec. 310 appears 
difficult to support. It is, in fact, an extremely rare instance in 
which decisions have sanctioned doing indirectly something that cannot 
be done directly. Be that as it may, the exception has been followed 
since 1907 and appears firmly entrenched. Thus, in B-128209-0.M., July 
12, 1956, GAO addressed the relationship between 14 Comp. Dec. 310 and 
28 Comp. Gen. 476, stating that "14 Comp. Dec. 310 has been followed 
for almost 50 years and we have never expressed disagreement with the 
conclusion reached therein." The exception does not disturb the rule 
itself; it is "nothing more than an exception that may be advantageous 
if the timing of repair and payment can be made to coincide." 64 Comp. 
Gen. 431, 433 (1985). 

Compensation paid by an insurance company for damage to government 
property caused by a contractor may not be used to augment the 
agency's appropriation used for the contract. Therefore, absent 
specific statutory authority, the moneys, whether paid to the 
government or to the contractor, are for deposit into the Treasury as 
miscellaneous receipts. B-287738, May 16, 2002; 67 Comp. Gen. 129 
(1987); 48 Comp. Gen. 209 (1968). The retention of insurance proceeds 
was also at issue in B-93322, Apr. 19, 1950, an apparent exception 
based on the particular circumstances involved. In that case, the 
General Services Administration had entered into a contract for 
renovation of the Executive Mansion. The contract required the 
contractor to carry adequate fire and hazard insurance. The renovation 
project had been undertaken under a specific appropriation which was 
enough for the initial cost but would not have been sufficient for 
repairs in the event of a fire or other hazard. Since the renovation 
was a "particular job of a temporary nature," and since a contrary 
result would defeat the purpose of the appropriation, the Comptroller 
General held that insurance proceeds received if a covered risk 
occurred could be retained and used for the cost of repairs. Id. at 4. 
[Footnote 175] 

The rule that recoveries for loss or damage to government property 
must be deposited as miscellaneous receipts applies equally to 
recoveries from common carriers for government property lost or 
damaged in transit. 46 Comp. Gen. 31 (1966); 28 Comp. Gen. 666 (1949); 
22 Comp. Dec. 703 (1916); 22 Comp. Dec. 379 (1916). There is a narrow 
exception in cases where the freight bill on the shipment of the 
property lost or damaged equals or exceeds the amounts paid for 
repairs and both are payable from the same appropriation, in which 
event the bill is reduced and the amount deducted to cover the cost of 
repairs is allowed to remain to the credit of the appropriation. 21 
Comp. Dec. 632 (1915), as amplified by 8 Comp. Gen. 615 (1929) and 28 
Comp. Gen. 666 (1949). The rule and exception are discussed in 46 
Comp. Gen. 31 and in B-4494, Sept. 19, 1939. Also, as with receipts in 
general, the miscellaneous receipts requirement does not apply if the 
appropriation or fund involved is made reimbursable by statute.
46 Comp. Gen. at 33-34. 

In 50 Comp. Gen. 545 (1971), the Comptroller General held that the 
requirement to deposit as miscellaneous receipts recoveries from 
carriers for property lost or damaged in transit does not apply to 
operating funds of the National Credit Union Administration. The 
decision noted that, under 12 U.S.C. § 1755, the Administration's 
funds consist entirely of fees and assessments collected from member 
credit unions and do not include any general revenue appropriations. 
Thus, the recoveries should go to the source that bore the costs of 
the transactions that gave rise to them. 

What happens when one federal agency damages the property of another 
agency? Under the so-called "interdepartmental waiver doctrine," the 
general rule is that funds available to the agency causing the damage 
may not be used to pay claims for damages by the agency whose property 
suffered the damage. 65 Comp. Gen. 910, 911 (1986); 46 Comp. Gen. 586, 
587 (1966). The interdepartmental waiver doctrine is based primarily 
on the concept that property of the various agencies is not the 
property of separate entities but rather of the government as a single 
entity, and there can be no reimbursement by the government for 
damages to or loss of its own property. B-302962, June 10, 2005; 46 
Comp. Gen. at 586, 587. However, as GAO pointed out in B-302962, this 
general rule also has a well-established exception: 

"The interdepartmental waiver doctrine does not apply... where an 
agency has statutory authority to retain income derived from the use 
or sale of certain property, and the governing legislation shows an 
intent for the particular program or activity to be self-sustaining. 
24 Comp. Gen. 847 (1945). Thus, where an agency operation is financed 
through reimbursements or a revolving fund, the prohibition does not 
apply. 65 Comp. Gen. 910 (1986). See also 3 Comp. Gen. 74, 75 (1923). 
In such cases, the agency should recover amounts sufficient to cover 
loss or damage to property financed by the reimbursements or revolving 
fund, regardless of whether that damage is caused by another federal 
agency or a private party, and deposit those funds into the revolving 
fund. See 65 Comp. Gen. 910. The rationale for this exception is that 
the revolving fund, established to operate like a self-sustaining 
business, should not bear the cost for 'other than objects for which 
the fund was created.' Id." 

The decision in B-302962 held that the exception to the 
interdepartmental waiver doctrine applied in the case of damage to 
facilities of the National Archives and Records Administration whose 
operations were financed by a revolving fund. Thus, the Administration 
should collect from other federal agencies, their contractors, or the 
Administration's own contractors, as the case may be, amounts 
sufficient to repair damages they caused to the Administration's 
facilities and deposit those amounts into the revolving fund. 

While the preceding cases involved loss or damage to property, the 
United States may also recover amounts resulting from tortious injury 
to persons, for example, under the so-called Federal Medical Care 
Recovery Act, 42 U.S.C. § 2651. See, e.g., 57 Comp. Gen. 781 (1978). 
Such recoveries, absent express congressional authorization, must be 
deposited in the Treasury as miscellaneous receipts. 52 Comp. Gen. 125 
(1972). Because of a statutory exception to the miscellaneous receipts 
statute, the Department of Veterans Affairs may retain recoveries 
under the Federal Medical Care Recovery Act to the extent of medical 
care or services furnished under chapter 17 of title 38, United States 
Code. The recoveries may be deposited into the Department of Veterans 
Affairs Medical Care Collections Fund. Memorandum Opinion for the 
Assistant Attorney General, Civil Division, Miscellaneous Receipts Act 
Exception for Veterans' Health Care Recoveries, OLC Opinion, Dec. 3, 
1998 (construing 38 U.S.C. § 1729A). 

A case involving the Military Personnel and Civilian Employees Claims 
Act of 1964, 31 U.S.C. § 3721, provides a good illustration of an 
adjustment to a prior disbursement, that is, an authorized refund 
which the agency may retain for credit to the disbursing 
appropriation. The statute authorizes agencies to pay claims by their 
employees for personal property lost or damaged incident to service. 
In cases where there may be third-party liability (e.g., an insurer or 
carrier), the agency has a choice. It may pay the entire amount of the 
employee's claim and be subrogated to the employee's claim against the 
third party, or it may require the employee to pursue the third-party 
claim first. If the agency chooses the former option, it may retain 
any third-party recoveries for credit to the appropriation used to pay 
the claim. 61 Comp. Gen. 537 (1982). An agency adopting the former 
policy, the decision stated, 

"will be making payments in some cases that are, strictly speaking, 
higher than are required. In such cases, it is entirely legitimate to 
treat a third-party recovery as a reduction in the amount previously 
disbursed rather than as an augmentation of the agency's 
appropriation." 

Id. at 540. 

A comparison of 61 Comp. Gen. 537 to the Federal Medical Care Recovery 
Act case discussed above, 52 Comp. Gen. 125 (1972), illustrates the 
distinction previously discussed with respect to applying the 
definition of "refund"-61 Comp. Gen. 537 is an example of an 
adjustment to an amount previously disbursed; 52 Comp. Gen. 125 
illustrates a collection which must go to miscellaneous receipts even 
though it is "related" to a prior expenditure. 

d. Fees and Commissions: 

Federal agencies must have statutory authority both (1) to charge fees 
for their programs and activities in the first instance and (2), even 
if they have fee-charging authority, to retain in their appropriations 
and use the amounts collected. See, e.g., B-300826, Mar. 3, 2005; B-
300248, Jan. 15, 2004. Thus, fees and commissions paid either to the 
government itself or to a government employee for activities relating 
to official duties must be deposited in the Treasury as miscellaneous 
receipts, absent statutory authority to the contrary. 

In the case of fees paid directly to the government, the result is a 
simple application of 31 U.S.C. § 3302(b). Thus, the following items 
must be deposited as miscellaneous receipts: 

* Commissions from the use of pay telephones in government buildings. 
59 Comp. Gen. 213 (1980); 44 Comp. Gen. 449 (1965); 23 Comp. Gen. 873 
(1944); 14 Comp. Gen. 203 (1934); 5 Comp. Gen. 354 (1925); B-4906, 
Oct. 11, 1951. 

* Fees and related reimbursable incidental expenses paid to the 
Department of Agriculture in connection with the investigation of and 
issuance of certifications of quality on certain farm products. 2 
Comp. Gen. 677 (1923). 

* Fees collected under the Freedom of Information Act. 4B Op. Off. 
Legal Counsel 684, 687 (1980). 

* Fees for copying and shipping documents by the Office of Federal 
Housing Enterprise Oversight as part of discovery in administrative 
proceedings before that agency. B-302825, Dec. 22, 2004. 

Of course, if and to the extent expressly authorized by statute an 
agency may retain fees and use them to offset operating costs. See, 
e.g., 2 U.S.C. § 68-7(b) (fees and other charges collected for 
services provided by the Senate Office of Public Records); 7 U.S.C. § 
7333(k)(3) (fees for certain services collected by the Commodity 
Credit Corporation); 28 U.S.C. § 1921(e) (fees collected by the United 
States Marshals Service for service of civil process and judicial 
execution seizures and sales, to the extent provided in advance in 
appropriation acts); 28 U.S.C. § 1931 (specified portions of filing 
fees paid to the clerk of court). The relevant legislation will 
determine precisely what may be retained. E.g., 34 Comp. Gen. 58 
(1954). 

Training fees illustrate both the general rule and statutory 
exceptions. Under the Government Employees Training Act, an agency may 
extend its training programs to employees of other federal agencies on 
a reimbursable or nonreimbursable basis. 5 U.S.C. § 4104. The agency, 
unless it receives appropriations for interagency training, may retain 
the fees. B-241269, Feb. 28, 1991 (nondecision letter). Similarly, an 
agency may admit state and local government employees to its training 
programs and may charge a fee or waive it in whole or in part. 42 
U.S.C. § 4742(a). Under 42 U.S.C. § 4742(b), the agency that provided 
the training is authorized to credit its appropriation for 
reimbursement of fees received. The agency may also admit private 
persons to its training programs on a space-available and fee basis, 
but, unless it has statutory authority to the contrary, the agency 
must deposit the fees as miscellaneous receipts. B-271894, July 24, 
1997; 65 Comp. Gen. 666 (1986); 42 Comp. Gen. 673 (1963); B-241269, 
Feb. 28, 1991; B-190244, Nov. 28, 1977. 

Parking fees assessed by federal agencies under the authority of 40 
U.S.C. § 586 are to be credited to the appropriation or fund 
originally charged for providing the service. However, any amounts 
collected in excess of the actual cost of providing the service must 
be deposited as miscellaneous receipts. 55 Comp. Gen. 897 (1976). 
Statutes other than 40 U.S.C. § 586 may authorize parking fees, in 
which event the terms of the particular statute must be examined. For 
example, parking fees at Department of Veterans Affairs medical 
facilities are addressed in 38 U.S.C. § 8109. Originally, the fees had 
to go to miscellaneous receipts under 31 U.S.C. § 3302(b). 45 Comp. 
Gen. 27 (1965). However, 38 U.S.C. § 8109 was amended, and the fees 
now go into a revolving fund. 

Income derived from the installation and operation of vending machines 
on government-owned or controlled property is generally for deposit as 
miscellaneous receipts. 32 Comp. Gen. 124 (1952); A-44022, Aug. 14, 
1944. There are, however, two major exceptions. First, if an employee 
association with administrative approval makes a contractual 
arrangement with the vendor, the employee group may retain the income. 
32 Comp. Gen. 282 (1952); B-112840, Feb. 2, 1953. Second, under the 
Randolph-Sheppard Act, 20 U.S.C. § 107d-3, vending machine income in 
certain cases must go to blind licensee-operators or state agencies 
for the blind. See B-238937, Mar. 22, 1991; B-199132, Sept. 10, 1980 
(nondecision letters). 

Donations, which are voluntary, and fees and assessments, which are 
not, require different dispositions of amounts collected.[Footnote 
176] Statutory authority to accept gifts and donations does not 
include fees and assessments exacted involuntarily. 25 Comp. Gen. 637, 
639 (1946); B-195492, Mar. 18, 1980; B-225834.2-0.M., Apr. 11, 1988. 
However, on occasion, GAO has held that gift-acceptance authorities 
extended to certain payments that were not wholly gratuitous or purely 
voluntary. See B-286182, Jan. 11, 2001 (statutory authority of the 
District of Columbia courts to accept gifts permits acceptance of 
services provided as part of an administrative settlement in a rate 
case); B-232482, June 4, 1990 (not improper for Commerce Department to 
treat certain registration fees as "contributions" within scope of 22 
U.S.C. § 2455(f)). For a discussion of the difference between the 
statutory authority to accept donations and the authority to charge 
fees to cover the costs of services provided, see B-272254, Mar. 5, 
1997. 

Fees paid to individual employees require a two-step analysis. The 
first step is the principle that the earnings of a government employee 
in excess of the regular compensation gained in the course of or in 
connection with his or her services belong to the government. See, 
e.g., 62 Comp. Gen. 39, 40 (1982) and cases cited (military member 
must remit to the government fee for service on state jury while he 
was not in leave status). The second step is the application of 31 
U.S.C. § 3302(b). Using this analysis, GAO has held that agencies must 
deposit such fees as miscellaneous receipts in the following instances: 

* An honorarium paid to an Army officer for lecturing at a university 
in his capacity as an officer of the United States. 37 Comp. Gen. 29 
(1957). 

* Fees collected from private individuals by government employees for 
their services as notaries public. 16 Comp. Gen. 306 (1936). 

* Witness fees and any allowances for travel and subsistence, over and
above actual expenses, paid to federal employees for testifying in 
certain state court proceedings. 36 Comp. Gen. 591, 592 (1957);
23 Comp. Gen. 628 (1944); 15 Comp. Gen. 196 (1935); B-160343, Nov. 23, 
1966. 

Applying the same analysis, a proposal under which a nonprofit 
corporation funded entirely by private industry would pay monthly 
"bonuses" to Army enlistees to encourage enlistment and satisfactory 
service, even if otherwise proper, could not be implemented without 
specific statutory authority, because the payments could not be 
retained by the enlistees but would have to be deposited in the 
Treasury under 31 U.S.C. § 3302(b). B-200013, Apr. 15, 1981. 

e. Economy Act: 

The Economy Act, 31 U.S.C. §§ 1535 and 1536, authorizes the inter- and 
intradepartmental furnishing of materials or performance of work or 
services on a reimbursable basis.[Footnote 177] It is a statutory 
exception to the miscellaneous receipts statute, 31 U.S.C. § 3302(b), 
authorizing a performing agency to credit reimbursements to the 
appropriation or fund charged in executing its performance.[Footnote 
178] Crediting Economy Act reimbursements to agency appropriations is 
not mandatory. The performing agency may, at its discretion, deposit 
reimbursements for both direct and indirect costs in the Treasury as 
miscellaneous receipts. 57 Comp. Gen. 674, 685 (1978), modifying 56 
Comp. Gen. 275 (1977). There is one area in which the performing 
agency has no discretion. Reimbursements may not be credited to an 
appropriation against which no charges have been made in executing the 
order.[Footnote 179] This would constitute an improper augmentation of 
the credited appropriation(s). As noted in section E.4 of this 
chapter, this also applies to appropriations available in different 
time periods. See B-288142, Sept. 6, 2001. Such reimbursements must 
therefore be deposited into the General Fund as miscellaneous 
receipts. An example would be crediting reimbursement for depreciation 
to an appropriation that did not bear any costs of the transaction. If 
the appropriation that bore the costs is no longer available, the 
reimbursement for depreciation must be deposited into the Treasury as 
miscellaneous receipts. 57 Comp. Gen. at 685-86. An agency must 
deobligate funds at the end of their availability period to the extent 
that obligations for Economy Act work exceed costs incurred for that 
work. 31 U.S.C. § 1535(d). See B-286929, Apr. 25, 2001; 39 Comp. Gen. 
317, 319 (1959); 34 Comp. Gen. 418, 421-22 (1955). Likewise, where 
performance of an Economy Act order extends beyond a fiscal year and 
is funded by more than one fiscal year appropriation, the 
reimbursement must be split between the two appropriations based on 
the work actually performed by each. B-301561, June 14, 2004 
(nondecision letter). 

Reimbursement under the Economy Act is to be made on the basis of 
"actual cost" as determined by the performing agency. 31 U.S.C. § 
1535(b). Advance payments based on estimated costs are authorized, but 
the final payment amount must be adjusted to account for actual costs. 
31 U.S.C. § 1535(b), (d); B-282601, Sept. 27, 1999; B-260993, June 26, 
1996. See also GAO, DFOH Financial Management, GAO/AIMD-96-167R 
(Washington, D.C.: Sept. 30, 1996). While agencies have some 
flexibility in determining costs, their determinations must be 
reasonable in order to avoid an augmentation. B-257823, Jan. 22, 1998; 
B-250377, Jan. 28, 1993.[Footnote 180] In reviewing cost issues under 
the Economy Act, GAO's role is to assess the general accuracy and 
reasonableness of a performing agency's charges, not to "recompute" 
those charges. B-257823, Jan. 22, 1998. 

Failure to obtain reimbursement for all required costs in a 
reimbursable Economy Act transaction improperly augments the 
appropriations of the ordering agency. 57 Comp. Gen. 674, 682 (1978). 
Thus, an ordering agency must reimburse all appropriate costs incurred 
by the performing agency even if they exceed those agreed upon so long 
as the ordering agency received the benefit of the added costs. B-
260993, June 26, 1996. The ordering agency's obligation to reimburse 
such additional costs remains even if those costs are not identified 
until years later and after the appropriation of the ordering agency 
originally charged for the transaction has closed. In this event, the 
additional costs are payable from the ordering agency's current 
appropriations for the same general purpose. B-260993, June 26, 1996. 
By the same token, the performing agency must return to the ordering 
agency advance payments that exceeded actual costs. 72 Comp. Gen. 120 
(1993). 

On occasion, the costs may be so out of proportion as to undercut the 
legitimacy of a purported Economy Act transaction altogether. In 70 
Comp. Gen. 592 (1991), the Labor Department cited the Economy Act as 
authority to combine funds from a number of different departmental 
appropriation accounts for component agencies in order to purchase 
computer equipment for a department-wide network. However, the value 
of equipment provided to the various components under this arrangement 
did not match their contributions. For example, one component paid 
about four times more than the value of the equipment it received. 
Accordingly, the Comptroller General held that this arrangement was 
not a legitimate Economy Act transaction or reprogramming. Rather, it 
constituted an unauthorized transfer of appropriations that resulted 
in a subsidy to, and thus an improper augmentation of, the 
department's central management account. 70 Comp. Gen. at 594-96. 

Finally, the general authority of the Economy Act cannot be used to 
overcome 31 U.S.C. § 3302(b) if the transaction in question is 
governed by a more specific statutory authority. In B-241269, Feb. 28, 
1991, the Treasury Department's Financial Management Service asked 
whether it could invoke the Economy Act to retain reimbursements for 
training it provided to employees of other federal and state agencies 
as well as a few nongovernmental participants. GAO responded that the 
reimbursements were governed not by the Economy Act but by other 
statutory authorities dealing specifically with federal training 
programs. These statutory authorities allowed the agency that provided 
training to credit its appropriations for reimbursements on behalf of 
federal and other governmental participants. However, since the 
statutes did not cover nongovernmental trainees, they could not 
provide an exception from section 3302 that applied to them. Thus, the 
fees paid by nongovernmental participants must be deposited into the 
General Fund of the Treasury as miscellaneous receipts.[Footnote 181] 

The Comptroller General has applied Economy Act cost-reimbursement 
principles by analogy to interagency transactions conducted under 
other statutory authority requiring reimbursement where that authority 
does not otherwise specify the basis for reimbursement. See 72 Comp. 
Gen. 159 (1993). Cf. B-276509, Aug. 28, 1998 (implicitly following 
Economy Act principles). However, rules that are unique to the Economy 
Act, such as the deobligation requirement of 31 U.S.C. § 1535(d), do 
not apply to interagency transactions carried out under other 
statutory authorities. B-302760, May 17, 2004. 

f. Setoff: 

Collections by setoff may be factually distinguishable from direct 
collections, but the effect on the appropriation is the same. If 
crediting an agency appropriation with a direct collection in a 
particular instance would result in an improper augmentation, then 
retaining an amount collected by setoff would equally constitute an 
improper augmentation. Thus, setoffs must be treated the same as 
direct collections. If an agency could retain a direct collection in a 
given situation, it can retain the setoff. However, if a direct 
collection would have to go to miscellaneous receipts, the setoff also 
has to go to miscellaneous receipts. In this latter situation, the 
agency must take the amount of the setoff from its own appropriation 
and transfer it to the General Fund of the Treasury. E.g., 2 Comp. 
Gen. 599 (1923); 20 Comp. Dec. 349 (1913). 

A hypothetical situation will illustrate. Suppose a contractor 
negligently damages a piece of government equipment and becomes liable 
to the government in the amount of $500. Suppose further that an 
employee of the contracting agency, in a separate transaction, 
negligently damages property of the contractor. The contractor files a 
claim under the Federal Tort Claims Act and the agency settles the 
claim for $600. Neither party disputes the validity or amount of 
either claim. The agency sets the contract debt off against the tort 
claim and makes a net payment to the contractor of $100. However, if 
the agency stops here and if it lacks specific statutory authority to 
retain offsets, it has augmented its appropriation to the tune of 
$500. If the tort claim had never occurred and the agency collected 
the $500 from the contractor, the $500 would have to go to 
miscellaneous receipts (see "Contract Matters," above). Conversely, if 
the contract claim did not exist, the agency would end up paying $600 
on the tort claim. Now, combining both claims, if both were paid 
without setoff, the net result would be that the agency is out $600. 
The setoff cannot operate to put the agency's appropriation in a 
better position than it would have been in had the agency and 
contractor simply exchanged checks. Thus, in addition to paying the 
contractor $100, the agency must deposit $500 from its own 
appropriation into the Treasury as miscellaneous receipts. 

A different type of "setoff" occurs under the Back Pay Act, 5 U.S.C. § 
5596. When an agency pays an employee back pay under the Back Pay Act, 
it must deduct amounts the employee earned through other employment 
during the time period in question. The agency simply pays the net 
amount. There is no requirement to transfer the amount of the 
deduction for outside earnings to miscellaneous receipts. 31 Comp. 
Gen. 318 (1952). The deduction for outside earnings is not really a 
collection; it is merely part of the statutory formula for determining 
the amount of the payment. 

g. Revolving Funds: 

A major exception to the requirements of 31 U.S.C. § 3302(b) is the 
revolving fund.[Footnote 182] For most revolving funds, receipts are 
credited directly to the fund and are available, without further 
appropriation by Congress, for expenditures to carry out the purposes 
of the fund. An agency must have statutory authority to establish a 
revolving fund. The enabling statute will specify the receipts that 
may be credited to the fund and the purposes for which they may be 
expended. An example is the General Services Administration's "General 
Supply Fund," noted above under "Damage to Government Property." 
Receipts that are properly for deposit to a revolving fund are, 
obviously, exempt from the miscellaneous receipts requirement of 
section 3302(b). E.g., B-271894, July 24, 1997 (explaining when a 
revolving fund may retain receipts and when it must deposit receipts 
into the Treasury as miscellaneous receipts). 

However, the existence of a revolving fund does not automatically 
signal that 31 U.S.C. § 3302(b) will never apply. Thus, where the 
statute establishing the fund does not authorize the crediting of 
receipts of a given type into the fund, those receipts must be 
deposited in the Treasury as miscellaneous receipts. To credit those 
receipts to the revolving fund would augment the revolving fund. See, 
e.g., B-302825, Dec. 22, 2004 (the Office of Federal Housing 
Enterprise Oversight had authority to collect and deposit into its 
Oversight Fund annual assessments from the Federal National Mortgage 
Association and the Federal Home Loan Mortgage Corporation; its 
authority to conduct administrative and enforcement actions did not 
permit it to retain copying fees charged for document discovery). See 
also 69 Comp. Gen. 260 (1990); 40 Comp. Gen. 356 (1960); 23 Comp. Gen. 
986 (1944); 20 Comp. Gen. 280 (1940). 

Augmentation of a revolving fund may occur in other ways, depending on 
the nature of the fund and the terms of the governing legislation: 

* While the Bureau of Land Management has authority to retain funds 
collected as a result of coal trespasses on federal lands, to use 
those funds to repair damage to the specific lands involved in the 
trespass, and, within the Bureau's discretion, to refund any excess, 
the Bureau may not retain an excess of collections over repair costs 
which the Bureau determines is inappropriate to refund. To retain such 
amounts in the revolving fund to be used for other purposes would 
augment the revolving fund. The Bureau must deposit this amount in the 
Treasury as miscellaneous receipts. B-204874, July 28, 1982. 

* The Corps of Engineers provides construction contract supervision 
and administrative services to other agencies and has a revolving fund 
(the supervision and administration, or S&A, revolving fund) that it 
uses to cover its S&A costs. The Corps changes its customer agencies a 
flat rate for this service so that, over time, its S&A revolving fund 
will break even. Where the Air Force (a customer agency) received an 
amount from an Air Force contractor for additional expenses incurred 
by the government as a result of the contractor's defective 
workmanship, the Corps could cover into its S&A revolving fund only 
that portion representing S&A costs that the Corps had actually 
charged the Air Force, regardless of the amount collected from the 
contractor. 65 Comp. Gen. 838 (1986). To avoid augmenting its S&A 
revolving fund, the Corps had to deposit amounts in excess of that 
portion into miscellaneous receipts. Id. See also B-237421, Sept. 11, 
1991. 

* Although the Corps of Engineers may choose to offer training to 
nongovernmental personnel on a limited space-available basis, such 
training is not within the scope of the Corps' revolving fund for 
furnishing facilities and services for other government agencies. 
Therefore, any fees it receives for training nongovernmental personnel 
must be deposited to the Treasury under 31 U.S.C. § 3302(b) rather 
than being credited to Corps' revolving fund. B-271894, July 24, 1997. 

* The Tennessee Valley Authority (TVA) cannot credit to its revolving 
fund double and treble damages recovered under the False Claims Act. 
Since these damages are in the nature of penalties rather than 
compensation for actual losses, TVA must deposit them to the Treasury 
as miscellaneous receipts. TVA has no authority to augment its 
revolving fund with proceeds that exceed costs it has incurred and 
that are unrelated to its commercial and proprietary activities. B-
281064, Feb. 14, 2000. 

Legislation that merely authorizes, or even requires, that certain 
expenditures be reimbursed is not sufficient to create a revolving 
fund. Reimbursements must be deposited as miscellaneous receipts 
unless the statute specifically authorizes retention by the agency. 67 
Comp. Gen. 443 (1988); 22 Comp. Dec. 60 (1915); 1 Comp. Dec. 568 
(1895). 

h. Trust Funds: 

Moneys properly received by a federal agency in a trust capacity are 
not subject to 31 U.S.C. § 3302(b) and thus do not have to be 
deposited in the Treasury as miscellaneous receipts, unless otherwise 
required.[Footnote 183] B-303413, Nov. 8, 2004; 60 Comp. Gen. 15, 26 
(1980); 27 Comp. Gen. 641 (1948). Other authorities supporting this 
general proposition are Emery v. United States, 186 F.2d 900, 902 (9th 
Cir.), cert. denied, 341 U.S. 925 (1951) (money paid to the United 
States under court order as refund of overcharges by persons who had 
violated rent control legislation was held in trust for tenants and 
could be disbursed to them without need for appropriation); Varney v. 
Warehime, 147 F.2d 238, 245 (6th Cir.), cert. denied, 325 U.S. 882 
(1945) (assessments levied against milk handlers to defray certain 
wartime expenses were trust funds and did not have to be covered into 
the Treasury); 62 Comp. Gen. 245, 251-52 (1983) (proceeds from sale of 
certain excess stockpile materials where federal agency was acting on 
behalf of foreign government); B-223146, Oct. 7, 1986 (moneys received 
by Pension Benefit Guaranty Corporation when acting in its trustee 
capacity); B-23647, Feb. 16, 1942 (taxes and fines collected in 
foreign territories occupied by American armed forces). 

In addition, receipts generated by activities financed with trust 
funds are generally credited to the trust fund and not deposited as 
miscellaneous receipts. United States v. Sinnott, 26 E 84 (D. Ore. 
1886) (proceeds from sale of lumber made at Indian sawmill were to be 
applied for benefit of Indians and were not subject to 31 U.S.C. § 
3302(b)); B-166059, July 10, 1969 (recovery for damage to property 
purchased with trust funds). See also 50 Comp. Gen. 545, 547 (1971). 
In 51 Comp. Gen. 506 (1972), GAO advised the Smithsonian Institution 
that receipts generated by various activities at the National Zoo need 
not be deposited as miscellaneous receipts. The Smithsonian is 
financed in part by trust funds and in part by appropriated funds. 

In a 1991 case, an agency had discovered a $10,000 bank account 
belonging to an employee morale club which had become defunct. No 
documentation of the club's creation or dissolution could be located. 
Thus, if the club had ever provided for the disposition of its funds, 
it could no longer be established. Clearly, the money was not received 
for the use of the government for purposes of 31 U.S.C. § 3302(b). It 
was equally clear that the money could not be credited to the agency's 
appropriations. GAO advised that the money could be turned over to a 
successor employee morale organization to be used for its intended 
purposes. If no successor organization stepped forward, the funds 
would have to be deposited in a Treasury trust account in accordance 
with 31 U.S.C. § 1322. B-241744, May 31, 1991 (nondecision letter). 

There are limits on the extent to which trust funds can legitimately 
avoid the application of 31 U.S.C. § 3302(b). The Justice Department's 
Office of Legal Counsel has cautioned against carrying the trust 
theory too far in the case of trusts created by executive action 
rather than statute. For example, the United States and the 
Commonwealth of Virginia sued a transportation company for causing an 
oil spill in the Chesapeake Bay. A settlement was proposed under which 
the defendant would donate money to a private waterfowl preservation 
organization The Justice Department's Office of Legal Counsel found 
that the proposal would contravene 31 U.S.C. § 3302(b). 4B Op. Off. 
Legal Counsel 684 (1980). The opinion did not question that section 
3302(b) could be overcome by a statutorily created trust or in other 
circumstances where money is "given to the government which is not 
available to the United States for disposition on its own behalf." Id. 
at 687. However, it listed the following weaknesses in a nonstatutory 
trust argument: 

"(1) that trusts created by nonstatutory executive action could indeed 
be used to circumvent legislative prerogatives in the appropriations 
area; (2) that to some extent all money held in the Treasury ... is 
received 'in trust' for the citizenry and (3) that Congress has 
created or recognized trust funds explicitly in numerous cases and 
implicitly in others, but it has neglected to do so in this context." 

Id. at 687-68 (footnotes omitted). 

The opinion also noted that the applicability of section 3302(b) was 
not affected simply because the government did not physically receive 
any funds. Rather, "constructive receipt" of funds is sufficient to 
trigger the statute: 

"In our view, the fact that no cash actually touches the palm of a 
federal official is irrelevant for purposes of § [3302(b)], if a 
federal agency could have accepted possession and retains discretion 
to direct the use of the money. The doctrine of constructive receipt 
will ignore the form of a transaction in order to get to its 
substance.... Since we believe that money available to the United 
States and directed to another recipient is constructively 'received' 
for purposes of § [3302(b)], we conclude that the proposed settlement 
is barred by that statute." 

Id. at 688. 

There was a solution in that case, however. Since the United States 
had not suffered any monetary loss, it was not required to seek 
damages. The proposed contribution by the defendant could be 
attributed to the co-plaintiff, Virginia, which of course was not 
subject to 31 U.S.C. § 3302(b). Id.[Footnote 184] 

Along the lines of the Office of Legal Counsel opinion discussed 
above, the court in Motor Coach Industries, Inc. v. Dole, 725 F.2d 958 
(4th Cir. 1984), rejected a nonstatutory trust arrangement developed 
by the Federal Aviation Administration (FAA) in order to finance 
increased surface transportation to Dulles International Airport. FAA 
agreed to waive landing fees it charged airlines using Dulles if they 
agreed to establish and contribute to an "Air Carriers Trust Fund," 
which would be used to purchase additional ground transport buses to 
serve Dulles. The court observed: 

"The trust arrangement both undermined the integrity of the 
congressional appropriation process and ignored substantive duties 
under the procurement statutes. Viewed realistically, the Trust was an 
attempt by the FAA to divert funds from their intended destination—the 
United States Treasury. Although the purpose for which the FAA sought 
the funds was laudable, its methods certainly cannot be praised. Were 
the contract between the Trust and [the transport company] left 
intact, the agency's end-run around the normal appropriation channels 
would have been successful, enabling it effectively to supplement its 
budget by $3 million without congressional action." 

725 F.2d at 968 (footnote omitted). 

i. Fines and Penalties: 

Generally speaking, moneys collected as a fine or penalty must be
deposited in the Treasury as miscellaneous receipts pursuant to 31 
U.S.C. § 3302(b). E.g., B-281064, Feb. 14, 2000 (double or treble 
damages under the False Claims Act, which constitute "exemplary" or 
punitive rather than compensatory damages); 70 Comp. Gen. 17 (1990) 
(civil penalties assessed against Nuclear Regulatory Commission 
licensees); 69 Comp. Gen. 260 (1990) (penalties—as opposed to the 
recovery of actual losses—under the False Claims Act); 47 Comp. Gen. 
674 (1968) (dishonored checks); B-235577.2-0.M., Nov. 9, 1989 (civil 
penalties under Food Stamp Act). 

In B-210210, Sept. 14, 1983, the Comptroller General held that the 
Commodity Futures Trading Commission lacked authority to enter into a 
settlement agreement under which a party charged with violation of the 
Commodity Exchange Act would donate funds to an educational 
institution with no relationship to the violation. The decision 
pointed out that monetary penalties imposed by the Commission were 
subject to deposit into the Treasury under 31 U.S.C. § 3302(b) and 
rejected the Commission's characterization of the donation as a 
"voluntary contribution" as opposed to a "penalty:" 

"Despite the statement that the donations would not supplant the 
Commission's regular practice of imposing monetary penalties as part 
of a settlement, it is difficult to distinguish the proposed donations 
from money penalties. The money would be donated as a result of an 
enforcement action and in consideration of not imposing some further 
sanction or penalty. It is difficult for us to conceive of a situation 
under the proposed plan where one making the payment would not 
consider the payment a penalty." 

Another case concluded that, without statutory authority, permitting a 
party who owes a penalty to contribute to a research project in lieu 
of paying the penalty amounts to a circumvention of 31 U.S.C. § 
3302(b) and improperly augments the agency's research appropriations. 
70 Comp. Gen. 17 (1990). A case saying essentially the same thing in 
the context of Clean Air Act violations is B-247155, July 7, 1992, 
aff'd on reconsideration, B-247155.2, Mar. 1, 1993. 

GAO considered similar issues in several cases involving consent 
orders between the Department of Energy and oil companies charged with 
violation of federal oil price and allocation regulations. The 
Department has limited authority to use recovered overcharge funds for 
restitution purposes, and in fact has a duty to attempt restitution. 
However, to the extent this cannot reasonably be accomplished or funds 
remain after restitution efforts have been exhausted, the funds may 
not be used for energy-related programs with no restitution nexus but 
must be deposited in the Treasury pursuant to 31 U.S.C. § 3302(b). 62 
Comp. Gen. 379 (1983); 60 Comp. Gen. 15 (1980). It is equally 
unauthorized to give the funds to charity or to use them to augment 
appropriations for administering the overcharge refund program. B-
200170, Apr. 1, 1981. 

To the same effect is United States v. Smithfield Foods, Inc., 982 E 
Supp. 373 (E.D. Va. 1997). Smithfield was assessed a civil penalty of 
over $12 million for violating the Clean Water Act. The trial judge 
initially ordered the government to submit a proposal for "allocation" 
of the penalty with an emphasis on directing all or part of the 
penalty toward restoration of the Chesapeake Bay and its tributaries. 
The Government responded that, since the Clean Water Act did not 
specify an alternative disposition, the penalty must be paid into the 
Treasury pursuant to 31 U.S.C. § 3302(b). The court "regretfully 
agree[d]" that the penalty proceeds could not be directed toward local 
environmental projects. Smithfield Foods, 982 E Supp. at 375. 

j. Miscellaneous Cases: Money to Treasury: 

In addition to the categories discussed above, there have been 
numerous other decisions involving the disposition of receipts in 
various contexts. Some cases in which the Comptroller General held 
that receipts of a particular type must be deposited in the Treasury 
as miscellaneous receipts under 31 U.S.C. § 3302(b) or related 
statutes are set forth below. 

* Costs awarded to the United States by a court under 28 U.S.C. § 
2412. 47 Comp. Gen. 70 (1967). 

* Interest earned on grant advances by grantees other than states. 
E.g., 69 Comp. Gen. 660 (1990). 

* Interest earned by grantees on unauthorized loans of grant funds. 71 
Comp. Gen. 387 (1992). 

* Interest improperly earned on federal grant funds by various agencies
of the District of Columbia government. B-283834, Feb. 24, 2000. 

* Reimbursements received for child care services provided by federal 
agencies for their employees under authority of 40 U.S.C. § 590. 67 
Comp. Gen. 443, 448-49 (1988). 

* Receipts generated by undercover operations by law enforcement 
agencies. 67 Comp. Gen. 353 (1988); 4B Op. Off. Legal Counsel 684, 686 
(1980). In GAO's opinion, however, short-term operations (a card game 
or dice game, for example) may be treated as single transactions. 67 
Comp. Gen. 353, clarifying B-201751, Feb. 17, 1981. Thus, 31 U.S.C. § 
3302(b) need not be read as requiring an undercover agent 
participating in a card game to leave the table to make a 
miscellaneous receipts deposit after every winning hand. If, however, 
the agent ends up with winnings at the end of the game, the money 
cannot be used to offset expenses of the operation.[Footnote 185] 
Related cases are 5 Comp. Gen. 289 (1925) and 3 Comp. Gen. 911 (1924) 
(moneys used to purchase evidence for use in criminal prosecutions and 
recovered when no longer needed for that purpose must be deposited as 
miscellaneous receipts). 

* Proceeds from silver and gold sold as excess property by the 
Interior Department as successor to the American Revolutionary 
Bicentennial Administration. (The silver and gold had been obtained by 
melting down unsold commemorative medals which had been struck by the 
Treasury Department for sale by the American Revolutionary 
Bicentennial Administration.) B-200962, May 26, 1981. 

* Income derived from oil and gas leases on "acquired lands" (as 
distinguished from "public domain lands") of the United States used 
for military purposes. B-203504, July 22, 1981. 

k. Miscellaneous Cases: Money Retained by Agency: 

Most cases in which an agency may credit receipts to its own 
appropriation or fund involve the areas previously discussed: 
authorized repayments, Economy Act transactions, revolving funds, or 
the other specific situations noted. There is another group of cases, 
not susceptible to further generalization, in which an agency simply 
has specific statutory authority to retain certain receipts. Examples 
are: 

* Forest Service may retain moneys paid by permittees on national 
forest lands representing their pro rata share under cooperative 
agreements for the operation and maintenance of waste disposal systems 
under the Granger-Thye Act, 16 U.S.C. § 572 (1970). 55 Comp. Gen. 1142 
(1976). 

* Customs Service may, under 19 U.S.C. § 1524, retain charges 
collected from airlines for preclearance of passengers and baggage at 
airports in Canada, for credit to the appropriation originally charged 
with providing the service. 48 Comp. Gen. 24 (1968). 

* Overseas Private Investment Corporation may retain interest on loans 
of excess foreign currencies made under the Foreign Assistance Act of 
1961, as amended, 22 U.S.C. § 2196. 52 Comp. Gen. 54 (1972). 

* The African Development Foundation, by virtue of its statutory gift-
acceptance authority, may retain funds it receives from certain 
African governments in order to supplement its grants. B-300218, Mar. 
17, 2003. 

* Payroll deductions for government-furnished quarters under 5 U.S.C. 
§ 5911 are retained in the appropriation(s) or fund(s) from which the 
employee's salary is paid. 59 Comp. Gen. 235 (1980), as modified by 60 
Comp. Gen. 659 (1981). However, if the employee pays directly rather 
than by payroll deduction, the direct payments must go to 
miscellaneous receipts unless the agency has specific statutory 
authority to retain them. 59 Comp. Gen. at 236.[Footnote 186] 

* Under the Mineral Lands Leasing Act of 1920, 30 U.S.C. § 191, 
receipts from the sale or lease of public lands are distributed in the 
manner specified in the statute. This was held to include the proceeds 
of bid deposits forfeited by successful mineral lease bidders who fail 
to execute the lease. 65 Comp. Gen. 570 (1986). 

* By virtue of provisions in the Job Training Partnership Act[Footnote 
187] and annual appropriation acts, certain receipts generated by Job 
Corps Centers may be retained for credit to the Labor Department 
appropriation from which the Centers are funded. 65 Comp. Gen. 666 
(1986). 

* Legislation establishing the Commission on the Bicentennial of the 
United States Constitution authorized the Commission to retain 
revenues derived from its licensing activities but did not address 
sales revenues. Sales revenues, therefore, had to be deposited as 
miscellaneous receipts. B-228777, Aug. 26, 1988. 

In the occasional case, the authority may be less than specific. In B-
114860, Mar. 20, 1975, for example, based on the broad authority of 
the National Housing Act, GAO advised that the Department of Housing 
and Urban Development could require security deposits from tenants in 
HUD-owned multifamily projects. Consistent with practice in the 
private sector, the deposit would be considered the property of the 
tenant and held in an escrow account, to be either returned to the 
tenant upon completion of the lease or forfeited to the government in 
cases of breach. 

A final case we will note is 24 Comp. Gen. 514 (1945), an exception 
stemming from the particular funding arrangement involved rather than 
a specific statute. The case dealt with certain government 
corporations that did not receive annual appropriations but instead 
received annual authorizations for expenditures from their capital 
funds for administrative expenses. An appropriation act had imposed a 
limit on certain communication expenditures and provided that savings 
resulting from the limit "shall not be diverted to other use but shall 
be covered into the Treasury as miscellaneous receipts." The 
Comptroller General construed this as meaning returned to the source 
from which made available. In the case of the corporations in 
question, this meant that the savings could be returned to their 
capital funds. 

l. Money Erroneously Deposited as Miscellaneous Receipts: 

The various accounts that comprise the heading "miscellaneous 
receipts" are just that—they are receipt accounts, not expenditure or 
appropriation accounts. As noted earlier, by virtue of the 
Constitution, once money is deposited into miscellaneous receipts, it 
takes an appropriation to get it back out. What, therefore, can be 
done if an agency deposits some money into miscellaneous receipts by 
mistake? 

This question really involves two separate situations. In the first 
situation, an agency receives funds which it is authorized, under the 
principles discussed above, to credit to its own appropriation or 
fund, but erroneously deposits them as miscellaneous receipts. The 
decisions have always recognized that the agency can make an 
appropriate adjustment to correct the error. In an early case, the 
Interior Department sold some property and deposited the proceeds as 
miscellaneous receipts when in fact it was statutorily authorized to 
credit the proceeds to its reclamation fund. The Interior Department 
then requested a transfer of the funds back to the reclamation fund, 
and the Secretary of the Treasury asked the Comptroller of the 
Treasury if it was authorized. Of course it was, replied the 
Comptroller: 

"This is not taking money out of the Treasury in violation of 
paragraph 7, section 9, Article I of the Constitution .... 

"The proceeds of the sale ... have been appropriated by law. Taking it 
from the Treasury and placing it to the credit in the Treasury of the 
appropriation to which it belongs violates neither the Constitution 
nor any other law, but simply corrects an error by which it was placed 
to the unappropriated surplus instead of to the appropriation to which 
it belongs." 

12 Comp. Dec. 733, 735 (1906). 

This concept has consistently been followed. See 45 Comp. Gen. 724 
(1966); 3 Comp. Gen. 762 (1924); 2 Comp. Gen. 599 (1923). Cf. B-
275490, Dec. 5, 1996.[Footnote 188] The concept also has been applied 
to permit correction of some errors in accounts that had been closed 
and their balances canceled pursuant to 31 U.S.C. §§ 1552 or 1555. See 
72 Comp. Gen. 343 (1993). This decision held that, while canceled 
balances cannot be restored for purposes of recording obligations or 
malting disbursements, bookkeeping records of closed accounts can be 
adjusted to correct obvious accounting errors. The decision was 
prompted by the Defense Department's request that the Treasury 
Department reopen some of its accounts in order to record 
disbursements against those accounts for payments that, according to 
Defense, had been made from those accounts before cancellation but had 
not been properly charged against the accounts. The decision 
emphasized that: 

"Treasury's authority to correct the accounts relates only to obvious 
clerical errors such as misplaced decimals, transposed digits, or 
transcribing errors that result in inadvertent cancellations of budget 
authority, and is not meant to serve as a palliative for deficiencies 
in DOD's accounting systems." 

72 Comp. Gen. at 346. 

A subsequent decision again stressed that while patently erroneous 
appropriation transactions can and often must be corrected, the 
authority to make corrections "extends only to clerical and 
administrative errors, not all misjudgments and miscalculations by 
government officials." B-286661, Jan. 19, 2001, at fn. 5. 

In the second situation, a private party pays money to a federal 
agency, the agency deposits it as miscellaneous receipts, and it is 
subsequently determined that the party is entitled to a refund. Here, 
in contrast to the first situation, an appropriation is necessary to 
get the money out. E.g., 3 Comp. Gen. 296 (1923). 

There is a permanent indefinite appropriation for refunding 
collections "erroneously received and covered" that are not properly 
chargeable to any other appropriation. 31 U.S.C. § 1322(b)(2). The 
availability of this appropriation depends on exactly where the 
receipts were deposited. If the amount subject to refund was credited 
to some specific appropriation account, the refund is chargeable to 
the same account. If, however, the receipt was deposited in the 
general fund as miscellaneous receipts, then the appropriation made by 
31 U.S.C. § 1322(b)(2) is available for the refund, provided that the 
amount in question was "erroneously received and covered." B-257131, 
May 30, 1995; 71 Comp. Gen. 464 (1992); 61 Comp. Gen. 224 (1982); 55 
Comp. Gen. 625 (1976); 17 Comp. Gen. 859 (1938). Also, the 31 U.S.C. § 
1322(b) appropriation is not available as a source for adjusting an 
erroneous intra-governmental transfer between two appropriation 
accounts since such an adjustment does not involve a "refund" of funds 
"erroneously received" by the government. B-286661, Jan. 19, 2001, at 
fn. 6. 

Examples of cases in which use of the "Moneys Erroneously Received and 
Covered" appropriation was found authorized are 71 Comp. Gen. 464 
(1992) (refund to investment company of late filing fee upon issuance 
of order by Securities and Exchange Commission exempting company from 
filing deadline for fiscal year in question); 63 Comp. Gen. 189 (1984) 
(Department of Energy deposited overcharge recoveries from oil 
companies into general fund instead of first attempting to use them to 
make restitution refunds); B-217595, Apr. 2, 1986 (interest 
collections subsequently determined to have been erroneous). 

One case, 53 Comp. Gen. 580 (1974), combined elements of both 
situations. The Army Corps of Engineers had been authorized to issue 
discharge permits under the Refuse Act Permit Program. The program was 
statutorily transferred in 1972 to the Environmental Protection 
Agency. Under the user charge statute, 31 U.S.C. § 9701, both the 
Corps and EPA had charged applicants a fee. In some cases, the fees 
had been deposited as miscellaneous receipts before the applications 
were processed. The legislation that transferred the program to EPA 
also provided that EPA could authorize states to issue the permits. 
However, there was no provision that authorized EPA to transfer to the 
states any fees already paid. Thus, some applicants found that they 
had paid a fee to the Corps or EPA, received nothing for it, and were 
now being charged a second fee by the state for the same application. 
EPA felt that the original fees should be refunded. So did the 
applicants. 

GAO noted that the user charge statute contemplates that the federal 
agency will furnish something in exchange for the fee. Since this had 
not been done, the fees could be viewed as having been erroneously 
deposited in the general fund. However, the fees had not been 
erroneously received—the Corps and EPA had been entirely correct in 
charging the fees in the first place-—so the appropriation made by 31 
U.S.C. § 1322(b)(2) could not be used. There was a way out, but the 
refunds would require a two-step process. The Corps and EPA should 
have deposited the fees in a trust account[Footnote 189] and kept them 
there until the applications were processed, at which time depositing 
as miscellaneous receipts would have been proper. Thus, EPA could 
first transfer the funds from the general fund to its suspense account 
as the correction of an error, and then make the refunds directly from 
the suspense account. 

In cases where the "Moneys Erroneously Received and Covered" 
appropriation is otherwise available, it is available without regard 
to whether the original payment was made under protest. 55 Comp. Gen. 
243 (1975). 

The appropriation made by 31 U.S.C. § 1322(b)(2) for Refund of Moneys 
Erroneously Received and Covered is available only to refund amounts 
actually received and deposited. If a given refund bears interest, for 
example, a refund claim approved by a contracting officer under the 
Contract Disputes Act, the interest portion must be charged to the 
contracting agency's operating appropriations for the fiscal year in 
which the award is made. B-217595, Apr. 2, 1986. 

If an agency collects money from someone to whom it owes a refund from 
a prior transaction, it should not simply deposit the net amount. The 
correct procedure is to deposit the new receipt into the general fund 
(assuming that is the proper receptacle), and then make the refund 
using the "Moneys Erroneously Received and Covered" appropriation. B-
19882, Oct. 28, 1941; A-96279, Sept. 15, 1938. However, GAO has 
approved offsetting a refund against future amounts due from the same 
party in cases where there is a continuing relationship, but suggested 
that the party be given the choice. B-217595, Apr. 2, 1986, at 4. 

Clearly, if the receipt cannot be regarded as erroneous, 31 U.S.C.
§ 1322(b)(2) is not available. E.g., Lee v. United States, 33 Fed. CL 
374 (1995); 53 Comp. Gen. 580 (1974); B-146111, July 6, 1961. Citing 
several of the Comptroller General decisions discussed previously, the 
court in Lee held that a filing fee appropriately paid by a litigant 
and deposited into the Treasury was not subject to refund under 
section 1322(b)(2). Lee, 33 Fed. Cl. at 381-84. Also, the "Moneys 
Erroneously Received and Covered" appropriation is available only 
where the amount to be refunded was deposited into the general fund. 
E.g., 11 Comp. Dec. 300 (1904). If a refund is due of moneys deposited 
somewhere other than the general fund, some other basis must be sought. 

Republic National Bank of Miami v. United States, 506 U.S. 80 (1992), 
and the varied opinions of the Justices it spawned, illustrate how 
perplexing the issues can be when it comes to retrieving from the 
Treasury funds that should not have been deposited there. Republic 
National Bank was an "in rem" forfeiture action against property (a 
house) that the government alleged had been purchased with income from 
illegal drug trafficking. The bank intervened, claiming to be an 
innocent owner of the property by virtue of its mortgage interest. 
With the consent of the bank, the property was sold and the proceeds 
were held by the U.S. marshal pending the outcome of the litigation. 
The trial court rejected the bank's claim and ordered the sale 
proceeds forfeited to the United States. The bank appealed; however, 
when it did not seek to stay execution of the judgment the government 
had the marshal deposit the sales proceeds into the Assets Forfeiture 
Fund of the Treasury. Once this occurred, the government sought to 
dismiss the appeal as moot. The government argued that since the 
proceeds were now in the Treasury, they could not be withdrawn without 
an appropriation and, thus, the courts could provide no remedy to the 
bank. 

When the case reached the Supreme Court, all of the Justices rejected 
the government's argument and agreed that the bank could be paid if it 
prevailed on the merits. However, they were deeply split as to the 
rationale. Justice Blackmun, author of most of the Court's opinion in 
Republic National Bank, characterized the government's position as 
being that, by virtue of the Constitution's Appropriations Clause, 
"absent an appropriation, any funds that find their way into a 
Treasury account must remain there, regardless of their ownership." 
506 U.S. at 89. Rejecting this position as producing "bizarre" and 
"absurd" results, Justice Blackmun concluded that an appropriation was 
not necessary. He reasoned that money involved in a pending in rem 
forfeiture proceeding could not be regarded as "public funds" within 
the scope of the Appropriations Clause where the very purpose of the 
proceeding was to sort out their proper ownership. Furthermore, he 
observed: 

"Contrary to the Government's broad submission here, the Comptroller 
General has long assumed that, in certain situations, an erroneous 
deposit of funds into a Treasury account can be corrected without a 
specific appropriation. See 53 Comp. Gen. 580 (1974); 45 Comp. Gen. 
724 (1966); 3 Comp. Gen. 762 (1924); 12 Comp. Dec. 733, 735 (1906); 
Principles of Federal Appropriations Law, at 5-79 to 5-81. Most of 
these cases have arisen where money intended for one account was 
accidentally deposited in another. It would be unrealistic, for 
example, to require congressional authorization before a data 
processor who misplaces a decimal point can 'undo' an inaccurate 
transfer of Treasury funds. The Government's absolutist view of the 
scope of the Appropriations Clause is inconsistent with these
commonsense understandings." 

Republic National Bank, 506 U.S. at 92. 

However, Chief Justice Rehnquist, joined by four other Justices, wrote 
the opinion of the Court on this point. The Chief Justice expressed 
"difficulty accepting the proposition that funds which have been 
deposited into the Treasury are not public money, regardless of 
whether the Government's ownership of those funds is disputed." Id. at 
93. He added, "even if there are circumstances in which funds that 
have been deposited into the Treasury may be returned absent an 
appropriation, I believe it unnecessary to plow that uncharted ground 
here." Id. at 95. Instead, he concluded that the judgment fund 
appropriation under 31 U.S.C. § 1304 would be available to provide a 
source of payment if the bank prevailed in the case. 

Justice Blackmun had rejected the Chief Justice's judgment fund 
rationale for two reasons. First, he viewed the judgment fund as being 
limited to the payment of money judgments. Second, he pointed out that 
the proceeds from the in rem action were not in the judgment fund. 
Rather, they were in the Treasury Assets Forfeiture Fund. See Republic 
National Bank, 506 U.S. at 91, fn. 6.[Footnote 190] 

Finally, in their separate opinions, Justice White and Justice Stevens 
both expressed displeasure over the need to address the Appropriations 
Clause issue, indicating surprise that the Government would advance 
"such a transparently fallacious position." See 506 U.S. at 97-99. 

3. Gifts and Donations to the Government: 

a. Donations to the Government: 	 

It has long been recognized that the United States (as opposed to a 
particular agency) may receive and accept gifts. No particular 
statutory authority is necessary. As the Supreme Court has said: 
"Uninterrupted usage from the foundation of the Government has 
sanctioned it."	 

United States v. Burrtison, 339 U.S. 87, 90 (1950). The gifts may be 
of real property or personal property, and they may be testamentary 
(made by will) or inter vivos (made by persons who are not dead yet). 
Monetary gifts to the United States go to the general fund of the 
Treasury and present no augmentation problem since there is no 
appropriation to augment. 

However, as the Supreme Court held in the Burrtison case, a state may 
prohibit testamentary gifts by its domiciliaries to the United States. 
Also, a state may impose an inheritance tax on property bequeathed to 
the United States. United States v. Perkins, 163 U.S. 625 (1896). The 
tax is not regarded as a constitutionally impermissible tax on federal 
property "since	the tax is imposed upon the legacy before it reaches 
the hands of the government. The legacy becomes the property of the 
United States only after it has suffered a diminution to the amount of 
the tax ...." Id. at 630. 

While gifts to the United States do not require statutory authority, 
gifts to an individual federal agency stand on a different footing. 
The rule is that a government agency may not accept for its own use 
(i.e., for retention by the agency or credit to its own 
appropriations) gifts of money or other property in the absence of 
specific statutory authority. 16 Comp. Gen. 911 (1937). As the 
Comptroller General said in that decision, "[w]hen the Congress has 
considered desirable the receipt of donations ... it has generally 
made specific provision therefor ...." Id. at 912. See also B-286182, 
Jan. 11, 2001; B-289903, Mar. 4, 2002 (nondecision letter). 

Thus, acceptance of a gift of money or other property by an agency 
lacking statutory authority to do so is an improper augmentation. 
E.g., B-286182, Jan. 11, 2001 (District of Columbia Courts statutory 
gift-acceptance authority permitted receipt of a private company's 
contribution of telecommunications services and equipment). If an 
agency does not have statutory authority to accept donations of money, 
it must turn the money in to the Treasury as miscellaneous receipts. 
E.g., B-139992, Aug. 31, 1959 (proceeds of life insurance policy 
designating federal agency as beneficiary). Under the Federal Property 
and Administrative Services Act of 1949, as amended, agencies without 
gift retention authority must report gifts of property to the General 
Services Administration (GSA) and the property is treated in 
accordance with its regulations. See 40 U.S.C. § 121; 41 C.F.R. §§ 102-
36.410 and 102-36.415 (2005). Gifts from foreign governments or 
entities must also be reported to GSA and treated in accordance with 
41 C.F.R. § 102-36.420 and part 101-49. 

For purposes of this discussion, the term "gifts" may be defined as 
"gratuitous conveyances or transfers of ownership in property without 
any consideration." B-286182, Jan. 11, 2001; 25 Comp. Gen. 637, 639 
(1946); B-217909, Sept. 22, 1986. A receipt that does not meet this 
definition does not become a gift merely because the agency 
characterizes it as one. For example, a fee paid for the privilege of 
filming a motion picture in a national park is not a gift and must be 
deposited as miscellaneous receipts rather than in the agency's trust 
fund. 25 Comp. Gen. 637. See also B-89294, Aug. 6, 1963. Similarly, a 
reduction of accrued liability in fulfillment of a contractual 
obligation is not a donation for purposes of a statute authorizing 
appropriations to match "donations." B-183442, Oct. 21, 1975 (statute 
indicated that only gifts may be matched and payment in satisfaction 
of a contractual debt is not a gift). On the other hand, some payments 
that are not wholly voluntary or gratuitous may occasionally qualify 
for acceptance as gifts or contributions. See B-286182, Jan. 11, 2001 
(District of Columbia Court System may accept and use a contribution 
of telecommunication services and equipment from a telecommunication 
company as part of a settlement agreement in a rate case); B-232482,
June 4, 1990 (payments of fees by nongovernment participants for 
services provided as part of Department of Commerce-sponsored 
international trade shows are considered "contributions" under 
specific language in Commerce's appropriation act). 

A number of departments and agencies have statutory authority to 
accept gifts. A partial listing is contained in B-149711, Aug. 20, 
1963 (although dated, B-149711 is still useful since there is no more 
recent comprehensive compilation of these authorities). The statutory 
authorizations contain varying degrees of specificity as to precisely 
what may be accepted (money, property, services, etc.). For example, 
the State Department's general gift statute, 22 U.S.C. § 2697, 
authorizes the State Department to accept gifts of money or property, 
real or personal, and, in the Secretary's discretion, conditional 
gifts. A case discussing this statute is 67 Comp. Gen. 90 (1987) 
(United States Information Agency may accept donations of radio 
programs prepared by private syndicators for broadcast over Voice of 
America facilities). Another is 70 Comp. Gen. 413 (1991) (United 
States Information Agency may accept donations of foreign debt). 
Authority to accept voluntary services does not include donations of 
cash. A-86115, July 15, 1937; A-51627, Mar. 15, 1937. For a further 
discussion of voluntary services, see section C.3 of this chapter. 

The authority of the Defense Department to accept gifts is found in 
several statutes. First, the Defense Department may accept 
contributions of money or real or personal property "for use by the 
Department of Defense" from any person, foreign government, or 
international organization The money and proceeds from the sale of 
property are credited to the Defense Cooperation Account in the 
Treasury. The money is not automatically available to Defense, but is 
available for obligation or expenditure only in the manner and to the 
extent provided in appropriation acts. 10 U.S.C.
§ 2608. Second, the Department may accept services, supplies, real 
property, or the use of real property under a mutual defense or 
similar agreement or as reciprocal courtesies, from a foreign 
government for the support of any element of United States armed 
forces in that country. 10 U.S.C. § 2350g. These authorities formed 
the basis for the United States to accept contributions from foreign 
governments and others to defray the costs of the 1991 military 
operations in the Persian Gulf. See GAO, Operations Desert 
Shield/Storm: Foreign Government and Individual Contributions to the 
Department of Defense, GAO/NSIAD-92-144 (Washington, D.C.: May 11, 
1992). Other limited-purpose authorities available to the military are 
found in 10 U.S.C. §§ 2601-2607. 

We also should note a statute tailor-made for the philanthropist 
desiring to make a donation for the express purpose of reducing the 
national debt. 

(Some people mistakenly think they already do this in April of each 
year.) The Secretary of the Treasury may accept gifts of money, 
obligations of the United States, or other intangible personal 
property made for the express purpose of reducing the public debt. 
Gifts of other real or personal property for the same purpose may be 
made to the Administrator of the General Services Administration. 31 
U.S.C. § 3113. 

Assuming the existence of the requisite statutory authority, it is 
quite easy to make a gift to the government. The essential elements of 
a gift are donative intent, delivery, and acceptance. There are no 
particular forms required. A simple letter to the appropriate agency 
head transmitting the funds for the stated purpose will suffice. See B-
274855, Jan. 23, 1997; B-157469, July 24, 1974 (nondecision letter). 

A 1980 GAO study found that, during fiscal year 1979, 41 government 
agencies received a total of $21.6 million classified as gift revenue. 
See GAO, Review of Federal Agencies' Gift Funds, FGMSD-80-77 
(Washington, D.C.: Sept. 24, 1980). The report pointed out that the 
use of gift funds dilutes congressional oversight because the funds do 
not go through the appropriation process. The report recommended that 
agencies be required to more fully disclose gift fund operations in 
their budget submissions. 

The issue raised in most gift cases is the purpose for which gift 
funds may be used. This ultimately depends on the scope of the 
agency's statutory authority and the terms of the gift. Gift funds are 
accounted for as trust funds. They generally must be deposited in the 
Treasury as trust funds under 31 U.S.C. § 1321(b), to be disbursed in 
accordance with the terms of the trust. In 16 Comp. Gen. 650, 655 
(1937), the Comptroller General stated: 

"Where the Congress authorizes Federal officers to accept private 
gifts or bequests for a specific purpose, often subject to certain 
prescribed conditions as to administration, authority must of 
necessity be reposed in the custodians of the trust fund to make 
expenditures for administration in such a manner as to carry out the 
purposes of the trust and to comply with the prescribed conditions 
thereof without reference to general regulatory and prohibitory 
statutes applicable to public funds." 

While this passage correctly states the trust fund concept, agencies 
have sometimes misconstrued it to mean that they have free and 
unrestricted use of donated funds. This is not the case. On the one 
hand, donated funds may not be subject to all of the restrictions 
applicable to direct appropriations. Yet on the other hand, gift funds 
constitute appropriated funds unless Congress provides otherwise 
[Footnote 191] and they are still "public funds" in a very real sense. 
As GAO stated in B-274855, Jan. 23, 1997: 

"Funds available to agencies are considered appropriated, regardless 
of their source, if they are made available for collection and 
expenditure pursuant to specific statutory authority. See B-215042, 
April 12, 1985. This means that although donated funds may not be 
subject to all the restrictions applicable to direct appropriations, 
they are still public funds. See B-197565, May 13, 1980." 

Id. at 3. See also B-275669.2, July 30, 1997. Consequently, gift funds 
can be used only in furtherance of authorized agency purposes and 
incident to the terms of the trust. See B-300218, Mar. 17, 2003; B-
195492, Mar. 18, 1980. 

An interesting illustration of this point occurred in B-16406, May 17, 
1941. A citizen had bequeathed money in her will to a hospital. When 
the will was made, the hospital belonged to the state of Louisiana. By 
the time the will was probated, however, it had been acquired by the 
United States. Louisiana was concerned that the bequest might, if 
deposited in the United States Treasury, be diverted from the 
decedent's intent. There was no need for concern, the Comptroller 
General advised. The money would have to be deposited as trust funds 
and would be available for expenditure only for the purposes specified 
in the trust, that is, for the hospital. 

In evaluating the propriety of a proposed use of gift funds, it is 
first necessary to examine the precise terms of the statute 
authorizing the agency to accept the gift. Limitations imposed by that 
statute must be followed. Thus, under a statute which authorized the 
Forest Service to accept donations "for the purpose of establishing or 
operating any forest research facility," the Forest Service could not 
turn over unconditional gift funds to a private foundation under a 
cooperative agreement, with the foundation to invest the funds and use 
the proceeds for purposes other than establishing or operating forest 
research facilities. 55 Comp. Gen. 1059 (1976). See also B-198730, 
Dec. 10, 1986 (funds donated to Library of Congress to further 
purposes of Library's Center for the Book could not be used for 
unrelated Library programs); 40 Op. Att'y Gen. 66 (1941) (Library of 
Congress could not, without statutory authority, share income from 
donated property with Smithsonian Institution). 

Under a statute authorizing the Federal Board for Vocational Education 
to accept donations to be used "in connection with the appropriations 
hereby made or hereafter to be made, to defray the expenses of 
providing and maintaining courses of vocational rehabilitation," the 
funds could be used only to supplement the Board's regular 
appropriations and could not be used for any expense not legally 
payable from the regular appropriation. The statute here conferred no 
discretion. 27 Comp. Dec. 1068 (1921). 

If an agency is authorized to accept gifts, the funds may be used to 
augment a "not to exceed" earmark applicable to that purpose. B-52501, 
Nov. 9, 1945. (Although the statute involved in B-52501, the 
predecessor of 10 U.S.C. § 2608 noted above, no longer exists, the 
point of the decision is still valid.) 

Once it is determined that the proposed use will not contravene the 
terms of the agency's authorizing statute, the agency will have some 
discretion under the trust fund concept. For example, donated funds 
may be used for entertainment only if the entertainment will further a 
valid function of the agency for which the donated funds were 
provided, if the government could not accomplish the function as 
effectively without the expenditure, and if the expenditure does not 
violate any restrictions imposed by the donor on the use of the funds. 
46 Comp. Gen. 379 (1966); B-195492, Mar. 18, 1980; B-170938, Oct. 30, 
1972; B-142538, Feb. 8, 1961. See also B-152331, Nov. 19, 1975 
(involving a trust fund which included both gift and non-gift funds). 
It follows that donated funds may not be used for entertainment which 
does not bear a legitimate relationship to official agency purposes. 
61 Comp. Gen. 260 (1982), aff'd upon reconsideration, B-206173, Aug. 
3, 1982 (donated funds improperly used for breakfast for Cabinet wives 
and Secretary's holiday party). 

The trust fund concept was also applied in 36 Comp. Gen. 771 (1957). 
The Alexander Hamilton Bicentennial Commission had been given 
statutory authority to accept gifts and wanted to use the donations to 
award Alexander Hamilton Commemorative Scholarships. The Commission 
was to have a brief existence and would not have sufficient time to 
administer the scholarship awards. The Comptroller General held that 
the Commission could, prior to the date of its expiration, transfer 
the funds to a responsible private organization for the purpose of 
enabling proper administration of the scholarship awards. The 
distinction between this case and 55 Comp. Gen. 1059, mentioned above, 
is that in 36 Comp. Gen. 771, the objective of transferring the funds 
to a private organization was to better carry out an authorized 
purpose. In 55 Comp. Gen. 1059, the objective was to enable the funds 
to be used for unauthorized purposes. 

Another case illustrating permissible administrative discretion under 
the trust fund concept is B-131278, Sept. 9, 1957. A number of persons 
had made donations to St. Elizabeth's Hospital to enable it to buy an 
organ for its chapel. The donors (organ donors?) had made the gifts on 
the condition that the Hospital purchase a high-quality (expensive) 
organ. When the Hospital issued its invitation for bids on the organ, 
the specifications were sufficiently restrictive so as to preclude 
offers on lower quality organs. The decision found this to be entirely 
within the Hospital's discretion in using the gift funds in accordance 
with their terms. 

As noted above, however, the agency's discretion in administering its 
gift funds is not unlimited. Thus, for example, an agency may not use 
gift funds for purely personal items such as greeting cards that do 
not further agency purposes for which the gift funds were donated. 47 
Comp. Gen. 314 (1967). See also B-195492, Mar. 18, 1980 (when an 
agency uses trust funds for what appear to be personal purposes, it 
has the burden of showing that this use furthers the trust purposes). 

The particular statutory scheme will determine the extent to which 
donated funds are subject to other laws governing the expenditure of 
public funds. In two cases, for example, where a designated activity 
was to be carried out solely or primarily with donated funds, GAO 
found that the recipient agency could invest the gift funds in non-
Treasury interest-bearing accounts and was not required to comply with 
the Federal Property and Administrative Services Act of 1949 (FPASA), 
41 U.S.C. § 251-266, or the Federal Acquisition Regulation (FAR), 48 
C.F.R. §§ 1.104 and 12.101. 68 Comp. Gen. 237 (1989) (Christopher 
Columbus Quincentenary Jubilee Commission); B-211149, Dec. 12, 1985 
(Holocaust Memorial Council). However, these cases were distinguished 
in B-275669.2, July 30, 1997, in which GAO determined that the 
American Battle Monuments Commission charged with establishing the 
World War II memorial must use donated funds for contracts in 
accordance with the FPASA and FAR since neither the authorizing 
legislation nor the legislative history indicated an intention to 
exempt the Commission from such requirements. 

Gifts that would require the government to incur significant expenses 
in future years present special issues. Although there are no recent 
cases, indications are that the agency needs specific statutory 
authority—not merely general authority to accept gifts—since the 
agency's appropriations would not otherwise be available to make the 
future expenditures. For example, an individual made a testamentary 
gift to a United States naval hospital. The will provided that the 
money was to be invested in the form of a memorial fund, with the 
income to be used for specified purposes. The Comptroller General 
objected to this, finding that the gift appeared to be conditional and 
that "the United States would become, in effect, a trustee for 
charitable uses, would never gain a legal title to the money, but 
would have the burden and obligation of administering in perpetuity a 
trust fund ...." 11 Comp. Gen. 355, 366 (1932). Also, absent specific 
authorization by Congress, appropriations would not be available for 
the expenses of administering the trust. Therefore, absent 
congressional authorization to accept the donation "as made," it could 
not be accepted either by the naval hospital, id., or by the Treasury 
Department, A-40707, Dec. 15, 1936. See Story v. Snyder, 184 F.2d 454, 
456 (D.C. Cir.), cert. denied, 340 U.S. 866 ((1950) ("gifts to the 
United States which involve any duty, burden, or condition, or are 
made dependent upon some future performance by the United States, are 
not accepted by the Government unless by the express authority of 
Congress"). See also 10 Comp. Gen. 395 (1931); 22 Comp. Dec. 465 
(1916);[Footnote 192] 30 Op. Att'y Gen. 527 (1916). A few of the cases 
(e.g., 10 Comp. Gen. 395 and 30 Op. Att'y Gen. 527) have tied the 
result to the Antideficiency Act prohibition against incurring 
obligations in advance of appropriations, reasoning that acceptance 
would, in effect, create an unauthorized and unfunded contractual 
commitment to incur future expenses. See 10 Comp. Gen. at 398. 

A question that received little attention in the past is whether an 
agency with statutory authority to accept gifts may use either 
appropriated funds or donated funds to solicit the gifts. GAO found 
that the Holocaust Memorial Council may use either appropriated or 
donated funds to hire a fund-raiser, but the cases have little 
precedential value since the legislation involved included specific 
authority to solicit as well as accept donations. See B-211149, Dec. 
12, 1985; B-211149, June 22, 1983. 

An interesting, and hopefully unique, situation presented itself in B-
230727, Aug. 1, 1988. Congress had enacted legislation to establish a 
Commission on Improving the Effectiveness of the United Nations, to be 
funded solely from private contributions. Pub. L. No. 100-204, title 
VII, pt. B, § 727, 101 Stat. 1331, 1394 (Dec. 22, 1987). The effective 
date of the legislation was March 1, 1989. Unfortunately, the 
legislation failed to provide a mechanism for anyone (Treasury 
Department or General Services Administration, for example) to accept 
and account for donations prior to the effective date, and the 
Commission itself could not do so since it had no legal existence. 
Thus, unless the statute were amended to authorize some other agency 
to act on the Commission's behalf, potential donors could not make 
contributions prior to the effective date since there was no one 
authorized to accept them. 

In 1995, GAO was asked whether, under the Public Health Service's gift 
acceptance statute, 42 U.S.C. § 238(a), the National Institutes of 
Health (NIH), a component of the Public Health Service, may use its 
appropriated funds to apply for grants from nongovernmental sources, a 
kind of solicitation of funds. GAO determined that, since NIH had the 
authority to accept grants as conditional gifts under the statute, it 
could use its appropriated funds to cover the costs incurred in 
applying for such grants. B-255474, Apr. 3, 1995. 

Finally, if an agency is authorized to accept gifts, it may also 
accept a loan of equipment by a private party without charge to be 
used in connection with particular government work. The agency's 
appropriations for the work will be available for repairs to the 
equipment, but only to the extent necessary for the continued use of 
the equipment on the government work, and not after the government's 
use has terminated. 20 Comp. Gen. 617 (1941). In one case, GAO 
approved the loan of private property to a federal agency by one of 
its employees, without charge and apparently without statutory 
authority, where the agency administratively determined that the 
equipment was necessary to the discharge of agency functions and the 
loan was in the interest of the United States. 22 Comp. Gen. 153 
(1942). The decision stressed, however, that the practice of borrowing 
property should not be encouraged since it might give rise to claims 
against the government or questions about favors received or expected 
by the persons loaning the property. The decision seems to have been 
based in part on wartime needs and its precedent value would therefore 
seem minimal. See, e.g., B-168717, Feb. 18, 1970. 

b. Donations to Individual Employees: 

(1) Contributions to salary or expenses: 

As a general proposition, unless authorized by statute, private 
contributions to the salary or expenses of a federal employee are 
improper. First, they may in some circumstances violate 18 U.S.C. § 
209, which prohibits the supplementation of a government employee's 
salary from private sources. "The evils of such, were it permitted, 
are obvious." Exchange National Bank v. Abramson, 295 E Supp. 87, 90 
(D. Minn. 1969). For purposes of 18 U.S.C. § 209, the proverb that it 
is better to give than to receive does not work. Both the giving and 
the receiving are criminal offenses under the statute. The employee 
would presumably violate the law by receiving more than he or she is 
entitled to receive under applicable statutes and regulations. 33 Op. 
Att'y Gen. 273, 275 (1922) (object of the predecessor to 18 U.S.C. § 
209 was that "no Government official or employee should serve two 
masters to the prejudice of his unbiased devotion to the interests of 
the United States"). For further discussion of section 209, see the 
Memorandum Opinion for the General Counsel, Federal Bureau of 
Investigation, Applicability of 18 U.S.C. § 209 to Acceptance by FBI 
Employees of Benefits under the 'Make a Dream Come True" Program, OLC 
Opinion, Oct. 28, 1997. See also the Office of Government Ethics, 
Standards of Ethical Conduct for Employees of the Executive Branch,, 5 
C.F.R. part 2635 (2005) (implementing 18 U.S.C. § 201), which prohibit 
an employee from accepting gifts from persons whose interests may be 
substantially affected by the employee. 

Second, they are improper as unauthorized augmentations. To the extent 
the private contribution replaces the employee's government salary, it 
is a direct augmentation of the employing agency's appropriations. To 
the extent the contribution supplements the government salary, it is 
an augmentation in an indirect sense, the theory being that when 
Congress appropriates money for an activity, all expenses of that 
activity must be borne by that appropriation unless Congress 
specifically provides otherwise. 

An early case in point is 2 Comp. Gen. 775 (1923). The American 
Jewelers' Protective Association offered to pay the salary and 
expenses of a customs agent for one year on the condition that the 
agent be assigned exclusively for that year to investigate jewelry 
smuggling. The Comptroller General found the arrangement improper, for 
the two reasons noted above. Whether the payments were to be made 
directly to the employee or to the agency by way of reimbursement was 
immaterial. 

Most questions in this area involve schemes for private entities to 
pay official travel expenses. From the sheer number of cases GAO has 
considered, one cannot help feeling that the bureaucrat must indeed be 
a beloved creature. A long series of decisions established the 
proposition that donations from private sources for official travel to 
conduct government business constituted an unlawful augmentation 
unless the employing agency had statutory authority to accept gifts. 
If the agency had such authority, the donation could be made to the 
agency, not the individual employee, and the agency would then 
reimburse the employee in accordance with applicable travel laws and 
regulations, with the allowances reduced as appropriate in the case of 
contributions in kind.[Footnote 193] 

One problem with this system was the lack of uniformity in treatment, 
varying with the agency's statutory authority. Congress addressed the 
situation in the Ethics Reform Act of 1989, Pub. L. No. 101-194, § 
302, 103 Stat. 1716, 1745 (Nov. 30, 1989), codified at 31 U.S.C. § 
1353. Subsection (a) provides as follows: 

"Notwithstanding any other provision of law, the Administrator of 
General Services, in consultation with the Director of the Office of 
Government Ethics, shall prescribe by regulation the conditions under 
which an agency in the executive branch (including an independent 
agency) may accept payment, or authorize an employee of such agency to 
accept payment on the agency's behalf, from non-Federal sources for 
travel, subsistence, and related expenses with respect to attendance 
of the employee (or the spouse of such employee) at any meeting or 
similar function relating to the official duties of the employee. Any 
cash payment so accepted shall be credited to the appropriation 
applicable to such expenses. In the case of a payment in kind so 
accepted, a pro rata reduction shall be made in any entitlement of the 
employee to payment from the Government for such expenses." 

GSA's implementing regulations are found at 41 C.F.R. chapter 304 
(2005). Thus, as long as acceptance complies with the statute and 
regulations, there is no longer an augmentation problem. The existence 
or lack of separate statutory authority to accept gifts is immaterial. 

Another relevant statute, which seemingly overlaps 31 U.S.C. § 1353 to 
some extent but was left untouched by it, is 5 U.S.C. § 4111, enacted 
as part of the Government Employees Training Act, Pub. L. No. 85-507, 
72 Stat. 327 (July 7, 1958). Under this provision, an employee may 
accept (1) contributions and awards incident to training in 
nongovernment facilities, and (2) payment of travel, subsistence, and 
other expenses incident to attendance at meetings, but only if the 
donor is a tax-exempt nonprofit organization. If an employee receives 
a contribution in cash or in kind under this section, travel and 
subsistence allowances are subject to an "appropriate reduction." 

Section 4111 authorizes the employee to accept the donation. It does 
not authorize the agency to accept the donation, credit it to its 
appropriations, and then reimburse the employee. 55 Comp. Gen. 1293 
(1976). An employee who receives an authorized donation after the 
government has already paid the travel expenses cannot keep 
everything. The employee must refund to the government the amount by 
which his or her allowances would have been reduced had the donation 
been received before the allowances were paid. The agency may then 
credit this refund to its travel appropriation as an authorized 
repayment. Id. at 1294-95. See also 41 C.F.R. § 304-9.5. 

The statute requires an "appropriate reduction" in travel payments in 
order to preclude the agency from paying for something that has 
already been reimbursed by an authorized private organization. An 
employee being reimbursed on an "actual expense" basis should not be 
claiming items which would duplicate private reimbursements. Thus, the 
agency is not required to reduce the actual expense entitlement by the 
value of provided meals. 64 Comp. Gen. 185 (1985). However, the value 
of subsistence items furnished in kind must be deducted where the 
employee is being reimbursed on a per diem basis. Id. at 188; 49 Comp. 
Gen. 572, 576 (1970). 

The authority conferred by 5 U.S.C. § 4111 is expressly limited to 
organizations exempt from taxation under section 501(c)(3) of the 
Internal Revenue Code, 26 U.S.C. § 501(c)(3) (religious, charitable, 
scientific, educational, etc.). It does not extend to organizations 
which may be tax-exempt under other portions of section 501. B-225986, 
Mar. 2, 1987. Also, it does not apply to an organization whose 
application for exemption under section 501(c)(3) has not yet been 
approved; subsequent approval is not retroactive for purposes of 5 
U.S.C. § 4111. B-225264, Nov. 24, 1987 (nondecision letter). 

Donations made under the express condition that they be used for some 
unauthorized purpose should be returned to the donor. 47 Comp. Gen. 
319 (1967). 

(2) Travel-related promotional items: 

Over the years, commercial airlines and others have devised a variety 
of programs to reward frequent customers. Promotional materials 
awarded to customers may take various forms—bonus trips, reduced-fare 
coupons, cash, merchandise, credits toward future goods or services, 
etc. Government employees traveling on government business are 
eligible for these promotional items the same as anyone else. 
Historically, statutes, regulations, and case law had maintained that 
the government employee, with certain exceptions, could not keep such 
promotional items. The fundamental principle underlying the prior 
decisions and regulations in this area was that any benefit, cash 
payment or otherwise, received by a government employee from private 
sources incident to or resulting from the performance of official duty 
was regarded as having been received on behalf of the government and 
was the property of the government.[Footnote 194] 

On December 28, 2001, the President signed into law a provision that 
federal employees may retain travel-related promotional items for 
personal use. Pub. L. No. 107-107, div. A, title XI, subtitle B, § 
1116, 115 Stat. 1012, 1241 (Dec. 28, 2001), 5 U.S.C. § 5702 note. The 
law specifically provides that a federal traveler who receives a 
promotional item (such as frequent flyer miles, upgrades, or access to 
carrier clubs or facilities) as a result of using travel or 
transportation services obtained at federal government expense may 
retain those items for personal use if the item is obtained under the 
same terms as those offered to the general public and at no additional 
cost to the government. The Federal Travel Regulation addresses 
promotional items in 41 C.F.R. part 301-53 (2005). 

4. Other Augmentation Principles and Cases: 

As pointed out earlier in our introductory comments, the augmentation 
theory is relevant in a wide variety of contexts. The most common 
applications are the areas previously discussed—the spectrum of 
situations involving the miscellaneous receipts statute and the 
acceptance of gifts. This portion of the discussion will present a 
sampling of cases to illustrate other applications of the theory. 

Another way of stating the augmentation rule is that when Congress 
appropriates funds for an activity, the appropriation represents a 
limitation Congress has fixed for that activity, and all expenditures 
for that activity must come from that appropriation absent express 
authority to the contrary. Thus, a federal institution is normally not 
eligible to receive grant funds from another federal institution. It 
is not necessary for the grant statute to expressly exclude federal 
institutions as eligible grantees; the rule will apply based on the 
augmentation theory unless the grant statute expressly includes 
federal institutions. 57 Comp. Gen. 662, 664 (1978); 23 Comp. Gen. 694 
(1944); B-114868, Apr. 11, 1975.[Footnote 195] 

The improper treatment of reimbursable transactions may result in an 
augmentation. An example of this type of transaction is an order under 
the Economy Act, 31 U.S.C. § 1535.[Footnote 196] Thus, if a given 
reimbursement must be credited to the appropriation that "earned" it 
(i.e., that financed the transaction), and that appropriation has 
expired, crediting the reimbursement to current funds is an improper 
augmentation. E.g., 72 Comp. Gen. 109, 110 (1993); B-242274, Aug. 27, 
1991. However, a de minimis exception to this rule was recognized in 
72 Comp. Gen. 63 (1992). This decision held that a refund of $100 or 
less that related to an expired account could be treated as a credit 
against a future invoice to the party owing the refund, and thus 
applied to a current account since the cost of processing a separate 
refund check would exceed the amount of the refund. The decision 
reasoned that this approach would save the government money and have 
an insignificant impact on the agency's account integrity. Id. at 64. 
The decision in 72 Comp. Gen. 109 (1993), which was issued shortly 
thereafter, underscored that this exception applied to de minimis 
amounts of $100 or less and did not apply to refunds that regularly 
exceeded $1,000. 72 Comp. Gen. at 110. 

Some statutes give an agency the option of crediting reimbursements 
either to current funds or to the appropriation that financed the 
transaction. E.g., 10 U.S.C. §§ 2205 and 2210; 22 U.S.C. § 2392(c) and 
(d).[Footnote 197] Even here, however, crediting a reimbursement to an 
appropriation that bears no relationship to the transaction would be 
an unauthorized augmentation. B-132900-0.M., Nov. 1, 1977. 

Likewise, treating a transaction which should be reimbursed as 
nonreimbursable may result in an improper augmentation. For example, 
an agency receives appropriations to do its own work, not that of 
another agency. Accordingly, as a general proposition, 
interdepartmental loans of personnel on a nonreimbursable basis 
improperly augment the appropriations of the receiving agency. 65 
Comp. Gen. 635 (1986); 64 Comp. Gen. 370 (1985). Such nonreimbursable 
loans also constitute a misuse of the detailing agency's appropriation 
under 31 U.S.C. § 1301. B-247348, June 22, 1992. 

Reimbursement by one agency to another in situations which are not the 
proper subject of an Economy Act agreement or where reimbursement is 
not otherwise statutorily authorized is improper for several reasons: 
It is an unauthorized transfer of appropriations; it violates 31 
U.S.C. § 1301(a) by using the reimbursing agency's appropriations for 
other than their intended purpose; and it is an improper augmentation 
of the appropriations of the agency receiving the reimbursement. (The 
cases do not always cite all of these theories; they again illustrate 
the close interrelationship of the various concepts discussed 
throughout this publication.) The situation arises, for example, when 
agencies attempt to use the Economy Act for a "service" that is a 
normal part of the providing agency's mission and for which it 
receives appropriations. 

To illustrate, an agency acquiring land cannot reimburse the Justice 
Department for the legal expenses incurred incident to the acquisition 
because these are regular administrative expenses of the Justice 
Department for which it receives appropriations. 16 Comp. Gen. 333 
(1936). Similarly, an agency cannot reimburse the Treasury Department 
for the administrative expenses incurred in making disbursements on 
its account. 17 Comp. Gen. 728 (1938). 

Federal agencies may not reimburse the Patent Office for services 
performed in administering the patent and trademark laws since the 
Patent Office is required by law to furnish these services and 
receives appropriations for them. 33 Comp. Gen. 27 (1953). Nor may 
they reimburse the Library of Congress for recording assignments of 
copyrights to the United States. 31 Comp. Gen. 14 (1951). See also 40 
Comp. Gen. 369 (1960) (Interior Department may not charge other 
agencies for the cost of conducting hearings incident to the 
validation of unpatented mining claims, although it may charge for 
other services in connection with the validation which it is not 
required to furnish); B-211953, Dec. 7, 1984 (General Services 
Administration may not seek reimbursement for costs of storing records 
which it is required by law to store and for which it receives 
appropriations). 

The Merit Systems Protection Board may not accept reimbursement from 
other federal agencies for travel expenses of hearing officers to 
hearing sites away from the Board's regular field offices. Holding the 
hearings is not a service to the other agency, but is a Board function 
for which it receives appropriations. The inadequacy of the Board's 
appropriations to permit sufficient travel is legally irrelevant. 59 
Comp. Gen. 415 (1980), affd upon reconsideration, 61 Comp. Gen. 419 
(1982). Where an agency provides personnel to act as hearing officers 
for another agency, it may be reimbursed if it is not required to 
provide the officers (B-192875, Jan. 15, 1980) but may not be 
reimbursed if it is required to provide them (32 Comp. Gen. 534 
(1953)). Likewise, the Export-Import Bank cannot charge its customers 
for travel expenses incurred by Bank employees in transacting their 
business. B-277254, Mar. 5, 1997. 

A client agency must bear from its own appropriations costs it incurs 
in assisting the Justice Department to defend it in litigation. Such 
support costs, which may include substantial temporary services 
provided by the agency's staff lawyers and paralegals, cannot be 
billed to Justice. 73 Comp. Gen. 90 (1994), citing 39 Comp. Gen. 643 
(1960). 

The decision in 70 Comp. Gen. 601 (1991) provides a variant on this 
principle. That decision approved the Army Civilian Appellate Review 
Agency's practice of obtaining reimbursement from other Army 
components for costs it incurred in investigating grievances filed by 
employees of the other components. For one thing, both the Review 
Agency and the other components were funded from the same 
appropriation in most instances; thus, there could be no augmentation. 
However, even when different appropriations were involved, the other 
component's appropriation could be charged pursuant to 31 U.S.C. § 
1534. Indeed, the decision pointed out that such charges were 
"precisely the kind of situation contemplated by section 1534" since 
the Review Agency assisted the other components in satisfying their 
obligation to provide a grievance resolution process for their 
employees. 70 Comp. Gen. at 604. 

Augmentation issues also can arise when an agency is trying to decide 
which of its appropriations to use for a given object. In 68 Comp. 
Gen. 337 (1989), for example, the Railroad Retirement Board wanted to 
make performance awards to personnel in its Office of Inspector 
General (IG), and was unsure whether to charge its appropriation for 
the IG's office or its general appropriation. A reasonable argument 
could be made to support either choice. Thus, the Board could make an 
election as long as it remained consistent thereafter. Since there was 
no indication that the IG appropriation was intended to be the 
exclusive funding source for the performance awards, using the general 
appropriation would not result in an improper augmentation of the IG 
appropriation.[Footnote 198] 

A somewhat analogous situation could arise if an agency agrees to 
reduce or forgo receipts to which it is entitled, and the party owing 
those receipts agrees in return to make some expenditure which would 
otherwise have to be borne by a separate appropriation of the same 
agency. GAO examined such a situation in B-77467, Nov. 8, 1950, 
involving the leasing of lands under the Bankhead-Jones Farm Tenant 
Act at reduced rentals on condition that the lessees in return perform 
certain improvements to the land. There was no augmentation in that 
case, however, since the statute expressly authorized the leasing with 
or without consideration and on such terms as the Secretary of 
Agriculture determined would best accomplish the purposes of the act.
The following cases illustrate other situations which GAO found would
result in unauthorized augmentations: 

* The Customs Service may not charge the party-in-interest for travel 
expenses of customs employees incurred incident to official duties 
performed at night or on a Sunday or holiday. 43 Comp. Gen. 101 
(1963); 3 Comp. Gen. 960 (1924). See also 22 Comp. Dec. 253 
(1915).Department of Energy may not use overcharge refunds collected 
from oil companies to pay the administrative expenses of its Office of 
Hearings and Appeals. B-200170, Apr. 1, 1981. 

* Proposal for airlines to reimburse Treasury to permit Customs 
Service to hire additional staff to reduce clearance delays at Miami 
airport was unauthorized in that it would augment appropriations made 
by Congress for that service. 59 Comp. Gen. 294 (1980). 

Chapter 6 Footnotes: 

[1] Tyson & Brother United Theater Ticket Offices v. Banton, 273 U.S. 
418 (1927) (Holmes, J., dissenting). 

[2] For fiscal year 1905, for example, Congress appropriated to the 
Department of Justice a specific line item of $3,000 for stationery. 
Legislative, Executive and Judicial Appropriations Act, 1905, ch. 716, 
33 Stat. 85, 134 (Mar. 18, 1904). For fiscal year 2005, Congress 
appropriated to the Department of Justice a lump-sum appropriation of 
$124,100,000 for administrative expenses. Departments of Commerce, 
Justice, and State, the Judiciary, and Related Agencies Appropriations 
Act, 2005, Pub. L. No. 108-447, div. B, title I, 118 Stat. 2809, 2853 
(Dec. 8, 2004). 

[3] As a result of appropriation account consolidation over the years, 
200 accounts now cover 90 percent of all federal expenditures. Allen 
Schick, The Federal Budget: Politics, Policy, and Process, 229 (2000). 

[4] See Chapter 1, section D. See also GAO, A Glossary of Terms Used 
in the Federal Budget Process, GAO-05-734SP (Washington, D.C.: 
September 2005), Appendixes I and II, for an overview of the budget 
and appropriations process. 

[5] See Chapter 2, section D.6 for a general discussion of the uses 
and limits of legislative history. 

[6] For example, agencies and their employees are, of course, legally 
bound by apportionments and subdivisions of lump-sum appropriations. 
See 31 U.S.C. §§ 1517-1519. See also sections C.4 and C.5 of this 
chapter for a discussion of these requirements. 

[7] Allen Schick, The Federal Budget: Politics, Policy, and Process, 
238 (2000). See also John C. Roberts, Are Congressional Committees 
Constitutional?: Radical Textualism, Separation of Powers, and the 
Enactment Process, 52 Case Western Reserve L. Rev. 489, 563-64 (2001). 

[8] Report of the House Committee on Appropriations on the 1974 
Defense Department appropriation bill, H.R. Rep. No. 93-662, at 16 
(1973). 

[9] Louis Fisher, Presidential Spending Power, 72 (1975). 

[10] See Chapter 2, section B.3.b for an overview of reprogramming 
concepts and practices, and Schick, supra, at 247-250. 

[11] This assumes, of course, that Congress is acting within its 
constitutional authority. See Chapter 1, section B for a general 
discussion of Congress's constitutional authority to appropriate and 
the limits on that authority. Legal Services Corp. v. Velasquez, 531 
U.S. 533 (2001), provides an example of restrictive appropriation 
language that was declared unconstitutional. 

[12] The effort has not always been free from controversy. One 
senator, concerned with what he felt was excessive flexibility in a 
1935 appropriation, tried to make his point by suggesting the 
following: 

"Section 1. Congress hereby appropriates $4,880,000,000 to the 
President of the United States to use as he pleases. 

"Section 2. Anybody who does not like it is fined $1,000." 

79 Cong. Rec. 2014 (1935) (remarks of Sen. Arthur Vandenberg), quoted 
in Fisher, supra, at 62-63. 

[13] Pub. L. No. 97-272, § 401, 96 Stat. 1160, 1178 (Sept. 30, 1982). 

[14] A recent example is section 1004(d) of the Bob Stump National 
Defense Authorization Act for Fiscal Year 2003, Pub. L. No. 107-314, 
116 Stat. 2458, 2629-30 (Dec. 2, 2002), which imposes conditions on 
the Department's spending for financial system improvements. 

[15] On the other hand, inclusion of a budget estimate for a 
particular purpose can strengthen the case that the appropriation is 
available for that purpose. See B-285066.2, Aug. 9, 2000. 

[16] Of course, all this meant was that there would be no 
Antideficiency Act violation at the time the option was exercised. The 
decision recognized that subsequent actions could still produce a 
violation. 55 Comp. Gen. at 826. 

[17] See B-285725, Sept. 29, 2000; B-278968, May 28, 1998; B-278121, 
Nov. 7, 1997; B-277241, Oct. 21, 1997; B-271845, Aug. 23, 1996; 71 
Comp. Gen. 411, 413 (1992); 64 Comp. Gen. 359 (1985); 59 Comp. Gen. 
228 (1980);B-258000, Aug. 31, 1994; B-248284, Sept. 1, 1992; B-
247853.2, July 20, 1992; B-231711, Mar. 28, 1989; B-222853, Sept. 29, 
1987; B-204449, Nov. 18, 1981; B-204270, Oct. 13, 1981; B-202992, May 
15, 1981; B-157356, Aug. 17, 1978; B-159993, Sept. 1, 1977; B-163922, 
Oct. 3, 1975; GAO, Internal Controls: Funding of International Defense 
Research and Development Projects, GAO/NSIAD-91-27 (Washington, D.C.: 
Oct. 30, 1990). 

[18] The Justice Department's Office of Legal Counsel also reached the 
same conclusion. See, e.g., Memorandum for the General Counsel, United 
States Marshals Service, USMS Obligation to Take Steps To Avoid 
Anticipated Appropriations Deficiency, OLC Opinion, May 11, 1999; 16 
Op. Off. Legal Counsel 77 (1992); 4B Op. Off. Legal Counsel 702 (1980);
4B Op. Off. Legal Counsel 674 (1980). 

[19] In Ramah, Congress had capped the amount appropriated for 
contract support cost payments under the Indian Self-Determination and 
Education Assistance Act, as amended, 25 U.S.C. §§ 450-450n, at less 
than the total amount all recipients would have received if paid their 
full allocations under the Act. The court rejected the government's 
argument (and the lower court's conclusion) that Lincoln precluded 
judicial review of the method the agency devised to distribute the 
reduced allocations. Distinguishing Lincoln, the court held that the 
Act provided sufficient law to apply in order to determine the 
legality of the agency's distribution method. Indeed, the court 
further held that the agency's distribution method violated the Act. 
The Ramah decision is discussed further in Chapter 2, section C.2, and 
Chapter 3, section C.5. 

[20] In Cherokee Nation of Oklahoma v. Leavitt, the Court disposed of 
three decisions from different appellate courts: Thompson v. Cherokee 
Nation of Oklahoma, 334 F.3d 1075 (Fed. Cir. 2003), which the Court 
affirmed, as well as Cherokee Nation of Oklahoma v. Thompson, 311 E3d 
1054 (10th Cir. 2002), and Shoshone-Bannock Tribes of the Fort Hall 
Reservation v. Thompson, 279 E3d 660 (9th Cir. 2002), both of which 
the Court reversed. Ramah Navajo School Board, Inc. v. Babbitt, 87 
F.3d 1338 (D.C. Cir. 1996), discussed previously, is another decision 
on this subject. 

[21] The Act also applies to the Secretary of the Interior and 
programs administered by that department. However, the Cherokee Nation 
of Oklahoma v. Leavitt case concerned self-determination contracts for 
the provision of services by the Department of Health and Human 
Services' Indian Health Service. 

[22 The logical conclusion from the Court's finding that the Indian 
Self-Determination Act contracts are no different from ordinary 
procurement contracts is that the Indian Health Service, at the time 
it entered into the contracts, should have recorded an obligation 
against its appropriations for the full amount of the support costs to 
which the Tribes were entitled. 

[23] Section 314 of the Omnibus Consolidated and Emergency 
Supplemental Appropriations Act, 1999, Pub. L. No. 105-277, 112 Stat. 
2681, 2681-288 (Oct. 21, 1998). 

[24] See GAO, A Glossary of Terms Used in the Federal Budget Process, 
GAO-05-734SP (Washington, D.C.: September 2005), at 46-47. 

[25] See Glossary, at 64. 

[26] Pub. L. No. 108-199, div. A, title IV, 118 Stat. 3, 27 (Jan. 23, 
2004). 

[27] A "not to exceed" earmark was held not to constitute a maximum in 
19 Comp. Gen. 61 (1939), where the earmarking language was 
inconsistent with other language in the general appropriation. This 
holding was based on an interpretation of the statute as a whole. See 
section D of Chapter 2 for additional information on statutory 
interpretation. 

[28] While the Comptroller General concluded that the Department did 
not have to use funds for UNFPA, he cautioned that whenever an agency 
withholds fiscal year funds from obligation, it must release the funds 
with sufficient time remaining in the fiscal year to obligate them 
before the end of the fiscal year. B-290659, July 24, 2002. 

[29] District of Columbia Appropriations Act, 2005, Pub. L. No. 108-
335, § 301, 118 Stat. 1322, 1399 (Oct. 18, 2004). 

[30] Pub. L. No. 107-66, § 305, 115 Stat. 486, 509 (Nov. 12, 2001). 

[31] Pub. L. No. 108-83, 117 Stat. 1007, 1015 (Sept. 30, 2003). 

[32] Pub. L. No. 105-55, 111 Stat. 1177, 1191-92 (Oct. 7, 1997). 

[33] But see B-231711, Mar. 28, 1989 (appropriation provision 
earmarked portion of lump sum to remain available for an additional 
fiscal year for a specific purpose, but was neither maximum nor 
minimum limitation on amount available for particular object). While B-
231711 was not explicitly overruled by B-278121, Nov. 7, 1997, it has 
little precedential value. 

[34] Hopkins & Nutt, The Anti-Deficiency Act (Revised Statutes 3679) 
and Funding Federal Contracts: An Analysis, 80 Mil. L. Rev. 51,56 
(1978). 

[35] Hopkins & Nutt, at 57-58; Louis Fisher, Presidential Spending 
Power, 232 (1975). 

[36] Senate Committee on Government Operations, Financial Management 
in the Federal Government, S. Doc. No. 87-11, at 45-46 (1961). In the 
Senate document, the Antideficiency Act is cited as "section 3679 of 
the Revised Statutes," a designation that is now obsolete. 

[37] See S. Doc. No. 87-11, at 48; B-131361, Apr. 12, 1957. Further 
discussion of the Antideficiency Act from varying perspectives will be 
found in the following sources: James A. Harley, Multiyear Contracts: 
Pitfalls and Quandaries, 27 Public Contract L.J. 555 (1998); Col. 
James W. McBride, Avoiding Antideficiency Act Violations on Fixed 
Price Incentive Contracts (The Hunt for Red Ink), June Army Lawyer 
(1994); Fenster & Volz, The Antideficiency Act: Constitutional Control 
Gone Astray, 11 Public Contract L.J. 155 (1979); Rollee H. Efros, 
Statutory Restrictions on Funding of Government Contracts, 10 Public 
Contract L.J. 254 (1978); Hopkins & Nutt, The Anti-Deficiency Act 
(Revised Statutes 3679) and Funding Federal Contracts: An Analysis, 80 
Mil. L. Rev. 51 (1978); William J. Spriggs, The Anti-Deficiency Act 
Comes to Life in U.S. Government Contracting, 10 National Contract 
Management Journal 33 (1976-77); Col. John R. Frazier, Use of Annual 
Funds with Conditional, Option, or Indefinite Delivery Contracts, 8 
A.F. JAG L. Rev. 50 (1966). 

[38] Prior to the 1982 recodification of title 31 of the United States 
Code, the Antideficiency Act consisted of nine lettered subsections of 
what was then 31 U.S.C. § 665. The recodification scattered the law 
among several new sections. To better show the relationship of the 
material, our organization in this chapter retains the sequence of the 
former subsections. 

[39] Pursuant to the Federal Credit Reform Act, agencies are required 
to have budget authority in advance to cover the long-term costs 
(i.e., subsidy costs) of direct loans and loan guarantees. 2 U.S.C. § 
661c(b). 

[40] See GAO, A Glossary of Terms Used in the Federal Budget Process, 
GAO-05-734SP (Washington, D.C.: September 2005), at 3-5. 

[41] See section B of this chapter for a discussion of earmarking. 

[42] See 31 U.S.C. §§ 1552(a), 1553(a), 1554(a), and Chapter 5, 
section D, for a discussion of expired and closed appropriation 
accounts. 

[43] GAO, Corporation for National and Community Service: Better 
Internal Control and Revised Practices Would Improve the Management of 
AmeriCorps and the National Service Trust, GAO-04-225 (Washington, 
D.C.: Jan. 16, 2004). 

[44] Louis Fisher, Presidential Spending Power, 236 (1975). 

[45] "We believe it is obvious that, once an Antideficiency Act 
violation has been discovered, the agency concerned must take all 
reasonable steps to mitigate the effects of the violation insofar as 
it remains executory." 55 Comp. Gen. at 772. 

[46] GAO has cautioned, however, that an Antideficiency Act violation 
should not be determined solely on the basis of year-end reports prior 
to reconciliation and adjustment. B-114841.2-0.M., Jan. 23, 1986. 

[47] Determining the amount of available budget authority against 
which obligations may be incurred is covered later in this chapter in 
section C.2.e under the heading "Amount of Available Appropriation or 
Fund." 

[48] We cover the obligational treatment of contracts of this type in 
Chapter 7, section B.1.e, which should be read in conjunction with 
this section. 

[49] The authority was subsequently sought and granted. See 10 U.S.C. 
§ 2306(g). For a discussion of multiyear contracting authority for 
defense and civilian agencies, which authorize obligating annual funds 
in advance of appropriations, see Chapter 5, section B.9.b. 

[50] The rationale worked in that case because the Navy could stay 
within the appropriation by deleting a relatively small percentage of 
GFP. If the numbers had been different, such that the amount of GFP to 
be deleted was so large as to effectively preclude contractor 
performance, the analysis might well have been different. In a 1964 
report, for example, GAO found the Antideficiency Act violated where 
the Air Force, to keep within a "minor military construction" ceiling, 
deleted needed plumbing, heating, and lighting from a building 
alteration contract, resulting in an incomplete facility, and 
subsequently charged the deleted items to Operation and Maintenance 
appropriations. GAO, Continuing Inadequate Control over Programming 
and Financing of Construction, B-133316 (Washington, D.C.: July 23, 
1964), at 12-15. 

[51] Every violation of the bona fide needs rule does not necessarily 
violate the Antideficiency Act as well. Determinations must be made on 
a case-by-case basis. 71 Comp. Gen. 428, 431 (1992); B-235086.2, Jan. 
22, 1992 (nondecision letter). 

[52] E.g., 67 Comp. Gen. 190 (1988); 66 Comp. Gen. 556 (1987); 61 
Comp. Gen. 184, 187 (1981); 48 Comp. Gen. 471, 475 (1969); 42 Comp. 
Gen. 272 (1962); 37 Comp. Gen. 60 (1957); 36 Comp. Gen. 683 (1957); 33 
Comp. Gen. 90 (1953); 29 Comp. Gen. 91 (1949); 27 Op. Att'y Gen. 584 
(1909). 

[53] See also 10 U.S.C. §§ 2306b and 2306c, which provide similar 
authority for defense agencies and the other agencies listed in 10 
U.S.C. § 2302(1). FASA does not affect these authorities. 41 U.S.C. § 
254c(e). 

[54] See Chapter 7, section B.1.e for a further discussion of 
recording obligations under IDIQ and similar contracts. 

[55] Some additional cases are 67 Comp. Gen. 190 (1988); 66 Comp. Gen. 
556 (1987); 42 Comp. Gen. 272, 276 (1962); 37 Comp. Gen. 155, 160 
(1957); 37 Comp. Gen. 60, 62 (1957); 36 Comp. Gen. 683 (1957); 9 Comp. 
Gen. 6 (1929); B-116427, Sept. 27, 1955. See also Cray Research v. 
United States, 44 Fed. Cl. 327 (1999). 

[56] The Claims Court based its conclusion in part on Leiter and the 
Antideficiency Act; the Federal Circuit relied on the language of the 
contract. 

[57] The Federal Acquisition Regulation states that encouraging a 
contractor to continue performance in the absence of funds violates 
the Antideficiency Act. 48 C.F.R. § 32.704(c) (2005). In this regard, 
section C.3 of this chapter discusses how the Antideficiency Act's 
prohibition against acceptance of voluntary services, 31 U.S.C. § 
1342, prohibits contracting officers from soliciting or permitting a 
contractor to continue performance on a "temporarily unfunded" basis. 

[58] See section C.1 of this chapter for a discussion of the coercive 
deficiency concept. 

[59] Availability of Funds, 48 C.F.R. § 52.232-18. 

[60] Availability of Funds for the Next Fiscal Year 48 C.F.R. § 52.232-
19. 

[61] Limitation of Cost, 48 C.F.R. § 52.232-20. 

[62] Limitation of Cost (Facilities), 48 C.F.R. § 52.232-21. 

[63] Limitation of Funds, 48 C.F.R. § 52.232-22. 

[64] See section B.9.a of Chapter 5 for a discussion of severable 
service contracts that cross fiscal years. 

[65] Where a termination for convenience clause is required by 
regulation, it will be read into the contract whether expressly 
included or not. G.L. Christian & Associates v. United States, 312 E2d 
418 and 320 E2d 345 (Ct. Cl.), cert. denied, 375 U.S. 954 (1963). 

[66] The Burroughs case was decided before the enactment of the FASA 
multiyear contracts provision. As discussed above, that provision now 
enables agencies to enter into contracts like the one at issue in the 
Burroughs case without running afoul of the Antideficiency Act as long 
as they follow the terms of the statute by either obligating the full 
contract amount against appropriations available at the time of the 
contract or obligating the first year costs plus estimated termination 
costs. With reference to termination costs, FASA requires the contract 
to include a clause stating that the contract shall be terminated if 
funds are not made available for its continuation in any fiscal year 
and provides that amounts obligated for termination costs shall remain 
available until the costs are paid. 41 U.S.C. § 254c(b). 

[67] The prohibition against incurring indefinite liabilities is not 
limited to indemnification agreements. It applies as well to types of 
liabilities such as contract termination charges. The cases are 
included in our preceding discussion of multiyear contracting. See
section C.2.b of this chapter. 

[68] See section C.2.b of this chapter for a discussion of recording 
obligations. 

[69] See section C.4.b of this chapter for a discussion on 
establishing reserves. 

[70] This is still another example of a so-called "coercive 
deficiency," particularly in light of the fact that the potential 
claimant was another sovereign nation and failure to honor the 
agreement would have international consequences. See section C.2.b of 
this chapter for a discussion of the "coercive deficiency" concept. 

[71] For further information on the government's policy regarding self-
insurance, see Chapter 4, section C.10. 

[72] On March 1, 2003, the Federal Emergency Management Agency became 
part of the U.S. Department of Homeland Security. 

[73] The Act is now codified at 28 U.S.C. §§ 2671-2680. 

[74] The Supreme Court's decision affirmed two Claims Court decisions 
that had similarly cited the general rule against indemnification 
agreements with respect to the Agent Orange contracts: Wm. T Thompson 
Co. v. United States, 26 Cl. Ct. 17, 29 (1992); Hercules Inc. v. 
United States, 25 Cl. Ct. 616 (1992). 

[75] See Major Randall J. Bunn, Contractor Recovery for Current 
Environmental Cleanup Costs Under World War H-Era Government 
Indemnification Clauses, 41 Air Force L. Rev. 163 (1997), for an 
extensive background discussion and analysis of the issues
addressed in the DuPont case. This article also discusses at length 
the First War Powers Act and its successor, 50 U.S.C. § 1431 (Pub. L. 
No. 85-804, § 1, 72 Stat. 972 (Aug. 28, 1958)), which are referenced 
later in this section. 

[76] See Chapter 4, section B for a discussion of the necessary 
expense rule. 

[77] The decision in 22 Comp. Gen. 892 is discussed in 62 Comp. Gen. 
361, 362-63 (1983), and Johns-Manville Corp. v. United States, 12 Cl. 
Ct. 1, 23 (1987). The Claims Court noted the "significant deficiency" 
of 22 Comp. Gen. 892 in that it nowhere mentions the Antideficiency 
Act. 

[78] The decision in 54 Comp. Gen. 824 overruled a portion of 42 Comp. 
Gen. 708 (the FAA aircraft lease case), discussed in the text, to the 
extent it held that there was no need to either obligate or reserve 
funds. Thus, in a situation like 42 Comp. Gen. 708, the agency would 
presumably have to either obligate or administratively reserve funds 
or include a provision that payments for losses may not exceed 
appropriations available at the time of the loss and nothing in the 
contract may be construed as implying that Congress will appropriate 
funds to meet any deficiencies at a later date. 

[79] To illustrate the potential fiscal consequences, an authorized 
indemnity agreement entered into in 1950 produced liability of over 
$64 million plus interest more than four decades later. See E.I. Du 
Pont De Nemours & Co. v. United States, 24 Cl. Ct. 635 (1991), affd, 
980 E2d 1440 (Fed. Cir. 1992). 

[80] Note that the Price-Anderson Act, at 42 U.S.C. § 2210(j), 
provided contract rather than indemnity authority to the Nuclear 
Regulatory Commission (NRC) to address indemnification and other 
financial protection that NRC is required to provide nuclear 
licensees, contractors, and others to cover the consequences of 
nuclear incidents. 

[81] Pub. L. No. 85-804, § 1, 72 Stat. 972 (Aug. 28, 1958). 

[82] Exec. Order No. 10789, Contracting Authority of Government 
Agencies In Connection With National Defense Functions, 23 Fed. Reg. 
8897 (Nov. 14, 1958), as amended, 50 U.S.C. § 1431 note. A decision 
approving an indemnity agreement under authority of the First War 
Powers Act is B-33801, Apr. 19, 1943. A later related decision is B-
33801, Oct. 27, 1943. Both of these decisions involved the famed 
"Manhattan Project," although that fact is well-concealed. The 
decisions had been classified, but were declassified in 1986. 

[83] Although the Board's decision was vacated and remanded on other 
grounds by the Court of Appeals for the Federal Circuit, New England 
Tank Industries of New Hampshire v. United States, 861 F.2d 685 (Fed. 
Cir. 1988), the court noted its agreement with the Board's 
Antideficiency Act conclusions. Id. at 692 n.15. 

[84] Another report in this series, making similar findings under a 
different statutory ceiling, is GAO, Illegal Use of Operation and 
Maintenance Funds for Rehabilitation and Construction of Family 
Housing and Construction of a Related Facility, B-133102 (Washington, 
D.C.: Aug. 30, 1963). 

[85] This case also illustrates that the Antideficiency Act applies to 
interagency transactions the same as any other obligations or 
expenditures. Cf. B-247348, June 22, 1992 (nonreimbursable interagency 
personnel detail). 

[86] There are also a few older cases finding violations of both 
statutes, but they are of little help in attempting to formulate a 
reasoned approach. Examples are 39 Comp. Gen 388 (1959), which does 
not discuss the relationship, and 22 Comp. Gen. 772 (1943), which 
includes a rationale, now obsolete, based on the then-existing lack of 
authority to include interest stipulations in contracts. 

[87] See generally OMB Circular No. A-11, Preparation, Submission, and 
Execution of the Budget, §§ 20.4(b), 20.7, and 20.12 (June 21, 2005). 
See also the definitions of "Budget Authority" and "Collections" in 
GAO, A Glossary of Terms Used in the Federal Budget Process, GAO-05-
734SP (Washington, D.C.: September 2005), at 20-23, 28-30. 

[88] The Public Buildings Act of 1959, Pub. L. No. 86-249, 73 Stat. 
479 (Sept. 9, 1959), superseded the provisions of the 1949 legislation 
discussed in 29 Comp. Gen. 504. The substance of the Public Buildings 
Act of 1959 is codified in 40 U.S.C. §§ 3301-3315. 

[89] The decision in 28 Comp. Gen. 300 concerned increases to Wage 
Board employees under legislation which is now obsolete (see 39 Comp. 
Gen. 422, cited in the text). However, it is still useful for the 
basic proposition that nonmandatory increases are not obligations 
"authorized by law" as that term is used in 31 U.S.C. § 1341(a). 28 
Comp. Gen. at 302. 

[90] Act of May 1, 1884, ch. 37, 23 Stat. 17. 

[91] Pub. L. No. 217, ch. 1484, § 4, 33 Stat. 1214, 1257 (Mar. 3, 
1905). 

[92] Pub. L. No. 28, ch. 510, § 3, 34 Stat. 27, 48-49 (Feb. 27, 1906). 

[93] See section C.1 of this chapter for a discussion of the coercive 
deficiency concept. See also PCL Construction Services, Inc. v. United 
States, 41 Fed. Cl. 242, 251-260 (1998) (incrementally funded contract 
did not raise coercive deficiency issues where contract clauses 
clearly provided that contractor assumed the sole risk of working at a 
rate that would exhaust funding.) 

[94] 39 Cong. Rec. 3687 (1906), quoted in 30 Op. Att'y Gen. 51, 53-54 
(1913). 

[95] See 30 Op. Att'y Gen. 51, 54-55 (1913), discussing the 
legislative history of the 1884 prohibition. 

[96] Glavey v. United States, 182 U.S. 595 (1901); Miller v. United 
States, 103 F. 413 (C.C.S.D.N.Y. 1900). See also 9 Comp. Dec. 101 
(1902). Later cases following Glavey are MacMath v. United States, 248 
U.S. 151 (1918), and United States v. Andrews, 240 U.S. 90 (1916). The 
policy rationale is that to permit agencies to disregard compensation 
prescribed by statute could work to the disadvantage of those who 
cannot, or are not willing to, accept the position for less than the 
prescribed salary. See Miller, 103 F. at 415-16. 

[97] Some cases in addition to those cited in the text are 32 Comp. 
Gen. 236 (1952); 23 Comp. Gen. 109, 112 (1943); 14 Comp. Gen. 193 
(1934); 34 Op. Att'y Gen. 490 (1925); 30 Op. Att'y Gen. 129 (1913); 13 
Op. Off. Legal Counsel 113 (1989); 3 Op. Off. Legal Counsel 78 (1979). 

[98] While the principle in B-181934 remains valid, the decision was 
overruled by 55 Comp. Gen. 109 (1975) on factual grounds. Additional 
information showed that the individual involved in that case was a "de 
facto employee" performing under color of appointment and with a claim 
of right to the position. A "voluntary" employee has no such "color of 
appointment" or indicia of lawful employment. 

[99] Further support for the decision's conclusion that 22 U.S.C. § 
2395(d) was addressed to services from private sources rather than 
federal employees can be found in the immediately preceding 
subsection, which states: "It is the sense of Congress that the 
President, in furthering the purposes of this [chapter], shall use to 
the maximum extent practicable the services and facilities of 
voluntary, nonprofit organizations registered with, and approved by, 
the Agency for International Development." 22 U.S.C. § 2395(c). 

[100] See footnote number 96, supra, and accompanying text. 

[101] Pub. L. No. 92-54, 85 Stat. 146 (July 12, 1971). 

[102] Pub. L. No. 93-203, 87 Stat. 839 (Dec. 28, 1973). 

[103] It would now also contravene 18 U.S.C. § 209, which prohibits 
payment of salaries of government employees from nongovernmental 
sources. This statute did not exist at the time of the 1905 decision. 

[104] See generally Chapter 12, section C.2.b in volume Ill of the 
second edition of Principles of Federal Appropriations Law. 

[105] The July 12, 2004, opinion clarified an earlier opinion on the 
subject of the National Brokers Contract, B-291947, Aug. 15, 2003. 
Also, it distinguished another opinion, B-300248, Jan. 15, 2004, which 
held that the Small Business Administration improperly augmented its 
appropriations by requiring certain lenders to pay fees to an agency 
contractor. See section E.2.a of this chapter for a detailed 
discussion of the Small Business Administration opinion and how it 
compares with the GSA opinion. 

[106] As explained in section C.6, this amendment was intended to 
guard against what might have been viewed as an overly broad 
application of one of the Attorney General's funding gap opinions. 

[107] Finally, the opinion noted that, even if the exception to 
section 1342 applied, it would not sanction the agency's actual 
disbursement of funds in excess of its appropriations. Thus, the 
agency violated the Antideficiency Act in any event. 

[108] The opinions did acknowledge, of course, that USMS could not 
actually spend funds if its appropriations were exhausted. They also 
noted that a determination whether particular obligations would 
satisfy the emergencies exception could not be made in the abstract 
and would require case-by-case evaluation. 

[109] See section C.2.b of this chapter for a discussion of the 
"coercive deficiency" concept. 

[110] Pub. L. No. 217, ch. 1484, 33 Stat. 1214, 1257 (Mar. 3, 1905). 

[111] Pub. L. No. 759, ch. 896, 64 Stat. 595, 765 (Sept. 6, 1950). 

[112] Exec. Order No. 6166, § 16 (June 10, 1933), at 5 U.S.C. § 901 
note. 

[113] Reorganization Plan No. 2 of 1970, 35 Fed. Reg. 7959, 84 Stat. 
2085 (effective July 1, 1970), designated the Bureau of the Budget as 
OMB and transferred to the President all functions vested in the 
former Bureau of the Budget. Executive Order No. 11541, 35 Fed. Reg. 
10737 (July 1, 1970), 31 U.S.C. § 501 note, transferred those 
functions to the Director of OMB. 

[114] GAO, A Glossary of Terms Used in the Federal Budget Process, GAO-
05-734SP (Washington, D.C.: September 2005), at 12-13. See also OMB 
Circular No. A-11, pt. 4, Instructions on Budget Execution, §§ 120.1-
120.5 (June 21, 2005). For a discussion of the Impoundment Control 
Act, see section D.3.b of Chapter 1. 

[115] 31 U.S.C. § 665(d)(2) (1976 ed.). 

[116] See the codification note following 31 U.S.C. § 1511. 

[117] Before 2002, OMB's guidance on apportionments was located in 
Circular No. A-34. 

[118] Pub. L. No. 93-344, title X, § 1002, 88 Stat. 297, 332 (July 12, 
1974). 

[119] The Court concluded that the one-house legislative veto was not 
severable from the Act's deferral provision, and invalidated that 
provision as well. Id. 

[120] The two decisions cited concerned apportionments that OMB made 
under continuing resolutions. As a general matter, the discussion of 
OMB's apportionment discretion would apply to any appropriation. For a 
discussion of continuing resolutions, see Chapter 8. 

[121] A permanent provision of law included in the 1988 District of 
Columbia appropriation act states that appropriations for the D.C. 
government "shall not be subject to apportionment except to the extent 
specifically provided by statute." Pub. L. No. 100-202, § 135, 101 
Stat. 1329, 1329-102 (1987). This provision appears to implicitly 
repeal 31 U.S.C. § 1513(a) as applied to the D.C. government. 

[122] Neither section 1513 nor case law defines the phrase "official 
having administrative control." Consequently, the apportioning 
official for legislative and judicial appropriations is named by the 
head of the agency to whom the appropriation is made. 

[123] See footnote 113, supra, and accompanying text. 

[124] See section C.2.g of this chapter. 

[125] The law mandating payment of severance pay was enacted after the 
start of fiscal year 1966, which is why the expenditures in that case 
would qualify under 31 U.S.C. § 1515(b). 

[126] Pub. L. No. 100-202, § 105, 101 Stat. 1329, 1329-433 (Dec. 22, 
1987) (1988 continuing resolution). 

[127] See section C.2.a of this chapter for a further discussion of 41 
U.S.C. § 11. 

[128] Prior to the 1982 recodification of title 31, sections 1513(d) 
and 1514 had been combined as subsection (g) of the Antideficiency Act. 

[129] See, in this regard, GAO, Standards for Internal Control in the 
Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: Nov. 9, 
1999); GAO, Policy and Procedures Manual for the Guidance of Federal 
Agencies, title 7 (Washington, D.C.: May 18, 1993). 

[130] Pub. L. No. 863, ch. 814, § 3, 70 Stat. 782, 783 (Aug. 1, 1956). 

[131] The historical summary in this paragraph is taken largely from 
37 Comp. Gen. 220 (1957). 

[132] Pub. L. No. 759, ch. 896, § 1211, 64 Stat. 595, 765 (Sept. 6, 
1950). 

[133] Hearings Before Senate Comm. on Appropriations on H.R. 7786, 
81st Cong., 2d Sess. 10 (1950), quoted in Hopkins & Nutt, The Anti-
Deficiency Act (Revised Statutes 3679) and Funding Federal Contracts: 
An Analysis, 80 Mil. L. Rev. 51, 128 (1978). 

[134] Memorandum for the Assistant Secretary of the Army (Financial 
Management), 1976, quoted in Hopkins & Nutt, supra, at 130. 

[135] Id. 

[136] But see Cessna Aircraft Co. v. Dalton, 126 F.3d 1442 (Fed. Cir. 
1997), cert. denied, 525 U.S. 818 (1998). In that case, the Navy had 
exercised an option to extend a contract on October 1. The 
appropriation that Navy charged the obligation to was signed into law 
on October 1; however, OMB had not yet apportioned the appropriation. 
Cessna, trying to get out of the contract, argued that the obligation 
for the contract extension was not valid since it was made in advance 
of the apportionment. The court held that the provisions of the 
Antideficiency Act were only internal government operating 
requirements and, as such, they did not confer legal rights on outside 
parties. Id. at 1451-52. See generally Blackhawk Heating & Plumbing 
Co. v. United States, 622 E2d 539, 552 n.9 (Ct. Cl. 1980); Rough 
Diamond Co. v. United States, 351 F.2d 636, 640, 642 (Ct. Cl. 1965), 
cert. denied, 383 U.S. 957 (1966). 

In dicta, the court said that apportionment is not a prerequisite to 
the obligation of appropriated funds. The court noted that 31 U.S.C. § 
1341 explicitly prohibits obligations both in excess of and (unless 
otherwise authorized) in advance of appropriations. By contrast, the 
court pointed out, the apportionment sections of title 31 explicitly 
prohibit only obligations exceeding an apportionment; they do not 
literally forbid obligations in advance of an apportionment. Cessna, 
126 F.3d at 1450-51. The court also rejected Cessna's reliance on 
provisions of the Defense Department accounting manual that generally 
prohibited obligations in advance of an apportionment. The Cessna 
dicta has not been followed in any subsequent case. 

[137] 31 U.S.C. §§ 1351, 1517(b), as amended by Consolidated 
Appropriations Act, 2005, Pub. L. No. 108-447, div. G, title II, § 
1401, 118 Stat. 2809, 3192 (Dec. 8, 2004). See, in this regard, the 
Comptroller General's Memorandum to Heads of Departments, Agencies, 
and Others Concerned, Transmission of Antideficiency Act Reports to 
the Comptroller General of the United States, B-304335, Mar. 8, 2005. 

[138] Payment under this authority is appropriate where there is no 
enforceable contractual obligation on the part of the government but 
where the government has received a benefit not prohibited by law 
conferred in good faith. See chapter 12, section C.2.b in volume Ill 
of the second edition of Principles of Federal Appropriations Law for 
a general discussion of quantum meruit claims. 

[139] See, e.g., GAO, Government Shutdown: Funding Lapse Furlough 
Information, GAO/GGD-96-52R (Washington, D.C.: Dec. 1, 1995); 
Government Shutdown: Permanent Funding Lapse Legislation Needed, 
GAO/GGD-91-76 (Washington, D.C.: June 6, 1991); Funding Gaps 
Jeopardize Federal Government Operations, PAD-81-31 (Washington, D.C.: 
Mar. 3, 1981). 

[140] 125 Cong. Rec. 26974 (Oct. 1, 1979) (remarks of Sen. Magnuson). 

[141] GAO commented on this legislation in B-197584, Feb. 5, 1980, and 
B-197059, Feb. 5, 1980. The legislation was not enacted. 

[142] This would also include certain revolving fund operations, but 
not those whose use requires affirmative authorization in annual 
appropriation acts. B-241730.2, Feb. 14, 1991 (Government Printing 
Office revolving fund). 

[143] See section C.4 of this chapter for a more detailed discussion 
of apportionment authorities. 

[144] The Administrative Office noted a combination of factors 
contributing to its projected shortfall, including Congress's decision 
to enact an appropriation in an amount less than the Administrative 
Office had requested and the appointment of new judges, which 
increased the number of jury trials. Armster, 792 E2d at 1425 n.3. 

[145] Although this case addressed an agency's projected exhaustion of 
its appropriations rather than a funding gap, the court's dicta would 
appear relevant for a funding gap. 

[146] These figures are based on another CRS report, Shutdown of the 
Federal Government: Causes, Effects, and Process, No. 98-844 
(Washington, D.C.: Nov. 1, 2003), at 2-3. For a discussion of the 
nature, background, and dynamics of the fiscal year 1996 funding gaps 
and shutdowns, see Anita S. Krishnakumar, Reconciliation and the 
Fiscal Constitution: The Anatomy of the 1995-1996 Budget "Train 
Wreck," 35 Harv. J. On Legis. 589 (1998). 

[147] The August 1995 opinion was discussed at length and reaffirmed 
in a Memorandum for the General Counsel, United States Marshals 
Service, Continuation of Federal Prisoner Detention Efforts in the 
Face of a USMS Appropriation Deficiency, OLC Opinion, Apr. 5, 2000. 
Current Office of Management and Budget guidance still references the 
August 1995 opinion as well as the earlier opinions in 43 Op. Att'y 
Gen. 224 (1980) and 43 Op. Att'y Gen. 293 (1981) as the principal 
legal authorities governing what agencies can do during a funding gap. 
See OMB Circular No. A-11, Preparation, Submission, and Execution of 
the Budget, § 124.1 (a) (June 21, 2005). 

[148] These legislative actions are described in the Congressional 
Research Service report, Preventing Federal Government Shutdowns: 
Proposals for an Automatic Continuing Resolution, cited previously. 
Other automatic continuing resolution bills have been introduced but 
died in committee. See H.R. 29, 107th Cong. (2000); H.R. 3744, 107th 
Cong. (2001). 

[149] Prior to the 1982 recodification of title 31, the mandate was 
found in 31 U.S.C. § 623. The recodifiers thought those words 
themselves were unnecessary, and the concept is now included in the 
general mandate in 31 U.S.C. § 1104(a) to "use uniform terms" in 
requesting appropriations. 

[150] For a further discussion of the voluntary services prohibition, 
see section C.3 of this chapter. 

[151] In a 1984 decision, GAO found that acceptance by the Federal 
Communications Commission of booth space and utility services at 
industry trade shows did not augment the Commission's appropriation 
because "no money changed hands, nor was money paid on the 
Commission's behalf to anyone else." 63 Comp. Gen. 459, 461 (1984). 
GAO found that there was a "mutually beneficial arrangement" between 
the Commission and trade show promoters that was "neither an 
augmentation of appropriations nor an illegal retention of a gift." 
Id. For a discussion of "no-cost" contract, see section E.2.b of this 
chapter. 

[152] Akin to B-211079.2, the decision in B-286182, Jan. 11, 2001, 
suggested that acceptance of services might be considered an improper 
augmentation in some circumstances. That decision concerned a 
settlement agreement in a rate case whereby a company agreed to 
provide telecommunications equipment and services valued at $1.53 
million to the District of Columbia courts for the purpose of 
facilitating access to the legal system. The decision concluded, 
however, that there was no augmentation issue in this case because the 
courts had statutory gift-acceptance authority, which is discussed in 
section E.3 of this chapter. 

[153] The exception referenced as section 3718(b) now appears in 
section 3718(d). It permits agencies to contract for assistance in the 
collection of debts due the United States, and to pay the contractor 
from the amounts recovered. For a decision addressing the scope and 
application of this exception, see 72 Comp. Gen. 85 (1993). 

[154] As a general proposition, an agency's appropriations do remain 
"in the Treasury" until needed for a valid purpose. Unless Congress 
expressly so provides, an agency may not have its appropriations paid 
over directly to it to be held pending disbursement. 21 Comp.
Gen. 489 (1941). 

[155] Several specific references to miscellaneous receipts in the pre-
1982 version of title 31 were deleted in the recodification because 
they were regarded as covered by the general prescription of the new 
section 3302. An example is the so-called User Charge Statute. The pre-
recodification version, 31 U.S.C. § 483a, required fees to be 
deposited as miscellaneous receipts. The current version, 31 U.S.C. § 
9701, omits the requirement because, as the Revision Note points out, 
it is covered by § 3302. 

[156] Section 571 stems from the Federal Property and Administrative 
Services Act of 1949, ch. 288, 63 Stat. 377 (June 30, 1949). Prior to 
this law, proceeds from the sale of public property were required to 
be deposited as miscellaneous receipts under the more general 
authority of what is now 31 U.S.C. § 3302(b). See Mammoth Oil Co. v. 
United States, 275 U.S. 13, 34 (1927); Pan-American Petroleum & 
Transport Co. v. United States, 273 U.S. 456, 502 (1927). (These are 
the notorious "Teapot Dome" cases.) 

[157] In addition to instances described elsewhere in the text, the 
following are examples of statutory exceptions to section 3302(b): 42 
U.S.C. § 8287 (measured savings from energy savings performance 
contracts), discussed in B-287488, June 19, 2001; 42 U.S.C. § 8256 and 
note (rebates received by federal agencies from utility companies on 
account of energy-saving measures), discussed in B-265734, Feb. 13, 
1996; and 38 U.S.C. § 1729A (compensatory settlement amounts under the 
Federal Medical Care Recovery Act stemming from care provided at 
Department of Veterans Affairs facilities), discussed in Memorandum 
Opinion for the Assistant Attorney General, Civil Division, 
Miscellaneous Receipts Act Exception for Veterans' Health Care 
Recoveries, OLC Opinion, Dec. 3, 1998. 

[158] It should not be automatically assumed that every form of credit 
accruing to the government under a contract will qualify as a refund 
to the appropriation. See, e.g., B-302366, July 12, 2004; A-51604, May 
31, 1977. 

[159] For further discussion of these concepts in the context of 
statutes applicable to the Defense Department, see GAO, Reimbursements 
to Appropriations: Legislative Suggestions for Improved Congressional 
Control, FGMSD-75-52 (Washington, D.C.: Nov. 1, 1976). A more recent 
report made a similar point in relation to agencies crediting user fee 
proceeds to their appropriations. GAO, Federal User Fees: Budgetary 
Treatment, Status, and Emerging Management Issues, GAO/AIMD-98-11 
(Washington, D.C.: Dec. 19, 1997). 

[160] Further guidance is contained in I Treasury Financial Manual 
chapter 6-8000. For example, the Manual provides at section 6-8030.20 
that collections totaling less than $5,000 may be accumulated and 
deposited when the total reaches $5,000. However, deposits must be 
made at least weekly regardless of amount. 

[161] Act of March 3, 1849, ch. 110, 9 Stat. 398. 

[162] Pub. L. No. 97-258, § 1, 96 Stat. 877, 948 (Sept. 13, 1982). 

[163] The opinion also concluded that the fee arrangement was not 
authorized under the user charge statute, 31 U.S.C. § 9701, or under 
provisions of SBA's organic legislation. 

[164] The court's disposition in Scheduled Airlines differed from a 
Comptroller General decision that had denied a protest against this 
solicitation. 73 Comp. Gen. 310 (1994). 

[165] Subsequently, Congress enacted legislation that specifically 
authorized Defense agencies to enter into contracts of the type 
invalidated in Scheduled Airlines Traffic Offices that permit a 
portion of commissions from unofficial travel to be deposited into 
nonappropriated morale funds. 10 U.S.C. § 2646. See, in this regard, B-
283731, Dec. 21, 1999. 

[166] See Chapter 5, section B.6. The basic rule is that where it 
becomes necessary to terminate a contract because of the contractor's 
default, the funds obligated under the original contract are 
available, beyond their original period of availability, for purposes 
of funding a contract to complete the unfinished work. Id. As 
discussed in section B.6, certain conditions must be met in order to 
invoke the replacement contract rule. Excess reprocurement costs 
recovered from defaulting contractors cannot be retained by an agency 
in its appropriations and applied to a new contract if the 
reprocurement does not constitute an appropriate replacement contract. 
Cf. B-242274, Aug. 27, 1991 (applying this principle in the context of 
recovered liquidated damages). 

[167] In 1990, subsequent to the decision in 65 Comp. Gen. 838 and 
many of the other decisions discussed in this section, Congress 
amended the statutory provisions applicable to the closing of 
appropriation accounts and the disposition of account balances. See 
generally Chapter 5, section D. These statutory changes do not 
fundamentally affect the substantive rules discussed in this section, 
although the changes they make in the time periods that appropriation 
accounts retain their identity after they expire for obligation 
purposes and before they close may affect the practical application of 
those rules in particular circumstances. 

[168] E.g., 46 Comp. Gen. 554 (1966); 40 Comp. Gen. 590 (1961); 27 
Comp. Gen. 117 (1947); 14 Comp. Gen. 729 (1935); 14 Comp. Gen. 106 
(1934); 10 Comp. Gen. 510 (1931); 8 Comp. Gen. 284 (1928); 26 Comp. 
Dec. 877 (1920); 23 Comp. Dec. 352 (1916); A-26073, Mar. 20, 1929, 
affd upon reconsideration, A-26073, Aug. 8, 1929; A-24614, June 20, 
1929. The rule was applied regardless of whether the funds were 
actually collected back from the contractor or merely withheld from 
future contract payments due. 52 Comp. Gen. 45 (1972). 

[169] This section provides that whenever a federal contract includes 
a provision for liquidated damages for delay, the Secretary of the 
Treasury may, upon the recommendation of the head of the procuring 
agency, remit all or part of the damages if such action would be just 
and equitable. The Comptroller General formerly exercised this 
remission function, but it was transferred by law to the executive 
branch in 1996. See the codification note following 41 U.S.C. § 256a. 

[170] See section E.2.a of this chapter and 65 Comp. Gen. 600 (1986). 

[171] The 1953 decision is inconsistent with the 1945 decision on this 
point and appears to have effectively overruled the latter decision. 

[172] See 42 U.S.C. § 8256(c)(5)(A), which authorizes such credits for 
most agencies, subject to appropriation. 

[173] Additional cases for this proposition are 35 Comp. Gen. 393 
(1956); 28 Comp. Gen. 476 (1949); 15 Comp. Gen. 683 (1936); 5 Comp. 
Gen. 928 (1926); 20 Comp. Dec. 349 (1913); 14 Comp. Dec. 87 (1907); 
and 9 Comp. Dec. 174 (1902). 

[174] A 1943 case suggested a different result, that is, the agency 
might have to transfer the value of the repairs to miscellaneous 
receipts, if the agency had a specific appropriation for repair or 
replacement of the property in question. 22 Comp. Gen. 1133, 1137 
(1943). GAO indicated in 67 Comp. Gen. 510 (1988) that this would not 
be the case, although 67 Comp. Gen. 510 did not deal with a specific 
repair appropriation, which would appear to be a rare case in any 
event. 

[175] As these cases demonstrate, the government occasionally 
purchases insurance; however, it is a self-insurer in most areas. See 
generally Chapter 4, section C.10. 

[176] See section E.3 of this chapter for a discussion of gifts and 
donations. 

[177] See section B.1 of Chapter 15 for a more detailed discussion of 
the Economy Act. Chapter 15 also discusses a variety of other 
interagency ordering authorities including working capital funds, 
special revolving funds, franchise funds, and program-specific funds. 

[178] Temporary credits among appropriations are authorized by 31 
U.S.C. § 1534, which generally provides for common service charges to 
more than one appropriation. See Chapter 2, section B.3.a. 

[179] Compare 10 U.S.C. § 2205(a), which provides that reimbursements 
to Defense Department appropriations under the Economy Act and similar 
authorities may be credited to authorized accounts and are available 
for obligation for the same period as the funds in the account so 
credited. 

[180] The cited decisions note, for example, that agencies can use 
standard costs for items provided from inventory as well as standard 
costs for transportation and labor. While the standard cost for 
inventory items may be based on the latest cost to acquire the item 
provided, it may not be the cost to acquire a more technologically 
advanced item. Also, reimbursement must include reasonable amounts for 
both direct and indirect costs. Of course, agencies may have more 
latitude to set rates under other, more specific statutes. See, e.g., 
10 U.S.C. § 2205(b); Department of Defense Financial Management 
Regulation 7000.14-R, vol. 11A, ch. 3, Economy Act Orders (April 
2000), available at [hyperlink, 
http://www.defenselink.mil/comptroller/fmr/11A/index.html] (last 
visited September 15, 2005). 

[181] This and related decisions are also discussed in section E.2.d 
of this chapter. 

[182] See section C of Chapter 15 for a much more detailed discussion 
of revolving funds. 

[183] Chapter 17, section D discusses trust funds in far greater 
detail. See also 31 U.S.C. §§ 1321-1323. 

[184] The opinion noted that the proposed settlement would be 
authorized under subsequent amendments to the governing legislation. 

[185] The Federal Bureau of Investigation and the Drug Enforcement 
Administration now have statutory authority to retain and use the 
proceeds from undercover operations, subject to certain conditions. 
See Pub. L. No. 102-395, § 102(b), 106 Stat. 1838 (Oct. 10, 1992), 
which was continued in effect by Pub. L. No. 104-132, § 815(d), 110 
Stat. 1315 (Apr. 24, 1996), and extended to the Bureau of Alcohol, 
Tobacco, Firearms, and Explosives by Pub. L. No. 108-447, div. B, 
title I, § 116, 118 Stat. 2809, 2870 (Dec. 8, 2004). See 28 U.S.C. § 
533 note. Other agencies have similar authority. See also 8 U.S.C. § 
1363a(a)(3) (Immigration and Naturalization Service); 19 U.S.C. § 
2081(a)(2) (Customs Service); 26 U.S.C. § 7608(c)(1)(B) and (C) 
(Internal Revenue Service). 

[186] For agencies funded under the annual Interior Department and 
Related Agencies appropriation acts, the rentals, whether collected by 
payroll deduction or otherwise, go into a "special fund" maintained by 
each agency to be used for maintenance and operation of the quarters. 
5 U.S.C. § 5911 note. 

[187] Pub. L. No. 97-300, 96 Stat. 1324 (Oct. 13, 1982). 

[188] The reverse adjustment is made when funds which should have been 
deposited as miscellaneous receipts are erroneously credited to an 
appropriation. The remedy is a transfer from the appropriation to the 
appropriate miscellaneous receipts account. E.g., B-48722, Apr. 16, 
1945. 

[189] See also B-3596, A-51615, Nov. 30, 1939. Use of a deposit fund 
suspense account is equally acceptable. B-158381, June 21, 1968. 

[190] In B-259065, Dec. 21, 1995, the Comptroller General sided with 
Justice Blackmun on this point, holding that awards against the United 
States for the return of forfeited cash or cash proceeds of forfeited 
property that had been deposited in the Justice Department's Assets 
Forfeiture Fund should be satisfied from that fund. 

[191] See, e.g., 36 U.S.C. § 2307 (specifically provides that funds 
donated to the United States Holocaust Memorial Museum are not to be 
regarded as appropriated funds and are not subject to requirements or 
restrictions applicable to appropriated funds). 

[192] Some wag once said, jokingly we think, that if you looked hard 
enough you could probably find a case dealing with the use of 
appropriated funds to buy dog food. 22 Comp. Dec. 465 is it. 

[193] Some cases from this series are 59 Comp. Gen. 415 (1980); 55 
Comp. Gen. 1293 (1976); 49 Comp. Gen. 572 (1970); 46 Comp. Gen. 689 
(1967); 36 Comp. Gen. 268 (1956); 26 Comp. Dec. 43 (1919). 

[194] GAO's decisions involving promotional items obtained as a result 
of government-sponsored travel were decided under its claims 
settlement authority and predate the transfer of this authority to the 
executive branch in 1995. For details of this transfer see B-275605, 
Mar. 17, 1997. GAO has not issued decisions on such promotional items 
subsequent to that transfer. In testimony before the House of 
Representative's Subcommittee on Technology and Procurement Policy of 
the Committee on Government Reform, the Comptroller General spoke in 
favor of proposals that would allow employees who travel on government 
business to keep their frequent flyer miles, describing it as a "small 
benefit but one that private sector employers commonly provide their 
people as part of a mosaic of competitive employee benefits." GAO, 
Human Capital: Building the Information Technology Workforce to 
Achieve Results, GAO-01-1007T (Washington, D.C.: July 31, 2001), at 23. 

[195] GAO has no decisions addressing whether a federal agency with 
gift acceptance authority may receive a gift of money transferred to 
it from another federal agency. 

[196] Economy Act transactions are described in more detail in section 
E.2.e of this chapter, above, and in section B.1 of Chapter 15. 

[197] For a discussion of some of these statutes as well as related 
and predecessor provisions, see B-179708-0.M., Dec. 1, 1975, and B-
179708-0.M., July 21, 1975. 

[198] No augmentation requiring an election between potential funding 
sources exists, however, where the law clearly authorizes an agency to 
use both sources interchangeably in order to supplement each other. 
See B-272191, Nov. 4, 1997, distinguishing 68 Comp. Gen. 337. 

[End of Chapter 6 footnotes] 

[End of Chapter 6] 

Chapter 7: Obligation of Appropriations: 

A. Introduction: Nature of an Obligation: 
B. Criteria for Recording Obligations (31 U.S.C. § 1501): 
1. Section 1501(a)(1): Contracts: 
a Binding Agreement: 
b. Contract "in Writing": 
c. Requirement of Specificity: 
d. Invalid Award/Unauthorized Commitment: 
e. Variations in Quantity to Be Furnished: 
f. Amount to Be Recorded: 
g. Administrative Approval of Payment: 
h. Miscellaneous Contractual Obligations: 
i. Interagency Transactions: 
(1) Economy Act agreements: 
(2) Non-Economy Act agreements: 
(3) "Binding agreement" requirement: 
(4) Orders from stock: 
(5) Project orders: 
2. Section 1501(a)(2): Loans: 
3. Section 1501(a)(3): Interagency Orders Required by Law: 
4. Section 1501(a)(4): Orders without Advertising: 
5. Section 1501(a)(5): Grants and Subsidies: 
a Grants: 
b. Subsidies: 
6. Section 1501(a)(6): Pending Litigation: 
7. Section 1501(a)(7): Employment and Travel: 
a Wages, Salaries, Annual Leave: 
b. Compensation Plans in Foreign Countries: 
c. Training: 
d. Uniform Allowance: 
e. Travel Expenses: 
f. State Department: Travel Outside Continental United States: 
g. Employee Transfer/Relocation Costs: 
8. Section 1501(a)(8): Public Utilities: 
9. Section 1501(a)(9): Other Legal Liabilities: 
C. Contingent Liabilities: 
D. Reporting Requirements: 
E. Deobligation: 

A. Introduction: Nature of an Obligation: 

You, as an individual, use a variety of procedures to spend your 
money. Consider the following transactions: 

* You walk into a store, make a purchase, and pay at the counter with
cash, check, or debit card. 

* You move to another counter and make another purchase with a credit 
card. No money changes hands at the time, but you sign a credit form 
which states that you promise to pay upon being billed. ' 

* You call the local tree surgeon to remove some ailing limbs from 
your favorite sycamore. He quotes an estimate and you arrange to have 
the work done. The tree doctor arrives while you are not at home, does 
the work, and slips his bill under your front door. 

* You visit your family dentist to relieve a toothache. The work is 
done and you go home. No mention is made of money. Of course, you know 
that the work wasn't free and that the dentist will bill you. 

* You now visit your family lawyer to sue the dentist and the tree 
surgeon. The lawyer takes your case and you sign a contingent fee 
contract in which you agree that the lawyer's fee will be one-third of 
any amounts recovered. 

Numerous other variations could be added to the list but these are 
sufficient to make the point. The first example is a simple cash 
transaction. The legal liability to pay and the actual disbursement of 
money occur simultaneously. The rest of the examples all have one 
essential thing in common: You first take some action which creates 
the legal liability to pay—that is, you "obligate" yourself to pay—and 
the actual disbursement of money follows at some later time. The 
obligation occurs in a variety of ways, such as placing an order or 
signing a contract. 

The government spends money in much the same fashion except that it is 
subject to a variety of statutory restrictions. The simple "cash 
transaction" or "direct outlay" involves a simultaneous obligation and 
disbursement and represents a minor portion of government 
expenditures. The major portion of appropriated funds are first 
obligated and then expended. The subsequent disbursement "liquidates" 
the obligation. Thus, an agency "uses" appropriations in two basic 
ways—direct expenditures (disbursements) and obligations. There is no 
legal requirement for you as an individual to keep track of your 
"obligations." For the government, there is. 

The concept of "obligation" is central to appropriations law. As will 
be demonstrated in the discussion below, this is because of the 
principle, one of the most fundamental, that an obligation must be 
charged against the relevant appropriation in accordance with the 
rules relating to purpose, time, and amount. The term "available for 
obligation" is used throughout this publication to refer to 
availability as to purpose, time, and amount. This chapter will 
explore exactly what an obligation is. 

It would be nice to start with an all-inclusive and universally 
applicable definition of "obligation." However, because of the immense 
variety of transactions in which the government is involved, GAO has 
defined "obligation" only in the most general terms and has instead 
analyzed on a case-by-case basis the nature of the particular 
transaction at issue to determine whether an obligation has been 
incurred. B-192282, Apr. 18, 1979; B-116795, June 18, 1954. 

The most one finds in the decisions are general statements referring 
to an obligation in such terms as "a definite commitment which creates 
a legal liability of the Government for the payment of appropriated 
funds for goods and services ordered or received." B-116795, June 18, 
1954. See also B-300480.2, June 6, 2003; B-272191, Nov. 4, 1997; B-
265901, Oct. 14, 1997; 21 Comp. Gen. 1162, 1163 (1941) (circular 
letter); B-222048, Feb. 10, 1987; B-82368, July 20, 1954; B-24827, 
Apr. 3, 1942. From the earliest days, the Comptroller General has 
cautioned that the obligating of appropriations must be "definite and 
certain." A-5894, Dec. 3, 1924. 

Another definition of an "obligation" that one finds in the decisions 
takes a slightly broader perspective: 

"A legal duty on the part of the United States which constitutes a 
legal liability or which could mature into a legal liability by virtue 
of actions on the part of the other party beyond the control of the 
United States ..." 

42 Comp. Gen. 733, 734 (1963). 

Thus, in very general and simplified terms, an "obligation" is some 
action that creates a legal liability or definite commitment on the 
part of the government, or creates a legal duty that could mature into 
a legal liability by virtue of an action that is beyond the control of 
the government. Payment may be made immediately or in the future. GAO, 
A Glossary of Terms Used in the Federal Budget Process, GAO-05-734SP 
(Washington, D.C.: September 2005), at 70. See also McDonnell Douglas 
Corp. v. United States, 37 Fed. Cl. 295, 301, order modified, 39 Fed. 
Cl. 665 (1997); OMB Circular No. A-11, Preparation, Submission, and 
Execution of the Budget, §§ 20.3, 20.5 (June 21, 2005). 

An advance of funds to a working fund[Footnote 1] does not in itself 
serve to obligate the funds. See B-180578-0.M., Sept. 26, 1978. The 
same result holds for funds transferred to a special "holding account" 
established for administrative convenience. B-118638, Nov. 4, 1974 
(appropriations for District of Columbia Public Defender Service under 
control of the Administrative Office of the U.S. Courts are not 
obligated by transfer to a "Judiciary Trust Fund" established by the 
Administrative Office). 

The typical question on obligations is framed in terms of when the 
obligation may or must be "recorded," that is, officially charged 
against the spending agency's appropriations. Restated, what action is 
necessary or sufficient to create an obligation? This is essential in 
determining what fiscal year to charge, with all the consequences that 
flow from that determination. It is also essential to the broader 
concern of congressional control over the public purse. 

Before proceeding with the specifics, two general points should be 
noted. First, an obligation arises when the definite commitment is 
made, even though the actual payment may not take place until a future 
fiscal year. B-300480.2, June 6, 2003; 56 Comp. Gen. 351 (1977); 23 
Comp. Gen. 862 (1944). Second, for appropriations law purposes, the 
term "obligation" includes both matured and unmatured commitments. A 
matured commitment is a legal liability that is currently payable. An 
unmatured commitment is a liability which is not yet payable but for 
which a definite commitment nevertheless exists. For example, a 
contractual liability to pay for goods which have been delivered and 
accepted has "matured." The liability for monthly rental payments 
under a lease is largely unmatured although the legal liability covers 
the entire rental period. Both types of liability are "obligations." 
The fact that an unmatured liability may be subject to a right of 
cancellation does not negate the obligation. A-97205, Feb. 3, 1944, at 
9-10.[Footnote 2] 

A recent decision illustrates this point. In B-300480, Apr. 9, 2003, 
GAO determined that the Corporation for National and Community Service 
(Corporation), the parent body of the AmeriCorps national service 
program, incurred a legal liability for the award of AmeriCorps 
national service educational benefits at the time it entered into a 
grant agreement to provide educational benefits to AmeriCorps 
participants. Participants in the AmeriCorps program who successfully 
completed a required term of service earned a national service 
educational award that could be used to pay for post-secondary 
education. The Corporation awarded grants to state service 
commissions, which awarded subgrants to the nonprofit groups—the 
entities that actually enrolled the AmeriCorps participants. When the 
Corporation awarded a grant to a state service commission, it entered 
into a binding agreement authorizing the state service commissions to 
provide grant awards to a specified number of new participants in the 
AmeriCorps program. The Corporation argued that it did not incur an 
obligation for an education award until the time of enrollment because 
the Corporation could modify the terms and conditions of a grant, 
including suspension of enrollment, prior to the enrollment of all 
positions initially approved in a grant. GAO disagreed and explained 
that: 

"The fact that the government may have the power to amend unilaterally 
a contract or agreement does not change the nature or scope of the 
obligation incurred at time of award. Were it otherwise, every 
government contract that permits the government to terminate the 
contract for the convenience of the government (48 C.F.R. § 49.502), 
or to modify the terms of the contract at will (48 C.F.R. §§ 52.243-1, 
243-2, 243-3), would not be an obligation of the government at time of 
award. Long-standing practice and logic both of the Congress (31 
U.S.C. § 1501, 41 U.S.C. § 5) and the accounting officers of the 
government (B-234957, July 10, 1989, B-112131, Feb. 1, 1956) have 
rejected such a view." 

B-300480, Apr. 9, 2003. GAO concluded that because the Corporation had 
taken an action that could mature into a legal liability for the 
education benefits by virtue of actions taken by the grantee and 
participants, not the Corporation, the Corporation incurred an 
obligation at the time of grant award. Id. Subsequently, GAO issued a 
second decision, B-300480.2, June 6, 2003, which elaborated upon and 
affirmed the April decision. 

B. Criteria for Recording Obligations (31 U.S.C. § 1501): 

The overrecording and the underrecording of obligations are equally 
improper. Both practices make it impossible to determine the precise 
status of the appropriation and can lead to other adverse 
consequences. Overrecording (recording as obligations items that are 
not) is usually done to inflate obligated balances and reduce 
unobligated balances of appropriations expiring at the end of a fiscal 
year. Underrecording (failing to record legitimate obligations) may 
result in violating the Antideficiency Act. 31 U.S.C. § 1341.[Footnote 
3] A 1953 decision put it this way: 

"In order to determine the status of appropriations, both from the 
viewpoint of management and the Congress, it is essential that 
obligations be recorded in the accounting records on a factual and 
consistent basis throughout the Government. Only by the following of 
sound practices in this regard can data on existing obligations serve 
to indicate program accomplishments and be related to the amount of 
additional appropriations required." 

32 Comp. Gen. 436, 437 (1953). See also GAO, Policy and Procedures 
Manual for Guidance of Federal Agencies, title 7, § 3.5.A. 
(Washington, D.C.: May 18, 1993) (hereafter GAO-PPM). 

The standards for the proper recording of obligations are found in 31 
U.S.C. § 1501(a), originally enacted as section 1311 of the 
Supplemental Appropriation Act, 1955, Pub. L. No. 83-663, 68 Stat. 
800, 830 (Aug. 26, 1954). A Senate committee has described the origin 
of the statute as follows: 

"Section 1311 of the Supplemental Appropriation Act of 1955 resulted 
from the difficulty encountered by the House Appropriations Committee 
in obtaining reliable figures on obligations from the executive 
agencies in connection with the budget review. It was not uncommon for 
the committees to receive two or three different sets of figures as of 
the same date. This situation, together with rather vague explanations 
of certain types of obligations particularly in the military 
department[s], caused the House Committee on Appropriations to 
institute studies of agency obligating practices. 

"The result of these examinations laid the foundation for the 
committee's conclusion that loose practices had grown up in various 
agencies, particularly in the recording of obligations in situations 
where no real obligation existed, and that by reason of these 
practices the Congress did not have reliable information in the form 
of accurate obligations on which to determine an agency's future 
requirements. To correct this situation, the committee, with the 
cooperation of the General Accounting Office and the Bureau of the 
Budget, developed what has become the statutory criterion by which the 
validity of an obligation is determined...."[Footnote 4] 

Thus, the primary purpose of 31 U.S.C. § 1501 is to ensure that 
agencies record only those transactions which meet specified standards 
for legitimate obligations. 71 Comp. Gen. 109 (1991); 54 Comp. Gen. 
962, 964 (1975); 51 Comp. Gen. 631, 633 (1972); B-192036, Sept. 11, 
1978.[Footnote 5] 

Subsection (a) of 31 U.S.C. § 1501 prescribes specific criteria for 
recording obligations. The subsection begins by stating that "[a]n 
amount shall be recorded as an obligation of the United States 
Government only when supported by documentary evidence" and then goes 
on to specify nine criteria for recording obligations. Note that the 
statute requires "documentary evidence" to support the recording in 
each instance. In one sense, these nine criteria taken together may be 
said to comprise the "definition" of an obligation.[Footnote 6] 

If a given transaction does not meet any of the criteria, then it is 
not a proper obligation and may not be recorded as one. Once one of 
the criteria is met, however, the agency not only may but must at that 
point record the transaction as an obligation. While 31 U.S.C. § 1501 
does not explicitly state that obligations must be recorded as they 
arise or are incurred, it follows logically from an agency's 
responsibility to comply with the Antideficiency Act. GAO has made the 
point in decisions and reports in various contexts. E.g., B-302358, 
Dec. 27, 2004; 72 Comp. Gen. 59 (1992); 65 Comp. Gen. 4, 6 (1985); B-
242974.6, Nov. 26, 1991; B-226801, Mar. 2, 1988; B-192036, Sept. 11, 
1978; A-97205, Feb. 3, 1944, at 10; GAO, FGMSD-75-20 (Washington, 
D.C.: Feb. 13, 1975) (untitled letter report); GAO, Substantial 
Understatement of Obligations for Separation Allowances for Foreign 
National Employees, B-179343, (Washington, D.C.: Oct. 21, 1974), at 6. 

It is important to emphasize the relationship between the existence of 
an obligation and the act of recording. Recording evidences the 
obligation but does not create it. If a given transaction is not 
sufficient to constitute a valid obligation, recording it will not 
make it one. E.g., B-197274, Feb. 16, 1982 ("reservation and 
notification" letter held not to constitute an obligation, act of 
recording notwithstanding, where letter did not impose legal liability 
on government and subsequent formation of contract was within agency's 
control). Conversely, failing to record a valid obligation in no way 
diminishes its validity or affects the fiscal year to which it is 
properly chargeable. E.g., B-226782, Oct. 20, 1987 (letter of intent, 
executed in fiscal year 1985 and found to constitute a contract, 
obligated fiscal year 1985 funds, notwithstanding agency's failure to 
treat it as an obligation). See also 63 Comp. Gen. 525 (1984); 38 
Comp. Gen. 81, 82-83 (1958). 

The precise amount of the government's liability should be recorded as 
the obligation where that amount is known. However, where the precise 
amount is not known at the time the obligation is incurred, an 
obligation amount must still be recorded on a preliminary basis. How 
to determine this amount is discussed in section B.l.f of this 
chapter. See also OMB Circular No. A-11, Preparation, Submission, and 
Execution of the Budget, § 20.5 (June 21, 2005) for guidance on how to 
record obligation amounts in certain situations. As more precise data 
on the liability becomes available, the obligation must be 
periodically adjusted, that is, the agency must deobligate funds or 
increase the obligational level as the case may be. 7 GAO-PPM § 3.5.D; 
B-300480, Apr. 9, 2003. 

Adjustments to recorded obligations, like the initial recordings 
themselves, must be supported by documentary evidence. The use of 
statistical methods to make adjustments "lacks legal foundation if the 
underlying transactions cannot be identified and do not support the 
calculated totals." B-236940, Oct. 17, 1989; GAO, Financial 
Management: Defense Accounting Adjustments for Stock Fund Obligations 
Are Illegal, GAO/AFMD-87-1 (Washington, D.C.: Mar. 11, 1987), at 6. 

A related concept is the allocation of obligations for administrative 
expenses (utility costs, computer services, etc.) between or among 
programs funded under separate appropriations. There is no rule or 
formula for this allocation apart from the general prescription that 
the agency must use a supportable methodology. Merely relying on the 
approved budget is not sufficient. See GAO, Financial Management: 
Improvements Needed in OSMRE's Method of Allocating Obligations, 
GAO/AFMD-89-89 (Washington, D.C.: July 28, 1989). An agency may 
initially charge common-use items to a single appropriation as long as 
it makes the appropriate adjustments from other benefiting 
appropriations before or as of the end of the fiscal year. 31 U.S.C. § 
1534; 70 Comp. Gen. 601 (1991). The allocation must be in proportion 
to the benefit. 70 Comp. Gen. 592 (1991). 

Further procedural guidance may be found in OMB Circular No. A-11, at 
§ 20.5; the Treasury Financial Manual; and title 7 of GAO's Policy and
Procedures Manual for Guidance of Federal Agencies. For the most part, 
the statutory criteria in 31 U.S.C. § 1501(a) reflect standards that 
had been developed in prior decisions of the Comptroller General over 
the years. See, e.g., 18 Comp. Gen. 363 (1938); 16 Comp. Gen. 37 
(1936). The remainder of this section will explore the nine specific 
recording criteria. 

1. Section 1501(a)(1): Contracts: 

Subsection (a)(1) of 31 U.S.C. § 1501 establishes minimum requirements 
for recording obligations for contracts. Specifically, there must be
documentary evidence of: 

"(1) a binding agreement between an agency and another person 
(including an agency) that is: 

"(A) in writing, in a way and form, and for a purpose authorized by 
law; and; 
"(B) executed before the end of the period of availability for 
obligation of the appropriation or fund used for specific goods to be 
delivered, real property to be bought or leased, or work or service to 
be provided." 

As seen in Chapter 5, the general rule for obligating fiscal year 
appropriations by contract is that the contract imposing the 
obligation must be made within the fiscal year sought to be charged 
and must meet a bona fide need of that fiscal year. E.g., B-272191, 
Nov. 4, 1997; B-235086, Apr. 24, 1991; 37 Comp. Gen. 155 (1957). This 
discussion will center on the timing of the obligation from the 
perspective of 31 U.S.C. § 1501(a)(1). 

Subsection (a)(1) actually imposes several different requirements: 

* a binding agreement; 

* in writing; 

* for a purpose authorized by law; 

* executed before the expiration of the period of obligational 
availability; and; 

* a contract calling for specific goods, real property, work, or 
services. 

a. Binding Agreement: 

An agreement must be legally binding (offer, acceptance, consideration,
made by authorized official). As stated in a 1991 decision: 

"The primary purpose of section 1501(a)(1) is to 'require that there 
be an offer and acceptance imposing liability on both parties.' 39 
Comp. Gen. 829, 831 (1960). Hence the government may record an 
obligation under section 1501 only upon evidence that both parties to 
the contract willfully express the intent to be bound." 

71 Comp. Gen. 109, 110 (1991) (emphasis in original). To be binding, 
however, an agreement does not have to be the final "definitized" 
contract. The legislative history of subsection (a)(1) makes this 
clear. The following excerpt is taken from the conference report: 

"Section 1311(a)(1) precludes the recording of an obligation unless it 
is supported by documentary evidence of a binding agreement between 
the parties as specified therein. It is not necessary, however, that 
the binding agreement be the final formal contract on any specified 
form. The primary purpose is to require that there be an offer and an 
acceptance imposing liability on both parties. For example, an 
authorized order by one agency on another agency of the Government, if 
accepted by the latter and meeting the requirement of specificity, 
etc., is sufficient. Likewise, a letter of intent accepted by a 
contractor, if sufficiently specific and definitive to show the 
purposes and scope of the contract finally to be executed, would 
constitute the binding agreement required."[Footnote 7] 

The following passage from 42 Comp. Gen. 733, 734 (1963) remains a 
useful general prescription: 

"The question whether Government funds are obligated at any specific 
time is answerable only in terms of an analysis of written 
arrangements and conditions agreed to by the United States and the 
party with whom it is dealing. If such analysis discloses a legal duty 
on the part of the United States which constitutes a legal liability 
or which could mature into a legal liability by virtue of actions on 
the part of the other party beyond the control of the United States, 
an obligation of funds may generally be stated to exist." 

In 35 Comp. Gen. 319 (1955), and 59 Comp. Gen. 431 (1980), the 
Comptroller General set forth the factors that must be present in 
order for a binding agreement to exist for purposes of 31 U.S.C. § 
1501(a)(1) with respect to contracts awarded under competitive 
procedures: 

* Each bid must have been in writing. 

* The acceptance of each bid must have been communicated to the bidder 
in the same manner as the bid was made. If the bid was mailed, the 
contract must have been placed in the mails before the close of the 
fiscal year. If the bid was delivered other than by mail, the contract 
must have been delivered in like manner before the end of the fiscal 
year. 

* Each contract must have incorporated the terms and conditions of the 
respective bid without qualification. Otherwise, it must be viewed as 
a counteroffer and there would be no binding agreement until accepted 
by the contractor. 

To illustrate, where the agency notified the successful bidder of the 
award by telephone near the end of fiscal year 1979 but did not mail 
the contract document until fiscal year 1980, there was no valid 
obligation of fiscal year 1979 funds. 59 Comp. Gen. 431 (1980). See 
also Goldberger Foods v. United States, 23 Cl. Ct. 295, 302-303, 
aff'd, 960 F.2d 155 (Fed. Cir. 1992); B-159999-0.M., Mar. 16. 1967; B-
235086, Apr. 24, 1991; 35 Comp. Gen. 319 (1955). A document is 
considered "mailed" when it is placed in the custody of the Postal 
Service (given to postman or dropped in mailbox or letter chute in 
office building); merely delivering the document to an agency 
messenger with instructions to mail it is insufficient. 59 Comp.
Gen. 431, 433 (1980); B-235086, Apr. 24, 1991. Similarly, there was no 
recordable obligation of fiscal year 1960 funds where the agency 
erroneously mailed the notice of award to the wrong bidder and did not 
notify the successful bidder until the first day of fiscal year 1961. 
40 Comp. Gen. 147 (1960). It is important to note that, in the above 
cases, the obligation was invalid only with respect to the fiscal year 
the agency wanted to charge. The agency could still proceed to 
finalize the obligation but would have to charge funds current in the 
subsequent fiscal year. 

A mere request for additional supplies under a purchase order with no 
indication of acceptance of the request does not create a recordable 
obligation. 39 Comp. Gen. 829 (1960). Similarly, a work order or 
purchase order may be recorded as an obligation only where it 
constitutes a binding agreement for specific work or services. 34 
Comp. Gen. 459 (1955). 

A "letter of intent" is a preliminary document that may or may not 
constitute an obligation. At one extreme, it may be nothing more than 
an "agreement to agree" with neither party bound until execution of 
the formal contract. E.g., B-201035, Feb. 15, 1984, at 5. At the other 
extreme, it may contain all the elements of a contract, in which event 
it will create binding obligations. The crucial question is whether 
the parties intended to be bound, determinable primarily from the 
language actually used. Saul Bass & Associates v. United States, 505 
F.2d 1386 (Ct. Cl. 1974). For a good example of a letter of intent 
creating contractual obligations, see B-226782, Oct. 20, 1987. 

A letter of intent which amounts to a contract is also called a 
"letter contract." In the context of government procurement, it is 
used most commonly when there is insufficient time to prepare and 
execute the full contract before the end of the fiscal year. As 
indicated in the legislative history quoted earlier, a "letter of 
intent" accepted by the contractor may form the basis of an obligation 
if it is sufficiently specific and definitive to show the purpose and 
scope of the contract. 21 Comp. Gen. 574 (1941); B-127518, May 10, 
1956. Letters of intent should be used "only under conditions of the 
utmost urgency." 33 Comp. Gen. 291, 293 (1954). Under the Federal 
Acquisition Regulation (FAR), letter contracts may be used: 

"when (1) the Government's interests demand that the contractor be 
given a binding commitment so that work can start immediately and (2) 
negotiating a definitive contract is not possible in sufficient time 
to meet the requirement. However, a letter contract should be as 
complete and definite as feasible under the circumstances." 

48 C.F.R. § 16.603-2(a) (2005). 

The amount to be obligated under a letter contract is the government's 
maximum liability under the letter contract itself, without regard to 
additional obligations anticipated to be included in the definitive 
contract or, restated, the amount necessary to cover expenses to be 
incurred by the contractor prior to execution of the definitive 
contract. The obligation is recorded against funds available for 
obligation at the time the letter contract is issued. 34 Comp. Gen. 
418, 421 (1955); B-197274, Sept. 23, 1983; B-197274, Feb. 16, 1982; B-
127518, May 10, 1956. See also FAR, 48 C.F.R. §§ 16.603-2(d), 16.603-
3(a). 

Once the definitive contract is executed, the government's liability 
under the letter contract is merged into it. If definitization does 
not occur until the following fiscal year, the definitive contract 
will obligate funds of the latter year, usually in the amount of the 
total contract price less an appropriate deduction relating to the 
letter contract. B-197274, Sept. 23, 1983. The cited decision, at page 
5, specifies how to calculate the deduction as follows: 

"The definitized contract then supports obligating against the 
appropriation current at the time it is entered into since it is, in 
fact, a bona fide need of that year. The amount of the definitized 
contract would ordinarily be the total contract cost less either the 
actual costs incurred under the letter contract (when known) or the 
amount of the maximum legal liability permitted by the letter contract 
(when the actual costs cannot be determined)." 

Letter contracts should be definitized within 180 days, or before 
completion of 40 percent of the work to be performed, whichever occurs 
first. FAR, 48 C.F.R. § 16.603-2(c). Also, letter contracts should not 
be used to record excess obligations as this distorts the agency's 
funding picture. See GAO, Contract Pricing: Obligations Exceed 
Definitized Prices on Unpriced Contracts, GAO/NSIAD-86-128 
(Washington, D.C.: May 2, 1986). 

b. Contract "in Writing:" 

Although the binding agreement under 31 U.S.C. § 1501(a)(1) must be 
"in writing," the "writing" is not necessarily limited to words on a 
piece of paper. The traditional mode of contract execution is to affix 
original handwritten signatures to a document (paper) setting forth 
the contract terms. Change is in the winds, however, and traditional 
interpretations are being reassessed in light of advancing computer 
technologies. In 1983, GAO's legal staff, in an internal memorandum to 
one of GAO's audit divisions, took note of modern legal trends and 
advised that the "in writing" requirement could be satisfied by 
computer-related media which produce tangible recordings of 
information, such as punch cards, magnetic cards, tapes, or disks. B-
208863(2)-0.M., May 23, 1983. 

Eight years later, the Comptroller General issued his first formal 
decision on the topic, 71 Comp. Gen. 109 (1991). The National 
Institute of Standards and Technology (NISI) asked whether federal 
agencies could use certain Electronic Data Interchange (EDI) 
technologies to create valid contractual obligations for purposes of 
31 U.S.C. § 1501(a). Yes, replied the Comptroller, as long as there 
are adequate safeguards and controls to provide no less certainty and 
protection of the government's interests as under a "paper and ink" 
method. The decision states: 

"We conclude that EDI systems using message authentication codes which 
follow NIST's Computer Data Authentication Standard ... or digital 
signatures following NIST's Digital Signature Standard, as currently 
proposed, can produce a form of evidence that is acceptable under 
section 1501." 

71 Comp. Gen. at 111. In 2000, Congress enacted the Electronic 
Signatures in Global and National Commerce Act,[Footnote 8] which 
confirmed the legality of digital signatures in any transaction in or 
affecting interstate or foreign commerce. Section 101(a) of the act 
provides: 

"In General. Notwithstanding any statute, regulation, or other rule of 
law ... with respect to any transaction in or affecting interstate or 
foreign commerce: 

(1) a signature, contract, or other record relating to such 
transaction may not be denied legal effect, validity, or 
enforceability solely because it is in electronic form; and; 

(2) a contract relating to such transaction may not be denied legal 
effect, validity, or enforceability solely because an electronic 
signature or electronic record was used in its formation." 

While there may be some room for interpretation as to what constitutes 
a "writing" for purposes of 31 U.S.C. § 1501(a)(1), the writing, in 
some acceptable form, must exist. Under the plain terms of the 
statute, an oral agreement may not be recorded as an obligation. In 
United States v. American Renaissance Lines, Inc., 494 F.2d 1059, 1062 
(D.C. Cir.), cert. denied, 419 U.S. 1020 (1974), the court found that 
31 U.S.C. § 1501(a)(1) "establishes virtually a statute of frauds" for 
the government[Footnote 9] and held that neither party can judicially 
enforce an oral contract in violation of the statute. 

However, the Court of Claims and its successors, the Claims Court and 
United States Court of Federal Claims, have taken the position that
31 U.S.C. § 1501(a)(1) does not bar recovery "outside of the contract" 
where sufficient additional facts exist for the court to infer the 
necessary "meeting of minds" (contract implied-in-fact). Narva Harris 
Construction Corp. v. United States, 574 F.2d 508 (Ct. Cl. 1978); 
Johns-Manville Corp. v. United States, 12 Cl. Ct. 1, 19-20 (1987). Cf. 
Kinzley v. United States, 661 F.2d 187 (Ct. Cl. 1981) (documentary 
evidence of employment of persons sufficient to support oral 
employment contract for purposes of 31 U.S.C. § 1501(a)(7)). In 
Pacord, Inc. v. United States, 139 F.3d 1320 (9th Cir. 1998), the 
court relied on Narva Harris Construction Corp. in holding that, even 
though the Federal Acquisition Regulation (FAR) generally requires 
contracts to be in writing,[Footnote 10] an oral contract may be 
enforced if the plaintiff "can establish sufficient facts, beyond a 
mere oral agreement, for the court to infer the existence of an 
implied-in-fact contract." Pacord, 139 F.3d at 1323. 

These would be examples of subsequently imposed liability where the 
agency did not record—and lawfully could not have recorded—an 
obligation when the events giving rise to the liability took place. If 
a contractor received a judgment in this type of situation, the 
obligational impact on the contracting agency would depend on whether 
the case was subject to the Contract Disputes Act. If the Act applies, 
the judgment would be payable initially from the permanent judgment 
appropriation (31 U.S.C. § 1304), to be reimbursed by the agency from 
currently available appropriations. See 41 U.S.C. §§ 612(a)-(c); B-
252754, Oct. 6, 1994. If the Act does not apply, the judgment would be 
paid from the judgment appropriation without reimbursement, and there 
would thus be no obligational impact on the agency. 

In B-118654, Aug. 10, 1965, GAO concluded that a notice of award 
signed by the contracting officer and issued before the close of the 
fiscal year did not satisfy the requirements of 31 U.S.C. § 1501(a)(1) 
where it incorporated modifications of the offer as to price and other 
terms which had been agreed to orally during negotiations. The reason 
is that there was no evidence in writing that the contractor had 
agreed to the modifications. GAO conceded, however, that the agency's 
argument that there was documentary evidence of a binding agreement 
for purposes of section 1501(a)(1) was not without merit. In view of 
this and since the agency was in the process of changing its 
contracting procedures to assure adequate documentary evidence of both 
the offer and the acceptance, we did not insist on any appropriation 
adjustments. 

In a 1977 decision, however, GAO concluded that a signed contract that 
included ambiguous terms relating to pricing might not be defeated 
where the ambiguity was resolved by telephone conversations that were 
incorporated by reference into an award letter, even though there was 
no written record of the conversations showing agreement by both 
parties. The Comptroller General concluded that the potential defect 
in any event would not afford a basis for a third party (in this case 
a protesting unsuccessful offeror) to object to the contract's 
legality. 56 Comp. Gen. 768, 775 (1977). 

c. Requirement of Specificity: 

The statute requires documentary evidence of a binding agreement for 
specific goods or services. An agreement that fails this test is not a 
valid obligation. 

For example, a State Department contract under the Migration and 
Refugee Assistance Program establishing a contingency fund "to provide 
funds for refugee assistance by any means, organization or other 
voluntary agency as determined by the Supervising Officer" did not 
meet the requirement of specificity and therefore was not a valid 
obligation. B-147196, Apr. 5, 1965. 

Similarly, a purchase order which lacks a description of the products 
to be provided is not sufficient to create a recordable obligation. B-
196109, Oct. 23, 1979. In the cited decision, a purchase order for 
"regulatory, warning, and guide signs based on information supplied" 
on requisitions to be issued did not validly obligate fiscal year 1978 
funds where the requisitions were not sent to the supplier until after 
the close of fiscal year 1978. See also 70 Comp. Gen. 481 (1991) 
(advances to establish an imprest fund to finance unspecified future 
cash payments do not meet the statutory requirements for recording 
obligations). 

d. Invalid Award/Unauthorized Commitment: 

Where a contract award is determined to be invalid, the effect is that 
no binding agreement ever existed as required by 31 U.S.C. § 
1501(a)(1) and therefore there was no valid obligation of funds. 38 
Comp. Gen. 190 (1958); B-157360, Aug. 11, 1965. As discussed in 
Chapter 5, section B.6, under more recent authorities the original 
obligation is not extinguished for all purposes, and those amounts 
originally obligated remain available post-expiration to fund a valid 
"replacement contract." 70 Comp. Gen. 230 (1991); 68 Comp. Gen. 158 
(1988). Where the invalidity is determined under a bid protest, which 
will presumably cover most such instances, the extended availability 
described in the GAO decisions is statutorily defined as 100 days 
after the final ruling on the protest. 31 U.S.C. § 1558(a). Thus, 
cases like 38 Comp. Gen. 190 must be regarded as modified to this 
extent. Of course, amounts originally obligated do not survive post-
expiration for anything other than a valid replacement contract. B-
270723, Apr. 15, 1996. 

Where the Comptroller General awards bid preparation costs to a 
successful protester under authority of 31 U.S.C. § 3554(c), payment 
should be charged to the agency's procurement appropriations current 
at the time GAO issued its decision. If the agency must verify the 
amount of bid preparation costs to which the protester is entitled 
prior to payment, the agency should record an estimated obligation, 
using GAO's decision as the obligating document. Upon verification, 
the obligation is adjusted up or down as necessary, on the basis of 
the documents submitted by the protester to substantiate the amount. B-
199368.4, Jan. 19, 1983 (nondecision letter). 

Claims against the government resulting from unauthorized commitments 
raise obligation questions in two general situations. If the 
circumstances surrounding the unauthorized commitment are sufficient 
to give rise to a contract implied-in-fact, it may be possible for the 
agency to ratify the unauthorized act. If the ratification occurs in a 
subsequent fiscal year, the obligation is chargeable to the prior 
year, that is, the year in which the need presumably arose and the 
claimant performed. B-208730, Jan. 6, 1983. However, before an agency 
chooses to ratify the obligation, it first must assure that sufficient 
prior year unobligated funds remain available to cover the 
ratification. Id.; B-290005, July 1, 2002. If ratification is not 
available for whatever reason, the only remaining possibility for 
payment is a quantum meruit recovery under a theory of contract 
implied-in-law. The quantum meruit theory permits payment in limited 
circumstances even in cases where there was no valid obligation, for 
example, where the contractor has made partial delivery operating 
under what he believed to be a valid contract. B-303906, Dec. 7, 2004; 
B-251668, May 13, 1993; B-118428, Sept. 21, 1954. See also 67 Comp. 
Gen. 507 (1988). The obligational impact is the same as for 
ratification—payment is chargeable to the fiscal year in which the 
claimant performed. B-210808, May 24, 1984; B-207557, July 11, 1983. 

e. Variations in Quantity to Be Furnished: 

In some types of contracts, the quantity of goods to be furnished or 
services to be performed may vary. The quantity may be indefinite or it
may be stated in terms of a definite minimum with permissible 
variation. Variations may be at the option of the government or the 
contractor. The obligational treatment of this type of contract 
depends on the exact nature of the contractual liability imposed on 
the government. 

Before proceeding, it is important to define some terms. A 
requirements contract is one in which the government agrees to 
purchase all of its needs for the particular item or service during 
the contract period from the contractor, and the contractor agrees to 
fill all such needs. Federal Acquisition Regulation (FAR), 48 C.F.R. § 
16.503(a) (2005); Modern Systems Technology Corp. v. United States, 
979 F.2d 200, 206 (Fed. Cir. 1992); Torncello v. United States, 681 
F.2d 756, 761 (Ct. CL 1982). An indefinite-quantity contract is one in 
which the contractor agrees to supply whatever quantity the government 
may order, within limits, with the government under no obligation to 
use that contractor for all of its requirements. FAR, 48 C.F.R. § 
16.504(a); Hemet Valley Flying Service Co. v. United States, 7 Cl. Ct. 
512, 515-16 (1985); Mason v. United States, 615 F.2d 1343, 1346 n.5 
(Ct. CL), cert. denied, 449 U.S. 830 (1980); B-302358, Dec. 27, 2004. 
Under either type of contract, the government orders specific 
quantities from time to time by issuing a document variously termed a 
work order, task order, delivery order, etc. 

In a requirements contract, the government must state a realistic 
estimated total quantity. An agency may obtain its estimate from 
records of previous requirements and consumption, or by other means, 
and should base the estimate on the most current information 
available. FAR, 48 C.F.R. § 16.503(a)(1); B-190855, Mar. 31, 1978; B-
188426, Sept. 20, 1977. It is not legally necessary that requirements 
contracts place a minimum or a maximum limit upon the estimated 
requirements. B-256312, June 6, 1994; B-226992.2, July 13, 1987. See 
also Unlimited Enterprises, Export-Import, Inc., ASBCA No. 34825, 88-3 
BCA ¶ 20,908 (1988). However, the FAR provides that "the contract 
shall state, if feasible, the maximum limit of the contractor's 
obligation to deliver and the Government's obligation to order." 48 
C.F.R. § 16.503(a)(2). Needs must relate to the contract period. 21 
Comp. Gen. 961, 964 (1942). 

If, in the exercise of good faith, the anticipated requirements simply 
do not materialize, the government is not obligated to purchase the 
stated estimate or indeed, if no requirements arise, to place any 
orders with the contractor beyond any required minimum. 47 Comp. Gen. 
365, 370 (1968). See also Appeal of Shepard Printing, GPOBCA No. 37-92 
(1994); AGSGenesys Corp., ASBCA No. 35302, 89-2 BCA ¶ 21,702 (1989); 
World Contractors, Inc., ASBCA No. 20354, 75-2 BCA ¶ 11,536 (1975). 
The contractor assumes the risk that nonguaranteed requirements may 
fall short of expectations, and has no claim for a price adjustment if 
they do. Medan, Inc. v. Austin, 967 F.2d 579 (Fed. Cir. 1992); 37 
Comp. Gen. 688 (1958). If, however, the government attempts to meet 
its requirements elsewhere, including the development of in-house 
capability, or if failure to place orders with the contractor for 
valid needs is otherwise found to evidence lack of good faith, 
liability will result. E.g., Rumsfeld v. Applied Companies, Inc., 325 
F.3d 1328 (Fed. Cir), cert. denied, 540 U.S. 981 (2003); Torncello, 
681 F.2d at 768-69; Cleek Aviation v. United States, 19 CL Ct. 552 
(1990); Appeal of MDP Construction, Inc., ASBCA No. 49527, 96-2 BCA
¶ 28,525 (1996); Viktoria Transport GmbH & Co., ASBCA No. 30371, 88-3 
BCA ¶ 20,921 (1988); California Bus Lines, ASBCA No. 19732,
75-2 BCA ¶ 11,601 (1975); Henry Angelo & Sons, Inc., ASBCA No. 15082, 
72-1 BCA ¶ 9356 (1972); B-182266, Apr. 1, 1975. 

An indefinite-quantity contract, under current regulations, must 
include a minimum purchase requirement which must be more than 
nominal. FAR, 48 C.F.R. § 16.504(a)(2); B-302358, Dec. 27, 2004. An 
indefinite-quantity contract without a minimum purchase requirement is 
regarded as illusory and unenforceable. It is no contract at all. 
Torncello, 681 F.2d at 761; Mason, 615 F.2d at 1346 n.5; Howell v. 
United States, 51 Fed. CL 516 (2002); Rice Lake Contracting, Inc. v. 
United States, 33 Fed. CL 144, 152-53 (1995); Modern Systems 
Technology Corp. v. United States, 24 Cl. Ct. 360 (1991). Apart from 
the specified minimum, the government is free to obtain its 
requirements from other contractors. Government Contract Services, 
Inc., GSBCA No. 8447, 88-1 BCA ¶ 20,255 (1987); Alta Construction Co., 
PSBCA No. 1395, 87-2 BCA ¶ 19,720 (1987). 

An indefinite-delivery, indefinite-quantity (IDIQ) contract is a form 
of an indefinite-quantity contract. As with other indefinite quantity 
contracts, an IDIQ contract must require the government to order, and 
the contractor to furnish, at least a stated minimum quantity of 
supplies or services. FAR, 48 C.F.R. § 16.504(a). While the agency may 
place orders at any time during a fixed period, actual delivery dates 
during that period are undefined. After award of an IDIQ contract, the 
government places task or delivery orders with the contractor (or 
contractors) as the government's needs become definite. B-302358, Dec. 
27, 2004. IDIQs have historically provided a way to expeditiously fill 
certain government needs. See GAO, Contract Management: Few Competing 
Proposals for Large DOD Information Technology Orders, NSIAD-00-56 
(Washington, D.C.: Mar. 20, 2000), at 5. 

What does all this signify from the perspective of obligating 
appropriations? As we noted at the outset, the obligational impact of 
a variable quantity contract depends on exactly what the government 
has bound itself to do. A fairly simple generalization can be deduced 
from the decisions: In a variable quantity contract (requirements or 
indefinite-quantity), any required minimum purchase must be obligated 
when the contract is executed; subsequent obligations occur as work 
orders or delivery orders are placed, and are chargeable to the fiscal 
year in which the order is placed. B-302358, Dec. 27, 2004. 

Thus, in a variable quantity contract with no guaranteed minimum—or 
any analogous situation in which there is no liability unless and 
until an order is placed—there would be no recordable obligation at 
the time of award. B-302358, Dec. 27, 2004; B-259274, May 22, 1996; 63 
Comp. Gen. 129 (1983); 60 Comp. Gen. 219 (1981); 34 Comp. Gen. 459, 
462 (1955); B-124901, Oct. 26, 1955 ("call contract").[Footnote 11] 
Obligations are recorded as orders are placed. 

The same approach applies to a contract for a fixed quantity in which 
the government reserves an option to purchase an additional quantity. 
The contract price for the fixed quantity is an obligation at the time 
the contract is entered into; the reservation of the option ripens 
into an obligation only if and when the government exercises the 
option. 19 Comp. Gen. 980 (1940). See also B-287619, July 5, 2001 (for 
medical services provided through civilian contracted care, DOD's 
legal liability for at-risk payment is determined by the fixed price 
established by the contract and should be recorded at the time DOD 
executes the contract, and again when it executes any subsequent 
options). 

An application of these concepts also can be found at B-192036, Sept. 
11, 1978. The National Park Service entered into a construction 
contract for the development of a national historic site. Part of the 
contract price was a "contingent sum" of $25,000 for "Force Account 
Work," described in the contract as miscellaneous items of a minor 
nature not included in the bid schedule. No "Force Account Work" was 
to be done except under written orders issued by the contracting 
officer. Since a written order was required for the performance of 
work, no part of the $25,000 could be recorded as an obligation unless 
and until such orders were issued and accepted by the contractor. That 
portion of the master contract itself which provided for the Force 
Account Work was not sufficiently specific to create an obligation. 

In a 1955 case, the Army entered into a contract for the procurement 
of lumber. The contract contained a clause permitting a 10 percent 
overshipment or undershipment of the quantity ordered. This type of 
clause was standard in lumber procurement contracts. The Comptroller 
General held that the Army could obligate the amount necessary to pay 
for the maximum quantities deliverable under the contract. 34 Comp. 
Gen. 596 (1955). Here, the quantity was definite and the government 
was required to accept the permissible variation. 

In another 1955 case, the General Services Administration had 
published in the Federal Register an offer to purchase chrome ore up 
to a stated maximum quantity. Formal agreements would not be executed 
until producers made actual tenders of the ore. The program published 
in the Federal Register was a mere offer to purchase and GSA could not 
obligate funds to cover the total quantity authorized. Reason: there 
was no mutual assent and therefore no binding agreement in writing 
until a producer responded to the offer and a formal contract was 
executed. B-125644, Nov. 21, 1955. 

So-called "level of effort" contracts are conceptually related to the 
"variation in quantity" cases. In one case, the Environmental 
Protection Agency entered into a cost-plus-fixed-fee contract for 
various services at an EPA facility. The contractor's contractual 
obligation was expressed as a "level of effort" in terms of staff-
hours. The contractor was to provide up to a stated maximum number of 
direct staff-hours, to be applied on the basis of work orders issued 
during the course of the contract. Since the government was obligated 
under the contract to order specific tasks, the contract was 
sufficiently definitive to justify recording the full estimated 
contract amount at the time of award. B-183184, May 30, 1975. See also 
58 Comp. Gen. 471, 474 (1979); B-199422, June 22, 1981 (nondecision 
letter). 

f. Amount to Be Recorded: 

As noted previously, where the precise amount of the government's 
liability is defined at the time the government enters into the 
contract that is the amount to be recorded. For example, in the simple 
firm fixed-price contract, the contract price is the recordable 
obligation. The possibility that the contractor may not perform up to 
the level specified in the contract does not provide a basis for 
recording less than the full contract price as the obligation. 
However, for many types of obligations, the precise amount of the 
government's liability cannot be known at the time the liability is 
incurred. As summarized in our preliminary discussion of 31 U.S.C.
§ 1501(a), some initial amount must still be recorded. The agency 
should then adjust this initial obligation amount up or down 
periodically as more precise information becomes available.[Footnote 
12] 

GAO decisions, as well as GAO's Policy and Procedures Manual for 
Guidance of Federal Agencies,[Footnote 13] indicate that, in general, 
the agency should use its best estimate to record the initial amount 
where the amount of the government's final liability is undefined. 
E.g., 56 Comp. Gen. 414, 418 (1977); 50 Comp. Gen. 589 (1971). Section 
3.5.D of the Manual further provides that, where an estimate is used, 
the basis for the estimate and the computation must be documented. 

For example, in 50 Comp. Gen. 589, GAO considered the accounting 
procedures used by the Administrative Office of the United States 
Courts (Administrative Office) with respect to paying court-appointed 
attorneys in federal criminal cases. GAO held that at the time of 
appointment of such attorneys a contractual obligation was created on 
the part of the government to pay the reasonable costs of the 
representation, although the exact amount of such obligation remained 
to be determined. Such obligations must, therefore, be charged against 
the appropriations current at the time of appointment. Id. at 590-91. 
The proper procedure for charging these obligations was described as 
follows: 

"Upon the appointment of an attorney by the court, a copy of the order 
of appointment is sent to [the Administrative Office] for the purpose 
of estimating the obligation to be charged against the current 
appropriation. This estimate made by [the Administrative Office] is 
based on past average costs per case and the fact that the [Criminal 
Justice Act] sets dollar limits on the amount of compensation a court-
appointed attorney may receive." 

Id. at 589. The appropriation account current at the time of 
appointment was thus charged until the voucher reflecting the actual 
costs was approved (which could occur in a subsequent fiscal year), at 
which point the estimated amounts were adjusted accordingly.[Footnote 
14] 

Decisions dealing with certain kinds of contract obligations provide 
more specific rules. Under a fixed-price contract with escalation, 
price redetermination, or incentive provisions, the amount to be 
obligated initially is the fixed price stated in the contract or the 
target price in the case, for example, of a contract with an incentive 
clause. B-255831, July 7, 1995; 34 Comp. Gen. 418 (1955); B-133170, 
Jan. 29, 1975; B-206283-0.M., Feb. 17, 1983. Thus, in an incentive 
contract with a target price of $85 million and a ceiling price of 
$100 million, the proper amount to record initially as an obligation 
is the target price of $85 million. 55 Comp. Gen. 812, 824 (1976). See 
also McDonnell Douglas Corp. v. United States, 39 Fed. CL 665 (1997). 
The agency must increase or decrease the amount recorded (i.e., the 
target price) to reflect price revisions at the time such revisions 
are made or determined pursuant to the provisions of the contract. 34 
Comp. Gen. at 420-21. When obligations are recorded based on a target 
price, the agency should establish appropriate safeguards to guard 
against violations of the Antideficiency Act. This usually means the 
administrative reservation of sufficient funds to cover potential 
liability. 

B-255831, July 7, 1995; 34 Comp. Gen. at 420-21; B-206283-0.M., Feb. 
17, 1983. 

The two recent decisions involving the Corporation for National and 
Community Service, discussed previously in section A of this chapter, 
held that the Corporation must record the government's full liability 
under the grant at the time of grant award. B-300480, Apr. 9, 2003, 
aff'd, B-300480.2, June 6, 2003. Under the grant agreements involved, 
the Corporation agreed to fund a specified number of AmeriCorps 
program participants. This number could be converted into a precise 
dollar amount. Thus, the Corporation incurred an obligation to pay the 
maximum dollar amount if the grantee fully performed under the grant 
agreement and enrolled the specified number of participants. While the 
grantee might ultimately fail to enroll the number of participants 
called for in the grant agreement, the extent of the grantee's 
performance under the grant was entirely within the grantee's control. 
The decisions rejected contentions by the Corporation and the Office 
of Management and Budget that the initial grant obligation should be 
recorded on the basis of estimates that reflected past experience. As 
the April 9, 2003 decision observed: 

"For purposes of identifying the amount of the
Corporation's obligation at grant award ... the grantee and 
subgrantee, by their actions in enrolling participants, ultimately 
control the amount of the Corporation's liability. If the amount of 
liability of the government is under the control of the grantee, not 
the Corporation, the government should obligate funds to cover the 
maximum amount of the liability. See, e.g., B-238581, Oct. 31, 1990; B-
197274, Sept. 23, 1983."[Footnote 15] 

In this regard, the result in the two 2003 decisions is really no 
different from the obligation rule that applies to a simple fixed-
price contract. There, the government incurs a firm obligation to pay 
a specified amount provided, of course, that the contractor fully 
performs under the contract. The possibility that the contractor may 
not perform up to the level specified in the contract does not provide 
a basis for recording less than the full contract price as the 
obligation. 

g. Administrative Approval of Payment: 

In some instances, a liability does not arise until the agency 
formally reviews and approves a payment. In these instances, of 
course, the agency should not record an obligation for payment until 
it approves the payment. (The review and approval here refers to a 
process in addition to the normal review and approval of the voucher 
by a certifying and disbursing officer that is always required.) For 
example, under Internal Revenue Service (IRS) regulations, IRS has no 
financial liability to its informants until it has evaluated the worth 
of the information and assessed and collected any underpaid taxes and 
penalties stemming from that information. It is at this point that an 
appropriate IRS official determines that a reward should be paid and 
its amount, and it is at this point that IRS incurs a recordable 
obligation. B-137762.32, July 11, 1977. 

In 46 Comp. Gen. 895 (1967), GAO approved the then Veterans 
Administration's (VA) practice of recording obligations for fee-basis 
outpatient treatment of eligible veterans at the time the agency 
administratively approved the vouchers. VA had established a review 
and approval process to determine whether the government should accept 
liability; therefore, no obligation arose until that time. See also B-
133944, Jan. 31, 1958; B-92679, July 24, 1950. 

GAO followed 46 Comp. Gen. 895 in a decision concerning the Defense 
Department's TRICARE health care program, B-287619, July 5, 2001. The 
decision concluded that the Defense Department did not incur a 
liability for the costs of medical services provided under the so-
called "pass through" arrangement of the TRICARE program until the 
Department processed and approved a claim—that is, until the 
Department determined that the beneficiary was eligible to receive 
treatment, the services provided were allowable, and the amount billed 
was proper. Thus, claims-approval was the appropriate time at which to 
record an obligation. 

By way of contrast, the obligation for the expenses of a court-
appointed attorney under the Criminal Justice Act of 1964 (CJA) arises 
at the time of appointment, not later when the expenses are approved, 
because of the terms of the Act. 50 Comp. Gen. 589 (1971). Under 
section 2 of the CJA, as amended, 18 U.S.0 § 3006A, the court's order 
of appointment establishes contractual liability, even though the 
exact amount of the obligation is not determinable until the 
attorney's payment voucher is approved. The court's review of the 
voucher is intended only to ensure the reasonableness of the expenses 
incurred. Thus, GAO held that payment must be charged to the funds 
available for the fiscal year in which the appointment was made. 
Beginning with fiscal year 1977 the Judiciary has received no-year 
appropriations to pay court appointed attorneys. See Departments of 
State, Justice, and Commerce, the Judiciary, and Related Agencies 
Appropriation Act, 1977, Pub. L. No. 94-362, title IV, 90 Stat. 937, 
953 (July 14, 1976); Consolidated Appropriations Act, 2005, Pub. L. 
No. 108-447, div. B, title DI, 118 Stat. 2809, 2892 (Dec. 8, 2004). 

h. Miscellaneous Contractual Obligations: 

The core issue in many of the previously discussed cases has been when 
a given transaction ripens into a recordable obligation, that is, 
precisely when the "definite commitment" occurs. Many of the cases do 
not fit neatly into categories. Rather, the answer must be derived by 
analyzing the nature of the contractual or statutory commitments in 
the particular case. 

A 1979 case dealt with a lease arrangement entered into by the Peace 
Corps in Korea. Under a particular type of lease recognized by Korean 
law, the lessee does not make installment rental payments. Instead, 
the lessee makes an initial payment of approximately 50 percent of the 
assessed valuation of the property. At the end of the lease, the 
lessor is required to return the entire initial payment. The lessor 
makes his profit by investing the initial payment at the local 
interest rate. Since the lease is a binding contractual commitment and 
since the entire amount of the initial payment may not be recoverable 
for a number of reasons, GAO found it improper to treat the initial 
payment as a mere advance or an account receivable (as in the case of 
travel advances) and thus not reflected as an obligation. Rather, the 
amount of the initial payment must be recorded as an obligation 
chargeable to the fiscal year in which the lease is entered into, with 
subsequent returns to be deposited in the Treasury as miscellaneous 
receipts. B-192282, Apr. 18, 1979. 

Several cases deal with court-related obligations. For example, the 
obligation for fees of jurors, including retroactive increases 
authorized by 28 U.S.C. § 1871, occurs at the time the jury service is 
performed. 54 Comp. Gen. 472 (1974). See also the discussion of 
attorney fee payments in section B.1.g of this chapter. The recording 
of obligations for land commissioners appointed to determine just 
compensation in land condemnation cases was discussed in B-184782, 
Feb. 26, 1976, and 56 Comp. Gen. 414 (1977).[Footnote 16] The rules 
derived from these decisions are as follows: 

* The obligation occurs at the time of appointment and is chargeable 
to the fiscal year of appointment if a specific case is referred to 
the commission in that fiscal year. 

* Pendency of an action will satisfy the bona fide needs rule and will 
be sufficient to support the obligation even though services are not 
actually performed until the following fiscal year. 

* Appointment of a "continuous" land commission creates no obligation 
until a particular action is referred to it. 

* An amended court order increasing the compensation of a particular 
commissioner amounts to a new obligation and the full compensation is 
chargeable to the appropriation current at the time of the amended 
order. 

* A valid obligation occurs under the above principles even though the 
order of appointment does not expressly charge the costs to the United 
States because, under the Constitution, the costs cannot be assessed 
against the condemnee. 

i. Interagency Transactions: 

It is not uncommon for federal agencies to provide goods or services to
other federal agencies. Section 1501 addresses these interagency 
transactions in two places. Subsection (a)(3) addresses interagency 
orders required by law. We discuss these transactions in section B.3 
of this chapter. Subsection (a)(1) addresses the obligational 
requirements of all other interagency transactions: "a binding 
agreement between an agency and another person (including an agency)" 
(emphasis added). To distinguish these other transactions from those 
required by law, these transactions are often referred to as 
"voluntary orders." This section discusses voluntary orders. Because 
voluntary orders are covered by section 1501(a)(1), obligations for 
many voluntary orders are recorded in the same manner as for 
contracts. However, the authority that governs the interagency 
transaction, not contract practices, determines the obligational 
treatment of a voluntary order. 

(1) Economy Act agreements: 

A major source of authority for voluntary interagency agreements is 
the Economy Act, 31 U.S.C. §§ 1535, 1536. An Economy Act agreement is 
recorded as an obligation of the ordering agency at the time the 
ordering agency enters into the agreement.[Footnote 17] However, 
Economy Act agreements are subject to one additional requirement. 
Under 31 U.S.C. § 1535(d), if the ordering agency obligated a fixed-
year appropriation, the ordering agency must deobligate the obligation 
at the end of the fiscal year to the extent that the performing agency 
has not incurred an obligation, that is, (1) has not provided the 
requested item to the ordering agency, (2) has not performed the 
requested service, or (3) has not entered into a valid contract with 
another person to provide the requested item or service to the 
ordering agency. 39 Comp. Gen. 317 (1959); 34 Comp. Gen. 418, 421-22 
(1955). It was, for example, improper for the Library of Congress to 
use annual funds transferred to it under Economy Act agreements and 
not obligated by it prior to the end of the fiscal year to provide 
services in the following fiscal year. GAO, Financial Audit: First 
Audit of the Library of Congress Discloses Significant Problems, 
GAO/AFMD-91-13 (Washington, D.C.: Aug. 22, 1991). The reason for this 
requirement is to prevent the Economy Act from being used to extend 
the obligational life of an appropriation beyond that provided by law. 
31 Comp. Gen. 83, 85 (1951). The deobligation requirement of 31 U.S.C. 
§ 1535(d) does not apply to obligations against no-year 
appropriations. 39 Comp. Gen. 317, 319 (1959). For more background 
information on obligation and deobligation under the Economy Act, see 
Chapter 15, section B.1; B-302760, May 17, 2004; B-288142, Sept. 6, 
2001; and B-301561, June 14, 2004 (nondecision letter). 

(2) Non-Economy Act agreements: 

Where the agreement is based on some statutory authority other than 
the Economy Act, the recording of the obligation is still governed by 
31 U.S.C. § 1501(a)(1). However, the deobligation requirement of 31 
U.S.C. § 1535(d) does not apply. In this situation, the obligation 
will remain payable in full from the appropriation initially charged, 
regardless of when performance occurs, in the same manner as 
contractual obligations generally, subject, of course, to the bona 
fide needs rule and to any restrictions in the legislation authorizing 
the agreement. E.g., B-302760, May 17, 2004 (interagency agreement 
pursuant to 2 U.S.C. § 141(c) for renovation of loading dock); B-
289380, July 31, 2002 (interagency agreement pursuant to the
section 27(g) of the Consumer Product Safety Act, 15 U.S.C. § 
2076(g)); B-286929, Apr. 25, 2001 (interagency agreement pursuant to 
what is now 40 U.S.C. § 322 for implementation of a declassification 
information management system); 51 Comp. Gen. 766 (1972) (interagency 
agreement pursuant to section 303(a) of the former Manpower 
Development and Training Act of 1962, 42 U.S.C. § 2613(a) (1964) for 
training of air traffic controllers). Thus, it is necessary to 
determine the specific statutory authority supporting the interagency 
agreement in order to properly obligate a requesting agency's 
appropriation. The following examples illustrate these principles. 

The National Park Service (NPS) of the Department of Interior entered 
into a series of agreements during fiscal year 1998 with the National 
Resource Conservation Service of the Department of Agriculture to 
obtain soil surveys at various NPS locations. Each agreement 
delineated specific tasks organized in two or three phases across 
several fiscal years, culminating in the publication of a final soil 
survey report for each location. GAO concluded that the agreements 
were entered into primarily under the authority of 16 U.S.C. § 4601-
1(g) and thus were not subject to the deobligation requirement of 31 
U.S.C. § 1535(d). However, since NPS provided insufficient information 
for GAO to determine whether the agreements were for severable or 
nonseverable services for purpose of complying with the bona fide 
needs rule,[Footnote 18] GAO returned the case to NPS in order to make 
the requisite determinations and adjust its accounts accordingly. B-
282601, Sept. 27, 1999. 

The Administrative Office of United States Courts and the General 
Services Administration entered into an agreement during fiscal year 
1976 for design and implementation of an automated payroll system that 
was authorized by 40 U.S.C. § 759 (1976) (a provision of law that has 
since been repealed), rather than the Economy Act. The work was to be 
performed during fiscal years 1976 and 1977. Since the agreement met 
the requirements of 31 U.S.C. § 1501(a)(1), it was properly recordable 
as a valid obligation against fiscal year 1976 funds and was not 
subject to 31 U.S.C. § 1535(d). 55 Comp. Gen. 1497 (1976). 

The Army Corps of Engineers entered into agreement with Department of 
Housing and Urban Development (HUD) to perform flood insurance studies 
pursuant to orders placed by HUD. Since the agreement presumably 
required the Corps to perform as HUD placed the orders, a recordable 
obligation would arise when HUD placed an order under the agreement. 
Since the agreement was authorized by the National Flood Insurance 
Act,[Footnote 19] rather than the Economy Act, funds obligated by an 
order would remain obligated even though the Corps did not complete 
performance (or contract out for it) until following the fiscal year. 
B-167790, Sept. 22, 1977. 

(3) "Binding agreement" requirement: 

Regardless of whether the Economy Act or other interagency transaction 
authority governs the transaction, a voluntary interagency order is 
recordable under 31 U.S.C. § 1501(a)(1) only if it constitutes a 
binding agreement that meets the other criteria of that subsection. If 
it does, the applicability or nonapplicability of 31 U.S.C. § 1535(d) 
then becomes relevant. If it does not, an obligation arises only when 
the performing agency has completed the work or has awarded contracts 
to have the work done. See 59 Comp. Gen. 602 (1980); 39 Comp. Gen. 829 
(1960); 34 Comp. Gen. 705, 708 (1955); 23 Comp. Gen. 88 (1943); B-
193005, Oct. 2, 1978; B-180578-0.M., Sept. 26, 1978. For example, 
Military Interdepartmental Procurement Requests (MIPR) are viewed as 
authorized by the Economy Act. An MIPR is considered a binding 
agreement for obligation purposes under 31 U.S.C. § 1501(a)(1). It is 
subject to the deobligation requirement of 31 U.S.C. § 1535(d) and is 
thus ultimately chargeable to appropriations current when the 
performing component incurs valid obligations. 59 Comp. Gen. 563 
(1980); 34 Comp. Gen. 418, 422 (1955). 

In B-193005, Oct. 2, 1978, GAO considered the procurement of crude oil 
for the Strategic Petroleum Reserve. The Federal Property and 
Administrative Services Act of 1949[Footnote 20] authorized the 
General Services Administration (GSA) to procure materials for other 
federal agencies as well as to delegate such authority. GSA delegated 
the authority to procure fuel commodities to the Secretary of Defense, 
who redelegated the authority to the Defense Fuel Supply Center 
(DFSC). Thus, the Department of Energy (DOE) could procure oil through 
the DFSC in a non-Economy Act transaction. An order placed by DOE with 
DFSC prior to the expiration of the period of availability of the 
appropriation to be charged could be recorded as an obligation against 
such appropriation under 31 U.S.C. § 1501(a)(1) if it constituted a 
"binding agreement." Further, the appropriation that was obligated 
would remain available to liquidate contracts awarded by DFSC. This 
result would have been precluded by 31 U.S.C. § 1535(d) had the 
transaction been governed by the Economy Act. 

In 59 Comp. Gen. 602 (1980), GAO considered the procedure by which the 
then Bureau of Alcohol, Tobacco, and Firearms (ATF) ordered "strip 
stamps" from the Bureau of Engraving and Printing. (These are the 
excise tax stamps one sees pasted across the caps of liquor bottles.) 
GAO reviewed pertinent legislation and concluded that ATF was not 
"required by law" to procure its strip stamps from the Bureau of 
Engraving and Printing. Since individual orders were not binding 
agreements, it was immaterial in one important respect whether the 
order was governed by the Economy Act or some other law; in neither 
event could ATF's funds remain obligated beyond the last day of a 
fiscal year to the extent an order remained unfilled. Funds could be 
considered obligated at the end of a fiscal year only to the extent 
that stamps were printed or in process or that the Bureau of Engraving 
and Printing had entered into a contract with a third party to provide 
them. 

(4) Orders from stock: 

The obligational treatment of orders for items to be delivered from 
stock of the requisitioned agency derives from 32 Comp. Gen. 436 
(1953). An order for items to be delivered from stock is a recordable 
obligation if (1) it is intended to meet a bona fide need of the 
fiscal year in which the order is placed or to replace stock used in 
that fiscal year[Footnote 21] and (2) the order is firm and complete. 
To be firm and complete, the order must request prompt delivery of 
specific available stock items for a stated consideration and must be 
accepted by the supplying agency in writing. "Available" means on hand 
or routinely on order. However, acceptance is not required for common-
use stock items which are on hand or on order and will be delivered 
promptly. 

Materials which are specially manufactured or otherwise created for a 
particular purpose in order to satisfy an order are not "stock" 44 
Comp. Gen. 695 (1965). Likewise, an order for an item not stocked by 
the requisitioned agency (or, if out of stock, not routinely on order) 
is not a recordable obligation until the requisitioned agency 
purchases the item or executes a contract for it. The reason is that 
such an order does not mature into a binding agreement until the 
requisitioned agency executes the order or purchases the item(s) 
needed to fill it; before then, it is merely an offer subject to 
acceptance by the requisitioned agency's performance. B-193005, Oct. 
2, 1978. The basic rules in this area were established by
34 Comp. Gen. 705 (1955). 

Although the foregoing rules were developed prior to the enactment of
31 U.S.C. § 1501(a)(1), they continue to govern the recording of 
obligations under that statute. 34 Comp. Gen. 705; 34 Comp. Gen. 418, 
422 (1955). 

(5) Project orders: 

Historically, "project orders" refer to orders authorized by 41 U.S.C. 
§ 23,[Footnote 22] which provides: 

"All orders or contracts for work or material or for the manufacture 
of material pertaining to approved projects heretofore or hereafter 
placed with Government-owned establishments shall be considered as 
obligations in the same manner as provided for similar orders or 
contracts placed with commercial manufacturers or private contractors, 
and the appropriations shall remain available for the payment of the 
obligations so created as in the case of contracts or orders with 
commercial manufacturers or private contractors."[Footnote 23] 

GAO has interpreted this statute, which was derived from earlier 
appropriation act provisions for the military departments appearing 
shortly after World War I,[Footnote 24] as applying only to 
transactions between the military departments and establishments owned 
by the Defense Department for work related to military projects. 72 
Comp. Gen. 172, 173 (1993); B-95760, June 27, 1950. Thus, the decision 
in 72 Comp. Gen. 172 held that the Economy Act, rather than 41 U.S.C. 
§ 23, applies to Defense Department transactions with other federal 
agencies, in this case a Department of Defense request for research 
assistance from the Library of Congress. 

A project order is a valid and recordable obligation when the order is 
issued and accepted, regardless of the fact that performance may not 
be accomplished until after the expiration of the fiscal year. 1 Comp. 
Gen. 175 (1921); B-135037-0.M., June 19, 1958. The statute does not, 
however, authorize the use of the appropriations so obligated for the 
purpose of replenishing stock used in connection with the order. A-
25603, May 15, 1929. The requirement of specificity applies to project 
orders the same as any other recordable obligations under 31 U.S.C. § 
1501(a)(1). B-126405, May 21, 1957. 

Since a project order is not an Economy Act transaction, the 
deobligation requirement of 31 U.S.C. § 1535(d) does not apply. 34 
Comp. Gen. 418, 422 (1955). See also 16 Comp. Gen. 752 (1937). Also, 
unlike the Economy Act, 41 U.S.C. § 23 does not authorize advance 
payment. Thus, advance payment for project orders is not authorized 
unless permitted by some other statute. B-95760, June 27, 1950. 

2. Section 1501(a)(2): Loans: 

Under 31 U.S.C. § 1501(a)(2), a recordable obligation exists when 
there is documentary evidence of "a loan agreement showing the amount 
and terms of repayment." 

A loan agreement is essentially contractual in nature. Thus, to have a 
valid obligation, there must be a proposal by one party and an 
acceptance by another. Approval of the loan application must be 
communicated to the applicant within the fiscal year sought to be 
charged, and there must be documentary evidence of that communication. 
B-159999-0.M., Mar. 16, 1967. Where a loan application is made in one 
fiscal year and approval is not communicated to the applicant until 
the following fiscal year, the obligation is chargeable to the later 
year. Id.; B-159999-0.M., Dec. 14, 1966. 

Telegraphic notification of approval of a loan application where the 
amount of the loan and terms of repayment are thereby agreed upon is 
legally acceptable. B-159999-0.M., Dec. 14, 1966. 

To support a recordable obligation under section 1501(a)(2), the 
agreement must be sufficiently definite and specific, just as in the 
case of section 1501(a)(1) obligations. To illustrate, the United 
States and the government of Brazil entered into a loan agreement in 
1964. As a condition precedent to any disbursement under the 
agreement, Brazil was to furnish a statement covering utilization of 
the funds. The funds were to be used for various economic and social 
development projects "as may, from time to time, be agreed upon in 
writing" by the governments of the United States and Brazil While the 
loan agreement constituted a valid binding contract, it was not 
sufficiently definite or specific to validly obligate fiscal year 1964 
funds. The basic agreement was little more than an "agreement to 
agree," and an obligation of funds could arise only when a particular 
"utilization statement" was submitted and approved. B-155708-0.M., 
Apr. 26, 1965. 

Prior to fiscal year 1992, the amount to be recorded in the case of a 
loan was quite simple-—the face amount of the loan. From the budgetary 
perspective, however, this was undesirable because the obligation was 
indistinguishable from any other cash outlay. By disregarding at the 
obligational stage the fact that loans are supposed to be repaid, this 
treatment did not reflect the true cost to the government of direct 
programs. Congress addressed the situation in the Federal Credit 
Reform Act of 1990 (FCRA), Pub. L. No. 101-508, § 13201, 104 Stat. 
1388, 1388-609 (Nov. 5, 1990), codified at 2 U.S.C. §§ 661-661f). The 
general approach of the FCRA is to require the advance provision of 
budget authority to cover the subsidy portion of direct loans (in 
recognition of the fact that not all loans are repaid), with the non-
subsidy portion (the portion expected to be repaid) financed through 
borrowings from the Treasury. The Office of Management and Budget has 
issued detailed instructions for implementing the FCRA's requirements 
that appear in OMB Circular No. A-11, Preparation, Submission, and 
Execution of the Budget, part 5 (June 21, 2005).[Footnote 25] 

The FCRA defines "direct loan" as "a disbursement of funds by the 
Government to a non-Federal borrower under a contract that requires 
the repayment of such funds with or without interest." 2 U.S.C. § 
661a(1). A "direct loan obligation" is "a binding agreement by a 
Federal agency to make a direct loan when specified conditions are 
fulfilled by the borrower." Id. § 661a(2). The "cost" of a direct loan 
is the estimated long-term cost to the government, taking into 
consideration disbursements and repayments, calculated on a net 
present value basis at the time of disbursement. Id. § 661a(5). 

Unless otherwise provided by statute, new direct loan obligations may 
be incurred only to the extent that budget authority to cover the 
subsidy costs is provided in advance. 2 U.S.C. § 661c(b). Under this 
provision, the typical appropriation will include both an 
appropriation of budget authority for the subsidy costs and a program 
ceiling (total face amount of loans supportable by the cost 
appropriation). The appropriation is made to a "program account." When 
a direct loan obligation is incurred, its cost is obligated against 
the program account. See generally OMB Cir. No. A-11, at § 185.10. The 
actual funding is done through a revolving, nonbudget "financing 
account." Loan repayments are credited to the financing account. See 
generally OMB Cir. No. A-11, at § 185.11. The overobligation or 
overexpenditure of either the loan subsidy or the credit level 
supportable by the enacted subsidy violates the Antideficiency Act. 
See OMB Cir. No. A-11, at § 145.3. 

3. Section 1501(a)(3): Interagency Orders Required by Law: 

The third standard for recording obligations, 31 U.S.C. § 1501(a)(3), 
is "an order required by law to be placed with [a federal] agency." 

Subsection (a)(3) means exactly what it says. An order placed with 
another government agency is recordable under this subsection only if 
it is required by statute or statutory regulation to be placed with 
the other agency. The subsection does not apply to orders that are 
merely authorized rather than required. 34 Comp. Gen. 705 (1955). 

An order required by law to be placed with another agency is not an 
Economy Act transaction. Therefore, the deobligation requirement of
31 U.S.C. § 1535(d) does not apply. 35 Comp. Gen. 3, 5 (1955). The 
fact that the work will be performed in the next fiscal year does not 
defeat the obligation as long as the bona fide need test is met. B-
302760, May 17, 2004; 59 Comp. Gen. 386 (1980); 35 Comp. Gen. 3. Also, 
the fact that the work is to be accomplished and reimbursement made 
through use of a revolving fund is immaterial. 35 Comp. Gen. 3; 34 
Comp. Gen. 705. 

A common example of "orders required by law" is printing and binding 
to be done by the Government Printing Office (GPO). 44 U.S.C. § 501. 
[Footnote 26] The rule is that a requisition for printing services may 
be recorded as an obligation when placed if (1) there is a present 
need for the printing and (2) the requisition is accompanied by copy 
or specifications sufficient for GPO to proceed with the job. 

Thus, a requisition by the Commission on Fine Arts for the printing of 
"Sixteenth Street Architecture, Volume I" placed with GPO in fiscal 
year 1977 and accompanied by manuscript and specifications obligated 
fiscal year 1977 funds and was chargeable in its entirety to fiscal 
year 1977, notwithstanding that the printing would be done in the 
following fiscal year. 59 Comp. Gen. 386 (1980). However, a 
requisition for U.S. Travel Service sales promotional literature 
placed with GPO near the end of fiscal year 1964 did not obligate 
fiscal year 1964 funds where no copy or manuscript was furnished to 
GPO until fiscal year 1965. 44 Comp. Gen. 695 (1965). For other 
printing cases illustrating these rules, see 29 Comp.
Gen. 489 (1950); 23 Comp. Gen. 82 (1943); B-154277, June 5, 1964; B-
123964, Aug. 23, 1955; B-114619, Apr. 17, 1953; B-50663, June 30, 
1945; B-35807, Aug. 10, 1943; B-34888, June 21, 1943. 

After an agency certifies that it requires the services of GPO, the 
Public Printer is required to furnish an estimate of the cost of the 
services to the ordering agency, which then may make a requisition for 
performance from GPO. The estimate is the amount that the ordering 
agency should obligate against its appropriation and establishes a 
ceiling that GPO may not exceed without first providing the ordering 
agency a new estimate and obtaining a requisition from an authorized 
official of the ordering agency. 44 U.S.C. §§ 1102(c), 1103. Thus GPO 
was not authorized to exceed its estimate of $14,000 and incur 
expenses amounting to $304,334 without first notifying and obtaining 
the approval of an authorized official of the requisitioning agency, 
in this case the Environmental Protection Agency. B-259208, Mar. 6, 
1996. Further, the printing estimate alone, even if written, is not 
sufficient to create a valid and recordable obligation unless it is
accompanied by the placement of an order. B-182081, Jan. 26, 1977, 
aff'd, B-182081, Feb. 14, 1979. In the cited decision, there was no 
valid obligation before the ordering commission went out of existence 
and its appropriations ceased to be available for further obligation. 
Therefore, there was no appropriation available to reimburse GPO for 
work done under the invalid purported obligation. 

GPO is required by law to print certain congressional materials such 
as the Congressional Record, and receives a "Printing and Binding" 
appropriation for this purpose. For items such as these where no 
further request or authorization is required, a copy of the basic law 
authorizing the printing and a copy of the appropriation constitute 
the obligating documents. B-123964, Aug. 23, 1955. 

Another common "order required by law" situation is building 
alteration, management, and related services to be performed by the 
General Services Administration. For example, a job order by the 
Social Security Administration for building repairs validly obligated 
funds of the fiscal year in which the order was placed, by virtue of 
subsection (a)(3), notwithstanding that GSA was unable to perform the 
work until the following fiscal year. 35 Comp. Gen. 3 (1955). See also 
B-158374, Feb. 21, 1966. However, this result assumes compliance with 
the bona fide need concept. Thus, an agreement for work incident to 
the relocation of Federal Power Commission employees placed in fiscal 
year 1971 did not validly obligate fiscal year 1971 funds where it was 
clear that the relocation was not required to, and would not, take 
place, nor would the space in question be made tenantable, until the 
following fiscal year. B-95136-0.M., Aug. 11, 1972. Orders placed with 
GSA are further discussed in 34 Comp. Gen. 705 (1955). 

As noted earlier, GAO has expressed the view that the recording 
criteria of 31 U.S.C. § 1501(a) should be followed in evaluating 
obligations of the government of the District of Columbia. Thus, 
orders by a department of the District of Columbia government for 
repairs and improvements which are required by statute or statutory 
regulation to be placed with the District of Columbia Department of 
General Services and performed through use of the Repairs and 
Improvements Working Fund create valid obligations when the orders are 
placed. B-180578-0.M., Sept. 26, 1978. 

4. Section 1501(a)(4): Orders without Advertising: 

The fourth recording standard in 31 U.S.C. § 1501(a)(4) is: 

"an order issued under a law authorizing purchases without advertising: 

(A) when necessary because of a public exigency; 

(B) for perishable subsistence supplies; or; 

(C) within specific monetary limits." 

Subsection (a)(4) is limited to statutorily authorized purchases 
without advertising in the three situations specified. The subsection 
must be self-explanatory as there appear to be no Comptroller General 
decisions under it. 

5. Section 1501(a)(5): Grants and Subsidies: 

The fifth recording standard in 31 U.S.C. § 1501(a)(5) requires that 
the obligation be supported by documentary evidence of a grant or 
subsidy payable: 

"(A) from appropriations made for payment of, or contributions to, 
amounts required to be paid in specific amounts fixed by law or under 
formulas prescribed by law; 

"(B) under an agreement authorized by law; or: 

"(C) under plans approved consistent with and authorized by law." 

The recording statute refers to grants and subsidies although federal 
assistance may be characterized in many ways. See Chapters 10 and 11, 
respectively, for a more comprehensive discussion of the concepts of 
federal assistance in the form of grants and cooperative agreements 
and federal assistance in the form of guaranteed and insured loans. 

a. Grants: 

In order to properly obligate an appropriation for an assistance 
program, some action creating a definite liability against the 
appropriation must occur during the period of the obligational 
availability of the appropriation. In some situations, the obligating 
action under section 1501(a)(5) involves a discretionary action by an 
agency of awarding a grant that is evidenced by a grant agreement. The 
particular document will vary and may be in the form of an agency's 
approval of a grant application or a letter of commitment. See B-
289801, Dec. 30, 2002; 39 Comp. Gen. 317 (1959); 37 Comp. Gen. 861, 
863 (1958); 31 Comp. Gen. 608 (1952); B-128190, June 2, 1958; B-
114868.01-0.M., Mar. 17, 1976. 

Generally, in order to properly obligate federal assistance funds, 
there must be some action to establish a firm commitment on the part 
of the United States. This commitment must be unconditional. 50 Comp. 
Gen. 857, 862 (1971). There must be documentary evidence of the grant 
award and this requirement is not satisfied by the mere reservation or 
earmarking of amounts in accounting records for the purpose of having 
them available should an application for a grant be submitted and 
approved. Champaign County, Illinois v. United States Law Enforcement 
Assistance Administration, 611 F.2d 1200 (7th Cir. 1979); B-126372, 
Sept. 18, 1956. Finally, the award terms must be communicated to the 
official grantee, and where the grantee is required to comply with 
certain prerequisites, such as putting up matching funds, the 
prerequisite must also be accepted by the grantee during the period of 
availability of the grant funds. 

An illustration of this latter requirement is B-220527, Dec. 16, 1985. 
The Economic Development Administration made an "offer of grant" to a 
Connecticut municipality that would have required a substantial outlay 
of funds by the municipality. The offer was accepted by a town 
official who had no authority to accept the grant. By its own 
municipal ordinance, only the town council could accept a grant offer. 
By the time the town marshaled the resources to fulfill its 
obligations under the grant and the unauthorized acceptance was 
ratified by the town council, the federal funds had expired for 
obligational purposes. GAO held that no valid grant obligation on the 
part of the government had ever been made. See also B-164990, Jan. 10, 
1969, finding an attempted obligation invalid where the program 
legislation required approval of a proposed grant by the state 
governor and he had not yet agreed, even though the award instruments 
had already been executed. 

Applying the above principles, the Comptroller General found that a 
document entitled "Approval and Award of Grant" used by the Economic 
Development Administration was sufficient for recording grant 
obligations under the local public works program because it "reflects 
the Administration's acceptance of a grant application; specifies the 
project approved and the amount of funding; and imposes a deadline for 
affirmation by the grantee." B-126652, Aug. 30, 1977. Once the 
appropriation has been properly obligated, performance by the grantee 
and the actual disbursement of funds may extend beyond the period of 
obligational availability. B-300480, Apr. 9, 2003, aff'd, B-300480.2, 
June 6, 2003; B-289801, Dec. 30, 2002; 31 Comp. Gen. 608, 610 (1952); 
20 Comp. Gen. 370 (1941); B-37609, Nov. 15, 1943; B-24827, Apr. 3, 
1942; B-124374-0.M., Jan. 26, 1956. 

If the above requirements are not met, then the appropriation is not 
obligated. Thus, the Comptroller General determined that the attempted 
obligation was invalid in B-164990, Sept. 6, 1968, where the grantee 
corporation was not in existence when the obligation was recorded. 
Also, the relevant program legislation must be examined to see if 
there are any additional requirements. 

In other situations, the obligating action for purposes of 31 U.S.C.
§ 1501(a)(5)(A) may take place by operation of law under a statutory 
formula grant or by virtue of actions authorized by law to be taken by 
others that are beyond the control of the agency (even when the 
precise amount of the obligation is not determined until a later 
time). When this occurs, the documentary evidence used to support the 
accounting charge against the appropriation is a reflection of, not 
the creation of, the obligation under the particular law and usually 
is generated subsequent to the time that the actual obligation arose. 
63 Comp. Gen. 525 (1984); B-164031(3).150, Sept. 5, 1979. Thus where 
an agency is required to allocate funds to states on the basis of a 
statutory formula, the formula establishes the obligation to each 
recipient rather than the agency's allocation since, if the allocation 
is erroneous, the agency must adjust the amounts paid each recipient. 
41 Comp. Gen. 16 (1961); B-164031(3).150, Sept. 5, 1979. 

The rules for deobligation and reobligation of assistance funds are 
the same as for other obligations generally. Program legislation in a 
given case may, of course, provide for different treatment. For 
example, B-211323, Jan. 3, 1984, considered a provision of the Public 
Works and Economic Development Act of 1965[Footnote 27] under which 
funds apportioned to states remained available to the state until 
expended. Under that particular provision, funds deobligated as the 
result of a cost underrun could be reobligated by the state, without 
fiscal year limitation, for purposes within the scope of the program 
statute. For a discussion of obligation and deobligation of funds 
under the now defunct Comprehensive Employment and Training Act (the 
predecessor of the Job Training Partnership Act) in the context of the 
Impoundment Control Act, see B-200685, Apr. 27, 1981. 

b. Subsidies: 

There have been relatively few cases dealing with the obligational 
treatment of subsidies, although the principles should parallel those 
for grants since they both derive from 31 U.S.C. § 1501(a)(5). This 
may be explained by the fact that some courts when confronted with the 
necessity to determine the meaning of "subsidy" (when used in a 
statute that does not define the word) have done so in a manner that 
is remarkably similar to the commonly used definitions of a grant. 
(See the discussion of grants in Chapter 10, section B). Thus a 
subsidy has been defined as "a grant of public funds or property by a 
government to a private person to assist in establishment or support 
of an enterprise deemed advantageous to public..." In re Hooper's 
Estate, 359 F.2d 569, 575-76 Ord Cir.), cert. denied sub. nom, 385 
U.S. 903 (1966). See also Satellite Broadcasting & Communications 
Ass'n of America v. FCC, 146 F. Supp. 2d 803, 829-30 (E.D. Va.), affd, 
275 F.3d 337 (4th Cir. 2001), cert. denied, 536 U.S. 922 (2002); 
Kennecott Copper Corp. v. State Tax Commission, 60 E Supp. 181 (D. 
Utah 1944) rev'd, 150 F.2d 905 (10th Cir. 1945), aff'd, 327 U.S. 573 
(1946); Los Angeles County v. State Department of Public Health, 322 
P.2d 968, 973 (Cal. App. 2nd Dist. 1958). 

The few GAO decisions in this area treat subsidies in a manner similar 
to grants for obligational purposes. In 50 Comp. Gen. 857 (1971) GAO 
considered legislation authorizing the former Federal Home Loan Bank 
Board to make "interest adjustment" payments to member banks. The 
payments were designed to adjust the effective rates of interest 
charged by member banks on short- and long-term borrowing, the 
objective being to stimulate residential construction for low- and 
middle-income families. Funds were appropriated to the Board for this 
purpose on a fiscal year basis. GAO concluded that an obligation arose 
for purposes of 31 U.S.C. § 1501(a)(5) when a Federal Home Loan Bank 
made a firm and unconditional commitment in writing to a member 
institution, provided that the commitment letter included a reasonable 
expiration date. The funds would have to be deobligated to the extent 
that a member institution failed to execute loans prior to the 
specified expiration date. 

In 65 Comp. Gen. 4 (1985), GAO advised the Department of Education 
that mandatory interest subsidies under the Guaranteed Student Loan 
Program should be recorded as obligations on a "best estimate" basis 
as they arise, even if the recordings would exceed available budgetary 
resources. Since the subsidies are not discretionary obligations but 
are imposed by law, there would be no Antideficiency Act violation. 
The decision overruled an earlier case (B-126372, Sept. 18, 1956) 
which had held that the recording of obligations for mail rate 
subsidies to air carriers could be deferred until the time of payment. 
65 Comp. Gen. at 8 n.3. 

In 64 Comp. Gen. 410 (1985), GAO considered obligations by the 
Department of Housing and Urban Development for operating subsidies to 
state public housing authorities for low-income housing projects. 
Under the governing statute and regulations, the amount of the subsidy 
was determined upon HUD's approval of the state's annual operating 
budget, although the basic commitment stemmed from an annual 
contribution contract. HUD's practice, primarily for states whose 
fiscal year coincides with that of the federal government, was to 
record the obligation on the basis of an estimate, issued in a letter 
of intent. GAO found this to be legally permissible, but cautioned 
that HUD was required to adjust the obligation up or down once it 
approved the operating budget. 

A 1983 decision, B-212145, Sept. 27, 1983, discusses the use of 
estimates subject to subsequent adjustment for the recording of 
obligations for payments in lieu of taxes under 31 U.S.C. §§ 6901-6906. 

From the perspective of the recording of obligations, these two 
decisions-64 Comp. Gen. 410 and B-212145—are simply applications of 
the general principle, previously noted, that best estimates should be 
recorded when more precise information is not available, subject to 
later adjustment. 

For additional discussion see Chapter 5, section B.10, relating to the 
application of the bona fide needs rule to grants and cooperative 
agreements and Chapter 10 relating to the obligation of appropriations 
for grants. 

6. Section 1501(a)(6): Pending Litigation: 

The sixth standard for recording obligations is "a liability that may 
result from pending litigation." 31 U.S.C. § 1501(a)(6). 

Despite its seemingly broad language, subsection (a)(6) has very 
limited application. Most judgments against the United States are paid 
from a permanent indefinite appropriation, 31 U.S.C. § 1304. 
Accordingly, since the expenditure of agency funds is not involved, 
judgments payable under 31 U.S.C. § 1304 have no obligational impact 
on the respondent agency. 

Not all judgments against the United States are paid from the 
permanent judgment appropriation. Several types are payable from 
agency funds. However, the mere fact that a judgment is payable from 
agency funds does not make it subject to subsection (a)(6). Thus far, 
the Comptroller General has applied subsection (a)(6) in only two 
situations—land condemnation (35 Comp. Gen. 185 (1955)) and certain 
impoundment litigation (54 Comp. Gen. 962 (1975)). In land 
condemnation proceedings, the appropriation is obligated when the 
request is made to the Attorney General to institute the proceedings. 
34 Comp. Gen. 418, 423 (1955); 34 Comp. Gen. 67 (1954);
17 Comp. Gen. 664 (1938); 4 Comp. Gen. 206 (1924). In impoundment 
litigation, the Comptroller General has held that when the impounded 
balance is obligated under subsection (a)(6) as a liability which 
might result from the pending litigation, the balance so obligated may 
be used without further appropriation action. 54 Comp. Gen. 962. 

However, with limited exceptions, pending litigation itself does not 
create an obligation against the United States for purposes of section 
1501(a)(6). Rochester Pure Waters District v. EPA, 960 F.2d 180, 186 
(D.C. Cir. 1992) (citing 35 Comp. Gen. 185 and 54 Comp. Gen. 962). The 
plaintiff in Rochester sought an injunction to restore appropriated 
funds that Congress had rescinded pending adjudication of a claim the 
plaintiff was pursuing against the Environmental Protection Agency 
that would have been payable from the rescinded funds. The court held 
that it lacked statutory or constitutional authority to grant the 
requested relief. 

As stated in 35 Comp. Gen. at 187, subsection (a)(6) requires 
recording an obligation in cases where the government is definitely 
liable for the payment of money out of available appropriations and 
the pending litigation is for the purpose of determining the amount of 
the government's liability. Thus, for judgments payable from agency 
appropriations in other than land condemnation and impoundment cases, 
the standard of 35 Comp. Gen. 185 should be applied to determine 
whether an obligation must be recorded. 

In cases where a judgment will be payable from agency funds but 
recording is not required, 35 Comp. Gen. 185 suggested that the agency 
should nevertheless administratively reserve sufficient funds to cover 
the contingent liability to avoid a possible violation of the 
Antideficiency Act. Id. at 187. While the administrative reservation 
may still be a good idea for other reasons, the majority of more 
recent cases (cited and summarized in Chapter 6, section C.2.f under 
the heading "Intent/Factors Beyond Agency Control") have taken the 
position that overobligations resulting from court-ordered payments do 
not violate the Antideficiency Act.[Footnote 28] 

It should be apparent that the preceding discussion applies to money 
judgments-—judgments directing the payment of money. 62 Comp.
Gen. 527 (1983); 61 Comp. Gen. 509 (1982). In some types of 
litigation, a court may order an agency to take some specific action. 
While compliance will result in the expenditure of agency funds, this 
type of judgment is not within the scope of 35 Comp. Gen. 185. While 
we have found no cases, it seems clear from the application of 31 
U.S.C. § 1501(a) in other contexts that no recordable obligation would 
arise while this type of litigation is still "pending." 

7. Section 1501(a)(7): Employment and Travel: 

Under 31 U.S.C. § 1501(a)(7), obligations are recordable when 
supported by documentary evidence of "employment or services of 
persons or expenses of travel under law," which covers a variety of 
loosely related obligations. 

a. Wages, Salaries, Annual Leave: 

Salaries of government employees, as well as related items that flow 
from those salary entitlements such as retirement fund contributions, 
are obligations at the time the salaries are earned, that is, when the 
services are rendered. B-303961, Dec. 6, 2004; B-302911, Sept. 7, 
2004; B-287619, July 5, 2001; 24 Comp. Gen. 676, 678 (1945). For 
example, in 38 Comp. Gen. 316 (1958), the Commerce Department wanted 
to treat the salaries of employees performing administrative and 
engineering services on highway construction projects as part of the 
construction contract costs. Under this procedure, the anticipated 
expenses of the employees, salaries included, would be recorded as an 
obligation at the time a contract was awarded. However, the 
Comptroller General held that this would not constitute a valid 
obligation under 31 U.S.C. § 1501. The employee expenses were not part 
of the contract costs and could not be obligated before the services 
were performed. 

Section 1501(a)(7) is not limited to permanent federal employees. It 
applies as well to persons employed in other capacities, such as 
temporary or intermittent employees or persons employed under a 
personal services contract. In Kinzley v. United States, 661 F.2d 187 
(Ct. Cl. 1981), for example, the court found various agency 
correspondence sufficient compliance with subsection (a)(7) to permit 
a claim for compensation for services rendered as a project 
coordinator. Unlike subsection (a)(1), the court pointed out, 
subsection (a)(7) does not require a binding agreement in writing 
between the parties, but only documentary evidence of "employment or 
services of persons." Id. at 191. 

For persons compensated on an actual expense basis, it may be 
necessary to record the obligation as an estimate, to be adjusted when 
the services are actually performed. Documentation requirements to 
support the obligation or subsequent claims are up to the agency. 
E.g., B-217475, Dec. 24, 1986. 

When a pay increase is granted to wage board employees, the effective 
date of the increase is governed by 5 U.S.C. § 5344. This effective 
date determines the government's liability to pay the additional 
compensation. Therefore, the increase is chargeable to appropriations 
currently available for payment of the wages for the period to which 
the increases apply. B-287619, July 5, 2001; 39 Comp. Gen. 422 (1959). 
This is true regardless of the fact that appropriations may be 
insufficient to discharge the obligation and the agency may not yet 
have had time to obtain a supplemental appropriation. The obligation 
in this situation is considered "authorized by law" and therefore does 
not violate the Antideficiency Act. 39 Comp. Gen. at 426. 

Annual leave status "is synonymous with a work or duty status." 25 
Comp. Gen. 687 (1946). As such, annual leave obligates appropriations 
current at the time the leave is taken. Id.; 50 Comp. Gen. 863, 865 
(1971); 17 Comp. Gen. 641 (1938). Except for employees paid from 
revolving funds (25 Comp. Gen. 687), or where there is some statutory 
indication to the contrary (B-70247, Jan. 9, 1948), the obligation for 
terminal leave is recorded against appropriations for the fiscal year 
covering the employee's last day of active service. 25 Comp. Gen. at 
688; 24 Comp. Gen. 578, 583 (1945). 

Bonuses such as performance awards or incentive awards obligate 
appropriations current at the time the awards are made. Thus, for 
example, where performance awards to Senior Executive Service 
officials under 5 U.S.C. § 5384 were made in fiscal year 1982 but 
actual payment had to be split between fiscal year 1982 and fiscal 
year 1983 to stay within statutory compensation ceilings, the entire 
amount of the awards remained chargeable to fiscal year 1982 funds. 64 
Comp. Gen. 114, 115 n. 2 (1984). The same principle would apply to 
other types of discretionary payments; the administrative 
determination creates the obligation. E.g., B-80060, Sept. 30, 1948. 

Employees terminated by a reduction in force (RIF) are entitled by 
statute to severance pay. 5 U.S.C. § 5595. Severance pay is obligated 
on a pay period by pay period basis. Thus, where a RIF occurs near the 
end of a fiscal year and severance payments will extend into the 
following fiscal year, it is improper to charge the entire amount of 
severance pay to the fiscal year in which the RIF occurs. B-200170, 
July 28, 1981. 

GAO reached a different result in B-200170, Sept. 24, 1982. The United 
States Metric Board was scheduled to terminate its existence on 
September 30, 1982. Legislative history indicated that the Board's 
fiscal year 1982 appropriation was intended to include severance pay, 
and no appropriations had been requested for fiscal year 1983. Under 
these circumstances, severance payments to be made in fiscal year 1983 
were held chargeable to the fiscal year 1982 appropriation. A contrary 
result would have meant that the fiscal year 1982 funds would expire, 
and Congress would have had to appropriate the same funds again for 
fiscal year 1983. 

b. Compensation Plans in Foreign Countries: 

By statute, the State Department is required to establish compensation 
plans for foreign national employees of the Foreign Service in foreign 
countries. The plans are to be "based upon prevailing wage rates and 
compensation practices ... for corresponding types of positions in the 
locality of employment," to the extent consistent with the public 
interest. 22 U.S.C. § 3968(a)(1). 

Under subsection (b) of 22 U.S.C. § 3968, other government agencies 
are authorized to administer foreign national employee compensation 
programs in accordance with the applicable provisions of the Foreign 
Service Act. This provision, for example, authorized the Defense 
Department to establish a pension and life insurance program for 
foreign national employees in Bermuda, provided that it corresponded 
to prevailing local practice. 40 Comp. Gen. 650 (1961). 

Section 3968(c) of title 22, United States Code, authorizes the 
Secretary of State to prescribe regulations for local compensation 
plans applicable to all federal agencies. To the extent this authority 
is not exercised, however, the statute does not otherwise require that 
a plan established by another agency conform to the State Department's 
plan. An agency establishing a local plan should, to the extent not 
regulated by State, coordinate with other agencies operating in the 
locality. 40 Comp. Gen. at 652. (As a practical matter, two agencies 
operating in the same locality should not develop substantially 
different plans, assuming both legitimately reflect prevailing local 
practice.) 

To the extent the authority of 22 U.S.C. § 3968 is exercised in a 
given country, the obligational treatment of various elements of 
compensation may vary from what would otherwise be required. For 
example, Colombian law provides for the advance payment of accrued 
severance pay to help the employee purchase or make improvements on a 
home. Thus, under a compensation plan for foreign national employees 
in Colombia, severance pay would be recorded as an obligation against 
the fiscal year appropriation current at the time of accrual. B-
192511, Feb. 5, 1979. 

While 22 U.S.C. § 3968 authorizes compensation plans based on local 
practice, it does not permit automatic disregard of all other laws of 
the United States. Thus, under the Colombian severance pay program 
noted above, if the employee subsequently is terminated for cause or 
otherwise loses eligibility, the agency must proceed with collection 
action under the Federal Claims Collection Act, local practice to the 
contrary notwithstanding. B-192511, June 8, 1979. Similarly, accrued 
severance pay retains its status as United States funds up to actual 
disbursement and is therefore subject to applicable fiscal and fund 
control requirements. B-199722, Sept. 15, 1981 (severance pay plan in 
Jordan). 

In several foreign countries, foreign nationals employed by the United 
States are entitled to be paid a "separation allowance" when they 
resign, retire, or are otherwise separated through no fault of their 
own. The allowance is based on length of service, rate of pay at time 
of separation, and type of separation. Unlike severance pay for 
federal employees, these separation allowances represent binding 
commitments which accrue during the period of employment. As such, 
they should be recorded as obligations when they are earned rather 
than when they are paid. GAO, FGMSD-76-25 (Washington, D.C.: Oct. 17, 
1975); FGMSD-75-20 (Washington, D.C.: Feb. 13, 1975); Substantial 
Understatements of Obligations for Separation Allowances for Foreign 
National Employees, B-179343, (Washington, D.C.: Oct. 21, 1974). 
(These three items are GAO reports, the first two being untitled 
letter reports.) See also B-226729, May 18, 1987; B-192511, Feb. 5, 
1979. 

c. Training: 

The obligation for training frequently stems from a contract for 
services and to that extent is recordable under subsection (a)(1) 
rather than subsection (a)(7) of 31 U.S.C. § 1501. The rules for 
training obligations are summarized in Chapter 5, section B.5. 

d. Uniform Allowance: 

The Federal Employees Uniform Act, 5 U.S.C. § 5901, authorizes a 
uniform allowance for each employee required by statute or regulation 
to wear a uniform. The agency may furnish the uniform or pay a cash 
allowance. Where an agency elects to pay an allowance, the obligation 
arises when the employee incurs the expense and becomes entitled to 
reimbursement. Thus, the appropriation chargeable is the one currently 
available at the time the employee makes the expenditure or incurs the 
debt. 38 Comp. Gen. 81 (1958). 

e. Travel Expenses:[Footnote 29] 

The obligation of appropriations for expenses relating to travel was 
an extremely fertile area and generated a large number of decisions 
before 31 U.S.C. § 1501 was enacted. The cases seem to involve every 
conceivable permutation of facts involving trips or transactions 
covering more than one fiscal year. The enactment of 31 U.S.C. § 1501 
logically prompted the question of how the new statute affected the 
prior decisions. It did not, replied the Comptroller General. Thus, 
the starting point is that subsection (a)(7) incorporates prior GAO 
decisions on obligations for travel. 35 Comp. Gen. 183 (1955); 34 
Comp. Gen. 459 (1955). 

The leading case in this area appears to have been 35 Comp. Gen. 183, 
which states the pertinent rules. The rules for travel may be 
summarized as follows: The issuance of a travel order in itself does 
not constitute a contractual obligation. The travel order is merely an 
authorization for the person specified to incur the obligation. The 
obligation is not incurred until the travel is actually performed or 
until a ticket is purchased, provided in the latter case the travel is 
to be performed in the same fiscal year the ticket is purchased. 35 
Comp. Gen. at 185. A 1991 decision, 70 Comp. Gen. 469, reaffirmed the 
principle that the expenses of temporary duty travel are chargeable to 
the fiscal year or years in which they are actually incurred. 

Some of the earlier cases in this evolutionary process are as follows: 

* Where tickets are purchased in one fiscal year and the travel is 
performed in the following fiscal year, the obligation is chargeable 
to the year in which the travel is performed, even though early 
purchase of the tickets may have been necessary to assure 
reservations. 27 Comp. Gen. 764 (1948); 26 Comp. Gen. 131 (1946). 

* A "continuous journey" involving more than one segment obligates 
funds of the fiscal year in which the ticket was purchased, as long as 
the trip starts in that same fiscal year. However, procurement of 
transportation en route is a new obligation. Similarly, a round-trip 
ticket obligates funds at the time of purchase as long as the trip 
starts in the same fiscal year. However, if the return portion of the 
ticket cannot be used and a separate return ticket must be purchased, 
a new obligation is created. 26 Comp. Gen. 961 (1947); A-36450, May 
27, 1931. 

* Per diem incident to official travel accrues from day to day. Per 
diem allowances are chargeable to appropriations current when the 
allowances accrue (i.e., when the expenditures are made). Thus, where 
travel begins in one fiscal year and extends into the next fiscal 
year, the per diem obligation must be split along fiscal year lines, 
even though the cost of the travel itself may have been chargeable in 
its entirety to the prior fiscal year. 23 Comp. Gen. 197 (1943). 

* Reimbursement on a mileage basis is chargeable to the fiscal year in 
which the major portion of the travel occurred. If travel is begun 
sufficiently prior to the end of a fiscal year to enable the employee 
to complete a continuous journey before the close of the fiscal year, 
the obligation is chargeable entirely to that year. However, if the 
travel is begun so late in the fiscal year that the major portion of 
it is performed in the succeeding fiscal year, it is chargeable to 
appropriations for the succeeding year. 9 Comp. Gen. 458, 460 (1930); 
2 Comp. Dec. 14 (1895). 

* Where (1) an employee is authorized to travel by privately owned 
vehicle at not to exceed the constructive cost of similar travel by 
rail, (2) the trip starts in one fiscal year and extends into the 
following fiscal year, and (3) the journey would have been completed 
in the prior year had rail travel been used, the travel expense is 
chargeable to the fiscal year in which the travel began. 30 Comp. Gen. 
147 (1950). 

Other cases involving obligations for travel expenses are: 16 Comp. 
Gen. 926 (1937); 16 Comp. Gen. 858 (1937); 5 Comp. Gen. 1 (1925);
26 Comp. Dec. 86 (1919); B-134099, Dec. 13, 1957; A-30477, Apr. 20, 
1939; A-75086, July 29, 1936; A-69370, Apr. 10, 1936. 

f. State Department: Travel Outside Continental United States: 

By virtue of 22 U.S.C. § 2677, appropriations available to the State
Department for travel and transportation outside the continental United
States "shall be available for such expenses when any part of such 
travel or transportation begins in one fiscal year pursuant to travel 
orders issued in that year, notwithstanding the fact that such travel 
or transportation may not be completed during that same fiscal year." 
This provision appeared in appropriation acts starting in 1948 and was 
subsequently made permanent and codified. It has the effect of 
excluding State Department travel or transportation outside the 
continental United States from some of the earlier decisions. The 
authority is permissive rather than mandatory. 42 Comp. Gen. 699 
(1963). 

Section 2677 of title 22 applies to temporary duty travel as well as 
travel incident to change of duty station. 71 Comp. Gen. 494 (1992). 
In either case, expenses are chargeable to the year in which the 
travel is ordered as long as some travel-related expense is also 
incurred in that year, even though the physical travel may not begin 
until the following year. Id. Travel-related expenses in this context 
include miscellaneous incidental expenses such as inoculations and 
passports as long as they are not incurred at a time so far removed 
from the actual travel as to question their legitimacy as incident to 
the travel. 30 Comp. Gen. 25 (1950). The statute also permits charging 
the prior year for expenses incurred under amended travel orders 
issued in the subsequent fiscal year as long as some part of the 
travel or transportation began in the prior fiscal year. 29 Comp.
Gen. 142 (1949). 

The statute does not permit retroactive charging of an expired 
appropriation. Thus, the Comptroller General found it improper to 
issue a travel authorization in one fiscal year designating the 
succeeding fiscal year as the appropriation to be charged, and then, 
at the start of the succeeding fiscal year, cancel the authorization 
and replace it with a new authorization retroactively designating the 
prior year. 42 Comp. Gen. 699 (1963). 

g. Employee Transfer/Relocation Costs: 

A government employee transferred to a new duty station is entitled to 
various allowances, primarily travel expenses of the employee and his 
or her immediate family, and transportation and temporary storage of 
household goods. 5 U.S.C. § 5724. In addition, legislation enacted in 
1967, now found at 5 U.S.C. § 5724a, authorized several types of 
relocation expenses for transferred employees. Specifically, they are: 
(1) per diem allowance for employee's immediate family en route 
between old and new duty station; (2) expenses of one house-hunting 
trip to new duty station; (3) temporary quarters allowance incident to 
relocation; (4) certain expenses of real estate transactions incurred 
as a result of the transfer; and (5) a miscellaneous expense allowance. 

The leading case on the obligation of employee transfer expenses is 64 
Comp. Gen. 45 (1984). The rule is that "for all [reimbursable] travel 
and transportation expenses of a transferred employee, the agency 
should record the obligation against the appropriation current when 
the employee is issued travel orders." Id. at 48. This treatment 
applies to expenses stemming from employee transfers; it does not 
apply to expenses stemming from temporary duty. 70 Comp. Gen. 469 
(1991). 

The rule of 64 Comp. Gen. 45 applies to obligations for extensions of 
temporary quarters subsistence expenses—the obligation is chargeable 
to the year in which the transfer order was issued. 64 Comp. Gen. 901 
(1985). It also applies to dislocation allowances payable to members 
of the armed services incident to a permanent change of station move. 
67 Comp. Gen. 474 (1988). 

Agencies have discretionary authority under 5 U.S.C. § 5724c to 
contract with private firms for arranging the purchase of a 
transferred employee's old residence. Since this service is wholly 
discretionary and in no way an "entitlement," the agency's obligation 
to a relocation firm stems from its contract with the firm, not from 
the employee's transfer. Thus, the obligation under one of these 
arrangements occurs when a purchase order under the contract is 
awarded. 66 Comp. Gen. 554 (1987). Since the obligation is evidenced 
by a written contract, it would be recorded under 31 U.S.C. § 
1501(a)(1). 

The decision at 64 Comp. Gen. 45 overruled prior inconsistent 
decisions such as 28 Comp. Gen. 337 (1948) (storage) and B-122358, 
Aug. 4, 1976 (relocation expenses under 5 U.S.C. § 5724a). In 
assessing the impact of 64 Comp. Gen. 45, however, care must be taken 
to determine precisely what has been overruled and what has not. For 
example, since 64 Comp. Gen. 45 dealt with reimbursable expenses, 
prior decisions addressing the transportation of household goods 
shipped directly by the government presumably remain valid.[Footnote 
30] 

Also, 35 Comp. Gen. 183 (1955) should not be regarded as overruled, 
notwithstanding language to the contrary in 64 Comp. Gen. 45. There 
are two reasons for this. First, 35 Comp. Gen. 183 was not limited to 
employee transfers, but dealt with travel in other contexts as well, 
situations not involved in the 1984 decision. Second, 35 Comp. Gen. 
183 states, at page 185: 

"It may be stated, however, that we have no objection to recording 
tentatively as obligations the estimated cost of transportation to be 
purchased and reimbursements therefor to be earned, including 
reimbursements for transportation of household effects, within the 
current fiscal year at the time the travel orders are actually issued 
where it is administratively determined desirable in order to avoid 
certain additional accounting requirements; but all estimated amounts 
for travel and related expenses so recorded should be adjusted to 
actual obligations periodically ..." 

This is not very different from the holding of 64 Comp. Gen. 45. 

8. Section 1501(a)(8): Public Utilities: 

Under 31 U.S.C. § 1501(a)(8), a recordable obligation arises when 
there is documentary evidence of "services provided by public 
utilities. [Footnote 31] 

Government agencies are not required to enter into contracts with 
public utilities when charges are based on rates that are fixed by 
regulatory bodies. However, contracts may be used if desired by the 
utility or the agency. GAO, Policy and Procedures Manual for Guidance 
of Federal Agencies, title 7, § 6.2.C.5 (Washington, D.C.: May 18, 
1993). 

If there is a contract, monthly estimates of the cost of services to 
be performed, based on past experience, may be recorded as 
obligations. If there is no contract, obligations should be recorded 
only on the basis of services actually performed. 34 Comp. Gen. 459, 
462 (1955). See also B-287619, July 5, 2001; B-259274, May 22, 1996. 

A statute relating to obligations for public utility services is 31 
U.S.C. § 1308. Under this law, in making payments for telephone 
services and for services like gas or electricity where the quantity 
is based on metered readings, the entire payment for a billing period 
which begins in one fiscal year and ends in another is chargeable to 
appropriations current at the end of the billing period. If the charge 
covers several fiscal years, 31 U.S.C. § 1308 does not apply. A charge 
covering several fiscal years must be prorated so that the charge to 
any one fiscal year appropriation will not exceed the cost of service 
for a 1-year period ending in that fiscal year. 19 Comp. Gen. 365 
(1939). GAO has construed this statute as applicable to teletypewriter 
services as well. 34 Comp. Gen. 414 (1955). 

The General Services Administration is authorized to enter into 
contracts for public utility services for periods not exceeding 10 
years. 40 U.S.C. § 501(b)(1)(B).[Footnote 32] A contract for the 
procurement of telephone equipment and related services has been held 
subject to this provision even where the provider was not a 
"traditional" form of public utility. 62 Comp. Gen. 569 (1983). Noting 
that the concept of what constitutes "public utility service" is 
flexible, the decision emphasized that the nature of the product or 
service provided rather than the nature of the provider should govern 
for purposes of 40 U.S.C. § 501(b)(1)(B). 62 Comp. Gen. at 575. The 
decision also concluded that GSA is not required to obligate the total 
estimated cost of a multiyear contract under 40 U.S.C. § 501(b)(1)(B), 
but is required to obligate only its annual costs. 62 Comp. Gen. at 
572, 576. 

9. Section 1501(a)(9): Other Legal Liabilities: 

The final standard for recording obligations, 31 U.S.C. § 1501(a)(9), 
is documentary evidence of any "other legal liability of the 
Government against an available appropriation or fund." This is sort 
of a catch-all category designed to pick up valid obligations which 
are not covered by 31 U.S.C. §§ 1501(a)(1)-(a)(8). 34 Comp. Gen. 418, 
424 (1955). 

Thus far, the decisions provide very little guidance on the types of 
situations that might be covered by subsection (a)(9). The few 
decisions that mention subsection (a)(9) generally cite it in 
conjunction with one of the other subsections and stop short of a 
definitive statement as to its independent applicability. See, e.g., 
54 Comp. Gen. 962 (1975) (impoundment litigation); B-192511, Feb. 5, 
1979 (severance pay plan under 22 U.S.C. § 3968). 

Another case, although not specifically citing subsection (a)(9), 
pointed out a situation that would seemingly qualify under that 
subsection: estimates of municipal tax liabilities on United States 
property located in foreign countries, based on tax bills received in 
prior years. 35 Comp. Gen. 319 (1955). 

Thus, subsection (a)(9) must be applied on a case-by-case basis. If a 
given item is a legal liability of the United States, if 
appropriations are legally available for the item in terms of purpose 
and time, and if the item does not fit under any of the other eight 
subsections, then subsection (a)(9) should be considered. 

C. Contingent Liabilities: 

Up to this point in Chapter 7, we have discussed obligations: what 
they are and how and when to record them. As pointed out in the 
previous sections of this chapter, the core attribute of an obligation 
recordable under 31 U.S.C. § 1501 is that it creates a definite legal 
liability on the part of the federal government. While the precise 
amount of the liability may be undefined initially, an "obligational 
event," reflecting a definite liability, may occur even though the 
amount of the liability at that time is undefined. A "contingent 
liability" is fundamentally different. In contrast to a definite 
liability, a contingent liability does not create an obligation unless 
and until the contingency materializes. 

Contingent liabilities take different forms depending on the 
circumstances. However, whatever form it takes, a contingent liability 
by definition lacks the definiteness that is essential to the concept 
of an obligation. Thus, GAO defines a "contingent liability" 
generically as "[a]n existing condition, situation, or set of 
circumstances that poses the possibility of a loss to an agency that 
will ultimately be resolved when one or more events occur or fail to 
occur.[Footnote 33] 

Contingent liabilities are not recordable as obligations under section 
1501 of title 31.[Footnote 34] Rather, a contingent liability ripens 
into a recordable obligation for purposes of section 1501 only if and 
when the contingency materializes. E.g., 62 Comp. Gen. 143, 145-46 
(1983); 37 Comp. Gen. 69192 (1958); GAO, Policy and Procedures Manual 
for Guidance of Federal Agencies, title 7, § 3.5.0 (Washington, D.C.: 
May 18, 1993) (hereafter GAO-PPM). 

The contingent liability poses somewhat of a fiscal dilemma. On the 
one hand, it is by definition (and absent special statutory treatment) 
not sufficiently definite to support the recording of an obligation. 
Yet on the other hand, sound financial management may dictate that it 
somehow be recognized. Indeed, if completely disregarded, a contingent 
liability could mature into an actual liability and result in an 
Antideficiency Act violation. Agencies have a legal obligation to take 
reasonable steps to avoid situations in which contingent liabilities 
become actual liabilities that result in Antideficiency Act 
violations. This may include the "administrative reservation" or 
"commitment" of funds, as well as taking other actions to prevent 
contingencies from materializing.[Footnote 35] 

For example, in B-238201, Apr. 15, 1991, the General Services 
Administration (GSA) was faced with a contingent liability that could 
become an actual liability. GSA was engaged in litigation concerning 
an Illinois statute authorizing the taxation of government property 
purchased under an installment contract. GSA had entered into 
arrangements to purchase buildings in Illinois on an installment 
basis, so there was a potential for tax liability, including back 
taxes, which would be assessed if the Illinois statute was upheld. 
Since the litigation was extending over fiscal years and the outcome 
was in doubt, GSA accrued amounts from the fiscal years involved as 
loss contingencies for the potential tax liability. GAO agreed with 
GSA's approach and stated: 

"Because the underlying legal liability of the Government has yet to 
be established, the potential tax liability of the [property] is not 
sufficiently definite to be recorded as an obligation. However, GSA 
has not actually obligated funds for this purpose, ... Instead, in 
terms of fiscal operations, it is possible for GSA officials to have 
recorded the potential liability as a commitment through the budgetary 
account 'Commitments Available for Obligation' in the Standard General 
Ledger. This accounting procedure reflects allotments or other 
available funds which were earmarked in anticipation of a potential 
obligation and is used for purposes of effective financial planning." 

Id. See also 35 Comp. Gen. 185, 187 (1955) (GAO recommended reserving 
funds as a means to avoid potential Antideficiency Act violations from 
contingent liabilities involving pending litigation in cases where it 
was believed that claims against the government were meritorious). 

In addition to the obligational accounting treatment of contingent 
liabilities, agencies need to be aware of the financial accounting 
treatment of contingent liabilities. Contingent liabilities may be 
sufficiently important to warrant recognition in a footnote to 
pertinent financial statements. 62 Comp. Gen. 143, 146 (1983); 37 
Comp. Gen. at 692. See also Federal Accounting Standards Advisory 
Board, Accounting for Liabilities of the Federal Government, SSFAS No. 
5, 55 35-42 (Dec. 20, 1995), as amended by SSFAS No. 12 (December 
1998) (provides guidance on the appropriate accounting treatment of 
contingent liabilities in financial statements). 

D. Reporting Requirements: 

When 31 U.S.C. § 1501 was originally enacted in 1954,[Footnote 36] it 
required each agency to prepare a report each year on the unliquidated 
obligations and unobligated balance for each appropriation or fund 
under the agency's control. The reports were to be submitted to the 
Senate and House Appropriations Committees, the (then) Bureau of the 
Budget, and GAO. GAO was often asked by the appropriations committees 
to review these reports. 

After several years of reviewing reports, the appropriations 
committees determined that the requirement had served its purpose, and 
Congress amended the law in 1959 to revise and relax the reporting 
procedures. The current reporting requirements are found at 31 U.S.C. 
§§ 1108(c) and 1501(b). 

Under 31 U.S.C. § 1108(c), each agency, when submitting requests for 
appropriations to the Office of Management and Budget, must report 
that "the statement of obligations submitted with the request contains 
obligations consistent with section 1501 of this title." See 39 Comp.
Gen. 422, 425 (1959). The reports must be certified by officials 
designated by the agency head. OMB Circular No. A-11, Preparation, 
Submission, and Execution of the Budget, § 51.1 (June 21, 2005). The 
certification must be supported by adequate records, and the agency 
must retain the records and certifications in such form as to 
facilitate audit and reconciliation. Officials designated to make the 
certifications may not redelegate the responsibility.[Footnote 37] 

The conference report on the original enactment of 31 U.S.C. § 1501 
specified that the officials designated to make the certifications 
should be persons with overall responsibility for the recording of 
obligations, and "in no event should the designation be below the 
level of the chief accounting officer of a major bureau, service, or 
constituent organizational unit."[Footnote 38] 

The person who makes certifications under 31 U.S.C. § 1108(c) is not a 
"certifying officer" for purposes of personal accountability for the 
funds in question. Although he or she may be coincidentally an 
"authorized certifying officer," the two functions are legally 
separate and distinct. B-197559-0.M., May 13, 1980. 

The statute does not require 100 percent verification of unliquidated 
obligations prior to certification. Agencies may use statistical 
sampling. B-199967-0.M., Dec. 3, 1980. 

In the case of transfer appropriation accounts under interagency 
agreements, the certification official of the spending agency must 
make the certifications to the head of the advancing agency and not to 
the head of the spending agency. 7 GAO-PPM § 3.8.A. 

Finally, 31 U.S.C. § 1501(b) provides that any statement of 
obligations furnished by any agency to the Congress or to any 
congressional committee "shall include only those amounts that are 
obligations consistent with subsection (a) of this section."
The definition of the term "deobligation" is an agency's cancellation 
or downward adjustment of previously incurred obligations. Deobligated 
funds may be reobligated within the period of availability of the 
appropriation. For example, annual appropriations may be reobligated 
in the fiscal year for which the funds were appropriated, while 
multiyear or no-year appropriated funds may be reobligated in the same 
or subsequent fiscal years.[Footnote 39] Deobligations occur for a 
variety of reasons. Examples are: 

* Liquidation in amount less than amount of original obligation. E.g.,
B-207433, Sept. 16, 1983 (cost underrun); B-183184, May 30, 1975 
(agency called for less work than maximum provided under level-of-
effort contract). See also B-286929, Apr. 25, 2001. 

* Cancellation of project or contract. 

* Initial obligation determined to be invalid. 

* Reduction of previously recorded estimate. 

* Correction of bookkeeping errors or duplicate obligations. 

In addition, deobligation may be statutorily required in some 
instances. An example is 31 U.S.C. § 1535(d), requiring deobligation 
of appropriations obligated under an Economy Act agreement to the 
extent the performing agency has not incurred valid obligations under 
the agreement by the end of the fiscal year. See section B.1.i of this 
chapter for a further discussion of recording obligations in Economy 
Act transactions. 

For the most part, there are no special rules relating to 
deobligation. Rather, the treatment of deobligations follows logically 
from the principles previously discussed in this and preceding 
chapters. Thus funds deobligated within the original period of 
obligational availability are once again available for new obligations 
just as if they had never been obligated in the first place. 
Naturally, any new obligations are subject to the purpose, time, and 
amount restrictions governing the source appropriation. Funds 
deobligated after the expiration of the original period of 
obligational availability are not available for new obligations. B-
286929, Apr. 25, 2001; 64 Comp. Gen. 410 (1985); 52 Comp. Gen. 179 
(1972). They may be retained as unobligated balances in the expired 
account until the account is closed, however, and are available for 
adjustments in accordance with 31 U.S.C. § 1553(a). 

A proper and unliquidated obligation should not be deobligated unless 
there is some valid reason for doing so. Absent a valid reason, it is 
improper to deobligate funds solely to "free them up" for new 
obligations. To do so risks violating the Antideficiency Act. For 
example, where a government check issued in payment of some valid 
obligation cannot be promptly negotiated (if, for example, it is 
returned as undeliverable), it is improper to deobligate the funds and 
use them for new obligations. 15 Comp. Gen. 489 (1935); A-44024, Sept. 
21, 1942. (The two cited decisions deal with provisions of law which 
have since changed, but the thrust of the decisions remains the same.) 
The Antideficiency Act violation would occur if the payee of the 
original check subsequently shows up and demands payment but the funds 
are no longer available because they have been reobligated and the 
account contains insufficient funds. This does not preclude an agency 
from exercising flexibility in the use of its appropriations so long 
as the agency does not risk an Antideficiency Act violation. B-272191, 
Nov. 4, 1997. 

Under some programs, an agency provides funds to an intermediary which 
in turn distributes the funds to members of a class of beneficiaries. 
The agency records the obligation when it provides, or legally commits 
itself to provide, the funds to the intermediary. It is undesirable 
for many reasons to permit the intermediary to hold the funds 
indefinitely prior to reallocation. Unless the program legislation 
provides otherwise, the agency may establish a reasonable cutoff date 
at which time unused funds in the hands of the intermediary are 
"recaptured" by the agency and deobligated. GAO recommended such a 
course of action in 50 Comp. Gen. 857 (1971). If recapture occurs 
during the period of availability, the funds may be reobligated for 
program purposes; if it occurs after the period of availability has 
ended, the funds expire absent some contrary direction in the 
governing legislation. Id.; Dabney v. Reagan, No. 82 Civ. 2231-CSH 
(S.D.N.Y. Mar. 21, 1985). 

Congress may occasionally by statute authorize an agency to reobligate 
deobligated funds after expiration of the original period of 
availability. This is called "deobligation-reobligation" (or "deob-
reob") authority. Such authority exists only when expressly granted by 
statute. Deobligation-reobligation authority generally contemplates 
that funds will be deobligated only when the original obligation 
ceases to exist and not as a device to effectively augment the 
appropriation. See B-173240-0.M., Jan. 23, 1973. Also, absent 
statutory authority to the contrary, "deob-reob" authority applies 
only to obligations and not to expenditures. Thus, repayments to an 
appropriation after expiration of the original period of obligational 
availability are not available for reobligation. B-121836, Apr. 22, 
1955. 

Chapter 7 Footnotes: 

[1] A working fund account is established to receive advance payment 
from other agencies or accounts. 14 Comp. Gen. 25 (1934). For an 
example, see 10 U.S.C. § 2208, which authorizes working capital funds 
in the Department of Defense. 

[2] An "unmatured liability" as described in this paragraph is 
different from a "contingent liability" as discussed in section C of 
this chapter. 

[3] For further discussion of the Antideficiency Act, see Chapter 6, 
section C. 

[4] Senate Committee on Government Operations, Financial Management in 
the Federal Government, S. Doc. No. 87-11, at 85 (1961). 

[5] Although 31 U.S.C. § 1501 does not expressly apply to the 
government of the District of Columbia, GAO has expressed the view 
that the same criteria should be followed. B-180578, Sept. 26, 1978. 
This is because the proper recording of obligations is the only way to 
assure compliance with 31 U.S.C. § 1341, a portion of the 
Antideficiency Act, which does expressly apply to the government of 
the District of Columbia. District of Columbia Self-Government and 
Governmental Reorganization Act (so-called "Home Rule" Act), Pub. L. 
No. 93-198, § 603(e), 87 Stat. 774, 815 (Dec. 24, 1973). 

[6] S. Doc. No. 87-11, at 86. 

[7] H.R. Rep. No. 83-2663, at 18 (1954), quoted in B-118654, Aug. 10, 
1965. 

[8] Pub. L. No. 106-229, § 101(a), 114 Stat. 464 (June 30, 2000). 

[9] A "statute of frauds" is a law requiring contracts to be in 
writing in order to be enforceable. Most, if not all, states have some 
version of such a statute. Strictly speaking, as the Comptroller 
General has noted, there is no federal statute of frauds. 39 Comp. 
Gen. 829, 831 (1960). See also 55 Comp. Gen. 833 (1976). 

[10] The FAR defines "contracts" as including "all types of 
commitments that obligate the Government to an expenditure of 
appropriated funds and that, except as otherwise authorized, are in 
writing." This provision also provides that "in writing, writing, or 
written means any worded or numbered expression that can be read, 
reproduced, and later communicated, and includes electronically 
transmitted and stored information." 48 C.F.R. § 2.101 (2005). 

[11] As cases such as 63 Comp. Gen. 129 illustrate, there can be many 
variations on the basic indefinite-quantity theme. 

[12] This discussion addresses the amount to be recorded when the 
amount of the liability is undefined, and is not to be confused with a 
discussion of contingent liabilities. For example, for an indefinite-
delivery, indefinite-quantity contract, any liability in excess of the 
government's minimum commitment, as defined in the contract, is a 
contingent liability—that is, contingent on the government placing 
future orders with the contractor. For that reason, at the time the 
government enters into the contract, the government has no liability 
above the minimum specified in the contract, and thus incurs no 
obligation for future orders. We discuss contingent liabilities in 
section C of this chapter. 

[13] Title 7, § 3.5.D (Washington, D.C.: May 18, 1993). 

[14] The decision in 50 Comp. Gen. 589 is offered here as an example 
of a methodology for estimating obligations. Beginning with fiscal 
year 1977 the Judiciary has received no-year appropriations to pay 
court appointed attorneys. See Departments of State, Justice, and 
Commerce, the Judiciary, and Related Agencies Appropriation Act, 1977, 
Pub. L. No. 94-362, title IV, 90 Stat. 937, 953 (July 14, 1976); 
Consolidated Appropriations Act, 2005, Pub. L. No. 108-447, div. B, 
title III, 118 Stat. 2809, 2892 (Dec. 8, 2004). 

[15] Subsequently, Congress passed legislation clarifying the method 
by which the Corporation should record obligations, authorizing the 
Corporation to record as an obligation an estimate based on a formula 
that takes into consideration historical rates of enrollment in the 
program. Pub. L. No. 108-45, § 2(b), 117 Stat. 844 (July 3, 2003). See 
also 149 Cong. Rec. S8163-64 (2003) (statement of Sen. Bond). 

[16] Beginning with fiscal year 1978, the appropriation to compensate 
land commissioners was switched from the Justice Department to the 
Judiciary and since then has been a no-year appropriation. See the 
appropriation entitled "Fees of Jurors and Commissioners" in the 
Judiciary Appropriation Act, 1978, Pub. L. No. 95-86, title IV, 91 
Stat. 419, 434-35 (Aug. 2, 1977), and in the Consolidated 
Appropriations Act, 2005, Pub. L. No. 108-447, div. B, title III, 118 
Stat. 2809, 2892-93 (Dec. 8, 2004). We retain the above summary here 
to illustrate the analysis and because it may have use by analogy in 
similar situations. 

[17] The determination of whether an interagency agreement is 
"binding" for purposes of recording under 31 U.S.C. § 1501(a)(1) is 
made in the same manner as if the contract were with a private party—
examining precisely what the parties have "committed" themselves to do 
under the terms of the agreement. However, an agreement between two 
government agencies cannot be legally "enforced" against a defaulting 
agency in the sense of compelling performance or obtaining damages. 
Enforcement against another agency is largely a matter of comity and 
good faith. Thus, the term "binding" in the context of interagency 
agreements reflects the undertakings expressed in the agreement 
without regard to the legal consequences (or lack thereof) of 
nonperformance. 

[18] See Chapter 5, section B for a discussion of the bona fide needs 
rule. 

[19] 42 U.S.C. § 4101(A) (1970 and Supp. V 1975). 

[20] Ch. 288, 63 Stat. 377 (June 30, 1949). 

[21] The fact that the replacement stock will not be used until the 
following year will not defeat an otherwise valid obligation. See 73 
Comp. Gen. 259 (1994); 44 Comp. Gen. 695 (1965). 

[22] The Coast Guard has virtually identical authority in 14 U.S.C. § 
151. 

[23] The term "approved projects," as used in 41 U.S.C. § 23, has no 
special meaning. It refers simply to "projects that have been approved 
by officials having legal authority to do so." B-171049-0.M., Feb. 17, 
1972. 

[24] Thus 41 U.S.C. § 23 predates enactment of § 1311 of the 
Supplemental Appropriations Act of 1955, now codified at 31 U.S.C. § 
1501, and, like the Economy Act, provides an early statutory authority 
to obligate an appropriation on the basis of an interagency 
transaction. 

[25] The FCRA applies to new direct loan obligations incurred on or 
after October 1, 1991. The budgetary and obligational treatment of 
guaranteed and insured loans is discussed in Chapter 11, section B. 

[26] See B-300192, Nov. 13, 2002, regarding the constitutionality of 
this and related statutory provisions. 

[27] 42 U.S.C. § 3153 (1976 and Supp. IV 1980). 

[28] Apart from the considerations discussed here, pending litigation 
as well as potential litigation and other legal claims, may require 
disclosure as a contingent liability in an agency's financial 
statements. See generally Federal Accounting Standards Advisory Board, 
Accounting for Liabilities of the Federal Government, SFFAS No. 5, 33, 
35-42 (Dec. 20, 1995), as amended by SFFAS No. 12 (December 1998), 
available at www.fasab.gov/codifica.html (last visited September 15, 
2005). 

[29] This section does not apply to travel incident to employee 
transfers. The rules for employee transfers are set forth separately 
in section B.7.g of this chapter. 

[30] If the government ships the goods, the obligation occurs when a 
carrier picks up the goods pursuant to a government bill of lading. If 
separate bills of lading are issued covering different segments of the 
shipment, each bill of lading is a separate and distinct obligation. 
E.g., 31 Comp. Gen. 471 (1952). 

[31] Prior to the 1982 recodification of title 31, United States Code, 
section 1501(a)(7) included public utilities as well as employment and 
travel expenses. The recodification logically separated public 
utilities into a new subsection since it is unrelated to the other 
items. Thus, pre-1982 materials refer to eight subsections whereas 
there are now nine. 

[32] The military departments have authority to enter into utility 
service contracts for up to 50 years in connection with the conveyance 
of a utility system from the department to the service provider. See 
10 U.S.C. § 2688(c)(3). 

[33] GAO, A Glossary of Terms Used in the Federal Budget Process, GAO-
05-734SP (Washington, D.C.: September 2005), at 35 (emphasis added). 

[34] Outside the framework of 31 U.S.C. § 1501, however, Congress has 
provided special treatment for certain contingent liabilities in order 
to better capture their budgetary impact. Most notably, the Federal 
Credit Reform Act of 1990, 2 U.S.C. §§ 661-661, changed the normal 
budgetary treatment of loans and loan guarantees by establishing that 
for most programs, loan guarantee commitments cannot be made unless 
the Congress has appropriated budget authority in advance to cover 
their estimated losses (known as "credit subsidy costs"). See Chapter 
11, section B, for a detailed discussion of the budgetary and 
obligational treatment of loan and loan guarantee programs under the 
Federal Credit Reform Act. 

[35] See 7 GAO-PPM § 3.5.F; B-238201, Apr. 15, 1991 (nondecision 
letter). 

[36] See Pub. L. No. 83-663, § 1311(b), 68 Stat. 800, 830 (Aug. 26, 
1954). 

[37] See GAO, Policy and Procedures Manual for Guidance of Federal 
Agencies, title 7, § 3.8.A (Washington, D.C.: May 18, 1993) (hereafter 
GAO-PPM). 

[38] H.R. Rep. No. 83-2663, 18 (1954), quoted in Financial Management 
in the Federal Government, S. Doc. No. 87-11, 88 (1961), and in 50 
Comp. Gen. 857, 862 (1971). 

[39] See GAO, A Glossary of Terms Used in the Federal Budget Process, 
GAO-05-734SP (Washington, D.C.: September 2005), at 44 and 85. 

[End of Chapter 7] 

Chapter 8: Continuing Resolutions: 

A. Introduction: 
1. Definition and General Description: 
2. Use of Appropriation Warrants: 
B. Rate for Operations: 
1. Current Rate: 
2. Rate Not Exceeding Current Rate: 
3. Spending Pattern under Continuing Resolution: 
a. Pattern of Obligations: 
b. Apportionment: 
4. Liquidation of Contract Authority: 
5. Rate for Operations Exceeds Final Appropriation: 
C. Projects or Activities: 
D. Relationship to other Legislation: 
1. Not Otherwise Provided For: 
2. Status of Bill or Budget Estimate Used as Reference: 
3. More Restrictive Authority: 
4. Lack of Authorizing Legislation: 
E. Duration: 
1. Duration of Continuing Resolution: 
2. Duration of Appropriations: 
3. Impoundment: 

A. Introduction: 

1. Definition and General Description: 

The term "continuing resolution" may be defined as follows:
"An appropriation act that provides budget authority for federal 
agencies, specific activities, or both to continue in operation when 
Congress and the President have not completed action on the regular 
appropriation acts by the beginning of the fiscal year."[Footnote 1] 

For the most part, continuing resolutions are temporary appropriation 
acts. With a few exceptions to be noted later, they are intended by 
Congress to be stop-gap measures enacted to keep existing federal 
programs functioning after the expiration of previous budget authority 
and until regular appropriation acts can be enacted. B-300673, July 3, 
2003. Congress resorts to the continuing resolution when there is no 
regular appropriation for a program or agency, perhaps because the two 
houses of Congress have not yet agreed on common language, because 
authorizing legislation has not yet been enacted, or because the 
President has vetoed an appropriation act passed by Congress. 58 Comp. 
Gen. 530, 532 (1979). Also, given the size and complexity of today's 
government, the consequent complexity of the budget and appropriations 
process, and the occasionally differing policy objectives of the 
executive and legislative branches, it sometimes becomes difficult for 
Congress to enact all of the regular appropriation acts before the 
fiscal year ends. 

Continuing resolutions are nothing new GAO has found administrative 
decisions discussing them as far back as the 1880s.[Footnote 2] At one 
time, they were called "temporary resolutions." The term "continuing 
resolution" came into widespread use in the early 1960s.[Footnote 3] 

In the 20 years from fiscal years 1962 to 1981, 85 percent of the 
appropriation bills for federal agencies were enacted after the start 
of the fiscal year and thus necessitated continuing resolutions. GAO 
has discussed the problems inherent in this situation in several 
reports. See, e.g., GAO, Updated Information Regarding Funding Gaps 
and Continuing Resolutions, GAO/PAD-83-13 (Washington, D.C.: Dec. 17, 
1982); Funding Gaps Jeopardize Federal Government Operations, PAD-81-
31 (Washington, D.C.: Mar. 3, 1981). In 24 of the fiscal years between 
fiscal years 1977 and 2004, Congress and the President did not 
complete action on a majority of the 13 regular appropriations by the 
start of the fiscal year. In eight of those years, they did not finish 
any of the bills by the start of the new fiscal year.[Footnote 4] 
Twenty-one continuing resolutions were enacted for fiscal year 2001. 

The periodic experience of government "shutdowns," or partial 
shutdowns, when appropriations bills have not been enacted has led to 
proposals for an automatic continuing resolution. The automatic 
continuing resolution, however, is an idea for which the details are 
critically important. Depending on the detailed structure of such a 
continuing resolution, the incentive for policymakers—some in the 
Congress and the President—to negotiate seriously and reach agreement 
may be lessened. If the goal of the automatic continuing resolution is 
to provide a little more time for resolving issues, it could be 
designed to permit the incurrence of obligations to avoid a funding 
gap, but not the outlay of funds to liquidate the new obligations. 
This would allow agencies to continue operations for a period while 
the Congress completes appropriations actions. GAO, Budget Process: 
Considerations for Updating the Budget Enforcement Act, GAO-01-991T 
(July 19, 2001). Funding gaps and the legal problems they present are 
discussed in greater detail in Chapter 6, section C.6. 

Continuing resolutions are enacted as joint resolutions making 
continuing appropriations for a certain fiscal year or portion of the 
fiscal year. Although enacted in this form rather than as an "act," 
once passed by both houses of Congress and approved by the President, 
a continuing resolution becomes a public law and has the same force 
and effect as any other statute. Oklahoma v. Weinberger, 360 F. Supp. 
724, 726 (WD. Okla. 1973); B-152554, Dec. 15, 1970. Since a continuing 
resolution is a form of appropriation act, it often will include the 
same types of restrictions and conditions that are commonly found in 
regular appropriation acts. See, e.g., B-210603, Feb. 25, 1983 (ship 
construction appropriation in continuing resolution making funds 
available "only under a firm, fixed price type contract"). Indeed, 
continuing resolutions typically incorporate by reference restrictions 
and conditions from regular appropriations acts. See, e.g., Pub. L. 
No. 108-309, § 102, 118 Stat. 1137, 1138 (Sept. 30, 2004). Having said 
this, however, it is necessary to note that continuing resolutions, at 
least those in what GAO considers the "traditional form," differ 
considerably from regular appropriation acts. 

Continuing resolutions may take different forms. The "traditional" 
form, used consistently except for a few years in the 1980s, employs 
essentially standard language and is clearly a temporary measure. An 
example of this form is Public Law 108-309, the first continuing 
resolution for fiscal year 2005, which provided funding authority from 
October 1 through November 20, 2004. Section 101 appropriates: 

"Such amounts as may be necessary under the authority and conditions 
provided in the applicable appropriations Act for fiscal year 2004 for 
continuing projects or activities including the costs of direct loans 
and loan guarantees (not otherwise specifically provided for in this 
joint resolution) which were conducted in fiscal year 2004, at a rate 
for operations not exceeding the current rate, and for which 
appropriations, funds, or other authority was made available in the 
following appropriations Acts ..." 

Section 101 then references most of the regular appropriation acts for 
fiscal year 2004. 

Public Law 108-309 also contains a number of additional typical 
provisions, including the following: 

"SEC. 102. Appropriations made by section 101 shall be available to 
the extent and in the manner which would be provided by the pertinent 
appropriations Act." 

"SEC. 104. No appropriation or funds made available or authority 
granted pursuant to section 101 shall be used to initiate or resume 
any project or activity for which appropriations, funds, or other 
authority were not available during fiscal year 2004." 

"SEC. 107. Unless otherwise provided for in this joint resolution or 
in the applicable appropriations Act, appropriations and funds made 
available and authority granted pursuant to this joint resolution 
shall be available until (a) enactment into law of an appropriation 
for any project or activity provided for in this joint resolution, or 
(b) the enactment into law of the applicable appropriations Act by 
both Houses without any provision for such project or activity, or (c) 
November 20, 2004, whichever first occurs." 

When enacting continuing resolutions in this form, there is clear 
indication that Congress intends and expects that the normal 
authorization and appropriation process will eventually produce 
appropriation acts which will replace or terminate the budget 
authority contained in the resolution. Thus, a continuing resolution 
of this type generally provides that funds appropriated for an 
activity by the resolution will no longer be available for obligation 
if the activity is later funded by a regular appropriation act, or 
Congress indicates its intent to end the activity by enacting an 
applicable appropriation act without providing for the activity. 58 
Comp. Gen. at 532. See also section 107 of Public Law 108-309, quoted 
above. Obligations already incurred under the resolution, however, may 
be liquidated. 

GAO's decision in B-300673, July 3, 2003, illustrates the interplay 
between funding under a continuing resolution and a later-enacted 
regular appropriation. The fiscal year 2003 appropriation act for the 
legislative branch authorized the House of Representatives Chief 
Administrative Officer to use that Office's salaries and expenses 
appropriation to pay certain expenses of the House Child Care Center 
for "fiscal year 2003 and each succeeding fiscal year." Pub. L. No. 
108-7, § 108, 117 Stat. 11, 355 (Feb. 20, 2003). Previously, a 
revolving fund paid those expenses. However, since Public Law 108-7 
was not enacted until February 20, 2003, fiscal year 2003 expenses for 
the Child Care Center were initially charged to the revolving fund 
under continuing resolutions. With enactment of Public Law 108-7, GAO 
held that the Chief Administrative Officer's salaries and expenses 
appropriation should fund the Child Care Center expenses retroactive 
to the beginning of fiscal year 2003 and that this appropriation 
should reimburse the revolving fund for the fiscal year 2003 expenses 
initially charged to it under the continuing resolutions. The decision 
stated that the fact that payments were initially made during a period 
covered by a continuing resolution was not significant since the 
regular appropriation, once enacted, supersedes the continuing 
resolution and governs the amount and period of availability. 

Unlike regular appropriation acts, continuing resolutions in their 
traditional form do not usually appropriate specified sums of money. 
Rather, they usually appropriate "such amounts as may be necessary" 
for continuing projects or activities at a certain "rate for 
operations." The rate for operations may be the amount provided for 
the activity in an appropriation act that has passed both houses of 
Congress but has not become law; the lower of the amounts provided 
when each house has passed a different act; the lower of the amounts 
provided either in an act which has passed only one house or in the 
administration's budget estimate; the amount specified in a particular 
conference report; the lower of either the amount provided in the 
budget estimate or the "current rate"; or simply the current rate. 
Therefore, in order to determine the sum of money appropriated for any 
given activity by this type of continuing resolution, it is necessary 
to examine documents other than the resolution itself. Some continuing 
resolutions have used a combination of "formula appropriations" of the 
types described in this paragraph and appropriations of specific 
dollar amounts. An example is the fiscal year 1996 continuing 
resolution, Pub. L. No. 104-69, 109 Stat. 767 (Dec. 22, 1995). 

There are times when Congress acknowledges at the outset that it is 
not likely to enact one or more regular appropriation acts during the 
current fiscal year.[Footnote 5] See, for example, the 1980 continuing 
resolution, Pub. L. No. 96-86, 93 Stat. 656 (Oct. 12, 1979), which 
provided budget authority for the legislative branch for the entire 
fiscal year. 

For a few years in the 1980s, Congress used a very different form of 
continuing resolution, simply stringing together the complete texts of 
appropriation bills not yet enacted and enacting them together in a 
single "omnibus" package. This approach reached its extreme in the 
1988 continuing resolution, Pub. L. No. 100-202, 101 Stat. 1329 (Dec. 
22, 1987), which included the complete texts of all 13 of the regular 
appropriation bills. This form of continuing resolution differs from 
the traditional form in two key respects: 

* Unlike the traditional continuing resolution, the "full text" 
version amounts to an acknowledgment that no further action on the 
unenacted bills will be forthcoming, and consequently provides funding 
for the remainder of the fiscal year. 

* When the entire text of an appropriation bill is incorporated into a 
continuing resolution, the appropriations are in the form of specified 
dollar amounts, the same as if the individual bill had been enacted. 

The "full text" format generally does not raise the same issues of 
statutory interpretation that arise under the traditional format. 
However, it produces new ones. For example, in a continuing resolution 
which consolidates the full texts of what would otherwise have been 
several separate appropriation acts, GAO has construed the term "this 
act" as referring only to the individual "appropriation act" in which 
it appears rather than to the entire continuing resolution. B-230110, 
Apr. 11, 1988. 

While the omnibus approach of the 1988 resolution may appear 
convenient, it generated considerable controversy because, among other 
reasons, it is virtually "veto-proof-—the President has little choice 
but to sign the bill or bring the entire government to an abrupt halt. 
See Presidential Remarks on the Signing of the Continuing 
Appropriations for Fiscal Year 1988 and the Omnibus Budget 
Reconciliation Act of 1987 Into Law, 23 Weekly Comp. Pres. Doc. 1546, 
1547 (Dec. 22, 1987). 

There was no continuing resolution for fiscal year 1989. All 13 of the 
appropriation bills were enacted on time, for what was reported to be 
the first time in 12 years.[Footnote 6] For fiscal year 1990, Congress 
reverted to the traditional type of continuing resolution. See Pub. L. 
No. 101-100, 103 Stat. 638 (Sept. 29, 1989). Nor were there any 
continuing resolutions for fiscal years 1995 and 1997. The start of 
the 1997 fiscal year was met with an omnibus appropriations act which 
added five regular appropriations bills to a sixth regular 
appropriations bill. Pub. L. No. 104-208, 110 Stat. 3009 (Sept. 30, 
1996). The remaining seven bills were enacted separately. 

Questions arising under continuing resolutions can be grouped loosely 
into two broad categories. First are questions in which the fact that 
a continuing resolution is involved is purely incidental, in other 
words, questions which could have arisen just as easily under a 
regular appropriation act. For example, one of the issues considered 
in B-230110, Apr. 11, 1988, was whether certain provisions in the 1988 
resolution constituted permanent legislation. Cases in this category 
are included with their respective topics throughout this publication 
and are not repeated in this chapter. 

Second are issues that are unique to continuing resolutions, and these 
are the focus of the remainder of this chapter. For the most part, the 
material deals with the traditional form of continuing resolution as 
it is this form that uses concepts and language found only in 
continuing resolutions. 

One point that should emerge from the GAO decisions and opinions is 
the central role of legislative intent. To be sure, legislative intent 
cannot change the plain meaning of a statute; Congress must enact what 
it intends in order to make it law. However, there are many cases in 
which the statutory language alone does not provide a clear answer, 
and indications of congressional intent expressed in well-established 
methods, viewed in light of the purpose of the continuing resolution, 
will tip the balance. 

In one case, for example, a continuing resolution provided a lump-sum 
appropriation for the National Oceanic and Atmospheric 
Administration's research and facilities account, and provided further 
for the transfer of $1.8 million from the Fisheries Loan Fund. The 
first continuing resolution for 1987 included the transfer provision 
and was signed into law on October 1, 1986. The Fisheries Loan Fund 
was scheduled to expire at "the close of September 30, 1986." Under a 
strictly technical reading, the $1.8 million ceased to be available 
once the clock struck midnight on September 30. However, the 
Comptroller General found the transfer provision effective, noting 
that a contrary result would "frustrate the obvious intent of 
Congress." B-227658, Aug. 7, 1987. 

Similarly, appropriations for the United States Commission on Civil 
Rights contained in a fiscal year 1992 continuing resolution were 
found to have extended the existence of the Commission beyond its 
termination on September 30, 1991. "When viewed in their entirety, 
legislative actions on the Commission's reauthorization and 
appropriation bills, together with their legislative history, clearly 
manifest an intent by Congress for the Commission to continue to 
operate after September 30, 1991." 71 Comp. Gen. 378, 381 (1992). 

While many of the continuing resolution provisions to be discussed 
will appear highly technical (because they are highly technical), 
there is an essential logic to them, evolved over many years, which is 
more readily seen from the perspective not of a specific case or 
problem, but of the overall goals and objectives of continuing 
resolutions and their relationship to the rest of the budget and 
appropriations process. 

2. Use of Appropriation	Warrants: 

Funds, including funds appropriated under a continuing resolution, are 
drawn from the Treasury by means of an appropriation warrant (FMS
Form 6200).[Footnote 7] A warrant is the official document issued 
pursuant to law by the Secretary of the Treasury upon enactment of an 
appropriation that establishes the amount of money authorized to be 
withdrawn from the Treasury.[Footnote 8] Under 31 U.S.C. § 3323(a), 
warrants authorized by law are to be signed by the Secretary of the 
Treasury and countersigned by the Comptroller General. However, under 
the authority of section 3326(a) of title 31, United States Code, the 
Secretary of the Treasury and the Comptroller General have issued 
several joint regulations phasing out the countersignature 
requirement.[Footnote 9] First, Department of the Treasury-General 
Accounting Office Joint Regulation No. 5 (Oct. 18, 1974) waived the 
requirement for all appropriations except continuing resolutions. 
Next, Treasury-GAO Joint Regulation No. 6 (Oct. 1, 1983) further 
simplified the process by requiring issuance of a warrant and 
countersignature under a continuing resolution only once, for the 
total amount appropriated, unless a subsequent resolution changed the 
annual amount. Finally, Treasury-GAO Joint Regulation No. 7, effective 
January 1, 1991, eliminated the countersignature requirement 
completely. 

B. Rate for Operations: 

1. Current Rate: 

The current rate, as that term is used in continuing resolutions, is 
equivalent to the total amount of money which was available for 
obligation for an activity during the fiscal year immediately prior to 
the one for which the continuing resolution is enacted. 

The term "current rate" is used in continuing resolutions to indicate 
the level of spending which Congress desires for a program. For 
example, a resolution may appropriate sufficient funds to enable a 
program to operate at a rate for operations "not in excess of the 
current rate," or at a rate "not in excess of the lower of the current 
rate" or the rate provided in a certain bill. It is possible to read 
the term "current rate" as referring to either the amount of money 
available for the program in the preceding year, or an amount of money 
sufficient to enable continuation of the program at the level of the 
preceding year. The two can be very different. 

As a general proposition, GAO regards the term "current rate" as 
referring to a sum of money rather than a program level. See, e.g., 58 
Comp. Gen. 530, 533 (1979); B-194362, May 1, 1979. Thus, when a 
continuing resolution appropriates in terms of the current rate, the 
amount of money available under the resolution will be limited by that 
rate, even though an increase in the minimum wage may force a 
reduction in the number of people participating in an employment 
program (B-194063, May 4, 1979), or an increase in the mandatory level 
of assistance will reduce the number of meals provided under a meals 
for the elderly program (B-194362, May 1, 1979). 

The term "current rate" refers to the rate of operations carried on 
within the appropriation for the prior fiscal year. B-152554, Dec. 6, 
1963. The current rate is equivalent to the total appropriation, or 
the total funds which were available for obligation, for an activity 
during the previous fiscal year. Edwards v. Bowen, 785 F.2d 1440 (9th 
Cir. 1986); B-300167, Nov. 15, 2002; B-255529, Jan. 10, 1994; 64 Comp. 
Gen. 21 (1984); 58 Comp. Gen. 530, 533 (1979); B-194063, May 4, 1979; 
B-194362, May 1, 1979. Funds administratively transferred from the 
account during the fiscal year, under authority contained in 
substantive legislation, should not be deducted in determining the 
current rate. B-197881, Apr. 8, 1980; B-152554, Nov. 4, 1974. 

It follows that funds transferred into the account during the fiscal 
year pursuant to statutory authority should be excluded. B-197881, 
Apr. 8, 1980. 

In those instances in which the program in question has been funded by 
1-year appropriations in prior years, the current rate is equal to the 
total funds appropriated for the program for the previous fiscal year. 
See, e.g., B-271304, Mar. 19, 1996; 64 Comp. Gen. at 22; 58 Comp. Gen. 
530; B-194362, May 1, 1979. In those instances in which the program 
has been funded by multiple year or no-year appropriations in prior 
years, the current rate is equal to the total funds appropriated for 
the previous fiscal year plus the total of unobligated budget 
authority carried over into that year from prior years. 58 Comp. Gen. 
530; B-152554, Oct. 9, 1970. 

One apparent deviation from this calculation of current rate occurred 
in 58 Comp. Gen. 530, a case involving the now obsolete Comprehensive 
Employment and Training Act program. In that decision, the Comptroller 
General, in calculating the current rate under the 1979 continuing 
resolution, included funds appropriated in a 1977 appropriation act 
and obligated during 1977. Ordinarily, only funds appropriated by the 
fiscal year 1978 appropriation act, and carry-over funds unobligated 
at the beginning of fiscal year 1979, would have been included in the 
current rate. However, Congress did not appropriate funds for this 
activity in the fiscal year 1978 appropriation act. In this instance 
the funds appropriated in 1977 were included because it was clear from 
the legislative history of the appropriation act that Congress 
intended these funds to be an advance of appropriations for fiscal 
year 1978. Thus, in order to ascertain the actual amount available for 
the activity for fiscal year 1978, it was necessary to include the 
advance funding provided by the 1977 appropriation act. The rationale 
used in this decision would apply only when it is clear that Congress 
was providing advance funding for the reference fiscal year in an 
earlier year's appropriation act. 

Where funding for the preceding fiscal year covered only a part of 
that year, it may be appropriate to "annualize" the previous year's 
appropriation in order to determine the current rate. This was the 
result in 61 Comp. Gen. 473 (1982), in which the fiscal year 1981 
appropriation for a particular program had been contained in a 
supplemental appropriation act and was intended to cover only the last 
quarter of the fiscal year. The current rate for purposes of the 
fiscal year 1982 continuing resolution was four times the fiscal year 
1981 figure. 

Prior year supplemental appropriations also count in calculating the 
current rate. In this regard, section 103 of Public Law 108-309, 118 
Stat. 1137, 1138 (Sept. 30, 2004), discussed above, provides: "The 
appropriations Acts listed in section 101 shall be deemed to include 
miscellaneous and supplemental appropriation laws enacted during 
fiscal year 2004." 

There are exceptions to the rule that current rate means a sum of 
money rather than a program level. For example, GAO construed the 
fiscal year 1980 continuing resolution as appropriating sufficient 
funds to support an increased number of Indochinese refugees in view 
of explicit statements by both the Appropriations and the Budget 
Committees that the resolution was intended to fund the higher program 
level. B-197636, Feb. 25, 1980. Also, the legislative history of the 
fiscal year 1981 continuing resolution (Pub. L. No. 96-369, 94 Stat. 
1351 (Oct. 1, 1980)) indicated that in some instances current rate 
must be interpreted so as to avoid reducing existing program levels. 

It is always preferable for the exception to be specified in the 
resolution itself. Starting with the first continuing resolution for 
fiscal year 1983 (Pub. L. No. 97-276, 96 Stat. 1186 (Oct. 2, 1982)), 
Congress began appropriating for the continuation of certain programs 
"at a rate to maintain current operating levels." GAO has construed 
this language as meaning sufficient funds to maintain the program in 
question at the same operating level as at the end of the immediately 
preceding fiscal year. B-209676, Apr. 14, 1983; B-200923, Nov. 16, 
1982 (nondecision letter). Recent continuing resolutions have included 
similar language for entitlement and other mandatory payments: 
"activities shall be continued at the rate to maintain program levels 
under current law."[Footnote 10] 

2. Rate Not Exceeding Current Rate: 

When a resolution appropriates funds to continue an activity at a rate 
for operations "not in excess of the current rate," the amount of 
funds appropriated by the resolution is equal to the current rate less 
any unobligated balance carried over into the present year.
As discussed in the preceding section, the current rate is equivalent 
to the total amount of funds that was available for obligation for a 
project or activity in the preceding fiscal year. When the continuing 
resolution appropriates funds to continue an activity at a rate for 
operations "not in excess of the current rate," it is the intent of 
Congress that the activity have available for obligation in the 
present fiscal year no more funds than it had available for obligation 
in the preceding fiscal year. Therefore, if there is a balance of 
unobligated funds which can be carried over into the present fiscal 
year because the funds are multiple year or no-year funds, this 
balance must be deducted from the current rate in determining the 
amount of funds appropriated by the continuing resolution. If this 
were not done, the program would be funded at a higher level in the 
present year than it was in the preceding year, which is not permitted 
by the language of the resolution. See 58 Comp. Gen. 530, 535 (1979). 

For example, suppose a continuing resolution for fiscal year 2006 were 
to appropriate sufficient funds to continue an activity at a rate not 
exceeding the current rate, and the current rate, or the total amount 
which was available for obligation in fiscal year 2005, is $1,000,000. 
Of this amount, suppose $100,000 of multiple year funds remains 
unobligated at the end of fiscal year 2005, and is available for 
obligation in fiscal year 2006. If the activity is to operate at a 
rate not to exceed the current rate, $1,000,000, then the resolution 
appropriates no more than the difference between the current rate and 
the carryover from 2005 to 2006, or $900,000. If the resolution were 
interpreted as appropriating the full current rate, then a total of 
$1,100,000 would be available for fiscal year 2006, and the activity 
would be able to operate at a rate in excess of the current rate, a 
result prohibited by the language of the resolution. 

An unobligated balance which does not carry over into the present 
fiscal year (the more common situation) does not have to be deducted. 
B-152554, Nov. 4, 1974. 

A commonly encountered form of continuing resolution formula 
appropriation is an amount not in excess of the current rate or the 
rate provided in some reference item, whichever is lower. The 
reference item may be an unenacted bill, a conference report, the 
President's budget estimate, etc. When the current rate produces the 
lower figure—the situation encountered in 58 Comp. Gen. 530—the above 
rule applies and an unobligated carryover balance must be deducted to 
determine the amount appropriated by the continuing resolution. 
However, when the current rate is not the lower of the two referenced 
items, the rule does not necessarily apply. 

To illustrate, a continuing resolution appropriated funds for the 
Office of Refugee Resettlement at a rate for operations not in excess 
of the lower of the current rate or the rate authorized by a bill as 
passed by the House of Representatives. The rate under the House-
passed bill was $50 million. The current rate was $77.5 million, of 
which $39 million remained unobligated at the end of the preceding 
fiscal year and was authorized to be carried over into the current 
fiscal year. If the continuing resolution had simply specified a rate 
not in excess of the current rate, or if the rate in the House-passed 
bill had been greater than the current rate, it would have been 
necessary to deduct the $39 million carryover balance from the
$77.5 million current rate to determine the maximum funding level for 
the current year. Here, however, the rate in the House-passed bill was 
the lower of the two. 

Reasoning that the current rate already includes an unobligated 
carryover balance, if any, whereas the rate in the House-passed bill 
did not include a prior year's balance, and supported by the 
legislative history of the continuing resolution, the Comptroller 
General concluded that the amount available for the current year was 
the amount appropriated by the resolution, $50 million, plus the 
unobligated carryover balance of $39 million, for a total of $89 
million. 64 Comp. Gen. 649 (1985). The decision distinguished 58 Comp. 
Gen. 530, stating that "the rule with respect to deduction of 
unobligated balances in 58 Comp. Gen. 530 is not applicable where the 
lower of two referenced rates is not the current rate." Id. at 652-53. 
The case went to court, and the Ninth Circuit Court of Appeals reached 
the same result. Edwards v. Bowen, 785 F.2d 1440
(9th Cir. 1986). 

In sum, if a continuing resolution appropriates the lower of the 
current rate or the rate in some reference item, you compare the two 
numbers to determine which is lower before taking any unobligated 
carryover balance into account. If the current rate is lower, you then 
deduct the carryover balance to determine the funding level under the 
continuing resolution. If the rate in the reference item is lower, the 
funding level is the reference rate plus the carryover balance unless 
it is clear that this is not what was intended. 

3. Spending Pattern under Continuing Resolution: 

a. Pattern of Obligations: 

An agency may determine the pattern of its obligations under a 
continuing resolution so long as it operates under a plan which will 
keep it within the rate for operations limit set by the resolution. If 
an agency usually obligates most of its annual budget in the first 
month or first quarter of the fiscal year, it may continue that 
pattern under the resolution. If an agency usually obligates funds 
uniformly over the entire year, it will be limited to that pattern 
under the resolution, unless it presents convincing reasons why its 
pattern must be changed in the current fiscal year. 

Continuing resolutions are often enacted to cover a limited period of 
time, such as a month or a calendar quarter. The time limit stated in 
the resolution is the maximum period of time during which funds 
appropriated by the resolution are available for obligation. 

However, this limited period of availability does not affect the 
amount of money appropriated by the resolution. The rate for 
operations specified in the resolution, whether in terms of an 
appropriation act which has not yet become law, a budget estimate, or 
the current rate, is an annual amount. The continuing resolution, in 
general, regardless of its period of duration, appropriates this full 
annual amount. See B-271304, Mar. 19, 1996; B-152554, Nov. 4, 1974. 

Because the appropriation under a continuing resolution is the full 
annual amount, an agency may generally follow any pattern of 
obligating funds, so long as it is operating under a plan which will 
enable continuation of activities throughout the fiscal year within 
the limits of the annual amount appropriated. Thus, under a resolution 
with a duration of one month, and which appropriates funds at a rate 
for operations not in excess of the current rate, the agency is not 
necessarily limited to incurring obligations at the same rate it 
incurred them in the corresponding month of the preceding year if the 
agency can establish that it is operating under a flexible plan that 
would enable continuation of activities throughout the fiscal year. B-
152554, Dec. 6, 1963. The same principle applies when the resolution 
appropriates funds at a rate to maintain current operating levels. B-
209676, Apr. 14, 1983. 

However, the pattern of obligations in prior years does provide a 
framework for determining the proper pattern of obligations under the 
continuing resolution. For example, if the activity is a formula grant 
program in which nearly all appropriated funds are normally obligated 
at the beginning of the fiscal year, then the full annual amount 
should be made available to the agency under the resolution, even 
though the resolution may be in effect for only 1 month. However, if 
the activity is salaries and expenses, in which funds are normally 
obligated uniformly throughout the year, then the amount made 
available to the agency should be only one-twelfth of the annual 
amount under a 1-month resolution or one-fourth of the annual amount 
under a calendar quarter resolution. B-152554, Feb. 17, 1972. 

For example, GAO determined that OMB properly apportioned, and the 
State Department properly obligated, 75 percent of funds appropriated 
by a fiscal year 1994 continuing resolution (Pub. L. No. 103-88, 107 
Stat. 977 (Sept. 30, 1993)) for payments to the United Nations. It was 
State Department policy to defer payment of the United States' general 
assessment of United Nations contributions to the fourth quarter of 
the calendar year, which is the first quarter of the fiscal year. As a 
matter of normal practice, the State Department also made peacekeeping 
payments when bills were received to the extent funds were available. 
We found that the advance apportionment and obligation for the United 
Nations assessment and peacekeeping payments with funds appropriated 
by the fiscal year 1994 continuing resolution did not violate either 
the continuing resolution or the provisions of title 31, United States 
Code, controlling apportionment of funds. B-255529, Jan. 10, 1994. 

Congress can, of course, alter the pattern of obligations by the 
language of the resolution. For example, if the resolution limits 
obligations in any calendar quarter to one-fourth of the annual rate, 
the agency is limited to that one-fourth rate regardless of its normal 
pattern of obligations. B-152554, Oct. 16, 1973. Further, even if the 
resolution itself does not have such limitations, but the legislative 
history clearly shows the intent of Congress that only one-fourth of 
the annual rate be obligated each calendar quarter, only this amount 
should be made available unless the agency can demonstrate a real need 
to exceed that rate. B-152554, Nov. 4, 1974. 

Beginning with fiscal year 1996, Congress to date has included the 
following two provisions in continuing resolutions: 

"... for those programs that had high initial rates of operation or 
complete distribution of funding at the beginning of the fiscal year 
in fiscal year [1995] because of distributions of funding to States, 
foreign countries, grantees, or others, similar distributions of funds 
for fiscal year [1996] shall not be made and no grants shall be 
awarded for such programs funded by this resolution that would impinge 
on final funding prerogatives." 

"This joint resolution shall be implemented so that only the most 
limited funding action of that permitted in the resolution shall be 
taken in order to provide for continuation of projects and activities." 

Pub. L. No. 104-31, §§ 113, 114, 109 Stat. 278, 281 (Sept. 30, 1995). 
[Footnote 11] 

GAO considered these provisions in B-300167, Nov. 15, 2002. That 
decision involved the Federal Highway Administration's (FHWA) 
distribution of federal aid to highways funds to the states under a 
continuing resolution for fiscal year 2003, Pub. L. No. 107-229, 116 
Stat. 1465 (Sept. 30, 2002). 

FHWA had determined its distributions to the states at 4/365ths of the 
current rate of $31.8 billion since that was the previous fiscal 
year's obligation limitation under the 2002 Department of 
Transportation appropriations act referenced by the continuing 
resolution. FHWA's consistent historical practice was to allocate 
funds to the states on a pro-rata basis by multiplying the percentage 
of the year covered by the continuing resolution by the rate for the 
continuing resolution (at the time the anticipated length of the 
continuing resolution was 4 days, hence FHWA's 4/365ths distribution). 

OMB, however, apportioned a total amount of $27.7 billion to FHWA 
during the term of the continuing resolution to refrain from 
"impinging on final funding prerogatives" per the first provision 
quoted above, thereby reducing the amount FHWA had available for 
allocation to the states from 4/365ths of $31.8 billion to 4/365ths of 
$27.7 billion. OMB reasoned that because the program traditionally 
makes available all of the budgetary resources subject to limitation 
for allocation to the states at the beginning of the fiscal year, had 
OMB apportioned the full amount of the fiscal year 2002 level, then 
any subsequent effort by Congress to enact an obligation limitation of 
less than $31.8 billion could have been compromised. 

GAO found that OMB had no basis to further reduce the level of highway 
spending below the current rate established in fiscal year 2002. Based 
on the plain language of the first provision above, it only applies to 
programs that (1) had "high initial rates of operation or a complete 
distribution" of funds at the beginning of the prior fiscal year 
(assuming the normal appropriations process), and where (2) a "similar 
distribution of funds" under the continuing resolution would impinge 
on Congress's final funding prerogatives. In other words, the 
provision can only be applied to reduce or limit the distribution of 
the current rate for a program (as defined in the continuing 
resolution) if both prongs of the two-part test are met. Since FHWA's 
long-standing practice of distributing highway funds under a 
continuing resolution on a pro-rata basis fully protects congressional 
funding prerogatives, and does so in a manner that is consistent with 
the second provision (and is far more restrictive than would be true 
under the first provision), GAO concluded that OMB was not justified 
under the two provisions to set the level of highway spending at $27.7 
billion. 

Congress subsequently resolved the dispute between OMB and FHWA by 
including a specific provision in its second amendment to the 
continuing resolution establishing an annual rate of operations of 
$31.8 billion for FHWA provided that total obligations for the program 
not exceed $27.7 billion while operating under the resolution, Pub. L. 
No. 107-240, § 137, 116 Stat. 1492, 1495 (Oct. 11, 2002). 

b. Apportionment: 

The requirement that appropriations be apportioned by the Office of 
Management and Budget, imposed by the Antideficiency Act, applies to 
funds appropriated by continuing resolution as well as regular 
appropriations.[Footnote 12] See generally OMB Circular No. A-11, 
Preparation, Submission, and Execution of the Budget, pt. 4, § 120.1 
(June 21, 2005). 

Typically, OMB has permitted some continuing resolution funds to be 
apportioned automatically. OMB Cir. No. A-11, § 123.5. For example, if 
a given continuing resolution covers 10 percent of a fiscal year, OMB 
may permit 10 percent of the appropriation to be apportioned 
automatically, meaning that the agency can obligate this amount 
without seeking a specific apportionment. Under such an arrangement, 
if program requirements produced a need for additional funds, the 
agency would have to seek an apportionment from OMB for the larger 
amount. 

Apportionment requirements may vary from year to year because of 
differences in duration and other aspects of applicable continuing 
resolutions. A device OMB has commonly used to announce its 
apportionment requirements for a given fiscal year is an OMB Bulletin 
reflecting the particular continuing resolution for that year. 
[Footnote 13] 

4. Liquidation of Contract Authority: 

When in the preceding fiscal year Congress has provided an agency with 
contract authority, the continuing resolution must be interpreted as 
appropriating sufficient funds to liquidate that authority to the 
extent it becomes due during the period covered by the continuing 
resolution. 

When an activity operates on the basis that in one year Congress 
provides contract authority to the agency and in the next year 
appropriates funds to liquidate that authority, then a continuing 
resolution in the second year must be interpreted as appropriating 
sufficient funds to liquidate the outstanding contract authority. The 
term "contract authority" means express statutory authority to incur 
contractual obligations in advance of appropriations.[Footnote 14] 
Thus, there is no "rate for operations" limitation in connection with 
the liquidation of due debts based on validly executed contracts 
entered into under statutory contract authority. In this context, rate 
for operations limitations apply only to new contract authority for 
the current fiscal year. B-114833, Nov. 12, 1974. 

5. Rate for Operations Exceeds Final Appropriation: 

If an agency operating under a continuing resolution incurs 
obligations within the rate for operations limit, but Congress 
subsequently appropriates a total annual amount less than the amount 
of these obligations, the obligations remain valid. B-152554, Feb. 17, 
1972. 

For example, a continuing resolution for a period of 1 month may have 
a rate for operations limitation of the current rate. The activity 
being funded is a grant program and the agency obligates the full 
annual amount during the period of the resolution. Congress then 
enacts a regular appropriation act which appropriates for the activity 
an amount less than the obligations already incurred by the agency. 
Under these circumstances, the obligations incurred by the agency 
remain valid obligations of the United States. 

Having established that the "excess" obligations remain valid, the 
next question is how they are to be paid. At one time, GAO took the 
position that an agency finding itself in this situation must not 
incur any further obligations and must attempt to negotiate its 
obligations downward to come within the amount of the final 
appropriation. B-152554, Feb. 17, 1972. If this is not possible, the 
agency would have to seek a supplemental or deficiency appropriation. 
This position was based on a provision commonly appearing in 
continuing resolutions along the following lines: 

"Expenditures made pursuant to this joint resolution shall be charged 
to the applicable appropriation, fund, or authorization whenever a 
bill in which such applicable appropriation, fund, or authorization is 
contained is enacted into law."[Footnote 15] 

However, the 1972 opinion failed to take into consideration another 
provision commonly included in continuing resolutions: 

"Appropriations made and authority granted pursuant to this joint 
resolution shall cover all obligations or expenditures incurred for 
any program, project, or activity during the period for which funds or 
authority for such project or activity are available under this joint 
resolution."[Footnote 16] 

When these two provisions are considered together, it becomes apparent 
that the purpose of the first provision is merely to emphasize that 
the funds appropriated by the continuing resolution are not in 
addition to the funds later provided when the applicable regular 
appropriation act is enacted. Accordingly, GAO modified the 1972 
opinion and held that funds made available by a continuing resolution 
remain available to pay validly incurred obligations which exceed the 
amount of the final appropriation. 62 Comp. Gen. 9 (1982). See also 67 
Comp. Gen. 474 (1988); B-207281, Oct. 19, 1982. 

Thus, obligations under a continuing resolution are treated as follows: 

"When an annual appropriation act provides sufficient funding for an 
appropriation account to cover obligations previously incurred under 
the authority of a continuing resolution, any unpaid obligations are 
to be charged to and paid from the applicable account established 
under the annual appropriation act. Similarly, to the extent the 
annual act provides sufficient funding, those obligations which were 
incurred and paid during the period of the continuing resolution must 
be charged to the account created by the annual appropriation act. On 
the other hand, to the extent the annual appropriation act does not 
provide sufficient funding for the appropriation account to cover 
obligations validly incurred under a continuing resolution, the 
obligations in excess of the amount provided by the annual act should 
be charged to and paid from the appropriation account established 
under authority of the continuing resolution. [Footnote omitted.] Thus 
the funds made available by the resolution must remain available to 
pay these obligations." 

62 Comp. Gen. 9, 11-12 (1982). Thus, as GAO had advised in 1972, 
agencies are still required to make their best efforts to remain 
within the amount of the final appropriation. The change recognized in 
62 Comp. Gen. 9 is that, to the extent an agency is unable to do so, 
the appropriation made by the continuing resolution remains available 
to liquidate the "excess" obligations. 

C. Projects or Activities: 

"Projects or activities" as used in continuing resolutions may have 
two meanings. When determining which government programs are covered 
by the resolution, and the rate for operations limit, the term 
"project or activity" refers to the total appropriation rather than to 
specific activities. When determining whether an activity was 
authorized or carried out in the preceding year, the term "project or 
activity" may refer to the specific activity. The following paragraphs 
will elaborate. 

The term "projects or activities" is sometimes used in continuing 
resolutions to indicate which government programs are to be funded and 
at what rate. Thus a resolution might appropriate sufficient funds to 
continue "projects or activities provided for" in a certain 
appropriation bill "to the extent and in the manner" provided in the 
bill or as provided for in prior year appropriation acts. See, e.g., 
Pub. L. No. 108-309, §§ 101, 102, 118 Stat. 1137-38 (Sept. 30, 2004). 

Occasionally Congress will use only the term "activities" by 
appropriating sufficient funds "for continuing the following 
activities, but at a rate for operations not in excess of the current 
rate." See, e.g., Pub. L. No. 97-51, § 101(d), 95 Stat. 958, 961 (Oct. 
1, 1981). When used in this context, "projects or activities" or 
simply "activities" does not refer to specific items contained as 
activities in the administration's budget submission or in a committee 
report. Rather, the term refers to the appropriation for the preceding 
fiscal year. B-204449, Nov. 18, 1981.[Footnote 17] Thus, if a 
resolution appropriates funds to continue projects or activities under 
a certain appropriation at a rate for operations not exceeding the 
current rate, the agency is operating within the limits of the 
resolution so long as the total of obligations under the appropriation 
does not exceed the current rate. Within the appropriation, an agency 
may fund a particular activity at a higher rate than that activity was 
funded in the previous year and still not violate the current rate 
limitation, assuming of course that the resolution itself does not 
provide to the contrary. 

An exception to the interpretation that projects or activities refers 
to the appropriation in existence in the preceding fiscal year 
occurred in 58 Comp. Gen. 530 (1979). In prior years, Comprehensive 
Employment and Training Act (CETA)[Footnote 18] programs had been 
funded in two separate appropriations, Employment and Training 
Assistance and Temporary Employment Assistance. The individual 
programs under the two appropriations differed only in that the number 
of jobs provided under Temporary Employment Assistance depended on the 
condition of the national economy. 

Concurrently with the enactment of the 1979 continuing resolution, 
Congress amended the CETA authorizing legislation so that certain 
programs previously operating under the Temporary Employment 
Assistance appropriation were to operate in fiscal year 1980 under the 
Employment and Training Assistance appropriation. Under these 
circumstances, if the phrase "activities under the Comprehensive 
Employment and Training Act" in the continuing resolution had been 
interpreted as referring to the two separate appropriations made in 
the preceding year, and the current rates calculated accordingly, 
there would have been insufficient funds available for the now 
increased programs under the Employment and Training Assistance 
appropriation, and a surplus of funds available for the decreased 
programs under the Temporary Employment Assistance appropriation. To 
avoid this result, the Comptroller General interpreted the 1979 
continuing resolution as appropriating a single lump-sum amount for 
all CETA programs, based on the combined current rates of the two 
appropriation accounts for the previous year. See 58 Comp. Gen. at 535-
36. 

Of course, as we noted earlier, continuing resolutions are really just 
short term appropriations that bridge the gaps that occasionally arise 
between the end of appropriations for one fiscal year and the start of 
appropriations for the next.[Footnote 19] For this reason, continuing 
resolutions usually refer only to those projects and activities for 
which annual funding has expired—on account of which funding is being 
provided. It should be remembered that most, but not all, of the 
government is funded under annual appropriations. Those projects and 
activities which are funded by multiple year and no-year 
appropriations are not usually directly affected by continuing 
resolutions. Thus, it would be a mistake to read the failure of a 
continuing resolution to address funding for the rest of the 
government as an implicit prohibition on undertaking other projects or 
activities that are, in fact, funded from other appropriations not 
covered by the continuing resolution.[Footnote 20] 

The term "projects or activities" has also been used in continuing 
resolutions to prohibit the use of funds to start new programs. Thus, 
many resolutions have contained a section stating that no funds made 
available under the resolution shall be available to initiate or 
resume any project or activity which was not conducted during the 
preceding fiscal year. When used in this context, the term "projects 
or activities" refers to the individual program rather than the total 
appropriation. See 52 Comp. Gen. 270 (1972); 35 Comp. Gen. 156 (1955). 

One exception to this interpretation occurred in B-178131, Mar. 8, 
1973. In that instance, in the previous fiscal year funds were 
available generally for construction of buildings, including plans and 
specifications. However, a specific construction project was not 
actually under way during the previous year. Nonetheless it was 
decided that, because funds were available generally for construction 
in the previous year, this specific project was not a new project or 
activity and thus could be funded under the continuing resolution. 
[Footnote 21] 

In more recent years, Congress has resolved the differing 
interpretations of "project or activity" by altering the language of 
the new program limitation. Rather than limiting funds to programs 
which were actually conducted in the preceding year, the more recent 
resolutions prohibit use of funds appropriated by the resolution for 
"any project or activity for which appropriations, funds, or other 
authority were not available" during the Continuing Resolutions
preceding fiscal year.[Footnote 22] Thus, if an agency had authority 
and sufficient funds to carry out a particular program in the 
preceding year, that program is not a new project or activity 
regardless of whether it was actually operating in the preceding year. 

A variation occurred in 60 Comp. Gen. 263 (1981). A provision of the 
Higher Education Act[Footnote 23] authorized loans to institutions of 
higher education from a revolving fund, not to exceed limitations 
specified in appropriation acts. Congress had not released money from 
the loan fund since 1978. The fiscal year 1981 continuing resolution 
provided funds to the Department of Education based on its regular 
fiscal year 1981 appropriation bill as passed by the House of 
Representatives. The House-passed version included $25 million for the 
higher education loans. Since the continuing resolution did not 
include a general prohibition against using funds for projects not 
funded during the preceding fiscal year, the $25 million from the loan 
fund was available under the continuing resolution, notwithstanding 
that the program had not been funded in the preceding year. 

Another variation can be seen in In re Uncle Bud's, Inc., 206 B.R. 889 
(Bankr. M.D. Tenn., 1997). In a fiscal year 1997 continuing 
resolution, Pub. L. No. 104-99, title II, § 211, 110 Stat. 26, 37-38 
(Jan. 26, 1996), Congress amended the Bankruptcy Code to require the 
U.S. Trustee to impose and collect a new quarterly fee as part of the 
bankruptcy process. Uncle Bud's, 206 B.R. at 897. Some debtors argued 
that the new fee was barred because it constituted a "new activity." 
The bankruptcy court disagreed, noting that, while the fee itself was 
new, the U.S. Trustee had long been required to collect other fees 
imposed by law. The court reasoned that the continuing resolution 
language was intended to limit spending to previous year levels. The 
new fee did not require the expenditure of additional funds—rather, it 
brought in more revenues. Accordingly, the bankruptcy court concluded 
that collection of the new fee represented, not a new project or 
activity, but the continuation of activities undertaken in the 
previous year. Id. On appeal, while other parts of the bankruptcy 
court's ruling were reversed, this part was upheld and even expanded 
when the district court gave retroactive effect to the provision 
imposing the new fees. See Vergos v. Uncle Bud's, Inc., No. 3-97-0296 
(M.D. Tenn., Aug. 17, 1998). 

Under the right set of circumstances, the projects or activities 
limitation can also have the effect of blocking existing programs. For 
example, in Environmental Defense Center v. Babbitt, 73 F.3d 867 (9th 
Cir. 1995), the Secretary of the Interior was sued for failing to 
determine whether to list the California red-legged frog under the 
Endangered Species Act, 16 U.S.C. § 1533(b)(6)(A). The Secretary 
acknowledged that the only actions that remained to be taken before 
the frog's status could be settled were the agency's in-house review 
and its final decision-making. Babbitt, 73 F.3d at 871-72. However, 
the Secretary argued he could not take those steps because, in 1995, 
Congress had enacted an appropriations rider which rescinded some of 
that fiscal year's funds and barred the remaining funds for that year 
from being used to make any determination that a species was 
threatened or endangered.[Footnote 24] See Emergency Supplemental 
Appropriations and Rescissions for the Department of Defense to 
Preserve and Enhance Military Readiness Act of 1995, Pub. L. No. 104-
6, 109 Stat. 73, 86 (Apr. 10, 1995). Although the supplemental rider 
applied only to fiscal year 1995 funds, the ban was effectively 
continued into fiscal year 1996 by the projects or activities 
limitation in the continuing resolution under which the government was 
being funded when the lawsuit was brought. Babbitt, 73 F.3d at 870. 

Continuing Resolutions can carry over restrictions on projects and 
activities that applied under prior year appropriations riders. The 
court held that neither the appropriations rider nor the projects or 
activities limitation repealed the Secretary's duty to determine 
whether the California red-legged frog is endangered, but they did bar 
the Secretary from complying with that duty by denying him funding for 
that purpose. Id. at 871-72. As the court explained: 

"Even though completion of the process may require only a slight 
expenditure of funds, ... taking final action on the California red-
legged frog listing proposal would necessarily require the use of 
appropriated funds. The use of any government resources—whether 
salaries, employees, paper, or buildings—to accomplish a final listing 
would entail government expenditure. The government cannot make 
expenditures, and therefore cannot act, other than by appropriation." 

Id. 

D. Relationship to other Legislation: 

1. Not Otherwise Provided For: 

Continuing resolutions often appropriate funds to continue projects 
"not otherwise provided for." This language limits funding to those 
programs which are not funded by any other appropriation act. Programs 
which received funds under another appropriation act are not covered 
by the resolution even though the authorizing legislation which 
created the program is mentioned specifically in the continuing 
resolution. See B-183433, Mar. 28, 1979. For example, if a resolution 
appropriates funds to continue activities under the Social Security 
Act, and a specific program under the Social Security Act has already 
been funded in a regular appropriation act, the resolution does not 
appropriate any additional funds for that program. 

2. Status of Bill or Budget Estimate Used as Reference: 

When a continuing resolution appropriates funds at a rate for 
operations specified in a certain bill or in the administration's 
budget estimate, the status of the bill or estimate on the date the 
resolution passes is controlling, unless the resolution specifies some 
other reference date. 

A continuing resolution will often provide funds to continue 
activities at a rate provided in a certain bill that has passed one or 
both houses of Congress, or at the rate provided in the 
administration's budget estimate. In such instances, the resolution is 
referring to the status of the bill or budget estimate on the date the 
resolution became law. B-164031(2).17, Dec. 5, 1975; B-152098, Jan. 
30, 1970. 

For example, the resolution may provide that activities are to be 
continued at the current rate or at the rate provided in the budget 
estimate, whichever is lower. The budget estimate referred to is the 
one in existence at the time the resolution is enacted, and the rate 
for operations cannot be increased by a subsequent upward revision of 
the budget estimate. B-164031(2).17, Dec. 5, 1975. 

Similarly, if a resolution provides that activities are to continue at 
the rate provided in a certain appropriation bill, the resolution is 
referring to the status of the bill on the date the resolution is 
enacted. A later veto of the bill by the President would not affect 
the continuation of programs under the resolution. B-152098, Jan. 15, 
1973. 

Where a continuing resolution provides funds based on a reference 
bill, this includes restrictions or limitations contained in the 
reference bill, as well as the amounts appropriated, unless the 
continuing resolution provides otherwise. 33 Comp. Gen. 20 (B-116069, 
July 10, 1953);[Footnote 25] B-199966, Sept. 10, 1980. In National 
Treasury Employees Union v. Devine, 733 F.2d 114 (D.C. Cir. 1984), the 
court construed a provision in a reference bill prohibiting the 
implementation of certain regulations, accepting without question the 
restriction as having been "enacted into law" by a continuing 
resolution which provided funds "to the extent and in the manner 
provided for" in the reference bill. See also Environmental Defense 
Center v. Babbitt, 73 F.3d 867 (9th Cir. 1995); Connecticut v. 
Schweiker, 684 F.2d 979 (D.C. Cir. 1982), cert. denied, 459 U.S. 1207 
(1983). Obviously, the same result applies under a "full text" 
continuing resolution, that is, a continuing resolution that enacts 
the full text of a reference bill "to be effective as if" the 
reference bill "had been enacted into law as the regular appropriation 
Act." B-221694, Apr. 8, 1986. 

A provision in a continuing resolution using a reference bill may 
incorporate legislative history, in which event the specified item of 
legislative history will determine the controlling version of the 
reference bill. For example, an issue in American Federation of 
Government Employees v. Devine, 525 F. Supp. 250 (D.D.C. 1981), was 
whether the 1982 continuing resolution prohibited the Office of 
Personnel Management from funding coverage of therapeutic abortions in 
government health plans. The resolution funded employee health 
benefits "under the authority and conditions set forth in H.R. 4121 as 
reported to the Senate on September 22, 1981." An earlier version of 
H.R. 4121 had included a provision barring the funding of therapeutic 
abortions. However, the bill as reported to the full Senate by the 
Appropriations Committee on September 22, 1981, dropped the provision. 
Accordingly, the court held that the continuing resolution could not 
form the basis for refusing to fund therapeutic abortions in the 
plaintiff's 1982 health plan. Devine, 525 F. Supp. at 254. 

In previous years, it was also not uncommon for a continuing 
resolution to appropriate funds as provided in a particular reference 
bill at a rate for operations provided for in the conference report on 
the reference bill. See, e.g., Pub. L. No. 99-103, § 101(c), 99 Stat. 
471, 472 (Sept. 30, 1985). At a minimum, this will include items on 
which the House and Senate conferees agreed, as reflected in the 
conference report. If the resolution also incorporates the "joint 
explanatory statement" portion of the conference report, then it will 
enact those amendments reported in "technical disagreement" as well. 
See B-221694, Apr. 8, 1986; B-205523, Nov. 18, 1981; B-204449, Nov. 
18, 1981. 

3. More Restrictive Authority: 

The "more restrictive authority," as that term is used in continuing 
resolutions, is the version of a bill which gives an agency less 
discretion in obligating and disbursing funds under a certain program. 

Continuing resolutions will often appropriate funds to continue 
projects or activities at the rate provided in either the version of 
an appropriation act that has passed the House or the version that has 
passed the Senate, whichever is lower, "or under the more restrictive 
authority." Under this language, the version of the bill which 
appropriates the lesser amount of money for an activity will be 
controlling. If both versions of the bill appropriate the same amount, 
the version which gives the agency less discretion in obligating and 
disbursing funds under a program is the more restrictive authority and 
will be the reference for continuing the program under the resolution. 
B-210922, Mar. 30, 1984; B-152098, Mar. 26, 1973; B-152554, Dec. 15, 
1970. 

However, this provision may not be used to amend or nullify a 
mandatory provision of prior permanent law. To illustrate, the Federal 
Housing Administration was required by a provision of permanent law to 
appoint an Assistant Commissioner to perform certain functions. The 
position subsequently became controversial. For the first month of 
fiscal year 1954, the agency operated under a continuing resolution 
which included the "more restrictive authority" provision. Language 
abolishing the position had been contained in one version of the 
reference bill, but not both. The bill, when subsequently enacted, 
abolished the position. 

Under a strict application of the "more restrictive authority" 
provision, it could be argued that there was no authority to continue 
the employment of the Assistant Commissioner during the month covered 
by the continuing resolution. Noting that "laws are to be given a 
sensible construction where a literal application thereof would lead 
to unjust or absurd consequences, which should be avoided if a 
reasonable application is consistent with the legislative purpose," 
the Comptroller General held that the Assistant Commissioner could be 
paid his salary for the month in question. B-116566, Sept. 14, 1953. 
The decision concluded: 

"Manifestly the [more restrictive authority] language... was not 
designed to amend or nullify prior permanent law which theretofore 
required, or might thereafter require, the continuance of a specific 
project or activity during July 1953.... 

"... Accordingly, it is concluded that the words 'the lesser amount or 
the more restrictive authority' as used in [the continuing resolution] 
had reference to such funds and authority as theretofore were provided 
in appropriations for [the preceding fiscal year], and which might be 
changed, enlarged or restricted from year to year." 

In addition, continuing resolutions frequently provide that a 
provision "which by its terms is applicable to more than one 
appropriation" and which was not included in the applicable 
appropriation act for the preceding fiscal year, will not be 
applicable to funds or authority under the resolution unless it was 
included in identical form in the relevant appropriation bill as 
passed by both the House and the Senate. Thus, in 52 Comp. Gen. 71 
(1972), a provision in the House version of the 1973 Labor Department 
appropriation act prohibited the use of "funds appropriated by this 
Act" for Occupational Safety and Health Act (OSHA)[Footnote 26] 
inspections of firms employing 25 persons or less. The Senate version 
contained the identical version except that "15" was substituted for 
"25." The continuing resolution for that year contained both the "more 
restrictive authority" and the "applicable to more than one 
appropriation" provisions. The Comptroller General concluded that, 
even though the House provision was more restrictive, the OSHA 
provision did not apply to funds under the continuing resolution since 
it had not been contained in the 1972 appropriation act and by its 
terms it was applicable to more than one appropriation (i.e., it 
applied to the entire appropriation act). See also B-210922, Mar. 30, 
1984; B-142011, Aug. 6, 1969. 

For purposes of the "applicable to more than one appropriation" 
provision, GAO has construed the "applicable appropriation act for the 
preceding fiscal year" as meaning the regular appropriation act for 
the preceding year and not a supplemental. B-210922, Mar. 30, 1984. 
(The cited decision also illustrates some of the complexities 
encountered when the appropriation act for the preceding year was 
itself a continuing resolution.) 

4. Lack of Authorizing Legislation: 

In order for a government agency to carry out a program, the program 
must first be authorized by law and then funded, usually by means of 
regular appropriations. This section deals with the relationship of 
continuing resolutions to programs whose authorization has expired or 
is about to expire. The common issue is the extent to which a 
continuing resolution provides authority to continue the program after 
expiration of the underlying authorization. 

As the following discussion will reveal, there are no easy answers. 
The cases frequently involve a complex interrelationship of various 
legislative actions (or inactions) and are not susceptible to any 
meaningful formulation of simple rules. For the most part, the answer 
is primarily a question of intent, circumscribed of course by 
statutory language and aided by various rules of statutory 
construction. 

We start with a fairly straightforward case. Toward the end of fiscal 
year 1984, Congress was considering legislation (S. 2456) to establish 
a commission to study the Ukrainian famine of 1932-33. The bill passed 
the Senate but was not enacted into law before the end of the fiscal 
year. The fiscal year 1985 continuing resolution provided that "there 
are hereby appropriated $400,000 to carry out the provisions of S. 
2456, as passed by the Senate on September 21, 1984.[Footnote 27] If 
this provision were not construed as authorizing the establishment and 
operation of the commission as well as the appropriation of funds, it 
would have been absolutely meaningless. Accordingly, GAO concluded 
that the appropriation incorporated the substantive authority of S. 
2456. B-219727, July 30, 1985. The result was supported by clear and 
explicit legislative history. 

In a 1975 case, GAO held that the specific inclusion of a program in a 
continuing resolution will provide both authorization and funding to 
continue the program despite the expiration of the appropriation 
authorization legislation. Thus, for example, if the continuing 
resolution specifically states that the School Breakfast Program is to 
be continued under the resolution, the program may be continued 
although funding authorization legislation for the program expires 
prior to or during the period the resolution is in effect. 55 Comp. 
Gen. 289 (1975). The same result would follow if the intent to 
continue the program was made particularly clear in legislative 
history. 65 Comp. Gen. 318, 320-21 (1986). 

The result in 55 Comp. Gen. 289 flows from two concepts. First, the 
continuing resolution, as the later enactment, is the more recent 
expression of congressional intent. Second, if Congress can 
appropriate funds in excess of a specific ceiling in authorizing 
legislation, which it can, then it should be able to appropriate funds 
to continue a program whose funding authorization is about to expire, 
at least where the authorization of appropriations is not a legal 
prerequisite to the appropriation itself. 

However, the "rule" of 55 Comp. Gen. 289 is not an absolute and the 
result in any given case will depend on several variables. Although 
not spelled out as such in any of the decisions, the variables may 
include: the degree of specificity in the continuing resolution; the 
apparent intent of Congress with respect to the expired program; 
whether what has expired is an authorization of appropriations or the 
underlying program authority itself; and the duration of the 
continuing resolution (short-term versus full fiscal year).[Footnote 
28] 

In one case, for example, "all authority" under the Manpower 
Development and Training Act (MDTA)[Footnote 29] terminated on June 
30, 1973. The program was not specifically provided for in the 1974 
continuing resolution, and the authority in fact was not reestablished 
until enactment of the Comprehensive Employment and Training Act 
(CETA)[Footnote 30] six months later. Under these circumstances, the 
Claims Court held that, in the absence of express language in the 
continuing resolution or elsewhere, contracts entered into during the 
gap between expiration of the MDTA and enactment of CETA were without 
legal authority and did not bind the government. Consortium Venture 
Corp. v. United States, 5 Cl. Ct. 47 (1984), aff'd mem., 765 F.2d 163 
(Fed. Cir. 1985). 

In another case, recent Defense Department authorization acts, 
including the one for fiscal year 1985, had authorized a test program 
involving payment of a price differential to "labor surplus area" 
contractors. The test program amounted to an exemption from permanent 
legislation prohibiting the payment of such differentials. The 1985 
provision expired, of course, at the end of fiscal year 1985. The 1986 
continuing resolution made no specific provision for the test program 
nor was there any evidence of congressional intent to continue the 
test program under the resolution. (This lack of intent was confirmed 
when the 1986 authorization act was subsequently enacted without the 
test program provision.) GAO found that the Defense Logistics Agency's 
failure to apply the price differential in evaluating bids on a 
contract awarded under the continuing resolution (even though the 
differential had been included in the solicitation issued prior to the 
close of fiscal year 1985) was not legally objectionable. 65 Comp. 
Gen. 318 (1986). 

A more difficult case was presented in B-207186, Feb. 10, 1989. 
Congress enacted two pieces of legislation on December 22, 1987. One 
was a temporary extension of the Solar Bank, which had been scheduled 
to go out of existence on September 30, 1987. Congress had enacted 
several temporary extensions while it was considering reauthorization, 
the one in question extending the Bank's life to March 15, 1988. The 
second piece of legislation was the final continuing resolution for 
1988 which funded the government for the remainder of the fiscal year. 
The resolution included a specific appropriation of $1.5 million for 
the Solar Bank, with a 2-year period of availability. 

If the concept of 55 Comp. Gen. 289 were applied, the result would 
have been that the specific appropriation in the continuing 
resolution, in effect, reauthorized the Solar Bank as well. However, 
the "later enactment of Congress" concept has little relevance when 
both laws are enacted on the same day. In addition, in contrast to 55 
Comp. Gen. 289, there was no indication of congressional intent to 
continue the Solar Bank beyond the March 1988 expiration date. 
Therefore, GAO distinguished prior cases,[Footnote 31] found that the 
two pieces of legislation could be reconciled, and concluded that the 
resolution merely appropriated funds for the Bank to use during the 
remainder of its existence. 

Another case involving a sunset provision is 71 Comp. Gen. 378 (1992). 
The legislation establishing the United States Commission on Civil 
Rights provided for the Commission to terminate on September 30, 1991. 
During fiscal year 1991, Congress was working on the Commission's 
reauthorization and its regular fiscal year 1992 appropriation. 
Although both bills passed both houses of Congress, neither was 
enacted into law by September 30. The first continuing resolution for 
fiscal year 1992, with a cutoff date of October 29, 1991, expressly 
provided funds for activities included in the Commission's yet-
unenacted 1992 appropriations bill. It was clear from all of this that 
Congress intended the Commission to continue operating beyond 
September 30. Thus, the continuing resolution effectively suspended 
the sunset date and authorized the Commission to operate until October 
28, 1991, when the regular 1992 appropriation act was enacted, at 
which time the regular appropriation provided similar authority until 
November 26, when the reauthorization was enacted. 

Appropriation bills sometimes contain provisions malting the 
availability of the appropriations contingent upon the enactment of 
additional authorizing legislation. If a continuing resolution used a 
bill with such a provision as a reference, and if the authorizing 
legislation was not enacted, the amount contained in the appropriation 
bill, and therefore the amount appropriated by the continuing 
resolution, would be zero. To avoid this possibility, a continuing 
resolution may contain a provision suspending the effectiveness of 
such "contingency" provisions for the life of the resolution.[Footnote 
32] Such a suspension provision will be applicable only until the 
referenced appropriation bill is enacted into law. 55 Comp. Gen. at 
294. 

E. Duration: 

1. Duration of Continuing Resolution: 

Continuing resolutions generally provide that the budget authority 
provided for an activity by the resolution shall remain available 
until (a) enactment into law of a regular appropriation for the 
activity, (b) enactment of the applicable appropriation by both houses 
of Congress without provision for the activity, or (c) a fixed cutoff 
date, whichever occurs first.[Footnote 33] Once either of the first 
two conditions occurs, or the cutoff date passes, funds appropriated 
by the resolution are no longer available for obligation and new 
obligations may be incurred only if a regular appropriation is made or 
if the termination date of the resolution is extended. 

The period of availability of funds under a continuing resolution can 
be extended by Congress by amending the fixed cutoff date stated in 
the resolution. B-165731(1), Nov. 10, 1971; B-152098, Jan. 30, 1970. 
The extension may run beyond the session of Congress in which it is 
enacted. B-152554, Dec. 15, 1970. 

Thus, some fiscal years have seen a series of continuing resolutions, 
informally designated "first," "second," etc., up to "final." This 
happens as Congress extends the fixed cutoff date for short time 
periods until either all the regular appropriation acts are enacted or 
Congress determines that some or all of the remaining bills will not 
be enacted individually, in which event relevant portions of the 
resolution will continue in effect for the remainder of the fiscal 
year. 

The second condition of the standard duration provision—enactment of 
the appropriation by both houses of Congress without provision for the 
activity—will be considered to have occurred only when it is clear 
that Congress intended to terminate the activity. Thus, in B-
164031(1), Mar. 14, 1974, although regular and supplemental 
appropriation acts had been enacted without provision for a program, 
the Comptroller General decided that funds for the program were still 
available under the continuing resolution. In this case, the 
legislative history indicated that in enacting the regular 
appropriation act, Congress was providing funding for only some of the 
programs normally funded by this act and was deferring consideration 
of other programs, including the one in question. Therefore, the 
second condition was not applicable. Moreover, because supplemental 
appropriations are intended to provide funding only for new or 
additional needs, omission of the program from the supplemental did 
not trigger the second cutoff provision. 

As discussed previously, once the applicable appropriation is enacted 
into law, expenditures made under the continuing resolution are 
charged to that appropriation, except that valid obligations incurred 
under the continuing resolution in excess of the amount finally 
appropriated are charged to the account established under the 
continuing resolution. 

2. Duration of Appropriations: 

For the most part, the duration (period of obligational availability) 
of an appropriation under a short-term continuing resolution does not 
present problems. If you have, say, only 1 month to incur obligations 
under a continuing resolution, it matters little that the 
corresponding appropriation in a regular appropriation act might be a 
multiple year or no-year appropriation. Also, once the regular 
appropriation is enacted, it supersedes the continuing resolution and 
governs the period of availability. 

B-300673, July 3, 2003. Questions may arise, however, under continuing 
resolutions whose duration is the balance of the fiscal year. 

For example, the continuing resolution for fiscal year 1979 included 
the standard duration provision described above, with a cutoff date of 
September 30, 1979, the last day of the fiscal year. However, a 
provision in the Comprehensive Employment and Training Act (CETA), 29 
U.S.C. § 802(B) (1976), stated that "notwithstanding any other 
provision of law, unless enacted in specific limitation of the 
provisions of this subsection," appropriations to carry out the CETA 
program shall remain available for 2 years. Applying the principle 
that a specific provision governs over a more general one, it was held 
that funds appropriated for CETA under the continuing resolution were 
available for obligation for 2 years in accordance with the CETA 
provision. B-194063, May 4, 1979; B-115398.33, Mar. 20, 1979. 

A few years earlier, the United States District Court for the District 
of Columbia had reached the same result in a case involving grants to 
states under the Elementary and Secondary Education Act. Pennsylvania 
v. Weinberger, 367 E Supp. 1378, 1384-85 (D.D.C. 1973). The court 
stated, "it is a basic premise of statutory construction that in such 
circumstances the more specific measure ... is to be held controlling 
over the general measure where inconsistencies arise in their 
application." Id. at 1385. 

Application of the same principle produced a similar result in B-
199966, Sept. 10, 1980. The 1980 continuing resolution appropriated 
funds for foreign economic assistance loans by referencing the regular 
1980 appropriation bill which had passed the House but not the Senate. 
For that type of situation, the resolution provided for continuation 
of projects or activities "under the appropriation, fund, or authority 
granted by the one House [which had passed the bill]." The House-
passed bill gave the economic assistance loan funds a 2-year period of 
availability. The continuing resolution also included the standard 
duration provision with a cutoff date of September 30, 1980. Since the 
duration provision applied to the entire resolution whereas the 
provision applicable to the loan funds had a narrower scope, the 
latter provision was the more specific one and the loan funds were 
therefore held to be available for 2 years. See also 60 Comp. Gen. 263 
(1981) for further discussion of similar continuing resolution 
language. 

In some instances, an extended period of availability is produced by a 
specific exemption from the standard duration provision. For example, 
the 1983 continuing resolution provided foreign assistance funds 
"under the terms and conditions" set forth in the Foreign Assistance 
Appropriation Act of 1982, and further exempted that appropriation 
from the duration provision. Since under the 1982 act, appropriations 
for the African Development Fund were to remain available until 
expended, appropriations to the Fund under the continuing resolution 
were also no-year funds. B-212876, Sept. 21, 1983. In view of the 
express exemption from the duration provision, there was no need to 
apply the "specific versus general" rule because there was no 
conflict. See also B-210922, Mar. 30, 1984. 

3. Impoundment: 

The duration of a continuing resolution is relevant in determining the 
application of the Impoundment Control Act. Impoundment in the context 
of continuing resolutions was discussed in a letter to the Chairman of 
the House Budget Committee, B-205053, Dec. 31, 1981. Generally, a 
withholding from obligation of funds provided under a continuing 
resolution would constitute an impoundment. Where the continuing 
resolution runs for only part of the fiscal year, the withholding, 
even if proposed for the duration of the continuing resolution, should 
be classified as a deferral rather than a rescission. Withholding 
funds during a temporary continuing resolution is different from 
withholding them for the life of a regular annual appropriation in 
that, in the former situation, Congress is still deliberating over the 
regular funding levels. Also, deferred funds are not permanently lost 
when a continuing resolution expires if a subsequent funding measure 
is passed. 

Under this interpretation, classification as a rescission would 
presumably still be appropriate where a regular appropriation is never 
passed, the agency is operating under continuing resolution authority 
for the entire fiscal year, and the timing of a withholding is such 
that insufficient opportunity would remain to utilize the funds. See B-
115398, May 9, 1975. 

Impoundment issues under continuing resolutions may arise in other 
contexts as well. See, e.g., 64 Comp. Gen. 649 (1985) (failure to make 
funds available based on good faith disagreement over treatment of 
carryover balances in calculating rate for operations held not to 
constitute an illegal rescission); B-209676, Apr. 14, 1983 (no 
improper impoundment where funds were apportioned on basis of budget 
request although continuing resolution appropriated funds at rate to 
maintain program level, as long as apportionment was sufficient to 
maintain requisite program level). 

Chapter 8 Footnotes: 

[1] GAO, A Glossary of Terms Used in the Federal Budget Process, GAO-
05-734SP (Washington, D.C.: September 2005), at 35-36. 

[2] 4 Lawrence, First Comp. Dec. 116 (1883); 3 Lawrence, First Comp. 
Dec. 213 (1882). 

[3] For a brief historical sketch, see Library of Congress, 
Congressional Research Service, Budget Concepts and Terminology: The 
Appropriations Phase, No. GGR 74-210, ch. V (1974), at 31-32, which 
identifies what may have been the first continuing resolution, an 1876 
resolution (ch. 157, 19 Stat. 65 (June 30, 1876)) requested by 
President Grant. 

[4] Library of Congress, Congressional Research Service (CRS), The 
Congressional Appropriations Process: An Introduction, No. 97-6845 
(Dec. 6, 2004), at 15. See also CRS, Duration of Continuing 
Resolutions in Recent Years, No. RL32614 (Apr. 22, 2005); CRS, 
Continuing Appropriations Acts: Brief Overview of Recent Practices, 
No. RL30343 (Jan. 10, 2005). 

[5] In November 1995, perhaps anticipating numerous continuing 
resolutions for fiscal year 1996, for example, Congress suspended for 
the remainder of that session the requirement in 1 U.S.C. § 107 that 
the resolutions be printed on parchment for presentation to the 
President. Pub. L. No. 104-56, title II, § 201, 109 Stat. 548, 553 
(Nov. 20, 1995). 

[6] Irvin Molotsky, AU Spending Bills Completed on Time, N.Y. Times, 
Oct. 2, 1988, at 27. 

[7] TFM 2-2025 (Dec. 15, 2004). 

[8] GAO, A Glossary of Terms Used in the Federal Budget Process, GAO-
05-734SP (Washington, D.C.: September 2005), at 101. 

[9] Treasury-GAO Joint Regulations are included in Appendix II to 
Title 7 of the GAO Policy and Procedures Manual for Guidance of 
Federal Agencies (Washington, D.C.: May 18, 1993). Because of their 
nature, they are not published in the Federal Register. Some of the 
earlier ones, but not those noted in the text, were published in the 
annual "Comp. Gen." volumes. Title 7 of the Policy and Procedures 
Manual is the only GAO reference in which the regulations and 
amendments can be found together in a single location, available at 
www.gao.govispecial.pubs/ppm.html (last visited September 15, 2005). 

[10] Pub. L. No. 108-309, § 126 (first continuing resolution for 
fiscal year 2005). See also Pub. L. No. 108-84, § 112, 117 Stat. 1042, 
1044 (Sept. 30, 2003) (first continuing resolution for fiscal year 
2004). 

[11] See also Pub. L. No. 108-309, §§ 110, 111, 118 Stat. 1137, 1138-
39 (Sept. 30, 2004). Our review did not reveal any relevant 
legislative history concerning the intent of Congress in adopting 
these provisions. 

[12] For a more general discussion of apportionment, see Chapter 6, 
section C.4. 

[13] See, e.g., OMB Bulletin No. 04-05, Apportionment of the 
Continuing Resolution(s) for Fiscal Year 2005 (Sept. 30, 2004). For a 
detailed review of apportionment of funds appropriated or authority 
granted by the fiscal year 2003 continuing resolution, see B-300373, 
Dec. 20, 2002. 

[14] GAO, A Glossary of Terms Used in the Federal Budget Process, GAO-
05-734SP (Washington, D.C.: September 2005), at 21. 

[15] E.g., Pub. L. No. 108-309, § 108, 118 Stat. 1137, 1138 (Sept. 30, 
2004). Comparable provisions have been included in continuing 
resolutions for over a century See, for example, the fiscal year 1883 
continuing resolution ( Pub. L. No. 38, 22 Stat. 384 (June 30, 1882)) 
discussed in 3 Lawrence, First Comp. Dec. 213 (1882). 

[16] E.g., Pub. L. No. 108-309, § 105. 

[17] This position also follows from decisions such as B-162447, Mar. 
8, 1971, read in conjunction with decisions on the availability of 
lump-sum appropriations. Of course, if the appropriation for the 
preceding fiscal year was a line-item appropriation, then the scope of 
"project or activity" will be defined accordingly. See 66 Comp. Gen. 
484 (1987) (Special Defense Acquisition Fund, a revolving fund made 
available by annual "limitation on obligations" provisions, held a 
"project or activity" for purposes of appropriating language in a 
continuing resolution). 

[18] Pub. L. No. 93-203, 87 Stat. 839 (Dec. 28, 1973). 

[19] See GAO, A Glossary of Terms Used in the Federal Budget Process, 
GAO-05-734SP (Washington, D.C.: September 2005) at 35-36 (definition 
of "Continuing Appropriation/Continuing Resolution"). 

[20] See 19 Op. Off. Legal Counsel 278 (1995) (requester was 
proceeding from the mistaken belief that a continuing resolution 
implicitly prohibits all obligations or expenditures except those 
expressly provided for in the resolution itself; activity at issue was 
funded by a no-year appropriation). 

[21] For this exception to work, however, the previous appropriation 
must have afforded adequate authority to undertake the construction. 
See 4 Lawrence, First Comp. Dec. 116 (1883), which concluded that 
Howard University violated the Antideficiency Act while operating 
under a continuing resolution. The University undertook building 
repairs that were not authorized by the outgoing appropriation or the 
continuing resolution, and could not defend its violation by pointing 
to new authority pending (and eventually enacted) during the 
continuing resolution that would have authorized the repairs. 

[22] See, e.g., Pub. L. No. 108-309, § 104 (first continuing 
resolution for fiscal year 2005, discussed above). 

[23] Pub. L. No. 96-374, § 731, 94 Stat. 1367, 1475 (Oct. 3, 1980). 

[24] For a further discussion of the effect of appropriations riders, 
see Chapter 1, section B, and the update of that section in GAO, 
Principles of Federal Appropriations Law: Annual Update of the Third 
Edition, GAO-05-354SP (Washington, D.C.: March 2005), available at 
www.gao.gov/legal.htm (last visited September 15, 2005). 

[25] Two decisions begin on the same page, hence the variation in 
citation format. 

[26] Pub. L. No. 91-596, 84 Stat. 1590 (Dec. 29, 1970). 

[27] Pub. L. No. 98-473, § 136, 98 Stat. 1837, 1973 (Oct. 12, 1984). 

[28] See also 71 Comp. Gen. 378, 380-81 (1992): 

"While the outcome in these cases varies, they are all grounded in the 
same principle. The Congress may revive or extend an act by any form 
of words which makes clear its intention to do so. Kersten v. United 
States, 161 F.2d 337 (10th Cir. 1947), cert. denied, 331 U.S. 851. 
Furthermore, when the Congress desires to extend, amend, suspend or 
repeal a statute, it can accomplish its purpose by including the 
requisite language in an appropriations or other act of Congress. The 
whole matter depends on the intention of Congress as expressed in 
statute. United States v. Will, 449 U.S. 200, 221-222 (1980) and 
United States v. Burton, 888 F.2d 682, 685 (10th Cir. 1989)." 

[29] Pub. L. No. 87-415, 76 Stat. 23 (Mar. 15, 1962). 

[30] Pub. L. No. 93-203, 87 Stat. 839 (Dec. 28, 1973). 

[31] GAO had also applied the concept of 55 Comp. Gen. 289 in 65 Comp. 
Gen. 524 (1986), holding that a specific provision in a regular 
appropriation act permitted the continuation of an activity whose 
organic authority had expired at the end of the preceding fiscal year.
See also B-164031(3), Jan. 3, 1973. 

[32] E.g., Pub. L. No. 102-109, § 109, 105 Stat. 551, 553 (Sept. 30, 
1991) (1992 continuing resolution). 

[33] E.g., Pub. L. No. 108-309, § 107, 118 Stat. 1137, 1138 (Sept. 30, 
2004). 

[End of Chapter 8] 

Chapter 9: Liability and Relief of Accountable Officers: 

A. Introduction: 
B. General Principles: 
1. The Concepts of Liability and Relief: 
a. Liability: 
b. Surety Bonding: 
c. Relief: 
2. Who Is an Accountable Officer? 
a. Certifying Officers: 
b. Disbursing Officers: 
c. Cashiers: 
d. Collecting Officers: 
e. Other Agents and Custodians: 
3. Funds to Which Accountability Attaches: 
a. Appropriated Funds: 
(1) Imprest funds: 
(2) Flash rolls: 
(3) Travel advances: 
b. Receipts: 
c. Funds Held in Trust: 
d. Items Which Are the Equivalent of Cash: 
4. What Kinds of Events Produce Liability? 
5. Amount of Liability: 
6. Effect of Criminal Prosecution: 
a. Acquittal: 
b. Order of Restitution: 
C. Physical Loss or Deficiency: 
1. Statutory Provisions: 
a. Civilian Agencies: 
b. Military Disbursing Officers: 
2. Who Can Grant Relief? 
a. 31 U.S.C. § 3527(a): 
b. 31 U.S.C. § 3527(b): 
c. Role of Administrative Determinations: 
3. Standards for Granting Relief: 
a. Standard of Negligence: 
b. Presumption of Negligence/Burden of Proof: 
c. Actual Negligence: 
d. Proximate Cause: 
e. Unexplained Loss or Shortage: 
f. Compliance with Regulations: 
g. Losses in Shipment: 
h. Fire, Natural Disaster: 
i. Loss by Theft: 
(1) Burglary: forced entry: 
(2) Robbery: 
(3) Riot, public disturbance: 
(4) Evidence less than certain: 
(5) Embezzlement: 
j. Agency Security: 
k. Extenuating Circumstances: 
D. Illegal or Improper Payment: 
1. Disbursement and Accountability: 
a. Statutory Framework: Disbursement Under Executive Order No. 166: 
b. Automated Payment Systems: 
c. Statistical Sampling: 
d. Provisional Vouchers and Related Matters: 
e. Facsimile Signatures and Electronic Certification: 
f. GAO Audit Exceptions: 
2. Certifying Officers: 
a. Duties and Liability: 
b. Applicability of 31 U.S.C. § 3528: 
c. Relief: 
3. Disbursing Officers: 
a. Standards of Liability and Relief: 
b. Some Specific Applications: 
(1) Fraudulent travel claims: 
(2) Other cash payments fraudulently obtained: 
(3) Military separation vouchers: 
(4) Assignment of contract payments: 
(5) Improper purpose/payment beyond scope of legal authority: 
4. Check Losses: 
a. Check Cashing Operations: 
b. Duplicate Check Losses: 
c. Errors in Check Issuance Process: 
5. Statute of Limitations: 
E. Other Relief Statutes: 
1. Statutes Requiring Affirmative Action: 
a. United States Court of Federal Claims: 
b. The Legislative and Judicial Branches: 
c. Savings Bond Redemption Losses: 
2. Statutes Providing "Automatic" Relief: 
a. Waiver of Indebtedness: 
b. Compromise of Indebtedness: 
c. Foreign Exchange Transactions: 
d. Check Forgery Insurance Fund: 
e. Secretary of the Treasury: 
f. Other Statutes: 
F. Procedures: 
1. Reporting of Irregularities: 
2. Obtaining Relief: 
3. De Minimis Rule: Payments of $100 or Less: 
4. Relief versus Grievance Procedures: 
G. Collection Action: 
1. Against Recipient: 
2. Against Accountable Officer: 
H. Restitution, Reimbursement, and Restoration: 
1. Restitution and Reimbursement: 
2. Restoration: 
a. Adjustment Incident to Granting of Relief: 
b. Other Situations: 

A. Introduction: 

The concept that a person should be held accountable for funds in his 
or her care is not peculiar to the government. If you get a job as a 
cashier at your local supermarket and come up short at the end of the 
day, you will probably be forced to make up the shortage from your own 
pocket. The store manager does not have to prove the loss was your 
fault. The very fact that the money is not there is sufficient to make 
you liable. Of course, if your cash register is emptied by an armed 
robber and you are in no way implicated, you will be off the hook. 

Just like a private business enterprise, the government can lose money 
in many ways. For example, it can be physically lost, stolen, paid out 
improperly, or embezzled. Sometimes the money is recovered; often it 
is not. If government funds are lost because of some employee's 
misconduct or carelessness, and if the responsible employee is not 
required to make up the loss, the result is that the taxpayer ends up 
paying twice for the same thing, or paying for nothing. 

When you accept the job at the supermarket, you do so knowing 
perfectly well that you will be potentially liable for losses. There 
is no reason why the government should operate any differently. If 
anything, there is a stronger case for the liability of government 
employees since they are, in effect, trustees for the taxpayers 
(themselves included). As the Comptroller General once stated, "A 
special trust responsibility exists with regard to public monies and 
with this special trust goes personal financial responsibility." B-
161457, Oct. 30, 1969. This chapter will explore these concepts—the 
liability and relief of government officers and employees who are 
entrusted with public funds or who have certain specific 
responsibilities in their disbursement. In government language, they 
are called "accountable officers."[Footnote 1] 

B. General Principles: 

1. The Concepts of Liability and Relief: 

a. Liability: 

The concept of accountability for public funds in the form of strict 
personal liability evolved during the nineteenth century. Its origins 
can be traced to a number of congressional enactments, some dating 
back to the Nation's infancy. The legislation establishing the 
Department of the Treasury in 1789 included a provision requiring the 
Comptroller of the Treasury to "direct prosecutions for all 
delinquencies of officers of the revenue.[Footnote 2] A few years 
later, in 1795, Congress authorized the Comptroller to require "any 
person who has received monies for which he is accountable to the 
United States" to render "all his accounts and vouchers, for the 
expenditure of the said monies," and to commence suit against anyone 
failing to do so.[Footnote 3] 

In 1846, Congress mandated that all government officials safeguard 
public funds in their custody. The statute provided that: 

"all public officers of whatsoever character, be, and they are hereby, 
required to keep safely, without loaning, using, depositing in banks, 
or exchanging for other funds than as allowed by this act, all the 
public money collected by them, or otherwise at any time placed in 
their possession and custody, till the same is ordered, by the proper 
department or officer of the government, to be transferred or paid out 
...." 

Act of August 6, 1846, ch. 90, § 6, 9 Stat. 59, 60. This statute still 
exists, in modernized form, at 31 U.S.C. § 3302(a). 
	
These are civil provisions. Congress also addressed fiscal 
accountability in a variety of criminal statutes. An important one is 
the Act of June 14, 1866, ch. 122, 14 Stat. 64, which declared it to 
be the duty of disbursing officers to use public funds entrusted to 
them "only as ... required for payments to be made ... in pursuance of 
law," and made it a felony for a disbursing officer to, among other 
things, "apply any portion of the public money intrusted to him" for 
his own use or for any purpose not prescribed by law.[Footnote 4] 

The strict liability of accountable officers became firmly established 
in a series of early Supreme Court decisions. In 1845, the Court 
upheld liability in a case where money had been stolen with no fault 
or negligence on the part of the accountable officer. In an often-
quoted passage, the Court said: 

"Public policy requires that every depositary of the public money 
should be held to a strict accountability. Not only that he should 
exercise the highest degree of vigilance, but that 'he should keep 
safely' the moneys which come to his hands. Any relaxation of this 
condition would open a door to frauds, which might be practiced with 
impunity. A depositary would have nothing more to do than to lay his 
plans and arrange his proofs, so as to establish his loss, without 
laches on his part. Let such a principle be applied to our 
postmasters, collectors of the customs, receivers of public moneys, 
and others who receive more or less of the public funds, and what 
losses might not be anticipated by the public?" 

United States v. Prescott, 44 U.S. (3 How.) 578, 588-89 (1845). While 
some might view this passage as unduly cynical of human nature, it 
makes the important point that the laws relating to the liability and 
relief of accountable officers are intended not only to give the 
officers incentive to guard against theft by others, but also to 
protect against dishonesty by the officers themselves. 

An 1872 case, United States v. Thomas, 82 U.S. (15 Wall.) 337, 
recognized that the liability announced in Prescott, while strict, was 
not absolute. In that case, the Court refused to hold a customs 
official liable for funds which had been forcibly taken by Confederate 
forces during the Civil War. 

In formulating its conclusion, the Court recognized two exceptions to 
the strict liability rule: 

"No rule of public policy requires an officer to account for moneys 
which have been destroyed by an overruling necessity, or taken from 
him by a public enemy, without any fault or neglect on his part." 

Id. at 352. The exceptions, however, are limited. In Smythe v. United 
States, 188 U.S. 156 (1903), the Court reviewed its precedents, 
including Prescott and Thomas, and upheld the liability of a Mint 
official for funds that had been destroyed by fire, finding the loss 
attributable neither to "overruling necessity" nor to a public enemy. 

The standard that has evolved from the cases and statutes noted is one 
of strict liability. It is often said that an accountable officer is, 
in effect, an "insurer" of the funds in his or her charge. E.g., B-
258357, Jan. 3, 1996; 64 Comp. Gen. 303, 304 (1985); 54 Comp. Gen. 
112, 114 (1974); 48 Comp. Gen. 566, 567 (1969); 6 Comp. Gen. 404, 406 
(1926). See also United States v. Heller, 1 F. Supp. 1, 6 (D. Md. 
1932). The liability is automatic and arises by operation of law at 
the moment a physical loss occurs or an erroneous payment is made. 
E.g., B-291001, Dec. 23, 2002; 70 Comp. Gen. 12, 14 (1990); 54 Comp. 
Gen. at 114. 

In addition to the applicable statutory provisions, courts have 
sometimes cited public policy considerations as a basis for an 
accountable officer's strict liability. E.g., Prescott, 44 U.S. at 587-
88 ("The liability of the defendant ... arises out of ... principles 
which are founded upon public policy"); Heller, 1 F. Supp. at 6 
(strict liability "is imposed as a matter of public policy"). 

As discussed in section B.2 of this chapter, accountable officer 
liability does not attach to individuals who are not accountable 
officers even if they played a part—even a crucial part—in causing an 
improper payment. By the same token, an accountable officer's 
liability is not diminished because other individuals induced—or even 
ordered—the improper payment. For example, in B-271021, Sept. 18, 
1996, an official of the Equal Employment Opportunity Commission 
(EEOC) submitted a memorandum to the director of an EEOC district 
office asking the district director to provide a travel advance in 
order to enable a nongovernment witness to appear in an agency 
proceeding. The official concluded his request as follows: "If there 
is a subsequent determination that the funds should not have been 
disbursed for the aforementioned purpose, I will assume liability for 
repayment of the funds." The district director ordered the travel 
advance to be made; his order was passed on to an accountable officer, 
Mr. Guthrie, who complied with it and issued the travel advance. EEOC 
headquarters later determined that the payment was unauthorized and 
disallowed it. GAO affirmed the disallowance, stating: 

"The fact that Mr. Guthrie may have received instructions from 
superiors to make the improper payment does not relieve him of 
responsibility for the deficiency in his account resulting from the 
improper payment. See 55 Comp. Gen. 297 (1975); 49 Comp. Gen. 38 
(1969)." 

B-271021 at 4. The other EEOC official's statement offering to assume 
liability if the payment proved to be erroneous was equally unavailing 
to Mr. Guthrie. The decision observed: 

"This statement ... has no effect on the liability of Mr. Guthrie for 
the deficiency in his account, which is fixed by statute and 
regulation. The government, accordingly, need look no further than Mr. 
Guthrie for restitution of the deficiency." 

Id. at 5. 

Similarly, a long line of GAO decisions holds that an accountable 
officer is liable even where his or her subordinates actually made the 
improper payment. See, e.g., B-274364, B-276306, Apr. 23, 1997; B-
260369, June 5, 1995; B-241019.2, Feb. 7, 1992; B-246418, Feb. 7, 
1992, and decisions cited.[Footnote 5] As these decisions point out, 
however, relief from liability is appropriate where the supervising 
accountable officer maintained and ensured effective implementation of 
an adequate system of procedures and controls to avoid errors. 

b. Surety Bonding: 

The early cases also based liability on the accountable officer's 
bond. Prior to 1972, the fidelity bonding of accountable officers was 
required by law. 

See, e.g., 22 Comp. Gen. 48 (1942); 21 Comp. Gen. 976 (1942). As an 
examination of the statement of the case in decisions such as United 
States v. Prescott, 44 U.S. (3 How.) 578 (1845), United States v. 
Thomas, 82 U.S. (15 Wall.) 337 (1872), and Smythe v. United States, 
188 U.S. 156 (1903), demonstrates, the terms of the bond were very 
similar to, and in fact were derived from, the 1846 "keep safely" 
legislation quoted above. Thus, while the bond gave the government a 
more certain means of recovery, it did not impose upon accountable 
officers any duties that were not already required by statute. 
[Footnote 6] 

In a 1962 report, GAO concluded that bonding was not cost-effective, 
[Footnote 7] and recommended legislation to repeal the bonding 
requirement. GAO, Review of the Bonding Program for Employees of the 
Federal Government, B-8201 (Washington, D.C.: Mar. 29, 1962). Congress 
repealed the requirement in 1972, and accountable officers are no 
longer bonded. Indeed, 31 U.S.C. § 9302 generally prohibits federal 
agencies from requiring or obtaining surety bonds to cover their 
officers and employees in carrying out official duties. The last 
sentence of 31 U.S.C. § 9302 specifically states that the prohibition 
against surety bonds "does not affect the personal financial 
liability" of individual officers or employees. Thus elimination of 
the bonding requirement has no effect on the legal liability of 
accountable officers. 54 Comp. Gen. 112 (1974); B-191440, May 25, 1979. 

c. Relief: 

The early cases and statutes previously noted made no mention of 
relief from liability.[Footnote 8] "Relief' in this context means an 
action, taken by someone with the legal authority to do so, which 
absolves an accountable officer from liability for a loss. Prior to 
the World War II period, with limited exceptions for certain 
accountable officers of the armed forces, an accountable officer had 
but two relief options available. First, a disbursing officer could 
bring an action in what was then the Court of Claims (now the United 
States Court of Federal Claims) under 28 U.S.C. § 2512.[Footnote 9] Of 
course, the officer would probably need legal representation and would 
incur other expenses, none of which were reimbursable. Second, and 
this became the most common approach, was private relief legislation, 
a burdensome process for amounts which were often relatively small. 
There was no mechanism for providing relief at the administrative 
level, however meritorious the case. 4 Comp. Gen. 409 (1924); 27 Comp. 
Dec. 328 (1920). 

Starting in 1941, Congress enacted a series of relief statutes, and 
there is now a comprehensive statutory scheme for the administrative 
relief of accountable officers who are found to be without fault. The 
major portion of this chapter deals with the application of this 
legislation. 

It is important to distinguish between liability and relief. It is not 
the denial of relief that makes an accountable officer liable. As 
noted previously, the basic legal liability of an accountable officer 
arises automatically by virtue of the loss and is not affected by any 
lack of fault or negligence on the officer's part. Relief is a 
separate process and may take lack of fault into consideration to the 
extent authorized by the governing statute.[Footnote 10] B-291001, 
Dec. 23, 2002; 54 Comp. Gen. 112 (1974); B-167126, Aug. 28, 1978. 

2. Who Is an Accountable Officer? 

An accountable officer is any government officer or employee who by 
reason of his or her employment is responsible for or has custody of 
government funds. B-288163, June 4, 2002; 62 Comp. Gen. 476, 479 
(1983); 59 Comp. Gen. 113, 114 (1979); B-257068, Oct. 22, 1994; B-
188894, Sept. 29, 1977. Accountable officers encompass such officials 
as certifying officers, disbursing officers, collecting officers, and 
other employees who by virtue of their employment have custody of 
government funds. 

Clearly, the relevant statutory provisions are the first place one 
looks for the source of authority conferring the status of 
"accountable officer" and establishing the responsibilities and 
liabilities that go with it. Does this leave any room for agencies to 
create "accountable officers" by administrative action? Until 
recently, GAO decisions indicated that agencies could impose 
accountable officer status and liability so long as they did so by 
specific regulation. See B-247563.3, Apr. 5, 1996; B-260369, June 15, 
1995; 72 Comp. Gen. 49, 52 (1992); B-241856, Sept. 23, 1992, and 
decisions cited. These decisions reasoned that such liability, duly 
imposed by regulation, could be regarded as part of the employee's 
"employment contract." However, in B-280764, May 4, 2000, GAO 
reconsidered its position and held that accountable officer status and 
liability can only be created by statute. The 2000 decision overruled 
prior inconsistent decisions.[Footnote 11] 

The decision in B-280764 concerned a Defense Department regulation 
that authorized the Department's certifying officers to designate as 
"accountable officials" certain employees engaged in developing, 
verifying, approving, and processing salary payments. Specifically, 
the regulation defined "accountable officials" as "DOD military and 
civilian personnel, who are designated in writing and not otherwise 
accountable under applicable law, who provide source information, data 
or service ... to a certifying or disbursing officer in support of the 
payment process." Id. at 3. The regulation further provided that these 
employees would be pecuniarily liable for erroneous payments resulting 
from negligence in performing their duties. Id. 

In analyzing the validity of the regulation in B-280764, GAO invoked 
the "unassailable proposition" that the federal employment 
relationship is primarily governed by statute rather than contract or 
common law concepts, and that this is equally true when it comes to 
disciplining or penalizing employees. Id. at 3. In this regard, the 
decision cited a number of judicial opinions, including Bush, v. 
Lucas, 462 U.S. 367 (1983); United States v. Gilman, 347 U.S. 507 
(1954); and United States v. Standard Oil Co., 332 U.S. 301 (1947). 
Applying these principles, GAO concluded that the Defense Department 
regulation could not stand since it lacked the necessary statutory 
authorization: 

"Here, as in the cases noted above, Congress has not spoken to the 
issue of the liability of government employees who provide information 
to certifying officers that they rely on when performing their 
statutory function.... Yet Congress has clearly legislated in detail 
on many features of the certifying and disbursing function as well as 
the government's employer-employee relationship. With respect to the 
certifying and disbursing function, Congress has specifically provided 
for the personal pecuniary liability of certifying and disbursing 
officers, but, significantly, has not extended liability beyond these 
officers to those governmental employees whose work supports these 
functions.... Pecuniary liability for negligent conduct, 
administratively imposed, is no less a penalty than would be an 
employee's judicially created obligation to indemnify the government 
for losses resulting from his negligent conduct. As noted above, the 
Supreme Court counseled in Gilman, Standard Oil Co. and Bush, v. Lucas 
that these issues are for Congress to resolve. We think the same holds 
true for administrative extensions of personal liability beyond the 
existing statutory parameters." 

B-280764, May 4, 2000, at 5-6 (footnotes omitted). 

In B-280764, GAO did not question the merits of extending 
accountability and potential pecuniary liability to more Defense 
Department employees, only the means of accomplishing that objective. 
In 2002, Congress added a new section 2773a to title 10, United States 
Code, which supplied the Department with the requisite statutory 
authority to designate additional accountable officials.[Footnote 12] 

Certifying officers play a significant role in the accountability for 
public funds. A certifying officer is a government officer or employee 
whose job is or includes certifying vouchers (including voucher 
schedules or invoices used as vouchers) for payment. B-280764, May 4, 
2000. A certifying officer differs from other accountable officers in 
one key respect: the certifying officer has no public funds in his or 
her physical custody. Rather, accountability is statutorily prescribed 
because of the nature of the certifying function. A certifying 
officer's liability, discussed in detail later in this chapter, is 
established by 31 U.S.C. § 3528. In brief, certifying officers are 
responsible for the legality of proposed payments and are liable for 
the amount of illegal or improper payments resulting from their 
certifications. 

Prior to enactment of the National Defense Authorization Act for 
Fiscal Year 1996, Pub. L. No. 104-106, 110 Stat. 186 (Feb. 10, 1996), 
the military departments were subject to a different system of 
accountability. The certifying officer provisions in section 3528 of 
title 31 of the United States Code did not apply to them. See 31 
U.S.C. § 3528(d) (1994). Instead, the military departments operated 
under a system of subordinate and supervisory disbursing officers. 
Supervisory disbursing officers (often called "finance and accounting 
officers") had responsibility and liability for the correctness of 
payments similar to that of a certifying officer in a civilian agency. 
See B-266001, May 1, 1996, for a general description of this system. 
Section 913 of Public Law 104-106 amended various provisions of titles 
10, 31, and 37 of the United States Code to change the system of 
accountability of the military departments. Among other things,
section 913 authorized the designation and appointment of certifying 
officers within the military departments. The purpose of this 
authorization was to strengthen internal controls within the military 
departments by providing a separation of duties between officials who 
authorized payments (certifying officers) and those who made payments 
(disbursing officers), thereby placing the military departments more 
in line with financial procedures in the civilian agencies. S. Rep. 
No. 104-112, at 279 (1995). 

A great many government officials make official "certifications" of 
one type or another, but this does not make them certifying officers 
for purposes of accountability and liability. E.g., B-247563.4, Dec. 
11, 1996 (voucher auditors who "certified" invoices for payment by 
accountable officers did not thereby become authorized certifying 
officers themselves). As discussed above, this status can only be 
conferred by statute. Thus, the concepts of accountability and relief 
discussed in this chapter apply only to "authorized certifying 
officers" who certify vouchers upon which moneys are to be paid out by 
disbursing officers in discharging a debt or obligation of the 
government. 23 Comp. Gen. 953 (1944). This may in appropriate 
circumstances include the head of a department or agency. 31 U.S.C.
§ 3325(a)(1); 21 Comp. Gen. 976, 979 (1942). An authorized certifying 
officer must be so designated in writing. 31 U.S.C. § 3325(a)(1); I 
TFM § 4-1140 (Aug. 18, 1997). 

Thus, an employee who "certified" overtime assignments in the sense of 
a timekeeper verifying that employees worked the hours of overtime 
claimed could not be held liable for resulting overpayments under an 
accountable officer theory. B-197109, Mar. 24, 1980. The same approach 
applies to various post-certification administrative actions, the rule 
being that once a voucher has been duly certified by an authorized 
official, subsequent administrative processing does not constitute 
certification for purposes of 31 U.S.C. § 3528. 55 Comp. Gen. 388, 390 
(1975). For example, the Comptroller General has held that 31 U.S.C. § 
3528 does not apply to an "approving officer" who approves vouchers 
after they have been duly certified. 21 Comp. Gen. 841 (1942). 

b. Disbursing Officers: 

A disbursing officer is an officer or employee of a federal department 
or agency, civilian or military, designated to disburse moneys and 
render accounts in accordance with laws and regulations governing the 
disbursement of public funds. The term is essentially self-defining. 
As one court has stated: 

"We do not find the term 'disbursing officer' statutorily defined, 
probably because it is self-definitive. It can mean nothing except an 
officer who is authorized to disburse funds of the United States." 

Romney v. United States, 167 F.2d 521, 526 (D.C. Cir.), cert. denied, 
334 U.S. 847 (1948). 

Whether an employee is a disbursing officer depends more on the nature 
of the person's duties than on the title of his or her position. In 
some cases, the job title will be "disbursing officer." This is the 
title for the disbursing officers of the Treasury Department who 
disburse funds for most civilian agencies under 31 U.S.C. § 3321. For 
the military departments, which generally do their own disbursing, the 
title may be "finance and accounting officer." As a general 
proposition, any employee to whom public funds are entrusted for the 
purpose of making payments from those funds will be regarded as a 
disbursing officer. See B-151156, Dec. 30, 1963. 

There may be more than one disbursing officer for a given transaction. 
Military disbursing operations, at least as they existed prior to 
enactment of the National Defense Authorization Act for Fiscal Year 
1996,[Footnote 13] provide an example. The account was often held in 
the name of a supervisory official such as a Finance and Accounting 
Officer, with the actual payment made by some subordinate (agent, 
cashier, deputy, etc.). Both were regarded as disbursing officers for 
purposes of liability and relief although, as we will discuss later, 
the standards for relief differ. E.g., B-261312, Feb. 5, 1995;
62 Comp. Gen. 476, 479-80 (1983); B-248532, Oct. 26, 1992; B-245127,
Sept. 18, 1991; B-240280, May 22, 1991. The principle of joint 
liability in the case of multiple disbursing officers applies outside 
the military departments as well. See B-288163, June 4, 2002 (clerk 
and deputy clerk of a bankruptcy court). 

c. Cashiers: 

A cashier is a federal officer or employee who has been designated as 
a cashier by an official delegated authority to make such designations 
and who is thereby authorized to perform limited cash disbursing 
functions or other cash operations. Department of the Treasury 
Financial Management Service, Manual of Procedures and Instructions 
for Cashiers (hereafter Cashier's Manual), § IV (April 2001), at 4. 
Cashiers are designated in writing. Id. § DI, at 3 (cashier is 
appointed by completing a specified form). 

Cashiers who are authorized to make payments from funds advanced to 
them are regarded as a category of disbursing officer. They deal 
primarily with petty cash funds known as "imprest funds.[Footnote 14] 
Cashiers outside the military departments exercise disbursing 
functions pursuant to a delegation of authority from the Secretary of 
the Treasury under 31 U.S.C. § 3321(b). Cashier's Manual, § II, at 2. 
With respect to disbursing functions under 31 U.S.C. § 3321, cashiers 
are divided into five categories: (1) Class A Cashier (may not advance 
imprest funds to another cashier except to an alternate); (2) Class B 
Cashier (may advance imprest funds to alternate or subcashier); (3) 
Class D Cashier (receives funds solely for change-making purposes); 
(4) Subcashier (may receive imprest funds from a Class B or D 
cashier); and (5) Alternate to a Cashier or Subcashier (functions 
during short absences of the cashier but may act simultaneously if 
required by workload). Cashier's Manual, § IV, at 4; § V, at 12-13; 
App. 1, at 16-17. 

Cashiers are personally liable for any loss or shortage of funds in 
their custody unless relieved by proper authority. Like other 
accountable officers, they are regarded as "insurers" and are subject 
to strict liability. B-258357, Jan. 3, 1996. Further discussion of the 
role and responsibilities of cashiers may be found in sections IV and 
V of the Cashier's Manual. 

For the most part, a cashier will be operating with funds advanced by 
his or her own employing agency. In some situations, however, such as 
an authorized interagency agreement, the funds may be advanced by 
another agency. Liability and relief are the same in either case. 65 
Comp. Gen. 666, 675-77 (1986). 

d. Collecting Officers: 

Collecting officers are those who receive or collect money for the 
government, such as Internal Revenue collectors or Customs collectors. 
Collecting officers are accountable for all money collected. E.g., 59 
Comp. Gen. 113, 114 (1979); 3 Comp. Gen. 403 (1924); 1 Comp. Dec. 191 
(1895); B-201673 et al., Sept. 23, 1982. For example, an Internal 
Revenue collector is responsible for the physical safety of taxes 
collected, must pay over to the government all taxes collected, and 
must make good any money lost or stolen while in his or her custody 
unless relieved. E.g., 60 Comp. Gen. 674 (1981). However, under a 
lockbox arrangement whereby tax payments are mailed to a financial 
institution at a post office box and then wired to a Treasury account, 
Internal Revenue Service officials are not accountable for funds in 
the possession of the financial institution since they do not gain 
custody or control over those funds. B-223911, Feb. 24, 1987. 

The clerk of a bankruptcy court, if one has been appointed under 28 
U.S.C. § 156(b), is the accountable officer with respect to fees paid 
to the court, as prescribed by 28 U.S.C. § 1930, by parties commencing 
a case under the Bankruptcy Code. 28 U.S.C. § 156(f). This provision, 
added in 1986, essentially codified the result of two GAO decisions 
issued the previous year, 64 Comp. Gen. 535 (1985) and B-217236, May 
22, 1985. See also B-288163, June 4, 2002, for a more recent decision 
following the same approach. 

In some situations, certain types of receipts may be collected by a 
contractor. Since the contractor is not a government officer or 
employee, the various accountable officer statutes discussed 
throughout this chapter do not apply, and the contractor's liability 
is governed by the terms of the contract. For example, a parking 
service contract with the General Services Administration required the 
contractor to collect parking fees at certain government buildings and 
to remit those fees to GSA on a daily basis. One day, instead of 
remitting the receipts, an official of the contractor took the money 
home in a paper bag and claimed to have been robbed in a parking lot 
near her residence. When GSA withheld the amount of the loss from 
contract payments, the contractor tried to argue that the risk of loss 
should fall upon the government. The Claims Court disagreed. Since the 
contract terms were clear and the contractor failed to comply, the 
contractor was held responsible for the loss. Miracle Contractors, 
Inc. v. United States, 5 CL Ct. 466 (1984). 

The Department of Agriculture has statutory authority to use 
volunteers to collect user fees in national forests. The volunteers, 
private individuals, are to be bonded, with the cost of the bonds paid 
by the Department. 16 U.S.C. § 4601-6a(k). In 68 Comp. Gen. 470 
(1989), GAO concurred with the Department that the volunteers could be 
regarded as agents of the Forest Service and, as such, eligible for 
relief for non-negligent losses. The practical significance of this 
decision is that it would be difficult to recruit volunteers if they 
faced potential liability for non-negligent losses, a possibility that 
would exist even under a surety bond. Id. at 471. 

e. Other Agents and Custodians: 

Officers and employees who do not fit into any of the preceding 
categories, and who may not even be directly involved in government 
fiscal operations, are occasionally given custody of federal funds and 
thereby become accountable officers for the funds placed in their 
charge. Note in this connection that the "safekeeping" mandate of 31 
U.S.C. § 3302(a) (made unmistakably clear by reference to the original 
1846 language quoted in section B.1.a of this chapter) applies to any 
government employee, regardless of job description, to whom public 
funds are entrusted in connection with the performance of government 
business. See, e.g., B-170012, Feb. 3, 1972. 

Examples of employees in this general custodial category include: a 
messenger sent to the bank to cash checks, B-226695, May 26, 1987; a 
Department of Energy special counsel with control over petroleum 
overcharge refunds, B-200170, Apr. 1, 1981; State Department employees 
responsible for packaging and shipping funds to an overseas embassy, B-
193830, Oct. 1, 1979; a special messenger delivering cash to another 
location, B-188413, June 30, 1977; and an officer in charge of a 
laundry operation on an Army base who had been advanced public funds 
to be held as a change fund, B-155149, Oct. 21, 1964. 

As with disbursing officers, there may be more than one accountable 
officer in a given case, and the concept of accountability is not 
limited to the person in whose name the account is officially held nor 
is it limited to the person or persons for whom relief is officially 
requested. For example, accounts in the regional offices of the U.S. 
Customs Service are typically held in the name of the Regional 
Commissioner. While the Regional Commissioner is therefore an 
accountable officer with respect to that account, subordinate 
employees who actually handle the funds are also accountable officers. 
B-197324, Mar. 7, 1980; B-193673, May 25, 1979. The same principle 
applies to the various service centers of the Internal Revenue 
Service. E.g., 60 Comp. Gen. 674 (1981). 

As demonstrated by the Customs and Internal Revenue Service 
situations, as well as the many cases involving military finance and 
accounting officers, a supervisory official will be an accountable 
officer if that official has actual custody of public funds, or if the 
account is held in the official's name, regardless of who has physical 
custody. B-271017, Aug. 12, 1996. Absent these factors, however, a 
supervisor is not an accountable officer and does not become one 
merely because he or she supervises one. E.g., B-266245, Oct. 24, 
1996; 72 Comp. Gen. 49, 51-52 (1992); B-214286, July 20, 1984; B-
194782, Aug. 13, 1979.[Footnote 15] 

In each case, it is necessary to examine the particular facts and 
circumstances to determine who had responsibility for or custody of 
the funds during the relevant stages of the occurrence or transaction. 
In B-193830, Oct. 1, 1979, money shipped from the State Department to 
the American Embassy in Paraguay never reached its destination. While 
the funds were chargeable to the account of the Class B cashier at the 
Embassy, the State Department employees responsible for packaging and 
shipping the funds were also accountable officers with respect to that 
transaction. In another case, a new Class B cashier had been 
recommended at a Peace Corps office in Western Samoa, and had in fact 
been doing the job, but his official designation was not made until 
after the loss in question. Since the new cashier, even though not yet 
formally designated, had possession of the funds at the time of the 
loss, he was an accountable officer. However, since the former cashier 
retained responsibility for the imprest fund until formally replaced, 
he too was an accountable officer. B-188881, May 8, 1978. 

In sum, any government officer or employee who physically handles 
government funds, even if only occasionally, is accountable for those 
funds while in his or her custody. 

It may be impossible, in rare cases, to specify exactly who the proper 
accountable officer is. For example, the Drug Enforcement 
Administration used a flash roll of 650 $100 bills and discovered that 
15 bills had been replaced by counterfeits scattered throughout the 
roll. (The "roll" was actually a number of stacks.) The roll had been 
used in a number of investigations and in each instance, the 
transactions (transfers from cashier to investigators, returns to 
cashier, transfers between different groups of investigators) were 
recorded on receipts and the money was counted. While it was thus 
possible to determine precisely who had the roll on any given day, 
there was no way to determine when the substitution took place and 
hence to establish to whom the loss should be attributed. B-191891, 
June 16, 1980. See also B-288284.2, Mar. 7, 2003 ("The lack of a paper 
trail makes assignment of responsibility for the improper payment 
impossible. In situations like this, where there is no basis for 
attributing a loss or improper payment to one particular individual, 
we have determined that no one can be held liable."); B-235368, Apr. 
19, 1991 ("Failure to follow ... procedures for transferring the fund 
to the alternate cashier makes assignment of responsibility for the 
loss impossible; there is no audit trail permitting placement of 
accountability, and no individual had exclusive control over the 
fund."). 

3. Funds to Which Accountability Attaches: 

a. Appropriated Funds: 

When we talk about the liability of accountable officers, we 
deliberately use the broad term "public funds." As a general 
proposition, for purposes of accountability, "public funds" consist of 
three categories: appropriated funds, funds received by the government 
from nongovernmental sources, and funds held in trust. It is important 
to emphasize that when we refer to certain funds as "nonaccountable" 
in the course of this discussion, all we mean is that the funds are 
not subject to the laws governing the liability and relief of 
accountable officers. Liability for losses may still attach on some 
other basis. 

Appropriated funds are accountable funds. The funds may be in the 
Treasury, which is where most appropriated funds remain pending 
disbursement, or they may be in the form of cash advanced to a 
government officer or employee for some authorized purpose. 

(1) Imprest funds: 

As noted previously, the definitions of the various types of cashier 
refer primarily to the use of "imprest funds." An imprest fund is 
essentially a petty cash fund. More specifically, it is a fixed-cash 
fund (i.e., a fixed dollar amount) advanced to a cashier for cash 
disbursements or other cash requirement purposes as specifically 
authorized. An imprest fund may be either a stationary fund, such as a 
change-making fund, or a revolving fund. Department of the Treasury 
Financial Management Service, Manual of Procedures and Instructions 
for Cashiers (hereafter Cashier's Manual), App. 1 (April 2001), at 17 
(definition of "imprest fund"). 

Historically, imprest funds were commonly used for such things as 
small purchases, travel advances, and authorized emergency salary 
payments. On November 9, 1999, however, the Treasury Department's 
Financial Management Service issued a policy directive that required 
federal agencies to eliminate imprest funds by October 1, 2001, except 
for certain waived payments.[Footnote 16] According to the directive's 
preamble, the main impetus for eliminating imprest funds was the 
strong preference for making payments by electronic funds transfer 
(EFT). Specifically, the National Performance Review had issued a 
report recommending the elimination of imprest funds in favor of using 
EFT transactions.[Footnote 17] Furthermore, the Debt Collection 
Improvement Act of 1996 generally mandated the use of EFT payments as 
of January 1, 1999, subject to waiver by the Secretary of the Treasury 
under certain circumstances.[Footnote 18] 

Under the Treasury policy directive, two conditions must be met in 
order for imprest funds to be used after October 1, 2001. First, the 
use of funds must qualify for waiver of the statutory prohibition 
against non-EFT payments under standards prescribed in 31 C.F.R. § 
208.4. Second, the payment must meet additional standards for waiver 
specified in the policy directive. Given the waiver authorities, 
imprest funds have not been completely eliminated. Thus, the 
discussion that follows retains some relevance. 

Current guidance on the use of imprest funds is contained primarily in 
the Cashier's Manual and in the Federal Acquisition Regulation (FAR),
48 C.F.R. §§ 13.305-1-13.305-4. Agencies using imprest funds are 
required to issue their own implementing regulations as well. FAR, 48 
C.F.R. § 13.305-2(c). Except to the extent specified in an agency's 
own regulations (e.g., B-220466 et al., Dec. 9, 1986), there are no 
special subject matter limitations on the kinds of services payable 
from imprest funds. 65 Comp. Gen. 806 (1986); B-242412, July 22, 1991. 
Of course, like any other appropriated funds, imprest funds may not be 
used for a purpose that is not authorized under the applicable 
appropriation. B-243411, July 30, 1991 (imprest fund not available for 
purchase of electric shoe polisher). 

Imprest funds of the revolving type are replenished to the fixed 
amount as spent or used. As replenishments are needed, replenishment 
vouchers are submitted through the certifying officer to the 
disbursing officer. Replenishment vouchers must be supported by 
receipts or other evidence of the expenditures. 

At any given time, an imprest fund may consist of cash, uncashed 
government checks, and other documents such as unpaid reimbursement 
vouchers, sales slips, invoices, or other receipts for cash payments. 
An imprest fund cashier must at all times be able to account for the 
full amount of the fund. Cashier's Manual, § IV at 8. For example, if 
a cash box containing a $1,000 imprest fund disappears, and at the 
time of disappearance the box contained $500 in cash and $500 in 
receipts for which reimbursement vouchers had not yet been issued, the 
loss to the government is the full $1,000 and the cashier is 
accountable for that full amount. A cashier's failure to keep adequate 
records, thus making proper reconciliation impossible, is negligence. 
B-189084, Jan. 15, 1980. 

Loss of a replenishment check before it reaches the cashier is not a 
situation requiring relief of the cashier. The proper procedure in 
such a situation is to report the loss to the disbursing office that 
issued the check to obtain a replacement. B-203025, Oct. 30, 1981. 

If it is in the government's interests, a checking account may be set 
up in a private bank for imprest fund disbursements as long as 
adequate control procedures are developed. B-117566, Apr. 29, 1959. 
Use of depositary accounts must be approved by the agency head or 
designee and is authorized only for cash withdrawal transactions. 
Cashier's Manual, § IV at 10-11. The account may be interest-bearing, 
in which event any interest earned must be deposited in the Treasury 
as miscellaneous receipts. Id. at 11. 

The method of imprest fund accountability changed starting with fiscal 
year 1985. Prior to that time, funds advanced to cashiers by Treasury 
disbursing officers were not "charged" to the agency's appropriations 
at the time of the advance but were carried on the disbursing 
officers' records of accountability. The cashiers were regarded as 
agents of the disbursing officers. In fact, it was common to refer to 
cashiers as "agent cashiers." E.g., A-89775, Mar. 21, 1945. Charges 
were made to the applicable appropriation or fund accounts only when 
replenishment checks were issued. Relief requests had to be submitted 
through the Treasury's Chief Disbursing Officer. 

In 1983, the Treasury Department proposed removing imprest fund 
advances from the disbursing officers' accountability inasmuch as the 
transactions were beyond the disbursing officers' control. GAO 
concurred. B-212819-0.M., May 25, 1984. The current procedures are 
discussed in 70 Comp. Gen. 481 (1991). In brief, the charge to the 
agency's appropriation is now made at the time of the initial advance. 
However, since the advance does not qualify as an obligation under 31 
U.S.C. § 1501, the charge must be in the form of a "commitment" or 
"reservation." In general, the actual obligation occurs when the 
advance is used and the cashier seeks replenishment. The preliminary 
charge is necessary to protect against violating the Antideficiency 
Act. Except for certain procedural matters (relief requests are no 
longer processed through the applicable disbursing officer), the 
changes have no effect on the cashier's liability as an accountable 
officer. 

An alternative approach to managing imprest funds is the "third-party 
draft" procedure described in I TFM § 4-3000 (Aug. 3, 2000). In brief, 
an agency may retain a contractor to provide the agency with payment 
instruments, not to exceed certain amounts, drawn on the contractor's 
account. The face value of an individual third-party draft generally 
may not exceed $10,000, and third-party drafts for routine imprest 
payments are limited to $2,500. Id. § 4-3020.10. The agency then uses 
these drafts for its imprest fund transactions and reimburses the 
contractor for properly payable drafts that the contractor has paid. 
Since the funds being disbursed from the imprest fund under the third-
party draft system are not government funds, personal liability does 
not attach to the cashier who issues the draft. Id. § 4-3020; GAO, 
Policy and Procedures Manual for Guidance of Federal Agencies, title 
7, § 6.8.B (Washington, D.C.: May 18, 1993); B-247563.4, Dec. 11, 
1996; B-247563.3, Apr. 5, 1996. However, this obviously does not mean 
that third-party drafts can or should be used to circumvent 
restrictions on the use of appropriated funds. 

(2) Flash rolls: 

Law enforcement officers on undercover assignments frequently need a 
supply of cash to support their operations, for example, to purchase 
contraband or to use as a gambling stake. This money, often advanced 
from an imprest fund, is called a "flash roll." By the very nature of 
the activities involved, flash roll money is at high risk to begin 
with. 

It is clear that a flash roll in the hands of a law enforcement agent 
retains its status as government funds. Garcia v. United States, 469 
U.S. 70 (1984) (flash roll held to be money of the United States for 
purposes of 18 U.S.C. § 2114, which makes it a criminal offense to 
assault a custodian of government money). However, flash roll money 
will be accountable in some situations and nonaccountable in others, 
depending on the nature of the loss. If the loss is within the risk 
inherent in the operation, such as the suspect absconding with the 
money, it is not viewed as an "accountable officer" loss but may be 
handled internally by the agency. If the agency, under its internal 
investigation procedures, finds the agent with custody of the funds to 
have been negligent, it should hold the agent liable to the extent 
provided in its regulations. Otherwise, it may simply record the loss 
as a necessary expense against the appropriation which financed the 
operation. If, on the other hand, the loss occurs in the course of the 
operation but is unrelated to carrying out its purpose, the 
accountable officer laws apply. The decision first recognizing this 
distinction is 61 Comp. Gen. 313 (1982), applying it in the context of 
Drug Enforcement Administration undercover operations.[Footnote 19] 

The fact pattern in the Garcia case illustrates the nonaccountable 
situation. A Secret Service agent had been given a flash roll to buy 
counterfeit currency from suspects in Miami. The agent met the 
suspects in a park. One of the suspects pulled a semi-automatic pistol 
and demanded the money. Other Secret Service agents rushed to the 
scene and apprehended the suspects, one of whom was trying to run off 
with the money. Of course there was no loss since the money was 
recovered. If the second suspect had gotten away with the money, 
however, the loss could have been treated as an expense of the 
operation, without the need to seek relief for anyone. GAO decisions 
finding flash roll losses "nonaccountable" under the standards of 61 
Comp. Gen. 313 are B-238222, Feb. 21, 1990 (suspect stole flash roll 
during drug arrest); B-232253, Aug. 12, 1988 (informant stole money 
provided to rent undercover apartment); and B-205426, Sept. 16, 1982 
(federal agent robbed at gunpoint while trying to purchase illegal 
firearms). 

An example of a case which remains subject to the accountable officer 
laws is B-218858, July 24, 1985. A federal agent, posing as a 
narcotics trafficker, stopped at a telephone booth to make a call. Two 
women approached the booth, which did not have a door. One diverted 
the agent's attention while the other picked his pocket. The loss, 
while certainly incident to the undercover operation, was unrelated to 
its central purpose. Relief was granted. Other cases are: 

* Agent set shoulder bag containing flash money on airport counter and 
left it unattended for several minutes while making ticket 
arrangements; relief denied. 64 Comp. Gen. 140 (1984). 

* Briefcase containing funds stolen when agent set it down in coffee 
shop for 15-20 seconds to remove jacket; relief granted. B-210507, 
Apr. 4, 1983. 

* Agent left funds in glove compartment while making phone call in 
high crime area; agent found negligent. B-220492, Dec. 10, 1985. 

As 64 Comp. Gen. 140 and B-210507 point out, losses which occur while 
flash money is being transported to the location where it is intended 
to be used are at best incidental to the operation and are thus 
governed by the accountable officer laws. 

The conspicuous display of a flash roll is not in and of itself 
negligence where necessary to the agent's undercover role. B-194919, 
Nov. 26, 1980. 

(3) Travel advances: 

Travel advances are authorized by 5 U.S.C. § 5705. The statute 
expressly directs the recovery, from the traveler or from his or her 
estate, of advances not used for allowable travel expenses. Like 
imprest funds, travel advances can still be used but their use is now 
the exception rather than the common practice. Section 2 of the Travel 
and Transportation Reform Act of 1998, Pub. L. No. 105-264, 112 Stat. 
2350 (Oct. 19, 1998), 5 U.S.C. § 5701 note, generally mandates the use 
of government contractor-issued travel charge cards for payment of 
official government travel. Under the General Services Administration 
regulations implementing this statute, travel advances are authorized 
only if an exemption from use of a travel charge card has been 
granted. 41 C.F.R. §§ 301-51.1, 301-51.5. 

A travel advance is "based upon the employee's prospective entitlement 
to reimbursement" (B-178595, June 27, 1973) and is essentially for the 
convenience of the traveler. Travel advances in the hands of the 
traveler are regarded as nonaccountable and hence not governed by the 
accountable officer laws. Rather, they are treated as loans for the 
personal benefit of the traveler. As such, if the funds are lost or 
stolen while in the traveler's custody, regardless of the presence or 
absence of fault attributable to the traveler, the funds must be 
recovered as provided by 5 U.S.C. § 5705, and the accountable officer 
relief statutes do not apply. 54 Comp. Gen. 190 (1974); B-206245, Apr. 
26, 1982; B-183489, June 30, 1975; B-254089, Sept. 10, 1993 
(nondecision letter). The same principle applies to traveler's checks. 
64 Comp. Gen. 456, 460 (1985). 

In many cases, a messenger or some other clerical employee picks up 
the funds for the traveler. If the funds are lost or stolen while in 
the intermediary's custody, and use of the intermediary was the 
traveler's choice, the intermediary is the agent of the traveler and 
the traveler, having constructively received the funds, remains 
liable. B-204387, Feb. 24, 1982; B-200867, Mar. 30, 1981. However, if 
use of the intermediary is required by agency or local policy, then 
the intermediary is the agent of the government and the traveler is 
not liable. 67 Comp. Gen. 402 (1988). 

Even though the accountable officer relief statutes do not apply, it 
may be possible to effectively "relieve" the non-negligent traveler by 
considering a claim under the Military Personnel and Civilian 
Employees' Claims Act of 1964, 31 U.S.C. § 3721, to the extent 
permissible under the agency's implementing regulations. B-208639, 
Oct. 5, 1982; B-197927, Sept. 12, 1980. 

Travel advances returned to government custody for reasons such as 
postponement of the travel regain their status as accountable funds, 
and an employee receiving custody of these funds is governed by the 
laws relating to the liability and relief of accountable officers. B-
200404, Feb. 12, 1981; B-170012, Mar. 14, 1972; B-170012, May 3, 1971. 
Also, where an advance greatly exceeds the employee's legitimate 
travel expense needs and it is clear that the excess is intended to be 
used for operational purposes, the excess over reasonable needs may be 
treated as accountable funds and not part of the "loan." B-196804, 
July 1, 1980. 

b. Receipts: 

In our definitions of governmental receipts and offsetting collections 
in Chapter 2, we noted that the government receives funds from 
nongovernment sources (a) from the exercise of its sovereign powers 
(e.g., tax collections, customs duties, court fines), and (b) from a 
variety of business-type activities (e.g., sale of publications). 
These collections, whether they are to be deposited in the Treasury as 
miscellaneous receipts or credited to some agency appropriation or 
fund, are accountable funds from the moment of receipt. Some examples 
are: B-288163, June 4, 2002, and 64 Comp. Gen. 535 (1985) (both cases 
involved registry funds and fees paid to bankruptcy court); 60 Comp. 
Gen. 674 (1981) (tax collections); B-200170, Apr. 1, 1981 (petroleum 
overcharge refunds); and B-194782, Aug. 25, 1980 (recreational fee 
collections). 

c. Funds Held in Trust: 

When the government holds private funds in a trust capacity, it is 
obligated, by virtue of its fiduciary duty, to pay over those funds to 
the rightful owners at the proper time. Thus, although the funds are 
not appropriated funds, they are nevertheless accountable funds. The 
principle has been stated as follows: 

"The same relationship between an accountable officer and the United 
States is required with respect to trust funds of a private character 
obtained and held for some particular purpose sanctioned by law as is 
required with respect to public funds." 

6 Comp. Gen. 515, 517 (1927). See also Woog v. United States, 48 Ct. 
Cl. 80 (1913). 

A common example is the Department of Veterans Affairs (VA) "Personal 
Funds of Patients" (PFOP) account. Patients, upon admission to a VA 
hospital, may deposit personal funds in this account for safekeeping 
and use as needed. Upon release, the balance is returned to the 
patient. Patient funds in the PFOP account have been consistently 
treated as accountable funds. 68 Comp. Gen. 600 (1989); 68 Comp. Gen. 
371 (1989); B-226911, Oct. 19, 1987; B-221447, Apr. 2, 1986; B-215477, 
Nov. 5, 1984; B-208888, Sept. 28, 1984. 

Another example is private funds of litigants deposited in a registry 
account of a court of the United States, to be held pending 
distribution by order of the court in accordance with 28 U.S.C. §§ 
2041 and 2042. These are also accountable funds under the trust 
capacity concept. B-288163, June 4, 2002; 64 Comp. Gen. 535 (1985); 6 
Comp. Gen. 515 (1927); B-200108, B-198558, Jan. 23, 1981. See also 
Osborn v. United States, 91 U.S. 474 (1875) (court can summarily 
compel restitution of funds improperly withdrawn from registry account 
by former officers). 

Other situations applying the trust capacity concept are B-288284.2, 
Mar. 7, 2003, and B-288284, May 29, 2002 (embassy employees' funds 
held on their behalf in a Suspense Deposit Abroad account administered 
by the State Department); B-238955, Apr. 3, 1991 (Overseas Consular 
Service fund from which embassy consular officers authorize payment 
for funerals and other expenses); 67 Comp. Gen. 342 (1988) (Indian 
trust accounts administered by Bureau of Indian Affairs); 17 Comp. 
Gen. 786 (1938) (United States Naval Academy laundry fund); B-190205, 
Nov. 14, 1977 (foreign currencies accepted in connection with 
accommodation exchanges authorized by 31 U.S.C. § 3342); and A-22805, 
Nov. 30, 1929 (funds taken from prisoners at the time of their 
confinement, to be held in their behalf). See also B-239955, June 18, 
1991 (Treasury Department personnel are held accountable for loss of 
damaged currency held in Treasury mailroom pending replacement); 69 
Comp. Gen. 314 (1990) (BIA may contract with private bank for 
ministerial aspects of trust fund disbursements, but government 
disbursing officer must retain responsibility for managerial and 
judgmental aspects). 

Not all nongovernment funds in the custody of a government official 
are held in a trust capacity. For example, in B-164419-0.M., May 20, 
1969, GAO distinguished between funds of a foreign government held by 
the United States incident to a cooperative agreement (trust capacity 
funds), and funds of a private contractor held by a government 
official for safekeeping as a favor to the contractor. The latter 
situation was a mere bailment for the benefit of the contractor, and 
the official was not an accountable officer with respect to those 
funds. 

d. Items Which Are the Equivalent of Cash: 

The concepts of accountability and liability discussed in this chapter 
apply primarily to money. However, for reasons which should be 
apparent, accountability also attaches to certain noncash items which 
are negotiable by the bearer or are otherwise the equivalent of cash. 
Examples are: 

* Food stamps. B-221580, Oct. 24, 1986 (nondecision letter). 

* Government Transportation Requests. B-239387, Apr. 24, 1991. 

* Military payment certificates. B-127937-0.M., Aug. 2, 1956. 

* Receipts signed by employees acknowledging that they were advanced 
funds to make small purchases. B-288014, May 17, 2002. 

* Traveler's checks in the custody of an accountable officer. 64 Comp. 
Gen. 456 (1985); B-235147.2, Aug. 14, 1991. 

* Treasury bonds with interest coupons attached. B-190506, Nov. 28, 
1977, aff'd on reconsideration, B-190506, Dec. 20, 1979. 

In the reconsideration of B-190506, Dec. 20, 1979, it was contended 
that loss of the bonds did not really result in a loss to the 
government because neither the bonds nor the coupons had been cashed 
and a "stop notice" had been placed with the Federal Reserve Bank. GAO 
could not agree, however, since the bonds were bearer bonds and the 
stop notice does not completely extinguish the government's liability 
to pay on them. (The Treasury Department no longer issues coupon 
bonds, although many older ones are still outstanding.) 

4. What Kinds of Events	Produce Liability? 

The generic term for losses which trigger an accountable officer's 
liability is "fiscal irregularity." See GAO, Policy and Procedures 
Manual for Guidance of Federal Agencies, title 7, § 8.2 (Washington, 
D.C.: May 18, 1993). Fiscal irregularities are divided into two broad 
categories: (1) physical loss or deficiency, and (2) illegal or 
improper payment. Since, as we will see, the relief statutes are 
expressly tied to these categories, the proper classification of a 
fiscal irregularity is the essential first step in determining which 
statute to apply. 

A working definition of "physical loss or deficiency" may be found in 
B-202074, July 21, 1983: 

"In sum, 'physical loss or deficiency' includes such things as loss by 
theft or burglary, loss in shipment, and loss or destruction by fire, 
accident, or natural disaster. It also includes the totally 
unexplained loss, that is, a shortage or deficiency with absolutely no 
evidence to explain the disappearance.... Finally, ... losses 
resulting from fraud or embezzlement by subordinate finance personnel 
may ... be treated as physical losses." 

This definition has been repeated in several subsequent decisions such 
as 70 Comp. Gen. 616, 621 (1991) and 65 Comp. Gen. 881, 883 (1986). A 
loss resulting from a bank failure would also be treated as a physical 
loss. See 18 Comp. Gen. 639 (1939). 

The second type of fiscal irregularity is the "illegal, improper, or 
incorrect payment." 31 U.S.C. §§ 3527(c), 3528(a)(4). The key word 
here is "payment"—-"the disbursement of public funds by a disbursing 
officer or his subordinate." B-202074, July 21, 1983. Improper 
payments include such things as payments obtained by fraud, whether by 
nongovernment persons or by government employees other than 
subordinate finance personnel; erroneous payments or overpayments 
resulting from human or mechanical error attributable to the 
government; payments prohibited by statute; and disbursements for 
unauthorized purposes. The legislative history of 31 U.S.C. § 3527(c), 
the improper payment relief statute for disbursing officers, describes 
an improper payment as a payment "which the Comptroller General finds 
is not in strict technical conformity" with the law. Excerpts from the 
pertinent committee reports are quoted in 49 Comp. Gen. 38, 40 (1969) 
and in B-202074, cited above. 

A loss resulting from an uncollectible personal check may be an 
improper payment or a physical loss, depending on the circumstances. 
If the loss results from an authorized check-cashing transaction, it 
is an improper payment because government funds were disbursed to the 
bearer. 70 Comp. Gen. 616 (1991). However, if the check is tendered to 
pay an obligation owed to the United States or to purchase something 
from the government, the loss, to the extent an accountable loss 
exists, would be a physical loss. In this connection, Treasury 
regulations provide: 

"Government officers accept checks received subject to collection. If 
a check cannot be collected in full or is lost or destroyed before 
collection, the agency making the deposit must obtain the proper 
payment. Payment by check is not effective until the full proceeds are 
received." 

I TFM § 5-2010 (Oct. 4, 2001). If a personal check is accepted subject 
to collection, and if the government does not exchange value for the 
check, any resulting loss is not a loss within the scope of the 
accountable officer laws and may be adjusted administratively by the 
agency. If, however, an accountable officer purports to accept a 
personal check in satisfaction of an obligation due the United States 
(rather than for collection only), or if the government parts with 
something of value in exchange for the check (e.g., sale of government 
property), a resulting loss is treated as a physical loss. B-201673 et 
al., Sept. 23, 1982. See also 3 Comp. Gen. 403 (1924); A-44019, Mar. 
15, 1934; A-24693, Oct. 30, 1929. The distinction is summarized in the 
following passage from B-201673: 

"If a check tendered in payment of a fine, duty, or penalty becomes 
uncollectible, it may be argued that the Government incurs a loss in 
the sense that it does not have money to which it was legally 
entitled, but it has not lost anything that it already had. When the 
check is in exchange for property, the Government has lost the 
property, the value of which is measured by the agreed-upon sales 
price. Of course, recovery of the property will remove or mitigate the 
loss." 

The concept of B-201673 has also been applied to a check seized as 
forfeiture under 31 U.S.C. §§ 5316 and 5317(b), and subsequently 
returned as uncollectible. B-208398, Sept. 29, 1983. 

A conceptually similar case is B-216279, Oct. 9, 1984. A teller at a 
Customs Service auction gave a receipt to a customer and negligently 
failed to collect the tendered funds. It was suggested that there was 
no loss because the teller never had physical possession of the funds. 
However, the applicable relief statute (31 U.S.C. § 3527) uses the 
terms "physical loss or deficiency" in the disjunctive, and there was 
clearly a deficiency in the teller's account to the extent of the 
property turned over in exchange for the lost payment. 

While every fiscal irregularity by definition involves a loss or 
deficiency for which someone is accountable, not every loss or 
deficiency is a fiscal irregularity which triggers accountability. For 
example, an accountable officer is not liable for interest lost on 
collections which should have been deposited promptly but were not. 64 
Comp. Gen. 303 (1985) (failure to deposit collections in designated 
depositary); B-190290, Nov. 28, 1977 (increased interest charges on 
funds borrowed from Treasury, no net loss to United States). 

Also, losses resulting from the imperfect exercise of judgment in 
routine business operations, where no law has been violated, do not 
create accountable officer liability. 65 Comp. Gen. 881 (1986) (loss 
to Internal Revenue Service Tax Lien Revolving Fund caused by sale of 
property for substantially less than amount for which it had been 
redeemed). 

5. Amount of Liability: 

As a general proposition, the amount for which an accountable officer 
is liable is easy to determine: It is the amount of the physical loss 
or improper payment, reduced by any amounts recovered from the 
recipient (thief, improper payee, etc.). E.g., 65 Comp. Gen. 858 
(1986); B-194727, Oct. 30, 1979. 

There is an exception, discussed in 65 Comp. Gen. at 863-64, in which 
amounts recovered from the recipient should not be used to reduce the 
amount of the accountable officer's liability. A loss may result from 
a series of transactions spanning several years, each transaction 
giving rise to a separate debt. By the time the loss is discovered, 
recovery from the accountable officer may be partially barred by the 3-
year statute of limitations found in 31 U.S.C. § 3526(c). This, 
however, does not affect the indebtedness of the recipient which, in 
this situation, will exceed the liability of the accountable officer. 
Under the Federal Claims Collection Standards,[Footnote 20] a debtor 
owing multiple debts may specify the allocation of a voluntary partial 
payment. If the recipient/debtor fails to so specify, or if payment is 
involuntary, the collecting agency may allocate the money among the 
various debts in accordance with the best interests of the United 
States. 31 C.F.R. § 901.3(c)(4). Generally, "the best interests of the 
United States are clearly served by applying payments made by the 
recipients to the class of debt for which only the recipients are 
liable" (65 Comp. Gen. at 864), that is, those for which recovery from 
the accountable officer is time-barred. Thus, in this type of 
situation, partial recoveries from the recipient should first be 
applied to the time-barred debt of the accountable officer until any 
such amounts have been recouped, and only thereafter used to reduce 
the accountable officer's remaining liability. 

A judgment obtained against some third party (improper payee, thief, 
etc.) is only "potential unrealized value" and does not reduce the 
accountable officer's liability until it is actually collected. B-
147747, Dec. 28, 1961; B-194727, Oct. 30, 1979 (nondecision letter).
The liability of an accountable officer does not include interest and 
penalties assessed against the recipient. 64 Comp. Gen. 303 (1985); B-
235037, Sept. 18, 1989. 

The liability of an accountable officer resulting from the payment of 
fraudulent travel claims is the amount of the fraudulent payment and 
does not include nonfraudulent amounts paid for the same day(s). 70 
Comp. Gen. 463 (1991). Previously GAO had included both, under the so-
called "tainted day" rule.[Footnote 21] The 1991 decision 
distinguishes fraudulent payees from fraudulent claimants, concluding 
that the tainted day rule does not apply to paid claims. That decision 
was modified in 72 Comp. Gen. 154 (1993) to make clear that rejected 
use of the tainted day rule was to be applied prospectively only from 
the date of the prior decision, May 6, 1991. 

When determining the amount of a loss for which an accountable officer 
is to be held liable, the government does not "net" overages against 
shortages. In GAO's view, such "netting" would weaken internal 
controls over the accounting for cash balances. B-212370, Nov. 15, 
1983; B-199447, Mar. 17, 1981.[Footnote 22] As noted in B-199447, 
overages must generally be deposited in the Treasury as miscellaneous 
receipts. 

In almost all cases, the amount of an accountable officer's liability 
is precisely determinable at the outset. It may be reduced by 
recoveries, but it will not increase. One exception is illustrated in 
B-239387, Apr. 24, 1991, in which an agency held an employee 
accountable for a booklet of missing or stolen Government 
Transportation Requests. Because the amount of the government's loss 
could not be known until the GTRs were actually used and the 
government forced to honor them, additional liability accrued as each 
GTR was used over time. 

6. Effect of Criminal Prosecution: 

As we noted previously, the body of law governing the liability and 
relief of accountable officers is designed not only to induce proper 
care but also to protect against dishonesty by the officers 
themselves. This section summarizes the relationship between criminal 
prosecution and civil liability. 

a. Acquittal: 

Acquittal in a criminal proceeding does not extinguish civil liability 
and does not bar subsequent civil actions to enforce that liability as 
long as they are remedial rather than punitive. Helvering v. Mitchell, 
303 U.S. 391 (1938). The reason is the difference in burden of proof. 
Acquittal means only that the government was unable to prove guilt 
beyond a reasonable doubt, a standard higher than that for civil 
liability "That acquittal on a criminal charge is not a bar to a civil 
action by the Government, remedial in its nature, arising out of the 
same facts on which the criminal proceeding was based has long been 
settled." Id. at 397. See also B-239134, Apr. 22, 1991 (nondecision 
letter) (conviction on only a portion of the loss). 

The rules are the same for acquittal (or reversal of a conviction) by 
a military court-martial. B-235048, Apr. 4, 1991. See also Serrano v. 
United States, 612 F.2d 525 (Ct. Cl. 1979) (acquittal held not to bar 
agency from imposing civil liability and withholding pay of 
accountable officer). 

It follows that an accountable officer's civil liability will be 
unaffected by the fact that a grand jury has refused to return an 
indictment. B-186922, Apr. 8, 1977. 

b. Order of Restitution: 

A court may order a defendant to make monetary restitution to the 
victim, either as part of the sentence (18 U.S.C. § 3556) or as a 
condition of probation (18 U.S.C. § 3563(b)(2)). In either case, the 
relevant terms and procedures are governed by 18 U.S.C. §§ 3663 and 
3664. Restitution may be ordered in a lump sum or in installments. 18 
U.S.C. § 3664(f)(3). These are general criminal statutes and would 
apply fully where the defendant is an accountable officer and the 
United States is the victim as well as the prosecutor. 

The statutory scheme clearly recognizes the possibility of subsequent 
civil proceedings by the United States as victim against the 
accountable officer. Any amounts paid to a victim under a restitution 
order must be set off against amounts recovered in a subsequent civil 
action. 18 U.S.C. § 3664(j)(2). In such an action, the previously 
convicted defendant cannot deny the "essential allegations" of the 
offense. 18 U.S.C. § 3664(k)(1). 

Where restitution is ordered in full, payable in installments, it has 
been held that the victim may nevertheless obtain a civil judgment for 
the unpaid balance, even though there has been no default in the 
installment payments. Teachers Insurance and Annuity Association v. 
Green, 636 F. Supp. 415 (S.D.N.Y. 1986). "Future payments that do not 
fully compensate a victim in present value terms cannot be a bar to a 
civil judgment." Id. 

Where restitution is ordered in an amount less than the full amount of 
the loss, civil liability for the balance would remain, subject to the 
statutory setoff requirement. See 64 Comp. Gen. 303 (1985), reaching 
this result under a prior version of the legislation. The decision 
further suggests that, if the record indicates that the court thought 
it was ordering restitution in full, it might be desirable to seek 
amendment of the restitution order. Obviously, the fact of conviction 
precludes any consideration of administrative relief. Id. at 304. 

The preceding paragraphs are presented from the perspective of 
restitution by the accountable officer. Similar principles would apply 
with respect to restitution by a responsible party other than the 
accountable officer. See, e.g., B-193673, May 25, 1979, modified on 
other grounds by B-201673 et al., Sept. 23, 1982 (partial restitution 
by thief reduces amount of accountable officer's liability). See also 
B-270863, June 17, 1996. For example, where the Department of Justice 
enters into a settlement with a culpable third party compromising a 
claim of the government, the liability of the accountable officer is 
terminated for any amounts of the claim in excess of the settlement. 
See B-235048, Apr. 4, 1991. 

C. Physical Loss or Deficiency: 

1. Statutory Provisions: 

The two principal statutes authorizing administrative relief from 
liability for the physical loss or deficiency of public funds are 31 
U.S.C. §§ 3527(a) and 3527(b). Subsection (a) applies to the civilian 
agencies and subsection (b) applies to accountable officers of the 
armed forces. 

a. Civilian Agencies: 

The physical loss or deficiency relief statute applicable to 
accountable officers generally, 31 U.S.C. § 3527(a), was originally 
enacted in 1947. Pub. L. No. 321, ch. 441, 61 Stat. 720 (Aug. 1, 
1947). Its justification, similar to that for all relief statutes, was 
summarized by the Senate Committee on Expenditures in the Executive 
Departments as follows: 

"The justification ... is that, at the present time, relief of the 
kind with which this bill is concerned is required to be granted 
either through passage of a special relief bill by the Congress or by 
the filing of suit by the responsible person in the United States 
Court of Claims, the latter to be done at the personal expense of the 
responsible person. Both methods are costly and time consuming." 

S. Rep. No. 80-379, at 1 (1947). 

Before the actual relief mechanism is triggered, two threshold 
conditions must be satisfied. First, the loss must be a physical loss 
or deficiency and not an improper payment. 31 U.S.C. § 3527(a)(2). 
Second, the person for whom relief is desired must be an "accountable 
officer."[Footnote 23] The legislative history confirms that this 
includes the general custodial category: 

"There are many agents of the Government who do not disburse but who, 
nevertheless, are fully responsible for funds ... entrusted to their 
charge and, for that reason, the committee bill has been broadened to 
include that class of personnel." 

S. Rep. No. 80-379, at 2. 

Once it has been determined that there has been a physical loss or 
deficiency of "public money, vouchers, checks, securities, or records" 
for which an accountable officer is liable, the statute authorizes the 
Comptroller General to grant relief from that liability if the head of 
the agency involved makes two administrative determinations (31 U.S.C.
§ 3527(a)(1)), and if the Comptroller General agrees with those 
determinations (31 U.S.C. § 3527(a)(3)). E.g., B-288014, May 17, 2002. 

First, the agency head must determine that the accountable officer was 
carrying out official duties at the time of the loss, or that the loss 
was attributable to the act or omission of a subordinate of the 
accountable officer. B-241820, Jan. 2, 1991. Note that this is stated 
in the disjunctive. The second part, loss attributable to a 
subordinate, is designed to cover the situation, found in several 
agencies such as the Internal Revenue Service and the Customs Service, 
in which the account is in the name of a supervisory official who does 
not actually handle the funds. In this situation, both persons are 
accountable, and relief of one does not necessarily mean relief of the 
other. See B-270863, June 17, 1996; B-265853, Jan. 23, 1996. 

Second, the agency head must determine that the loss was not 
attributable to fault or negligence on the part of the accountable 
officer. This determination is necessary regardless of which part of 
the first determination applies. Thus, while lack of fault does not 
affect the automatic imposition of liability, it does provide the 
basis for relief. See, e.g., B-288166, Mar. 11, 2003; B-258357, Jan. 
3, 1996. 

Generally, the requirement that the accountable officer must have been 
acting in the discharge of official duties does not present problems. 
Thus, in the typical case, the central question becomes whether GAO is 
able to concur with the administrative determination that the loss 
occurred without fault or negligence on the part of the accountable 
officer. In reviewing relief cases over the years, GAO has developed a 
number of standards, the application of which to a given case requires 
a careful analysis of the particular facts. Many factors may bear on 
the conclusion in any given case, and the result will be determined by 
the interrelationship of these factors. 

Section 3527(a) applies to accountable officers of "an agency," 
defined in 31 U.S.C. § 101 as any "department, agency, or 
instrumentality of the United States Government." Thus, section 
3527(a) has been construed as applicable to the judicial branch (B-
200108, B-198558, Jan. 23, 1981; B-197021, May 9, 1980; B-191440, May 
25, 1979; B-185486, Feb. 5, 1976), and to agencies of the legislative 
branch (B-192503-0.M., Jan. 8, 1979, denying relief to a GAO 
employee). GAO has not specifically considered whether it applies to 
the Senate or House of Representatives. Section 3527(a) has also been 
construed as applicable to those government corporations which are 
subject to GAO's accounts settlement authority. B-88578, Aug. 21, 
1951; B-88578-0.M., Aug. 21, 1951. 

b. Military Disbursing Officers: 

The need for physical loss relief authority for military disbursing 
officers became highlighted during World War I when several ships were 
sunk with funds and records on board. The first permanent 
administrative relief statute was enacted in 1919 and applied only to 
the Navy.[Footnote 24] The Army received similar statutory authority 
in 1944.[Footnote 25] The two were combined in 1955 and expanded to 
cover all of the military departments.[Footnote 26] The legislation 
was later codified at 31 U.S.C. § 3527(b). The origins of the 1919 law 
are described in 7 Comp. Gen. 374, 377-78 (1927); the statutory 
evolution is detailed in B-202074, July 21, 1983. The statute applies 
to both civilian and military personnel of the various military 
departments. B-151156, Dec. 30, 1963. As discussed later, section 
3527(b) was further amended in 1996 to expand the coverage of the 
section to all military accountable officials and to include erroneous 
payments. However, since the requirements and procedures regarding 
physical loss or deficiency were not altered, we retain the discussion 
of the earlier version of section 3527(b) to give context to our 
decisions predating the 1996 amendments. 

As with section 3527(a), two threshold conditions had to be satisfied 
before the relief mechanism came into play. First, like section 
3527(a), the pre-1996 section 3527(b) applied only to physical losses 
or deficiencies and not to improper payments. 31 U.S.C. § 
3527(b)(1)(B); 7 Comp. Gen. 374 (1927); 2 Comp. Gen. 277 (1922); B-
202074, July 21, 1983. The statute was intended to authorize relief in 
appropriate cases for losses "such as losses by fire, ship sinkings, 
thefts or physical losses resulting from enemy action or otherwise." B-
75978, June 1, 1948. Thus, a loss in shipment was cognizable under 
section 3527(b). B-200437, Oct. 21, 1980. However, the making of a 
travel advance to an employee who terminated his employment without 
accounting for the advance was not a physical loss but rather "a 
payment voluntarily made by the disbursing officer in the course of 
his duties." B-75978, June 1, 1948. 

Second--and here the two statutes differ--section 3527(b) applied only 
to disbursing officers and not to nondisbursing accountable officers. 
B-194782, Aug. 13, 1979; B-194780, Aug. 8, 1979; B-151156, Dec. 30, 
1963; B-144467, Dec. 19, 1960 ("while all disbursing officers are 
accountable officers, all accountable officers are not disbursing 
officers"). As each of the cited cases points out, physical loss 
relief for nondisbursing accountable officers of the military 
departments had to be sought under 31 U.S.C. § 3527(a). 

Section 3527(b) was also similar to section 3527(a) in that, once it 
had been determined that a loss is properly cognizable under the 
statute, the applicable agency head must determine that (1) the 
disbursing officer was carrying out official duties at the time of the 
loss or deficiency (prior versions of the statute, and hence many GAO 
decisions, use the military term "line of duty status"), and (2) the 
loss occurred without fault or negligence on the part of the 
disbursing officer. The first determination, 31 U.S.C. § 
3527(b)(1)(A), did not expressly include the "loss attributable to 
subordinate" clause found in section 3527(a). However, it was applied 
in the same manner. See B-155149, Oct. 21, 1964; B-151156, Dec. 30, 
1963. 

The administrative determinations under section 3527(b)(2) were 
conclusive on GAO. 31 U.S.C. § 3527(b)(2). Thus, once the 
determinations were made, the granting of relief was mandatory, and 
GAO had no discretion in the matter. Under section 3527(a), agency 
determinations on the threshold issues—what is a physical loss and who 
is a disbursing officer—were not conclusive. B-151156, Dec. 30, 1963. 

As noted above and in sections B.2 and C.2.b of this chapter, the 
statutory scheme for military accountable officers was changed by 
section 913 of Public Law No. 104-106, div. A, title IX, subtitle B, 
110 Stat. 186, 410-12 (Feb. 10, 1996). Section 913 amended a number of 
provisions in titles 10, 31, and 37 of the United States Code to 
authorize the designation and appointment of certifying and disbursing 
officials within the Department of Defense (including military 
departments, defense agencies, and field activities) to clearly 
delineate a separation of duties and accountabilities between 
personnel who authorize payments (certifying officers) and personnel 
who make payments (disbursing officers). In doing so, section 913 also 
amended 31 U.S.C. § 3527(b) to apply to all accountable officials of 
the armed forces, not just disbursing officers,[Footnote 27] and 
included a new section 3527(b)(1)(B) to provide relief for erroneous 
payments. 

2. Who Can Grant Relief? 

a. 31 U.S.C. § 3527(a): 

The statute confers the authority to grant relief on the Comptroller 
Genera1.[Footnote 28] At one time, every case, no matter how small the 
amount, involved an exchange of correspondence—a letter from the 
agency to GAO requesting relief, and a letter from GAO back to the 
agency granting or denying it. By 1969, after 20 years of experience 
under the statute, a set of standards had developed, and it became 
apparent that there was no need for GAO to actually review every case. 
In that year, GAO inaugurated the practice of setting a dollar amount, 
initially $150, below which GAO delegated its authority to the 
agencies to apply the standards and to grant or deny relief 
accordingly without the need to obtain formal concurrence from GAO. 

GAO has raised the amount several times over the years and has used 
various formats to announce the increase.[Footnote 29] The current 
ceiling is $3,000. See B-243749, Oct. 22, 1991. The authorization 
applies to all physical losses or deficiencies; however, with a few 
exceptions to be noted later, it does not extend to improper 
payments.[Footnote 30] 61 Comp. Gen. 646 (1982); 59 Comp. Gen. 113 
(1979). As stated in 61 Comp. Gen. at 647: 

"For the most part, the law governing the physical loss or deficiency 
of Government funds is clear, and most cases center around the 
determination of whether there was any contributing negligence on the 
part of the accountable officer. Our numerous decisions in this area 
should provide adequate guidance to agencies in resolving most smaller 
losses." 

The $3,000 limitation applies to "single incidents or the total of 
similar incidents which occur about the same time and involve the same 
accountable officer." 7 GAO-PPM § 8.9.C. Thus, two losses arising from 
the same theft, one under the limit and one over, should be combined 
for purposes of relief. B-189795, Sept. 23, 1977. In B-193380, Sept. 
25, 1979, an imprest fund cashier discovered a $300 shortage while 
reconciling her cash and subvouchers. A few days later, her 
supervisor, upon returning from vacation, found an additional $500 
missing. Since the losses occurred under very similar circumstances, 
GAO agreed with the agency that they should be treated together for 
purposes of seeking relief. Another case, B-187139, Oct. 25, 1978, 
involved losses of $1,500, $60, and $50. Since there was no indication 
that the losses were related, the agency was advised to separately 
resolve the $60 and $50 losses administratively. (The ceiling was $500 
at the time of B-193380 and B-187139.) Likewise, in B-260862, June 6, 
1995, GAO granted relief to an imprest fund cashier from liability for 
the loss of $3,939 missing from a safe, apparently due to theft, but 
did not grant relief for an $820 shortage allegedly due to a 
bookkeeping error discovered the day prior to the theft. The $820 
shortage was referred back to the agency for resolution since it was 
under the $3,000 limit. 

Thus, in cases of physical loss or deficiency, it is necessary to 
request relief from GAO only if the amount involved is $3,000 or more. 
For below-ceiling losses, GAO's concurrence is, in effect, granted 
categorically provided the matter is properly cognizable under the 
statute, the agency makes the required determinations, and the 
administrative resolution is accomplished in accordance with the 
standards set forth in the GAO decisions. E.g., B-252809, Apr. 7, 
1993; B-206817, Feb. 10, 1983; B-204740, Nov. 25, 1981. 

Each agency should maintain a central control record of its below-
ceiling resolutions, should document the basis for its decisions, and 
should retain that documentation for subsequent internal or external 
audit or review. 7 GAO-PPM § 8.9.C. Also, agencies should ensure the 
independence of the official or entity making the relief decisions. B-
243749, Oct. 22, 1991. 

If an agency inadvertently submits a relief request to GAO for a below-
ceiling loss, GAO's policy is simply to return the case with a brief 
explanation. E.g., B-214086, Feb. 2, 1984. GAO will also provide any 
further guidance that may appear helpful. See, e.g., B-249796, Feb. 9, 
1993. 

As a practical matter, GAO's authorization for below-ceiling 
administrative resolution is relevant only where the agency believes 
relief should be granted. In these cases, the need for an exchange of 
correspondence is eliminated, and the relief process is quicker, more 
streamlined, and less costly. If the agency believes relief should not 
be granted, its refusal to support relief effectively ends the matter 
regardless of the amount. GAO will not review an agency's refusal to 
grant relief in a below-ceiling case. B-247581, June 4, 1992; 59 Comp. 
Gen. 113, 114 (1979). 

b. 31 U.S.C. § 3527(b): 

Like 31 U.S.C. § 3527(a), section 3527(b) also specifies the 
Comptroller General as the relieving authority. However, by virtue of 
the mandatory nature of section 3527(b), the monetary ceiling concept 
used in civilian relief cases has much less relevance to military 
disbursing officer losses. 

By circular letter B-198451, Feb. 5, 1981, GAO notified the military 
departments of a change in procedures under the pre-1996 version of 31 
U.S.C. § 3527(b) pertaining to relief for physical loss or deficiency 
of funds. Since GAO has no discretion with respect to the agency
determinations and relief is mandatory as long as the determinations 
are made, there is no need for GAO to review any of those 
determinations on a case-by-case basis. Thus, there is no need for the 
agency to submit a formal request for relief regardless of the amount 
involved. As long as the case is properly cognizable under 31 U.S.C. § 
3527(b) (i.e., it involves a disbursing officer and a physical loss or 
deficiency), it is sufficient for purposes of compliance with the 
statute for the agency to make the required determinations and to 
retain the documentation on file for audit purposes. See B-303671, 
Dec. 3, 2004. Of course, should there be a question as to whether a 
particular case is properly cognizable under the statute, GAO is 
available to provide guidance. 

As noted above and in sections B.2 and C.1.b of this chapter, the 
statutory scheme for military accountable officers was changed by 
section 913 of Public Law No. 104-106, div. A, title IX, subtitle B, 
110 Stat. 186, 410-12 (Feb. 10, 1996). Section 913 amended a number of 
provisions in titles 10, 31, and 37 of the United States Code to 
authorize the designation and appointment of certifying and disbursing 
officials within the Department of Defense (including military 
departments, defense agencies, and field activities) to clearly 
delineate a separation of duties and accountabilities between 
personnel who authorize payments (certifying officers) and personnel 
who make payments (disbursing officers). In doing so, section 913 also 
amended 31 U.S.C. § 3527(b) to apply to all accountable officials of 
the armed forces, not just disbursing officers,[Footnote 31] and 
included a new section 3527(b)(1)(B) to provide relief for erroneous 
payments made by military accountable officials. As in the case of a 
physical loss or deficiency, the finding of the Secretary involved 
regarding whether the circumstances warrant relief is conclusive on 
the Comptroller General. GAO has not yet addressed relief of military 
accountable officials for erroneous payments under the revised section 
3527(b). 

c. Role of Administrative Determinations: 

Both of the relief statutes described above require two essentially 
identical administrative determinations as prerequisites to granting 
relief. It is the making of those determinations that triggers the 
ability to grant relief. If the agency cannot in good faith make those 
determinations, the legal authority to grant administrative relief 
simply does not exist, regardless of the amount involved and 
regardless of who is actually granting relief in any given case. GAO 
will not review an agency's refusal to make the determinations under 
either statute, and has no authority to "direct" an agency to make 
them. In this sense, an agency's refusal to make the required 
determinations is final. The best discussion of this point is found in 
59 Comp. Gen. 113 (1979) (case arose under section 3527(a) but point 
applies equally to both statutes). 

While GAO's role under section 3527(a) is somewhat broader than under 
section 3527(b), that role is still limited to concurring with 
determinations made by the agency. GAO cannot make those 
determinations for the agency. If they are absent, whatever the 
reason, relief cannot be granted regardless of the apparent merits of 
the case. There are numerous decisions to this effect. A few of them 
are B-248804.2, July 5, 1994; B-217209, Dec. 11, 1984; B-204464, Jan. 
19, 1982;[Footnote 32] and B-197616, Mar. 24, 1980. The determinations 
are as much required in below-ceiling cases as they are in cases 
submitted to GAO. 72 Comp. Gen. 49 (1992); 59 Comp. Gen. 113 (1979); B-
247581, June 4, 1992. 

On occasion GAO has been willing to infer a determination that the 
loss occurred while the accountable officer was carrying out official 
duties where that determination was not expressly stated but the facts 
make it clear and there is no question that relief would be granted. 
E.g., B-244723, Oct. 29, 1991; B-235180, May 11, 1989; B-199020, Aug. 
18, 1980; B-195435, Sept. 12, 1979. However, the determination of no 
contributing fault or negligence will not be inferred but must be 
expressly stated. B-241478, Apr. 5, 1991. It is not sufficient to 
state that the investigative report did not produce affirmative 
evidence of fault or negligence. B-167126, Aug. 9, 1976. Nor is it 
sufficient to state that there is "no evidence of willful misconduct." 
B-217724, Mar. 25, 1985. See also 70 Comp. Gen. 389, 390 (1991) ("The 
mere administrative determination that there is no evidence of fault 
or negligence will not adequately rebut the presumption of 
negligence."). 

As a practical matter, it will simplify the relief process if the 
agency's request explicitly states all required determinations. It is 
best simply to follow the wording of the statute. 

Agency determinations required by a relief statute must be made by an 
agency official authorized to do so. E.g., B-184028, Oct. 24, 1975. 
Section 3527(a) requires determinations by the "head of the agency." 
Section 3527(b) specifies the "appropriate Secretary." Of course in most
cases the authority under either statute will be delegated. It has 
been held that, absent a clear expression of legislative intent to the 
contrary, the authority to make determinations under these statutes 
may be delegated only to officials authorized by law to act in place 
of the agency head, or to an Assistant Secretary. 29 Comp. Gen. 151 
(1949). Many agency heads have separate statutory authority to 
delegate and redelegate, and this of course will be sufficient. See, 
e.g., 22 U.S.C. § 2651a(a)(4) (Secretary of State). As far as GAO is 
concerned, the form of the delegation is immaterial although it 
should, of course, be in writing. Documentation of delegations need 
not be furnished to GAO, nor need it be specified in relief requests, 
but should be available if requested. See GAO, Policy and Procedures 
Manual for Guidance of Federal Agencies, title 7, § 8.9.B (Washington, 
D.C.: May 18, 1993). 

If, under agency procedures, the determinations are made in the first 
instance by someone other than the designated official (e.g., a board 
of inquiry), the relief request must explicitly state the designated 
official's concurrence. B-207062, July 20, 1982. 

3. Standards for Granting Relief: 

a. Standard of Negligence: 

Again, it is important to distinguish between liability and relief. 
The presence or absence of negligence has nothing to do with an 
accountable officer's basic liability. The law is not that an 
accountable officer is liable for negligent losses. The officer is 
strictly liable for all losses, but may be relieved if found to be 
free from fault or negligence. It has frequently been stated that an 
accountable officer must exercise "the highest degree of care in the 
performance of his duty." E.g., 48 Comp. Gen. 566, 567-68 (1969); B-
186922, Aug. 26, 1976. See also 72 Comp. Gen. 49, 53 (1992) ("high 
standard of care"). Statements of this type, however, have little 
practical use in applying the relief statutes. 

In evaluating the facts to determine whether or not an accountable 
officer was negligent, GAO applies the standard of "reasonable care." 
54 Comp. Gen. 112 (1974); B-196790, Feb. 7, 1980. This is the standard 
of simple or ordinary negligence, not gross negligence. 54 Comp. Gen. 
at 115; B-158699, Sept. 6, 1968. The standard has been stated as what 
the reasonably prudent and careful person would have done to take care 
of his or her own property of like description under like 
circumstances. B-288166, Mar. 11, 2003 (failure to record checks 
mailed for deposit "not a common practice for many reasonably prudent 
and careful people handling their own collections"); B-257120, Dec. 
13, 1994 (leaving cash under truck seat not "an action that a 
reasonably prudent and careful person would have taken"). This is an 
objective standard, that is, it does not vary with such factors as the 
age and experience of the particular accountable officer. See, e.g., 
70 Comp. Gen. 389, 390 (1991). Likewise, inadequate training or 
supervision does not affect the standard. B-257120, Dec. 13, 1994. 

The doctrine of comparative negligence (allocating the loss based on 
the degree of fault) does not apply under the relief statutes. B-
211962, July 20, 1983; B-190506, Nov. 28, 1977. 

b. Presumption of Negligence/Burden of Proof: 

The mere fact that a loss or deficiency has occurred gives rise to a 
presumption of negligence on the part of the accountable officer. The 
presumption may be rebutted by evidence to the contrary, but it is the 
accountable officer's burden to produce the evidence. The government 
does not have to produce evidence to establish that the accountable 
officer was at fault in order to hold the officer liable. Rather, to 
be entitled to relief, the accountable officer must produce evidence 
to show that there was no contributing fault or negligence on his or 
her part, that is, that he or she exercised the requisite degree of 
care. 

This rule originated in decisions of the Court of Claims under 28 U.S.C.
§ 2512, before any of the administrative relief statutes existed, and 
has been consistently followed. An early statement is the following 
from Boggs v. United States, 44 Ct. Cl. 367, 384 (1909): 

"There is at the outset a presumption of liability, and the burden of 
proof must rest upon the officer who has sustained the loss." 

A later case quoting and applying Boggs is O'Neal v. United States, 60 
Ct. Cl. 413 (1925). More recently, the court said: 

"The Government does not have the burden of proving fault or 
negligence on the part of plaintiff; plaintiff has the sole burden of 
proving that he was without fault or negligence in order to qualify 
for [relief]." 

Serrano v. United States, 612 F.2d 525, 532-33 (Ct. Cl. 1979). 

GAO follows the same rule, stating it in literally dozens of relief 
cases. E.g., B-288014, May 17, 2002; B-271896, Mar. 4, 1997; 72 Comp. 
Gen. 49, 53 (1992); 67 Comp. Gen. 6 (1987); 65 Comp. Gen. 876 (1986); 
54 Comp. Gen. 112 (1974); 48 Comp. Gen. 566 (1969).[Footnote 33] 

The amount and types of evidence that will suffice to rebut the 
presumption vary with the facts and circumstances of the particular 
case. However, there must be affirmative evidence. It is not enough to 
rely on the absence of implicating evidence, nor is the mere 
administrative determination that there was no fault or negligence, 
unsupported by evidence, sufficient to rebut the presumption. E.g., B-
272613, Oct. 16, 1996 (assertions of "the absence of negligence, or 
mere administrative determinations that there was no fault or 
negligence on the part of the accountable officer are not sufficient 
to rebut the presumption of negligence when unsupported by the 
evidence."); B-257120, Dec. 13, 1994 (accountable officer "must rebut 
presumption with convincing evidence that the loss was not caused by 
the accountable officer's negligence or lack of reasonable care."); B-
242830, Sept. 24, 1991 (mere absence of evidence implicating the 
accountable officer in the loss is not sufficient to rebut the 
presumption of negligence.). See also 70 Comp. Gen. 12, 14 (1990); B-
204647, Feb. 8, 1982; B-167126, Aug. 9, 1976. 

If the record clearly establishes that the loss resulted from burglary 
or robbery, the presumption is easily rebutted. See, e.g., B-288014, 
May 17, 2002; B-265856, Nov. 9, 1995, and cases cited therein. But the 
evidence does not have to explain the loss with absolute certainty. If 
the evidence is not all that clear, the accountable officer may still 
be able to rebut the presumption by presenting evidence tending to 
corroborate the likelihood of theft or showing that some factor beyond 
his or her control was the proximate cause of the loss. If such 
evidence exists, and if the record shows that the accountable officer 
complied fully with all applicable regulations and procedures, the 
agency's determination of no fault or negligence will usually be 
accepted and relief granted. See, e.g., B-260862, June 6, 1995; B-
242830, Sept. 24, 1991. 

GAO will consider the results of a polygraph (lie detector) test as an 
additional factor in the equation, but does not regard those results, 
standing alone, as dispositive. This applies whether the results are 
favorable (B-260862, June 6, 1995; B-206745, Aug. 9, 1982, rev'd on 
submission of additional evidence, B-206745, May 11, 1983; B-204647, 
Feb. 8, 1982; B-142326, Mar. 31, 1960; B-182829-0.M., Feb. 3, 1975) or 
unfavorable (B-209569, Apr. 13, 1983. See also B-192567, Aug. 4, 1983, 
aff'd upon reconsideration, B-192567, June 21, 1988). 

Another situation in which the presumption is easily rebutted is where 
the accountable officer does not have control of the funds at the time 
of the loss. An example is losses occurring while the accountable 
officer is on leave or duty absence. As a practical matter, relief 
will be granted unless there is evidence of actual contributing 
negligence on the part of the accountable officer. B-196960, Nov. 18, 
1980; B-184028, Mar. 2, 1976; B-175756-0.M., June 14, 1972. Of course, 
where contributing negligence exists, relief will be denied and the 
role of the presumption never comes into play. B-182480, Feb. 3, 1975. 

The presumption of negligence may be criticized as unduly harsh. It 
is, however, necessary both in order to preserve the concept of 
accountability and to protect the government against dishonesty as 
well as negligence. See B-191440, May 25, 1979; B-167126, Aug. 28, 
1978. As stated in one decision, the presumption of negligence: 

"is a reasonable and legal basis for the denial of relief where the 
accountable officers have control of the funds and the means available 
for their safekeeping but the shortage nevertheless occurs without 
evidence of forcible entry or other conclusive explanation which would 
exclude negligence as the proximate cause of the loss." 

B-166519, Oct. 6, 1969. Indeed, if liability is strict and automatic, 
a legal presumption against the accountable officer is virtually 
necessary as a starting point. 

c. Actual Negligence: 

If the facts indicate negligence on the part of the accountable 
officer, and if it appears that the negligence was the proximate cause 
of the loss, then relief must be denied. 

One group of cases involves failure to lock a safe. It is negligence 
for an accountable officer to place money in a safe in an area which 
is accessible to others, and then leave the safe unlocked for a period 
of time when he or she is not physically present. E.g., B-190506, Nov. 
28, 1977; B-139886, July 2, 1959. It is also negligence to leave a 
safe unattended in a "day lock" position. B-199790, Aug. 26, 1980; B-
188733, Mar. 29, 1979, affd, B-188733, Jan. 17, 1980; B-187708, Apr. 
6, 1977. Compare these cases with B-180863, Apr. 24, 1975, in which an 
accountable officer who had left a safe on "day lock" was relieved in 
view of her lack of knowledge or instruction regarding the day lock 
mechanism. Thus, an accountable officer who leaves a safe unlocked 
(either by leaving the door open or closing the door but not rotating 
the combination dial), and then leaves the office for lunch or for the 
night will be denied relief. B-204173, Jan. 11, 1982, aff'd, B-204173, 
Nov. 9, 1982; B-183559, Aug. 28, 1975; B-180957, Apr. 24, 1975; B-
142597, Apr. 9, 1960; B-181648-0.M., Aug. 21, 1974. 

Merely being physically present may not be enough. A degree of 
attentiveness, dictated by the circumstances and common sense, is also 
required. In B-173710-0.M., Dec. 7, 1971, relief was denied where the 
cashier did not lock the safe while a stranger, posing as a building 
maintenance man, entered the cashier's cage ostensibly to repair the 
air conditioning system and erected a temporary barrier between the 
cashier and the safe. 

Another group involves the failure to use available security 
facilities. As we will see in our discussion of agency security, a 
good rule of thumb for the accountable officer is: You do the best you 
can with what is available to you. Failure to do so, without 
compelling justification, does not meet the standard of reasonable 
care. Some examples in which relief was denied are: 

* Accountable officer left unlocked cash box in safe to which several 
other persons had access. B-172614-0.M., May 4, 1971; B-167596-0.M., 
Aug. 21, 1969. 

* Cashier left funds overnight in locked desk drawer instead of safe 
provided for that purpose. B-177730-0.M., Feb. 9, 1973. 

* Cashier left funds in unlocked drawer while at lunch instead of 
locked drawer provided for that purpose. B-161229-0.M., Apr. 20, 1967. 

* Funds disappeared from bar-locking file cabinet. Combination safe 
was available but not used. B-192567, June 21, 1988. 

Inattentiveness or simple carelessness which facilitates a loss may 
constitute negligence and thus preclude relief. 64 Comp. Gen. 140 
(1984) (shoulder bag with money left unattended on airport counter for 
several minutes); B-257120, Dec. 13, 1994 (cash left under a truck 
seat); B-233937, May 8, 1989 (bag with money set on ledge in crowded 
restaurant); B-208888, Sept. 28 1984 (evidence suggested that funds 
were placed on desk and inadvertently knocked into trash can); B-
127204, Apr. 13, 1956 (pay envelopes left on top of desk in cashier's 
cage 19 inches from window opening on hallway to which many persons 
had access). 

The best way to know how much cash you have is to count it. Failure to 
do so where reasonable prudence would dictate otherwise is negligence. 
B-247581, June 4, 1992 (alternate cashier failed to count cash upon 
receipt from principal or upon return to principal); B-206820, Sept. 
9, 1982 (accountable officer handed money over to another employee 
without counting it or obtaining receipt); B-193380, Sept. 25, 1979 
(cashier cashed checks at bank and failed to count the cash received). 

A deficiency in an accountable officer's account caused by the 
acceptance of a counterfeit note constitutes a physical loss for 
purposes of 31 U.S.C. § 3527(a). B-140836, Oct. 3, 1960; B-108452, May 
15, 1952; B-101301, July 19, 1951. Whether accepting counterfeit money 
is negligence depends on the facts of the particular case, primarily 
whether the counterfeit was readily detectable. B-271895, Sept. 3, 
1996 ("super-dollars"). See also B-239724, Oct. 11, 1990; B-191891, 
June 16, 1980; B-163627-0.M., Mar. 11, 1968. (Relief was granted in 
these four cases.) If the quality of the counterfeit is such that a 
prudent person in the same situation would question the authenticity 
of the bill, relief should not be granted. B-155287, Sept. 5, 1967. 
Also, failure to check a bill against a posted list of serial numbers 
will generally be viewed as negligence. B-155287, Sept. 5, 1967; B-
166514-0.M., July 23, 1969. Finally, failure without compelling 
justification to use an available counterfeit detection machine is 
negligence. B-243685, July 1, 1991. 

Other examples of conduct which does or does not constitute negligence 
are scattered throughout this chapter, for example, in the sections on 
compliance with regulations and agency security. In all cases, 
including those which cannot be neatly categorized, the approach is to 
apply the standard of reasonable care to the conduct of the 
accountable officer in light of all surrounding facts and 
circumstances. For example, in B-196790, Feb. 7, 1980, a patient at a 
then Veterans Administration hospital, patient "X," had obtained a 
cashier's check from a bank on May 9, 1978. On September 12, 1978, 
another patient, patient "Y," presented the check at the hospital for 
deposit to patient X's personal funds account. On the following day, 
patient X withdrew the money and left. The bank refused to honor the 
check because, unknown to hospital personnel, patient X had gone to 
the bank on May 17, stated that he had never received the check, and 
the bank had refunded its face value. As noted in the decision, 
patient X had "cleverly managed to double his bank account by 
collecting the same funds twice." The issue was whether it was 
negligence for the hospital cashier to accept the check dated four 
months earlier or to permit patient X to withdraw the funds the day 
after the check was deposited. GAO considered the nature of a 
cashier's check, noted the absence of applicable regulations, applied 
the reasonable care standard, and granted relief, but recommended that 
the agency pursue further collection efforts against the bank. 

d. Proximate Cause: 

An accountable officer may be found negligent and nevertheless 
relieved from liability if it can be shown that the negligence was not 
the "proximate cause" of the loss or shortage. E.g., B-272613, Oct. 
16, 1996, fn. 2; B-235147, Aug. 14, 1991. A precise definition of the 
term "proximate cause" does not exist.[Footnote 34] The concept means 
that, first, there must be a cause-and-effect relationship between the 
negligence and the loss. In other words, the negligence must have 
contributed to the loss. However, as one authority notes, the cause of 
an event can be argued in a philosophical sense to "go back to the 
dawn of human events" and its consequences can "go forward to 
eternity." Prosser and Keeton, § 41. Obviously a line must be drawn 
someplace. Thus, the concept also means that the cause-and-effect 
relationship must be reasonably foreseeable; that is, a reasonably 
prudent person should have anticipated that a given consequence could 
reasonably follow from a given act. 

Before proceeding, we must refer again to the accountable officer's 
burden of proof. The Court of Claims said, in Serrano v. United 
States, 612 F.2d 525, 531-32 (Ct. CL 1979): 

"It is argued that the ... fault or negligence involved must be the 
proximate cause of the loss. Thus the Secretary... could not deny 
relief unless the loss was proximately attributable to plaintiff. This 
argument has no merit. If such an argument were to be accepted by this 
court, it would shift the burden of proof ... to the Government... 

"Shifting of the burden of proof, and forcing the Government to prove 
that plaintiffs conduct was a proximate cause of the loss, would be 
intolerable. This shift would negate the special responsibility that 
disbursing officers have in handling public funds." (Emphasis in 
original.) 

Thus, the government does not have to prove causation any more than it 
has to prove negligence. Rather, the accountable officer who has been 
negligent must, in order to be eligible for relief, show that some 
other factor or combination of factors was the proximate cause of the 
loss, or at least that the totality of evidence makes it impossible to 
fix responsibility. B-272613, Oct. 16, 1996 (relief denied when 
accountable officer failed to provide plausible evidence that some 
factor other than his negligence was the proximate cause of the loss). 

In analyzing proximate cause, it may be helpful to ask certain 
questions. First, if the accountable officer had not been negligent, 
would the loss have occurred anyway? If the answer to this question is 
yes, the negligence is not the proximate cause of the loss and relief 
will probably be granted. However, it may not be possible to answer 
this question with any degree of certainty. If not, the next question 
to ask is whether the negligence was a "substantial factor" in 
bringing about the loss. If this question is answered yes, relief will 
probably be denied. A couple of simple examples will illustrate: 

* An accountable officer leaves cash visible and unguarded on a desk 
top while at lunch, during which time the money disappears. There can 
be no question that the negligence was the proximate cause of the loss. 

* As noted previously, failure to count cash received at a bank window 
is negligence. Suppose, however, that the accountable officer is 
attacked and robbed by armed marauders while returning to the office. 
The failure to count the cash, even though negligent, would not be the 
proximate cause of the loss since presumably the robbers would have 
taken the entire amount anyway. 

Another good illustration is B-201173, Aug. 18, 1981. Twelve armed men 
in two Volkswagen minibuses broke into the West African Consolidated 
Services Center at the American Embassy in Lagos, Nigeria. They 
forcibly entered the cashier's office and proceeded to carry the safe 
down the stairs. The burglars dropped the safe while carrying it, the 
safe opened upon being dropped, and the burglars took the money and 
fled. The reason the safe opened when dropped was that the cashier had 
not locked it, clearly an act of negligence. However, even if the safe 
had been locked, the burglars would presumably have continued to carry 
it away, loaded it onto their minibus, and forcibly opened it 
somewhere else. Thus, the cashier's failure to lock the safe, while 
negligent, was not the proximate cause of the loss. 

Proximate cause considerations are often relevant in cases involving 
weaknesses in agency security, and the topic is explored further under 
the Agency Security heading in section C.3.j of this chapter. 

The following are a few additional examples of cases in which relief 
was granted even though the accountable officer was or may have been 
negligent, because the negligence was found not to be the proximate 
cause of the loss or deficiency. 

* Accountable officer left safe combination in unlocked desk drawer. 
Burglars found combination and looted safe. Had this been the entire 
story, relief could not be granted. However, burglars also pried open 
locked desk drawers throughout the office. Thus, locking the desk 
drawer would most likely not have prevented the theft. B-229587, Jan. 
6, 1988. 

* Accountable officer in Afghanistan negligently turned over custody 
of funds to unauthorized person. Money was taken by rioters in severe 
civil disturbance. Relief was granted because negligence was not the 
proximate cause of the loss. (Whether the person holding the funds was 
or was not an authorized custodian was not a matter of particular 
concern to the rioters.) B-144148-0.M., Nov. 1, 1960. 

* Cashier discovered loss upon return from 2-week absence. It could 
not be verified whether she had locked the safe when she left. 
However, time of loss could not be pinpointed, other persons worked 
out of the same safe, and it would have been opened daily for normal 
business during her absence. Thus, even if she had failed to lock the 
safe (negligence), proximate cause chain was much too conjectural. B-
191942, Sept. 12, 1979. 

Even if there is a clearly identified intervening cause, relief may 
still be denied depending on the extent to which the accountable 
officer's negligence facilitated the intervening cause or contributed 
to the loss. In such a case, the negligence will be viewed as the 
proximate cause notwithstanding the intervening cause. The following 
cases will illustrate. 

* Accountable officer failed to make daily deposits of collections as 
required by regulations. Funds were stolen from locked safe in 
burglary. Relief was denied because officer's negligence was proximate 
cause of loss in that funds would not have been in the safe to be 
stolen if they had been properly deposited. B-71445, June 20, 1949. 
See also B-203726, July 10, 1981; B-164449, Dec. 8, 1969; B-168672-
0.M., June 22, 1970. 

* Accountable officer negligently left safe on "day lock" position 
(door closed, dial or handle partially turned but not rotated, so that 
partial turning in one direction, without knowledge of combination, 
will permit door to open). Thief broke into premises, opened safe 
without using force, and stole funds. Relief was denied because 
negligence facilitated theft by making it possible for thief to open 
safe without force or knowledge of combination. B-188733, Mar. 29, 
1979, aff'd, B-188733, Jan. 17, 1980. 

* Although cash was stolen, negligence by the accountable officer in 
placing the cash under the seat of a truck while she went shopping 
enabled the theft to occur and was thus the proximate cause of the 
loss. Accordingly, relief was denied. B-257120, Dec. 13, 1994. 

e. Unexplained Loss or Shortage: 

The cases cited under the Actual Negligence heading all contained 
clear evidence of negligence on the part of the accountable officer. 
Absent a proximate cause issue, these cases are relatively easy to 
resolve. Such evidence, however, is not necessary in order to deny 
relief in the situation we refer to as the "unexplained loss or 
shortage." In the typical case, a safe is opened at the beginning of a 
business day and money is found missing, or an internal audit reveals 
a shortage in an account. There is no evidence of negligence or 
misconduct on the part of the accountable officer; there is no 
evidence of burglary or any other reason for the disappearance. All 
that is known with any certainty is that the money is gone. In other 
words, the loss or shortage is totally unexplained. In many cases, a 
formal investigation confirms this conclusion. 

The presumption of negligence has perhaps its clearest impact in the 
unexplained loss situation. If the burden of proof is on the 
accountable officer to establish eligibility for relief, the denial of 
relief follows necessarily. Since there is no evidence to rebut the 
presumption, there is no basis on which to grant relief. See, e.g., B-
272613, Oct. 16, 1996; 70 Comp. Gen. 389 (1991); B-238955, Apr. 3, 
1991. The presumption and its application to unexplained losses were 
discussed in 48 Comp. Gen. 566, 567-68 (1969) as follows: 

"While there is no positive or affirmative evidence of negligence on 
the part of [the accountable officer] in connection with this loss, we 
have repeatedly held that positive or affirmative evidence of 
negligence is not necessary, and that the mere fact that an 
unexplained shortage occurred is, in and of itself, sufficient to 
raise an inference or presumption of negligence. A Government official 
charged with the custody and handling of public moneys ... is expected 
to exercise the highest degree of care in the performance of his duty 
and, when funds ... disappear without explanation or evident reason, 
the presumption naturally arises that the responsible official was 
derelict in some way. Moreover, granting relief to Government 
officials for unexplained losses or shortages of this nature might 
tend to make such officials lax in the performance of their duties." 
[Footnote 35] 

The rationale is fairly simple. Money does not just get up and walk 
away. If it is missing, there is an excellent chance that someone took 
it. If the accountable officer exercised the requisite degree of care 
and properly safeguarded the funds, it is unlikely that anyone else 
could have taken the money without leaving some evidence of forced 
entry. Therefore, where there is no evidence to explain a loss, the 
leading probabilities are that the accountable officer either took the 
money or was negligent in some way that facilitated theft by someone 
else. Be that as it may, denial of relief in an unexplained loss case 
is not intended to imply dishonesty by the particular accountable 
officer; it means merely that there was insufficient evidence to rebut 
the applicable legal presumption. See B-122688, Sept. 25, 1956. See 
also B-258357, Jan. 3, 1996 (loss of receipts creates "unexplained 
loss" from imprest fund for which cashier is liable). 

Despite the strictness of the rule, there are many unexplained loss 
cases in which the presumption can be rebutted and relief granted. 
See, e.g., B-242830, Sept. 24, 1991. By definition, the evidence will 
not be sufficient to "explain" the loss; otherwise there would not be 
an unexplained loss to begin with. There is no simple formula to apply 
in determining the kinds or amount of evidence that will rebut the 
presumption. It is necessary to evaluate the totality of available 
evidence, including statements by the accountable officer and other 
agency personnel, investigation reports, and any relevant 
circumstantial evidence. Compare B-206745, Aug. 9, 1982 (denial of 
relief in "unexplained loss" case), with B-206745, May 11, 1983 
(reversing on submission of additional evidence B-206745, Aug. 9, 
1982). 

In some cases, for example, it may be possible to reasonably conclude 
that any negligence that may have occurred was not the proximate cause 
of the loss. These cases tend to involve security weaknesses and are 
discussed under the Agency Security heading, section C.3.j of this 
chapter. The evidence, in conjunction with the lack of any evidence to 
the contrary and the agency's "no fault or negligence" determination, 
supports the granting of relief. For example, relief from an 
unexplained loss was granted in B-271896, Mar. 4, 1997, when a cashier 
was forced to operate in a lax security environment. In this case, 
agency management allowed other employees access to the cash area of 
the cashier's office, failed to fix a safe combination lock that had 
been broken for over a week, and failed to heed repeated warnings to 
correct the security deficiencies. See also B-235147.2, Aug. 14, 1991 
(proximate cause of loss was "general lack of concern and sense of 
laxity" that pervaded agency). 

Since the burden of proof rests with the accountable officer, the 
accountable officer's own statements take on a particular relevance in 
establishing due care, and relief should never be denied without 
obtaining and carefully analyzing them. Naturally, the more specific 
and detailed the statement is, and the more closely tied to the time 
of the loss, the more helpful it will be. While the accountable 
officer's statement is obviously self-serving and may not be enough if 
there are no other supporting factors, it has been enough to tip the 
balance in favor of granting relief when combined with other evidence, 
however slight or circumstantial, which by itself would not have been 
sufficient.[Footnote 36] 

f. Compliance with Regulations: 

If a particular activity of an accountable officer is governed by a 
regulation, failure to follow that regulation will be considered 
negligence. If that failure is the proximate cause of a loss or 
deficiency, relief must be denied. 70 Comp. Gen. 12 (1990); 54 Comp. 
Gen. 112, 116 (1974). The relationship of this rule to the standard of 
reasonable care discussed earlier is the premise that the prudent 
person exercising the requisite degree of care will become familiar 
with, and will follow, applicable regulations. Indeed, it has been 
stated that accountable officers have a duty to familiarize themselves 
with pertinent Treasury Department and agency rules and regulations. B-
229207, July 11, 1988; B-193380, Sept. 25, 1979. 

Treasury Department regulations on disbursing, applicable to all 
agencies for which Treasury disburses under 31 U.S.C. § 3321, are 
found in volume I of the Treasury Financial Manual, especially part 4, 
"Disbursing," and part 5, "Deposit Regulations." The Treasury 
regulations establish general requirements for sound cash control, and 
failure to comply may result in the denial of relief. E.g., 70 Comp. 
Gen. 12 (1990) (cashier kept copy of safe combination taped to 
underside of desk pull-out panel).[Footnote 37] 

The same principle applies with respect to violations of individual 
agency regulations and written instructions. E.g., B-193380, Sept. 25, 
1979 (cashier violated agency regulations by placing the key to a 
locked cash box in an unlocked cash box and then leaving both in a 
locked safe to which more than one person had the combination). The 
decision further pointed out that oral instructions to the cashier to 
leave the cash box unlocked could not be considered to supersede 
published agency regulations. However, if agency regulations are 
demonstrably ambiguous, relief may be granted. B-169848-0.M., Dec. 8, 
1971. See also B-288166, Mar. 11, 2003 (accountable officer granted 
relief when he complied with agency regulations). 

Negligence will not be imputed to an accountable officer who fails to 
comply with regulations where full compliance is prevented by 
circumstances beyond his or her control. This recognizes the fact that 
compliance is sometimes up to the agency and beyond the control of the 
individual. For example, violating a regulation which requires that 
funds be kept in a safe is not negligence where the agency has failed 
to provide the safe. B-78617, June 24, 1949. Note, however, that 
instructions from superiors to disregard regulations do not, in 
themselves, relieve an accountable officer of responsibility to follow 
those regulations. See, e.g., B-271021, Sept. 18, 1986 (improper 
payment case). 

Also, as with other types of negligence, failure to follow regulations 
will not prevent the granting of relief if the failure was not the 
proximate cause of the loss or deficiency. B-229207, July 11, 1988; B-
229587, Jan. 6, 1988; B-185666, July 27, 1976. See also Libby v. 
United States, 81 F. Supp. 722, 727 (Ct. Cl. 1948). In B-185666, for 
example, a cashier kept her cash box key and safe combination in a 
sealed envelope in an unlocked desk drawer, in violation of the 
Cashier's Manual. Relief was nevertheless granted because the seal on 
the envelope had not been broken and the negligence could therefore 
not have contributed to the loss. 

While failure to comply with regulations is generally considered 
negligence, the converse is not always true. To be sure, the fact that 
an accountable officer has complied with all applicable regulations 
and instructions is highly significant in evaluating eligibility for 
relief. It is not conclusive, however, because the accountable officer 
might have been negligent in a matter not covered by the regulations. 
In a 1979 case, an accountable officer accepted a $10,000 personal 
check at a Customs auction sale and turned over the property without 
attempting to verify the existence or adequacy of the purchaser's 
account. The check bounced. It was not clear whether existing 
regulations applied to that situation. Even without regulations, 
however, accepting a personal check for a large amount without 
attempting verification was viewed as not meeting the standard of 
reasonable care, and relief was denied. B-193673, May 25, 1979, 
modified on other grounds, B-201673 et al., Sept. 23, 1982. 

g. Losses in Shipment: 

Government funds are occasionally lost or stolen in shipment. The 
Postal Service or other carrier is the agent of the sender, and funds 
in shipment remain in the "custody" of the accountable officer who 
shipped them until delivered, notwithstanding the fact that they are 
in the physical possession of the carrier. B-185905-0.M., Apr. 23, 
1976. Thus, a loss in shipment is a physical loss for which an 
accountable officer is liable. 

For the most part, relief for losses in shipment is the same as relief 
for other losses, and the rules discussed in this chapter with respect 
to negligence and proximate cause apply. For example, relief was 
denied in one case because transmitting cash by ordinary first-class 
mail rather than registered or certified mail was held not to meet the 
reasonable care standard. B-164450-0.M., Sept. 5, 1968. 

However, relief for losses in shipment differs from relief for other 
losses in one important respect. A loss in shipment is not viewed as 
an "unexplained loss" and there is no presumption of negligence. B-
164450-0.M., Sept. 5, 1968. The reason for this distinction is that 
there is no basis to infer negligence when a loss occurs while funds 
are totally beyond the control of the accountable officer. Thus, where 
funds are lost in shipment, in the absence of positive evidence of 
fault or negligence, an accountable officer will be relieved if he or 
she conformed fully with applicable regulations and procedures for the 
handling and safeguarding of the funds and they were nevertheless lost 
or stolen. B-142058, Mar. 18, 1960; B-126362, Feb. 21, 1956; B-119567, 
Jan. 10, 1955; B-95504, June 16, 1950. 

The Government Losses in Shipment Act (GLISA), 40 U.S.C. §§ 
1730117309, authorizes agencies to file claims with the Treasury 
Department for funds or other valuables lost or destroyed in shipment. 
See generally B-244473.2, May 13, 1993. The Treasury Department has a 
revolving fund for the payment of these claims and has issued 
regulations, found at 31 C.F.R. parts 361 and 362, to implement the 
statute. The Treasury Department will generally disallow a claim 
unless there has been strict compliance with the statute and 
regulations. See, e.g., B-200437, Oct. 21, 1980. 

If a loss in shipment occurs, the agency should first consider filing 
a claim under GLISA, and should seek relief only if this fails. 70 
Comp. Gen. 9 (1990). Denial of a GLISA claim should prompt further 
inquiry since it suggests the possibility that someone at the point of 
shipment may have been negligent, but it will not automatically 
preclude the granting of relief. For example, it is possible for a 
claim to be denied for reasons that do not suggest negligence. In B-
126362, Feb. 21, 1956, the accountable officer had reimbursed the 
government from personal funds, and a claim under GLISA was denied 
because there was no longer any loss. GAO nevertheless granted relief 
and the accountable officer was reimbursed. 

Disallowance of a GLISA claim for failure to strictly comply with the 
regulations carries with it an even stronger suggestion of negligence, 
but it is still appropriate to examine the facts and circumstances of 
the particular case to evaluate the relationship of the noncompliance 
to the loss. For example, GAO granted relief in B-191645, Oct. 5, 
1979, despite the denial of a GLISA claim, because there was no 
question that the funds had arrived at their initial destination 
although they never reached the intended recipient. Even if there had 
been negligence at the point of shipment, it could not have been the 
proximate cause of the loss. See also B-193830, Oct. 1, 1979, and B-
193830, Mar. 30, 1979 (both cases arising from the same loss). 

h. Fire, Natural Disaster: 

Earlier in this chapter, we noted the Supreme Court's conclusion in 
United States v. Thomas, 82 U.S. (15 Wall.) 337, 352 (1872), that 
strict liability (and hence the need for relief) would not attach in 
two situations: funds destroyed by an "overruling necessity" and funds 
taken by a "public enemy," provided there is no contributing fault or 
negligence by the accountable officer. The Court gave only one example 
of an "overruling necessity": 

"Suppose an earthquake should swallow up the building and safe 
containing the money, is there no condition implied in the law by 
which to exonerate the receiver from responsibility?" 

Id. at 348. We are aware of no subsequent judicial attempts to further 
define "overruling necessity," although some administrative 
formulations have used the term "acts of God." E.g., 48 Comp. Gen. 
566, 567 (1969). Thus, at the very least, assuming no contributing 
fault or negligence, an accountable officer is not liable for funds 
lost or destroyed in an earthquake, and hence there is no need to seek 
relief. Contributing negligence might occur, for example, if an 
accountable officer failed to periodically deposit collections and 
funds were therefore on hand which should not have been. See B-71445, 
June 20, 1949. 

GAO granted relief in one case involving an earthquake, B-229153, Oct. 
29, 1987, in which most of the funds were recovered. While arguably 
there was no need to seek relief in that case, it makes no difference 
as a practical matter since relief would be granted as a matter of 
routine unless there is contributing negligence, in which event the 
accountable officer would be liable even under Thomas. 

More recently, GAO relieved an accountable officer from liability for 
the loss of the "confidential fund" of the Secret Service field office 
resulting from the destruction of the World Trade Center on Sept. 11, 
2001. B-300677, June 19, 2003. See also B-249372, Aug. 13, 1992 
(rioting forced evacuation of the American embassy in Somalia, 
resulting in loss of funds in safe). 

Whatever the scope of the "overruling necessity" exception, it is 
clear that it does not extend to destruction by fire, even though 
money destroyed by fire is no longer available to be used by anyone 
else and can be replaced simply by printing new money. In Smythe v. 
United States, 188 U.S. 156, 173-74 (1903), the Supreme Court declined 
to apply Thomas and expressly rejected the argument that an 
accountable officer's liability for notes destroyed by fire should be 
limited to the cost of printing new notes. See also 1 Comp. Dec. 191 
(1895), in which the Comptroller of the Treasury similarly declined to 
apply the Thomas exception to a loss by fire. Thus, a loss by fire is 
a physical loss for which the accountable officer is liable, but for 
which relief will be granted under 31 U.S.C. § 3527 if the statutory 
conditions are met. Examples are B-212515, Dec. 21, 1983, and B-
203726, July 10, 1981. 

i. Loss by Theft: 

If money is taken in a burglary, robbery, or other form of theft, the
accountable officer will be relieved of liability if the following 
conditions are met: 

* There is sufficient evidence that a theft took place;[Footnote 38] 

* There is no evidence implicating, or indicating contributing 
negligence by, the accountable officer; and; 

* The agency has made the administrative determinations required by 
the relief statute. 

The fact patterns tend to fall into several well-defined categories. 

(1) Burglary: forced entry: 

Forced entry cases tend to be fairly straightforward. In the typical 
case, a government office is broken into while the office is closed 
for the night or over a weekend, and money is stolen. Evidence of the 
forced entry is clear. As long as there is no evidence implicating the 
accountable officer, no other contributing fault or negligence, and 
the requisite administrative determinations are made, relief is 
granted. A few examples follow:[Footnote 39] 

* Burglars broke into the welding shop at a government laboratory, 
took a blowtorch and acetylene tanks to the administrative office and 
used them to cut open the safe. B-242773, Feb. 20, 1991. 

* Cashier's office was robbed over a weekend. Office had been forcibly 
entered, but there was no evidence of forced entry into the safe. 
Federal Bureau of Investigation found no evidence of negligence or 
breach of security by any government personnel associated with the 
office. B-193174, Nov. 29, 1978. See also B-260862, June 6, 1995. 

* Persons unknown broke front door lock of Bureau of Indian Affairs 
office in Alaska and removed safe on sled. Sled tracks led to an 
abandoned building in which the safe was found with its door removed. 
B-182590, Feb. 3, 1975. 

* Unsecured bolt cutters found on premises used to remove safe 
padlock. No contributing negligence because there was no separate 
facility in which to secure the tools. B-202290, June 5, 1981. 

The same principles apply to theft from a hotel room. 69 Comp. Gen. 
586 (1990); B-229847, Jan. 29, 1988. Note, however, that relief was 
not granted in the case of a theft of cash stashed under the front 
seat of a locked vehicle left in an area where several vehicles had 
been broken into recently, since leaving cash in such a manner was not 
a prudent way to safeguard the funds. B-257120, Dec. 13, 1994. 

(2) Robbery: 

In this situation, one or more individuals, armed or credibly 
pretending to be armed, rob an accountable officer. Again, as long as 
there is no evidence implicating the accountable officer and no 
contributing negligence, relief is granted. The accountable officer is 
not expected to risk his or her life by resisting. Depending on the 
circumstances, it is not necessary that the thief be, or pretend to 
be, armed. An example is the common purse-snatching incident. B-
197021, May 9, 1980; B-193866, Mar. 14, 1979. Some illustrative 
robbery cases follow:[Footnote 40] 

* Armed robber forced cashier to open the safe at gunpoint, shot the 
cashier, and stole the funds. B-261261, Aug. 31, 1995. 

* Gunman entered cashier's office, knocked cashier unconscious, and 
robbed safe. B-235458, Aug. 23, 1990. 

* Man entered cashier's office in a veterans hospital and handed 
cashier a note demanding all of her $20 bills. Although he did not 
display a weapon, he said he was armed. B-191579, May 22, 1978. A very 
similar case is B-237420, Dec. 8, 1989 (man gave cashier note 
indicating bomb threat; upon running off with the money, he left a 
second note saying "no bomb"). 

(3) Riot, public disturbance: 

This category includes the popular pastime of ransacking American 
embassies. The Supreme Court's second exception in United States v. 
Thomas, 82 U.S. (15 Wall.) 337 (1872) (see Fire, Natural Disaster in 
section C.3.h of this chapter) to an accountable officer's strict 
liability is funds taken by a "public enemy." That case concerned the 
Civil War. As with the "overruling necessity" exception, we are aware 
of no further definition of "public enemy" in this context, and the 
cases cited here have consistently been treated as accountable officer 
losses. In any event, relief is routinely granted unless there is 
contributing negligence. Thus, GAO granted relief in the following 
cases:[Footnote 41] 

* Armed soldiers forced entry into U.S. Information Agency compound in 
Beirut, Lebanon, and looted safe. B-195435, Sept. 12, 1979. 

* Cash equivalents stolen when embassy in Belgrade, Federal Republic 
of Yugoslavia, was ransacked. B-288014, May 17, 2002. 

* Funds taken during attack on American Embassy in Tehran, Iran. B-
229753, Dec. 30, 1987; B-194666, Aug. 6, 1979 (separate attacks, both 
occurring in 1979). 

* Loss of Secret Service confidential funds resulting from terrorist 
attack on World Trade Center on September 11, 2001. B-300677, June 19, 
2003. 

* Safes looted by Cuban detainees during prison riot. B-232252, Jan. 
5, 1989; B-230796, Apr. 8, 1988. 

(4) Evidence less than certain: 

In all of the cases cited above dealing with forced entry, armed 
robbery, or rioting, the fact that a theft had taken place was beyond 
question. However, there are many cases in which the evidence of theft 
is not all that clear. The losses are unexplained in the sense that 
what happened cannot be determined with any certainty. The problem 
then becomes whether the indications of theft are sufficient to 
classify the loss as a theft and thereby to rebut the presumption of 
negligence. 

These tend to be the most difficult cases to resolve. The difficulty 
stems from the fact, which we have noted previously, that the 
accountable officer laws are designed to protect the government 
against dishonesty as well as negligence. On the one hand, an 
accountable officer who did all he or she could to safeguard the funds 
should be relieved of liability. But on the other hand, the 
application of the relief statutes should not provide a blueprint for 
(or absolution from) dishonesty. Recognizing that complete certainty 
is impossible in many if not most cases, the decisions try to achieve 
a balance between these two considerations. Thus, GAO gives weight to 
the administrative determinations and to statements of the individuals 
concerned, but these factors cannot be conclusive and the decision 
will be based on all of the evidence. Other relevant factors include 
how and where the safe combination was stored, when it was last 
changed, whether the combination dial was susceptible of observation 
while the safe was being opened, access to the safe and to the 
facility itself, and the safeguarding of keys to cash boxes. 

For example, in B-198836, June 26, 1980, funds were kept in the bottom 
drawer of a four-drawer file cabinet. Each drawer had a separate key 
lock and the cabinet itself was secured by a steel bar and padlock. 
Upon arriving at work one morning, the cashier found the bottom drawer 
slightly out of alignment with several pry marks on its edges. A 
police investigation was inconclusive. GAO viewed the evidence as 
sufficient to support a conclusion of burglary and, since the record 
contained no indication of negligence on the part of the cashier, 
granted relief. 

In another case, a safe was found unlocked with no signs of forcible 
entry. However, there was evidence that a thief had entered the office 
door by breaking a window. The accountable officer stated that he had 
locked the safe before going home the previous evening, and there was 
no evidence to contradict this or to indicate any other negligence. 
GAO accepted the accountable officer's uncontroverted statement and 
granted relief. B-188733, Mar. 29, 1979. See also B-260862, June 6, 
1995; B-242830, Sept. 24, 1991; B-210017, June 8, 1983. 

In B-170596-0.M., Nov. 16, 1970, the accountable officer stated that 
she had found the padlock on and locked in reverse from the way she 
always locked it. Her statement was corroborated by the agency 
investigation. In addition, the lock did not conform to agency 
specifications, but this was not the cashier's responsibility. She had 
used the facilities officially provided for her. Relief was granted. 

Relief was also granted in B-170615-0.M., Nov. 23, 1971, reversing 
upon reconsideration B-170615-0.M., Dec. 2, 1970. In that case, there 
was some evidence that the office lock had been pried open but there 
were no signs of forcible entry into the safe. This suggested the 
possibility of negligence either in failing to lock the safe or in not 
adequately safeguarding the combination. However, the accountable 
officer's supervisor stated that he (the supervisor) had locked the 
safe at the close of business on the preceding workday, and two safe 
company representatives provided statements that the safe was 
vulnerable and could have been opened by anyone with some knowledge of 
safe combinations. See also B-242830, Sept. 24, 1991. 

The occurrence of more than one loss under similar circumstances 
within a relatively short time will tend to corroborate the likelihood 
of theft. B-199021, Sept. 2, 1980; B-193416, Oct. 25, 1979. In B-
199021, two losses occurred in the same building within several weeks 
of each other. All agency security procedures had been followed and 
the record indicated that the cashier had exercised a very high degree 
of care in safeguarding the funds. In B-193416, the first loss was 
totally unexplained, and the entire cash box disappeared a week later. 
The safe combination had been kept in a sealed envelope in a "working 
safe" to which other employees had access. Although the seal on the 
envelope was not broken, an investigation showed that, while the 
combination could not be read by holding the envelope up to normal 
light, it could be read by holding it up to stronger light. In neither 
case was there any evidence of forcible entry or of negligence on the 
part of the accountable officer. Balancing the various relevant 
factors in each case, GAO granted relief. 

The disappearance of an entire cash box will also be viewed as an 
indication of theft. However, this factor standing alone will not be 
conclusive since there is nothing to prevent a dishonest employee from 
simply taking the whole box rather than a handful of money from it. 
Signs of forced entry to the safe or file cabinet will naturally 
reinforce the theft conclusion. E.g., B-229136, Jan. 22, 1988; B-
186190, May 11, 1976. Far more difficult are cases in which a cash box 
disappears with no signs of forcible entry to the container in which 
it was kept. Note the various additional factors viewed as relevant in 
each of the following cases: 

* Police were able to open file cabinet with a different key, and 
other thefts had occurred around the same time. Relief granted. B-
223602, Aug. 25, 1986. 

* Safe was not rated for burglary protection and could have been 
opened fairly easily by manipulating the combination dial. Relief 
granted. B-189658, Sept. 20, 1977. 

* Supervisor's secretary maintained a log of all safe and bar-lock 
combinations, a breach of security which could have resulted in the 
compromise of the combination. Relief granted. B-189896, Nov. 1, 1977. 

* Cashier locked safe and checked it in the presence of a guard. 
Several other employees had access to the safe combination. Relief 
granted. B-173133-0.M., Dec. 10, 1973. Multiple access also 
contributed to the granting of relief in B-241201.2, Apr. 15, 1992; B-
235167, Jan. 8, 1990; B-217945, July 23, 1985; and B-212605, Apr. 19, 
1984.[Footnote 42] 

* Safe was malfunctioning at time of loss. Relief granted. B-183284, 
June 17, 1975. 

* Extensive security violations attributable to agency. Relief 
granted. B-211649, Aug. 2, 1983. See also B-235167, Jan. 8, 1990; B-
197799, June 18, 1980. 

* Some evidence of forced entry to door of cashier's office but not to 
safe or safe drawer. Cash box later found in men's room. Negligence by 
cashier in improperly storing keys and safe combination in unlocked 
desk drawer not proximate cause of loss since seal on envelope was 
found intact. Relief granted. B-185666, July 27, 1976. Compare 70 
Comp. Gen. 12 (1990) (cashier denied relief because she negligently 
stored the cash box key, not in an envelope, in the back of her top 
center desk drawer which did not lock and kept a copy of the safe 
combination taped to the underside of an accessible pull-out panel on 
her desk). 

* Cash box disappeared during 2-week absence of cashier. Even assuming 
cashier negligently failed to lock safe prior to her absence, there 
was no way to establish this as the proximate cause of the loss since 
box had been kept in a "working safe" which would have been opened 
daily in her absence. Relief granted. B-191942, Sept. 12, 1979. 

* Cashier went on leave without properly securing key to file cabinet or
entrusting it to an alternate. Relief denied. B-182480, Feb. 3, 1975. 

* Cashier had been experiencing difficulty trying to lock the safe and 
stated she might have left it unlocked inadvertently. Relief denied. B-
184028, Mar. 2, 1976. 

To summarize the "cash box" cases, the disappearance of an entire cash 
box suggests theft but is not conclusive. In such cases, even though 
the cause of the loss cannot be definitely attributed, relief will 
probably be granted if there is uncontroverted evidence that the safe 
was locked, no other evidence of contributing fault or negligence on 
the part of the accountable officer, and especially if there are other 
factors present tending to corroborate the likelihood of theft. In no 
case has relief been granted based solely on the fact that a cash box 
disappeared; without more, it is simply another type of unexplained 
loss for which there is no basis for relief. 

(5) Embezzlement: 

The term "embezzlement" means the fraudulent misappropriation of 
property by someone to whom it has lawfully been entrusted. Black's 
Law Dictionary 540 (71h ed. 1999). Losses due to embezzlement or 
fraudulent acts of subordinate finance personnel, acting alone or in 
collusion with others, are treated as physical losses and relief will 
be granted if the statutory conditions are met. B-260563, Mar. 31, 
1995; B-244113, Nov. 1, 1991; B-202074, July 21, 1983, at 6; B-211763, 
July 8, 1983; B-133862-0.M., Nov. 29, 1957; B-101375-0.M., Apr. 16, 
1951. 

An illustrative group of cases involves the embezzlement of tax 
collections, under various schemes, by employees of the Internal 
Revenue Service (IRS). In each case the IRS pursued the perpetrators, 
and most were prosecuted and convicted. The IRS recovered what it 
could from the (now former) employees, and sought relief for the 
balance for the pertinent supervisor in whose name the account was 
held. In each case, GAO agreed with the "no fault or negligence" 
determination and granted relief. B-270863, June 17, 1996; B-265853, 
Jan. 23, 1996; B-260563, Mar. 31, 1995; B-244113, Nov. 1, 1991; B-
226214 et al., June 18, 1987; B-215501, Nov. 5, 1984; B-192567, Nov. 
3, 1978; B-191722, Aug. 7, 1978; B-191781, June 30, 1978. 

The accountable officer in each of the IRS cases was a supervisor who 
did not actually handle the funds. The approach to evaluating the 
presence or absence of negligence when the accountable officer is a 
supervisor is to review the existence and adequacy of internal 
controls and procedures and to ask whether the accountable officer 
provided reasonable supervision. If internal controls and management 
procedures are reasonable and were being followed, relief will be 
granted. As noted in B-226214 et al., June 18, 1987, the standard does 
not expect perfection and recognizes that a clever criminal scheme can 
outwit the most carefully established and supervised system. See also 
B-270863, June 17, 1996; B-260563, Mar. 31, 1995. 

Losses resulting from the fraudulent acts of other than subordinate 
finance personnel (e.g., payments on fraudulent vouchers) are not 
physical losses but must be treated as improper payments. See B-
287043, May 29, 2001; 2 Comp. Gen. 277 (1922); B-248517, Oct. 20, 
1992; B-202074, July 21, 1983; B-76903, July 13, 1948; B-133862-0.M., 
Nov. 29, 1957. 

j. Agency Security: 

In evaluating virtually any physical loss case, physical security—the 
existence, adequacy, and use of safekeeping facilities and procedures—
is a crucial consideration. The Department of the Treasury Financial 
Management Service's Manual of Procedures and Instructions for 
Cashiers (hereafter Cashier's Manual) (April 2001) sets forth many of 
the requirements.[Footnote 43] For example, the Cashier's Manual 
provides that safe combinations should be changed annually, whenever 
there is a change of cashiers, or when the combination has been 
compromised, and prescribes procedures for safeguarding the 
combination. It also reflects what is perhaps the most fundamental 
principle of sound cash control—that an employee with custody of 
public funds should have exclusive control over those funds. In 
addition, agencies should have their own specific regulations or 
instructions tailored to individual circumstances. Cashier's Manual, § 
VI at 14. 

The first step in analyzing the effect of a security violation or 
deficiency is to determine whether the violation or deficiency is 
attributable to the accountable officer or to the agency. Two 
fundamental premises drive this analysis: (1) the accountable officer 
is responsible for safeguarding the funds in his or her custody; and 
(2) the agency is responsible for providing adequate means to do so. 
Adequate means includes both physical facilities and administrative 
procedures. 

Basically, if the accountable officer fails to use the facilities and 
procedures that have been provided, this failure will be viewed as 
negligence and, unless some other factor appears to be the proximate 
cause of the loss, will preclude the granting of relief. Several 
examples have been previously cited under the Actual Negligence 
heading, section C.3.c of this chapter. 

Another element of the accountable officer's responsibility is the 
duty to report security weaknesses to appropriate supervisory 
personnel. E.g., 63 Comp. Gen. 489, 492 (1984), rev'd on other 
grounds, 65 Comp. Gen. 876 (1986). If the agency fails to respond, a 
loss attributable to the reported weakness is not the accountable 
officer's fault. E.g., B-235147.2, Aug. 14, 1991; B-208511, May 9, 
1983. 

Ultimately, an accountable officer can do no more than use the best 
that has been made available, and relief will not be denied for 
failure to follow adequate security measures which are beyond the 
accountable officer's control. E.g., B-226947, July 27, 1987 (U.S. 
Mint employees stole coins from temporarily leased facility which was 
incapable of adequate security); B-207062, May 12, 1983 (agent kept 
collections in his possession because, upon returning to office at 
4:30 p.m., he found all storage facilities locked and all senior 
officials had left for the day); B-210245, Feb. 10, 1983 (lockable gun 
cabinet was the most secure item available); B-186190,
May 11, 1976 (funds kept in safe with padlock because combination 
safe, which had been ordered, had not yet arrived); B-78617, June 24, 
1949 (agency failed to provide safe). Of course, the accountable 
officer is expected to act to correct weaknesses that are subject to 
his or her control. B-127204, Apr. 13, 1956. 

The principle that relief will be granted if the agency fails to 
provide adequate security and that failure is viewed as the proximate 
cause of the loss manifests itself in a variety of contexts. One group 
of cases involves multiple violations. In B-182386, Apr. 24, 1975, 
imprest funds were found missing when a safe was opened for audit. The 
accountable officer was found to be negligent for failing to follow 
approved procedures. However, the agency's investigation disclosed a 
number of security violations attributable to the agency. Two cashiers 
operated from the same cash box; transfers of custody were not 
documented; the safe combination had not been changed despite several 
changes of cashiers; at least five persons knew the safe combination. 
The agency, in recommending relief, concluded that the loss was caused 
by "pervasive laxity in the protection and administration of the funds 
... on all levels." GAO agreed, noting that the lax security 
"precludes the definite placement of responsibility" for the loss, and 
granted relief. 

In several later unexplained loss cases (no sign of forcible entry, no 
indication of fault or negligence on the part of the accountable 
officer), GAO has regarded overall lax security on the part of the 
agency, similar to that in B-182386, as the proximate cause of the 
loss and thus granted relief. 

B-271896, Mar. 4, 1997; B-243324, Apr. 17, 1991; B-229778, Sept. 2, 
1988; B-226847, June 25, 1987; B-217876, Apr. 29, 1986; B-211962, Dec. 
10, 1985; B-211649, Aug. 2, 1983. All of these cases involved numerous 
security violations beyond the accountable officer's control, and 
several adopt the "pervasive laxity" characterization of B-182386. 

However, in order for relief to be granted, security weaknesses 
attributable to the agency need not rise to the level of "pervasive 
laxity" encountered in the cases cited in the preceding paragraph. 
Thus, relief will usually be granted where several persons other than 
the accountable officer have access to the funds through knowledge of 
the safe combination since "multiple access" makes it impossible to 
attribute the loss to the accountable officer. B-241201.2, Apr. 15, 
1992; B-235368, Apr. 19, 1991; B-235072, July 5, 1989; B-228884, Oct. 
13, 1987; B-214080, Mar. 25, 1986; B-211233, June 28, 1983; B-209569, 
Apr. 13, 1983; B-196855, Dec. 9, 1981; B-199034, Feb. 9, 1981. 
Additional cases are cited in our earlier discussion of missing cash 
boxes. 

If multiple access to a safe will support the granting of relief for 
otherwise unexplained losses, it follows that multiple access to a 
cash box or drawer will have the same effect. The Cashier's Manual 
provides that cashiers should never work out of the same cash box or 
drawer. Cashier's Manual, § VI at 14. Violation of this requirement, 
where beyond the control of the accountable officer, is a security 
breach that, in appropriate cases, has supported the granting of 
relief. B-227714, Oct. 20, 1987; B-204647, Feb. 8, 1982. If it is 
necessary for more than one cashier to work out of the same safe, the 
safe should preferably have separate built-in locking drawers rather 
than removable cash boxes. B-191942, Sept. 12, 1979. 

The following security deficiencies have also contributed to the 
granting of relief: 

* Cash box could be opened with other keys. B-203646, Nov. 30, 1981; B-
197270, Mar. 7, 1980. 

* Crimping device used to seal cash bags did not use sequentially 
numbered seals and was accessible to several employees. B-246988, Feb. 
27, 1992. 

* Failure to change safe combination as required by Treasury 
regulations. B-211233, June 28, 1983; B-196855, Dec. 9, 1981. (Both 
cases also involve multiple access.) 

* Safe combination and key to cash drawer were kept in an unlocked 
desk drawer. B-177963-0.M., Mar. 21, 1973. (The result would most 
likely be different if the violation were the fault of the accountable 
officer or if the accountable officer passively acquiesced in the 
breach. See B-185666, July 27, 1976.) 

* Safe combination could be read through the sealed envelope in which 
it was kept. B-243324, Apr. 17, 1991. 

* Safe malfunctioning, defective, or otherwise not secure. B-271896, 
Mar. 4, 1997; B-221447, June 1, 1987; B-215477, Nov. 5, 1984; B-
183284, June 17, 1975. 

The preceding cases are mostly unexplained losses. It naturally 
follows that security violations of the type noted will contribute to 
rebutting the presumption of negligence in cases where there is clear 
evidence of theft. In B-184493, Oct. 8, 1975, for example, there was 
evidence of forced entry to the office door but not to the safe. The 
record showed that, despite the accountable officer's best efforts, it 
was impossible for him to shield the dial from observation while 
opening the safe. In view of the office layout, the position of the 
safe, and the number of persons allowed access to the office, GAO 
granted relief.[Footnote 44] Other examples are: B-241201.2, Apr. 15, 
1992, B-243324, Apr. 17, 1991, and B-180664-0.M., Apr. 23, 1974 
(multiple access to safe); and B-170251-0.M., Oct. 24, 1972 (insecure 
safe). 

If there is evidence of negligence on the part of the accountable 
officer in conjunction with security deficiencies attributable to the 
agency, the accountable officer's negligence must be balanced against 
the agency's negligence. Relief may be granted or denied based largely 
on the proximate cause analysis. As with the unexplained loss cases, 
relief has been granted in a number of cases where the agency's 
violations could be said to amount to "pervasive laxity." B-235147.2, 
Aug. 14, 1991; B-197799, June 19, 1980; B-182386, Apr. 24, 1975; B-
169756-0.M., July 8, 1970. Similarly, agency security violations which 
do not amount to pervasive laxity may support the granting of relief. 
Such violations must either be the proximate cause of the loss or make 
it impossible to attribute the loss to the accountable officer. In a 
1971 case, for example, a cashier kept the combinations to three safes 
on an adding machine tape in her wallet. The agency failed to change 
the combinations after the wallet was stolen. Also, safe company 
representatives stated that one safe was vulnerable and could readily 
have been opened. The fact that only the vulnerable safe had been 
robbed supported the conclusion that the stolen combinations had not 
been used. B-170615-0.M., Nov. 23, 1971. Other cases in which agency 
security violations were found to override negligence by the 
accountable officer are B-232744, Dec. 9, 1988 (safe combination not 
changed despite several requests by accountable officer following 
possible compromise); B-205985, July 12, 1982 (multiple access, safe 
combination not changed as required); B-199128, Nov. 7, 1980 (multiple 
access); B-191440, May 25, 1979 (two cashiers working out of same 
drawer). 

The result in these cases should not be taken too far. Poor agency 
security does not guarantee relief; it is merely another factor to 
consider in the proximate cause equation. Another relevant factor is 
the nature and extent of the accountable officer's efforts to improve 
the situation. 

Where security weaknesses exist, a supervisor will normally be in a 
better position to take or initiate corrective action, and a 
supervisor who is also an accountable officer may be found negligent 
for failing to do so. 63 Comp. Gen. 489 (1984), rev'd upon 
reconsideration, 65 Comp. Gen. 876 (1986) (new evidence presented); 60 
Comp. Gen. 674, 676 (1981). However, a new supervisor should not be 
held immediately responsible for the situation he or she inherited. B-
209715, Apr. 4, 1983 (supervisor relieved in pervasive laxity 
situation where loss occurred only a week after he became accountable). 

A close reading of the numerous security cases reveals the somewhat 
anomalous result that an accountable officer who works in a sloppy 
operation stands a much better chance of being relieved than one who 
works in a well-managed office. True as this may be, it would be wrong 
to hold accountable officers liable for conditions beyond their 
control. Rather, the solution lies in the proper recognition and 
implementation of the responsibility of each agency, mandated by the 
Federal Managers' Financial Integrity Act of 1982, 31 U.S.C. § 
3512(c)(1), to safeguard its assets against loss and misappropriation. 

k. Extenuating Circumstances: 

Since relief under 31 U.S.C. §§ 3527(a) and (b) is a creature of 
statute, it must be granted or denied solely in accordance with the 
statutory conditions. When Congress desires that "equitable" concerns 
be taken into consideration, it expressly so states. Examples are 
waiver statutes such as 5 U.S.C. § 5584 and 10 U.S.C. § 2774.[Footnote 
45] In contrast, the physical loss relief statutes do not authorize 
the granting of relief on the basis of equitable considerations or 
extenuating or mitigating circumstances. 

Thus, where an accountable officer has been found negligent, the 
following factors have been held not relevant, nor are they sufficient 
to rebut the presumption of negligence: 

* Acceptance of extra duties by the accountable officer; shortage of 
personnel. B-186127, Sept. 1, 1976. 

* Financial hardship of having to repay loss. B-239387, Apr. 24, 1991; 
B-241478, Apr. 5, 1991; B-216279.2, Dec. 30, 1985. 

* Good work record; long period of loyal and dependable service; 
evidence of accountable officer's good reputation and character. B-
241478, Apr. 5, 1991; B-204173, Nov. 9, 1982; B-170012, Aug. 11, 1970; 
B-158699, Sept. 6, 1968. 

* Heavy work load. 67 Comp. Gen. 6 (1987); 48 Comp. Gen. 566 (1969); B-
241201, Aug. 23, 1991, reed on reconsideration, B-241201.2, Apr. 15, 
1992 (reversed on other grounds—new evidence submitted indicating 
multiple access). 

* Inexperience; inadequate training or supervision. 70 Comp. Gen. 389 
(1991); B-257120, Dec. 13, 1994; B-189084, Jan. 3, 1979; B-191051, 
July 31, 1978. 

D. Illegal or Improper Payment: 

1. Disbursement and Accountability: 

In order to understand the laws governing liability and relief for 
improper payments, and how the application of those laws evolved over 
the last quarter of the twentieth century, it is helpful to start by 
summarizing, from the accountability perspective, a few points 
relating to how the federal government disburses its money. 

a. Statutory Framework: Disbursement Under Executive Order No. 6166: 

For most of the nineteenth century and the early decades of the 
twentieth century, federal disbursement was decentralized. Each agency 
had its own disbursing office(s), and the function was performed by a 
small army of disbursing officers and clerks (who were accountable 
officers) scattered among the various agencies and throughout the 
country. In part, the reason for this was the primitive state of 
communication and transportation then existing. One of the weaknesses 
of this system was that, in many cases, vouchers were prepared, 
examined, and paid by the same person. 20 Comp. Dec. 859, 869 (1914). 
This resulted in the growth of large disbursing offices in several 
agencies, some of which exceeded in size that of the Treasury 
Department. GAO, Annual Report of the Comptroller General of the 
United States for the Fiscal Year Ended June 30, 1939 (Washington, 
D.C.: 1939), at 98. 

From the perspective of accountability for improper payments, the 
modern legal structure of federal disbursing evolved in three major 
steps. First, Congress enacted legislation on August 23, 1912, 
[Footnote 46] the remnants of which are found at 31 U.S.C. § 3521(a), 
to prohibit disbursing officers from preparing and auditing their own 
vouchers. With this newly mandated separation of voucher preparation 
and examination from actual payment, payment was accomplished by 
having some other administrative official "certify" the correctness of 
the voucher to the disbursing officer. The 1912 legislation was thus 
the genesis of what would later become a new class of accountable 
officer—the certifying officer. 

Disbursing officers remained accountable for improper payments, the 
standard now reflecting the more limited nature of the function. Since 
1912 law was intended to prohibit the disbursing officer from 
duplicating the detailed voucher examination already performed by the 
certifying officer, disbursing officers were held liable only for 
errors apparent on the face of the voucher, as well as, of course, 
payments prohibited by law or for which no appropriation was 
available. 20 Comp. Dec. 859 (1914). In a sense, the 1912 statute 
operated in part as a relief statute, with credit being allowed or 
disallowed in the disbursing officer's account based on the 
application of this standard. E.g., 4 Comp. Gen. 991 (1925); 3 Comp.
Gen. 441 (1924). 

The second major step in the evolution was section 4 of Executive 
Order No. 6166, signed by President Roosevelt on June 10, 1933 (see 
note at 5 U.S.C. § 901). The first paragraph of section 4, codified at 
31 U.S.C. § 3321(a), consolidated the disbursing function in the 
Treasury Department, eliminating the separate disbursing offices of 
the other executive departments. The second paragraph, codified at 31 
U.S.C. § 3321(b), authorizes Treasury to delegate disbursing authority 
to other executive agencies for purposes of efficiency and economy. 
The third paragraph gave new emphasis to the certification function: 

"The Division of Disbursement [Treasury Department] shall disburse 
moneys only upon the certification of persons by law duly authorized 
to incur obligations upon behalf of the United States. The function of 
accountability for improper certification shall be transferred to such 
persons, and no disbursing officer shall be held accountable therefor." 

The following year, Executive Order No. 6728, May 29, 1934 (see note at
5 U.S.C. § 901), exempted the military departments from the 
centralization. This exemption, an exemption for the United States 
Marshals Service which originated in a 1940 reorganization plan, and 
an exemption for certain expenditures of the Coast Guard[Footnote 47] 
are codified at 31 U.S.C. § 3321(c). Executive Order No. 6166 provided 
the framework for the disbursing system still in effect today. Apart 
from the specified exemptions, the certifying officer is now an 
employee of the spending agency, and the disbursing officer is an 
employee of the Treasury Department. 

Disbursing officers continued to be liable for their own errors, as 
under the 1912 legislation. E.g., 13 Comp. Gen. 469 (1934). However, a 
major consequence of Executive Order No. 6166 was to make the 
certifying officer an accountable officer as well. The certifying 
officer became liable for improper payments "caused solely by an 
improper certification as to matters not within the knowledge of or 
available to the disbursing officer." 13 Comp. Gen. 326, 329 (1934). 
See also 15 Comp. Gen. 986 (1936); 15 Comp. Gen. 362 (1935). 

Over the next few years, confusion and disagreement developed as to 
the precise relationship of certifying officers and disbursing 
officers with respect to liability for improper payments. In the 
Annual Report of the Comptroller General of the United States for the 
Fiscal Year Ended June 30, 1940 (Washington, D.C.: 1941) at pages 63-
66, GAO summarized the problem and recommended legislation to specify 
the allocation of responsibilities "to provide the closest possible 
relationship between liability and fault" (id. at 64). 

The third major evolutionary step was the enactment of Public Law No. 
77389, ch. 641, 55 Stat. 875 (Dec. 29, 1941) to implement GAO's 
recommendation. Section 1, 31 U.S.C. § 3325(a), reflects the substance 
of the third paragraph of Executive Order No. 6166, § 4, quoted above. 
It requires that a disbursing officer disburse money only in 
accordance with a voucher certified by the head of the spending agency 
or an authorized certifying officer who, except for some interagency 
transactions, will also be an employee of the spending agency. As with 
the amended Executive Order No. 6166 itself, section 3325(a) does not 
apply to disbursements of the military departments or certain expenses 
of the Coast Guard. 31 U.S.C. § 3325(b). The rest of the statute, 
which we will discuss in detail later, delineates the responsibilities 
of certifying and disbursing officers and provides a mechanism for the 
administrative relief of certifying officers. (Comparable authority to 
relieve disbursing officers from liability for improper payments was 
not to come about until 1955.) Further detail on the federal 
disbursement system may be found in the Treasury Financial Manual, 
volume I, part 4 (2004), and GAO's Policy and Procedures Manual for 
Guidance of Federal Agencies, title 7, chapter 6 (Washington, D.C.:
May 18, 1993). 

It should be apparent that control of the public treasury must repose 
in the hands of federal officials. However, this does not mean that 
every task in the disbursement process must be performed by a 
government employee. For example, GAO has advised that the Bureau of 
Indian Affairs is authorized as a matter of law to contract with a 
private bank to perform certain ministerial or operational aspects of 
disbursing Indian trust fund money, such as printing checks, 
delivering checks to payees, and debiting amounts from accounts. 
However, in order to comply with 31 U.S.C. §§ 3321 and 3325, a federal 
disbursing officer must retain managerial and judgmental 
responsibility. 69 Comp. Gen. 314 (1990). The decision concluded: 

"We see no reason to object to a contractual arrangement whereby a 
private contractor provides disbursement services, so long as a 
government disbursing officer remains responsible for reviewing and 
overseeing the disbursement operations through agency installed 
controls designed to assure accurate and proper disbursements." 

Id. at 319. To intrude further into this responsibility would require 
clear statutory authority. E.g., B-210545-0.M., June 6, 1983 (Indian 
Health Service would need statutory authority to use fiscal 
intermediaries to pay claims by providers; memorandum cites examples 
of such authority in Medicare legislation). 

b. Automated Payment Systems: 

The statutory framework we have just described came into existence at 
a time when all disbursing was done manually. The certifying officer 
and his or her staff would review the supporting documentation for 
each payment voucher. The certifying officer would then sign the 
voucher, certifying to its legality and accuracy, and send it on to 
the disbursing officer. The increased use of automated payment systems 
has changed the way certifying officers must operate. Perhaps the 
clearest example is payroll certification. A certifying officer may be 
asked to certify a grand total accompanied by computer tapes 
containing payrolls involving millions of dollars. There is no way the 
certifying officer can verify that each payment is accurate and legal. 
Even if it were reasonably possible, the cost of doing it would be 
prohibitive. 

With the onslaught of the computer age, it was natural and inevitable 
to ask how accountability would function in a computerized 
environment. Since many of the assumptions of a manual system were 
unrealistic under an automated system, something had to change. GAO 
reviewed the impact of computerization in a report entitled New 
Methods Needed for Checking Payments Made by Computers, FGMSD-76-82 
(Washington, D.C.: Nov. 7, 1977). The report recognized that, while 
the certifying officer's basic legal liability remains, the conditions 
in which a certifying officer may be relieved under an automated 
payment system must be different to reflect the new realities. The 
approach to relief in this context stems from the following premises 
discussed in the report: 

* In automated systems, evidence that the payments are accurate and 
legal must relate to the system rather than to individual transactions. 

* Certifying and disbursing officers should be provided with 
information showing that the system on which they are largely 
compelled to rely is functioning properly. 

* Reviews should be made at least annually, supplemented by interim 
checks of major system changes, to determine that the automated 
systems are operating effectively and can be relied on to produce 
payments that are accurate and legal. 

The report then concluded: 

"In the future, when a certifying or disbursing officer requests 
relief from an illegal, improper, or incorrect payment made using an 
automated system, GAO will continue to require the officer to show 
that he or she was not negligent in certifying payments later 
determined to be illegal or inaccurate. However, consideration will be 
given to whether or not the officer possessed evidence at the time of 
the payment approval that the system could be relied on to produce 
accurate and legal payments. In cases in which the designated 
assistant secretary or comparable official provides the agency head 
and GAO with a written statement that effective system controls could 
not be implemented prior to voucher preparation and certifies that the 
payments are otherwise proper, GAO will not consider the absence of 
such controls as evidence of negligence in determining whether the 
certifying official should be held liable for any erroneous payment 
prior to receipt of an advance decision. Of course, the traditional 
requirements that due care be exercised in making the payments and 
that diligent effort be made to recoup any erroneous payments will 
still be considered in any requests for waiver of liability. Also, 
should the certifying official fail to take reasonable steps to 
establish adequate controls for future payments, the reasons for such 
failure will be taken into account in any requests for waiver of 
liability concerning such future payments." 

FGMSD-76-82, at 17-18. 

A few years later, the concepts and premises of the GAO report were 
explored and reported, with implementing recommendations, in a key 
study by the Joint Financial Management Improvement Program entitled 
Assuring Accurate and Legal Payments—The Roles of Certifying Officers 
in Federal Government (Washington, D.C.: June 1980).[Footnote 48] 
Further guidance from the internal control perspective may be found in 
GAO, Public Key Infrastructure: Examples of Risks and Internal Control 
Objectives Associated with Certification Authorities, GAO-04-1023R 
(Washington, D.C.: Aug. 10, 2004); GAO, Streamlining the Payment 
Process While Maintaining Effective Internal Control, GAO/AIMD-21.3.2 
(Washington, D.C.: May 1, 2000); GAO, Policy and Procedures Manual for 
Guidance of Federal Agencies (hereafter GAO-PPM), title 7 (Washington, 
D.C.: May 18, 1993); OMB Circular No. A-123, Management Accountability 
and Control (June 21, 1995); and OMB Circular No. A-127, Financial 
Management Systems (July 23, 1993). See also a GAO publication 
entitled Critical Factors in Developing Automated Accounting and 
Financial Management Systems, Document Accession No. 132042 
(Washington, D.C.: January 1987). 

Thus, in considering requests for relief under an automated payment 
system where verification of individual transactions is impossible as 
a practical matter, the basic question will be the reasonableness of 
the certifying officer's reliance on the system to continually produce 
legal and accurate payments. B-178564, Jan. 27, 1978 (confirming the 
conceptual feasibility of using automated systems to perform preaudit 
functions under various child nutrition programs). See also B-201965, 
June 15, 1982. Contexts in which system reliance is relevant are 
discussed in B-291001, Dec. 23, 2002 (proposed time and attendance 
system); 59 Comp. Gen. 85 (1989) (automated "ZIP plus 4" address 
correction system); 59 Comp. Gen. 597 (1980) (electronic funds 
transfer program). Regardless of what system is used, there is of 
course no authority to make known overpayments. B-205851, June 17, 
1982; B-203993-0.M., July 12, 1982. 

c. Statistical Sampling: 

Statistical sampling is a procedure whereby a random selection of 
items from a universe is examined, and the results of that examination 
are then projected to the entire universe based on the laws of 
probability. In 1963, the Comptroller General held that reliance on a 
statistical sampling plan for the internal examination of vouchers 
prior to certification would not operate to relieve a certifying 
officer from liability for improper or erroneous payments. 43 Comp. 
Gen. 36 (1963). GAO recognized in the decision that an adequate 
statistical sampling plan could produce overall savings to the 
government, but was forced to conclude that it was not authorized 
under existing law. 

In response to this, Congress enacted legislation in 1964, now found 
at 31 U.S.C. §§ 3521(b)-(d). The statute authorizes agency heads, upon 
determining that economies will result, to prescribe the use of 
adequate and effective statistical sampling procedures in the 
prepayment examination of disbursement vouchers. 

As originally enacted, 31 U.S.C. § 3521(b) was limited to vouchers not 
exceeding $100. A 1975 amendment to the statute removed the $100 limit 
and authorized the Comptroller General to prescribe maximum dollar 
limits. The current limit is $2,500. GAO, Policy and Procedures Manual 
for Guidance of Federal Agencies (hereafter GAO-PPM), title 7, § 7.4.E 
(Washington, D.C.: May 18, 1993). For further guidance, see 7 GAO-PPM 
App. DI, and GAO, Using Statistical Sampling, GAO/PEMD-10.1.6 
(Washington, D.C.: May 2, 1992). For vouchers over the prescribed 
limit, unless GAO has approved an exception (7 GAO-PPM App. III, § B),
43 Comp. Gen. 36 would continue to apply. 

The relevance of all this to accountable officers is spelled out in 
the statute. A certifying or disbursing officer acting in good faith 
and in conformity with an authorized statistical sampling procedure 
will not be held liable for any certification or payment on a voucher 
which was not subject to specific examination because of the 
procedure. However, this does not affect the liability of the payee or 
recipient of the improper payment, and relief may be denied if the 
agency has not diligently pursued collection action against the 
recipient. 31 U.S.C. §§ 3521(c)-(d). See B-254436, Mar. 1, 1994, where 
GAO found that disbursing and certifying officers are not liable for 
payments made on unaudited vouchers under the statistical sampling 
procedure provided that the agency carries out diligent collection 
actions on any improper payment. 

GAO has approved the use of statistical sampling to test the 
reliability of accelerated payment or "fast pay" systems. See, e.g., 
GAO, Streamlining the Payment Process While Maintaining Effective 
Internal Control, GAO/AIMD-21.3.2 (Washington, D.C.: May 1, 2000); 60 
Comp. Gen. 602, 606 (1981). In 67 Comp. Gen. 194 (1988), GAO for the 
first time considered the use of statistical sampling for post-payment 
audit in conjunction with "fast pay" procedures. The question arose in 
connection with a General Services Administration proposal to revise 
its procedures for paying and auditing utility invoices. GAO approved 
the proposal in concept, subject to several conditions: (1) the 
economic benefit to the government must exceed the risk of loss; (2) 
the plan must provide for a meaningful sampling of all invoices not 
subject to 100 percent audit; and (3) the plan must provide a reliable 
and defensible basis for the certification of payments. GAO then 
considered and approved GSA's specific plan in 68 Comp. Gen. 618 
(1989). As a general proposition, however, approaching the problem 
through system improvements is preferable to an alternative that 
involves relaxing controls or audit requirements. 7 GAO-PPM § 7.4.E 

d. Provisional Vouchers and Related Matters: 

Apart from questions of automation or statistical sampling, proposals 
arise from time to time, prompted by a variety of legitimate concerns, 
to expedite or simplify the payment process. Proposals of this type 
invariably raise the potential for overpayments or erroneous payments. 
Therefore, their consequences in terms of the liability and relief of 
certifying and disbursing officers must always be considered. 

A 1974 case involved a proposal by the Environmental Protection Agency 
for the certification of "provisional vouchers" for periodic payments 
under cost-type contracts. Under the proposal, monthly vouchers 
certified for payment would be essentially unaudited except for basic 
mathematical and cumulative cost checks, subject to adjustment upon 
audit when the contract is completed. Under this system, as with 
statistical sampling, some errors could escape detection. However, 
certifying officers would not have the benefit of the protection 
afforded by the statistical sampling legislation. Since there would be 
a complete audit upon contract completion, the provisional vouchers 
could be certified upon a somewhat lesser standard of prepayment 
examination, but GAO pointed out that any such system should provide, 
at a minimum, for periodic audit of the provisional vouchers. To 
better protect the certifying officers, GAO suggested following a 
Defense Department procedure under which "batch audits" of accumulated 
vouchers are conducted as frequently as deemed necessary based on the 
reliability of each contractor's accounting and billing procedures, 
but not less than annually, again subject to final audit upon contract 
completion. B-180264, Mar. 11, 1974. 

In order to meet processing deadlines, time and attendance forms are 
often "certified" by appropriate supervisory personnel before the end 
of the pay period covered, raising the possibility that information 
for the latter days of the pay period may turn out to be erroneous. 
Since necessary adjustments can easily be made in the subsequent pay 
period and since the risk of loss to the government is viewed as 
remote, the provisional certification of payroll vouchers based on 
these "provisional" time and attendance records is acceptable. B-
145729, Aug. 17, 1977 (internal memorandum). 

Simplification plans may be prompted by nothing more exotic than 
understaffing of audit resources. In B-201408, Apr. 19, 1982, an 
agency proposed an "audit resources utilization plan" whereby it would 
(1) attempt to identify high risk contractors through preaward 
questionnaires; (2) for low risk contracts below a monetary limit, 
substitute desk audits for field contract audits; and (3) encourage 
the use of systems audits where possible. GAO found no "conceptual 
objection" to the proposal, noting that the final audits discussed in 
B-180264, Mar. 11, 1974, did not necessarily have to be field audits, 
but emphasized that high risk contractors should be subject to 
contract audits in all cases. The decision also discusses the 
certifying officer's role. 

Another type of simplification proposal involves lessening the degree 
of scrutiny on small payments. For example, the Department of Veterans 
Affairs (VA) is authorized to reimburse certain low-cost supplies 
furnished to veterans under statutory training and rehabilitation 
programs. Experience taught the VA that participants could reasonably 
be expected to incur at least $35 of reimbursable supply expenses. The 
VA proposed to waive documentation and review requirements on invoices 
of up to $35 for miscellaneous supplies, and to pay essentially 
unsupported invoices up to that amount.[Footnote 49] GAO concurred, 
but added that the VA should be able to demonstrate that prior audits 
have not revealed a significant number of false or inappropriate 
claims, and that it has internal controls adequate to detect multiple 
claims for the same individual. B-221949, June 30, 1987. An unstated 
consequence of the decision is that a certifying officer who relied on 
the system, assuming it was set up in accordance with the specified 
criteria, would be relieved from liability should any of the payments 
turn out to be erroneous. 

e. Facsimile Signatures and Electronic Certification: 

Signature devices other than the traditional pen-and-ink signature are 
called "facsimile signatures." The term has been defined as "an 
impression of a signature made by a rubber stamp, metal plate, or 
other mechanical contrivance." B-194970, July 3, 1979. As a general 
proposition, there is no prohibition on the use of facsimile 
signatures on financial documents as long as adequate controls and 
safeguards are observed. The rule was stated as follows in B-48123, 
Nov. 5, 1965 (nondecision letter): 

"Generally, an acceptable facsimile of a signature may be made by a 
rubber stamp impression or may be reproduced on a metal plate or by 
other mechanical contrivances, the validity of which is derived from a 
signed original. An otherwise proper document may be so authenticated 
mechanically with the knowledge and consent or under an express 
delegation of authority from the signer of the original provided that 
appropriate safeguards are observed in those respects." 

The rule has statutory recognition. In any federal statute unless 
otherwise specified, the term "signature" includes "a mark when the 
person making the same intended it as such." 1 U.S.C. § 1; 71 Comp. 
Gen. 109 (1991) (definition of writing in 1 U.S.C. § 1 encompasses 
electronic data interchange technologies); 65 Comp. Gen. 806, 810 
(1986). 

When facsimile signatures are to be used by government officials, the 
safeguards should include: 

* Standards for the authorization of the use of facsimile signatures, 

* An enumeration of the types of documents on which facsimile 
signatures may be used, 

* Physical control of the signature device to prevent unauthorized 
use, and; 

* Notification to officials authorized to use facsimile signatures 
that use of a signature device in no way lessens their responsibility 
or liability. 

B-140697, Oct. 28, 1959 (approving use of facsimile signatures in the 
execution of contracts). Other cases approving the use or acceptance 
of facsimile signatures are 40 Comp. Gen. 5 (1960) (use by Air Force 
on purchase orders for small purchases); 33 Comp. Gen. 297 (1954) 
(certification of invoice bearing only rubber stamp signature of 
vendor); B-194970, July 3, 1979 (certification of voucher/purchase 
order bearing only facsimile signature of contracting officer); B-
150395, Dec. 21, 1962 (use by Navy on purchase orders); B-126776-0.M., 
Mar. 5, 1956 (use by Army on certificates of availability of 
government quarters and/or mess in support of military travel 
vouchers); B-104590, Sept. 12, 1951 (use on vouchers in federal 
educational grant programs).[Footnote 50] 

A more recent case held that payment could be certified on the basis 
of a contractor's facsimile ("fax") invoice, again provided that the 
agency has adequate internal controls to guard against fraud and 
overpayments and it determines that accepting facsimiles is beneficial 
to and cost-effective for the government. See B-242185, Feb. 13, 1991, 
citing several cases authorizing the acceptance of carbon copies. 

One place where facsimile signatures are not permitted is the Standard 
Form 210, the signature/designation card for certifying officers which 
must be filed with the Treasury Department and which must bear the 
certifying officer's original, manual signature. 1 TFM 4-1125. 

Most of the cases cited thus far have involved relatively primitive 
devices such as rubber stamps or signature machines. When we move into 
the realm of computerized data transmission, the equipment is far more 
sophisticated but the underlying principles are the same—there is no 
prohibition but there must be adequate safeguards. 

In the 1980s, GAO and the Treasury Department began to consider the 
feasibility of electronic certification of payment vouchers. In a 1984 
memorandum to one of GAO's audit divisions, GAO's General Counsel 
agreed with the Treasury Department that there is no specific legal 
requirement that a certifying officer's certification be limited to 
writing on paper. Then, applying the precedent of the earlier rubber 
stamp cases, the memorandum concluded that electronic certification, 
with adequate safeguards, was not legally objectionable. The 
"signature" could be an appropriate symbol adopted by the certifying 
officer, which should be unique, within the certifying officer's sole 
control or custody, and capable of verification by the disbursing 
officer. B-216035-0.M., Sept. 20, 1984. 

Treasury subsequently developed a proposal for a prototype electronic 
certification system, which GAO found to adequately satisfy the 
statutory requirements for voucher certification and payment. B-216035-
0.M., Sept. 25, 1987.[Footnote 51] In 1998, Congress enacted 
legislation that required executive agencies to implement procedures 
for the use and acceptance of electronic signatures. Government 
Paperwork Elimination Act, Pub. L. No. 105-277, § 1703, 112 Stat. 
2681, 2681-749 (Oct. 21, 1998), at 44 U.S.C. § 3504 note. The E-
Government Act of 2002 contains a provision to ensure the 
compatibility of executive agency methods for use and acceptance of 
electronic signatures.[Footnote 52] Treasury issued guidelines in 1998 
for the full implementation of an electronic certification system as 
the required method of submission of vouchers and schedule of payments 
to the Financial Management Service. 1 TFM 4-2030.10. The guidelines 
provide that an authorized ECS (electronic certifying system) 
certifying officer "will be held responsible for the correctness of 
the facts stated on the voucher or its supporting documents, and to 
the effect that payment is proper from the appropriations shown on the 
basic voucher or voucher-schedule." 1 TFM 4-2040.10. 

f. GAO Audit Exceptions: 

"Taking an exception" is a device GAO uses to formally notify an 
accountable officer of a fiscal irregularity which may result in 
personal liability. Today, this device is very rarely used. At one 
time, accountable officers had to submit all of their account 
documents to GAO, and GAO "settled" the accounts (31 U.S.C. § 3526(a)) 
by physically examining each piece of paper. Exceptions were common 
during that era. The nature of the process has evolved in recent 
decades in recognition of the increased responsibility of agencies in 
establishing their own financial systems and controls. Account 
settlement now is more a matter of systems evaluation and the review 
of administrative surveillance and the effectiveness of collection and 
disbursement procedures. Examination of individual transactions by GAO 
is minimal. See GAO, Policy and Procedures Manual for Guidance of 
Federal Agencies (hereafter GAO-PPM), title 7, § 8.5 (Washington, 
D.C.: May 18, 1993). However, fiscal irregularities still come to 
GAO's attention in various ways (through its normal audit activities, 
agency irregularity reports, etc.), and GAO may invoke the exception 
procedure when warranted by the circumstances. The process is 
summarized in 7 GAO-PPM § 8.6. Examples are noted in 65 Comp.
Gen. 858, 861 (1986), modified by 70 Comp. Gen. 463 (1991) (massive 
travel fraud scheme), and B-194727, Oct. 30, 1979 (fraudulent 
misappropriation of mass transit grant funds by government employee). 

The first step in the exception process is the issuance of a "Notice 
of Exception" to the agency concerned. The issuance of a Notice of 
Exception does not itself constitute a definite determination of 
liability. It has been described as "in the nature of a challenge to 
the propriety of a certifying officer's action in certifying the 
voucher for payment." B-69611, Oct. 27, 1947. The certifying or 
disbursing officer, through his or her agency, then has the 
opportunity to respond to the exception. It is the accountable 
officer's responsibility to establish the propriety of the payment. 13 
Comp. Gen. 311 (1934). If the reply to the exception is satisfactory, 
the exception is withdrawn. E.g., B-78091, Nov. 2, 1948. If the reply 
does not provide a satisfactory basis to remove the exception, the 
item is "disallowed" in the account. 

Technically, the term "disallowance" applies only to disbursing 
officers since a certifying officer does not have physical custody of 
funds and does not have an "account" in the same sense that a 
disbursing officer does. Thus, strictly speaking, GAO "disallows an 
expenditure" in the account of a disbursing officer and "raises a 
charge" against a certifying officer. See 32 Comp. Gen. 499, 501 
(1953); A-48860, Apr. 14, 1950. For account settlement purposes, a 
certifying officer's "account" consists of the certified vouchers and 
supporting documents on the basis of which payments have been made by 
a disbursing officer and included in the disbursing officer's account 
for a particular accounting period. B-147293-0.M., Feb. 21, 1962. 

The taking of an exception does not preclude submission of a relief 
request under applicable relief legislation. As a practical matter, if 
the agency has been unable to respond satisfactorily to the Notice of 
Exception, the likelihood of there being adequate basis for relief is 
diminished correspondingly. However, as in 65 Comp. Gen. 858, it can 
happen, and the possibility should therefore not be dismissed. 

2. Certifying Officers: 

a. Duties and Liability: 

As we have seen, a certifying officer is the official who certifies a 
payment voucher to a disbursing officer. The responsibility and 
accountability of certifying officers are specified in 31 U.S.C. § 
3528(a), part of the previously noted 1941 legislation enacted to 
clarify the roles of accountable officers under Executive Order No. 
6166, June 10, 1933 (see note at 5 U.S.C. § 901). The certifying 
officer is responsible for (1) the existence and correctness of the 
facts stated in the certificate, voucher, and supporting 
documentation; (2) the correctness of computations on the voucher; and 
(3) the legality of a proposed payment under the appropriation or fund 
involved. The statute further provides that a certifying officer will 
be accountable for the amount of any "illegal, improper, or incorrect" 
payment resulting from his or her false or misleading certification, 
as well as for any payment prohibited by law or which does not 
represent a legal obligation under the appropriation or fund involved. 

There is a recurring appropriation act provision, discussed in section 
C.4.b of Chapter 4 under the heading "Employment of Aliens," which 
bars the use of appropriated funds to pay the compensation of a 
government employee who is not a United States citizen, subject to 
certain exceptions. The provision applies only to employees whose post 
of duty is in the continental United States. Thus, a certifying 
officer (or disbursing officer) in the continental United States must 
be a U.S. citizen unless one of the exceptions applies. There is no 
comparable requirement applicable to employees outside the continental 
United States. B-206288-0.M., Aug. 4, 1982. 

A certifying officer must normally be an employee of the agency whose 
funds are being spent, but may be an employee of another agency under 
an authorized interagency transaction or agreement. 72 Comp. Gen. 279 
(1993); 59 Comp. Gen. 471 (1980); 44 Comp. Gen. 100 (1964). 

A certifying officer is liable the moment an improper payment is made 
as the result of an erroneous or misleading certification. E.g., 54 
Comp. Gen. 112, 114 (1974). This is true whether the certification 
involves a matter of fact, a question of law, or a mixed question of 
law and fact. 

55 Comp. Gen. 297, 298 (1975) (citing several other cases). As a 
general proposition, the government looks first to the certifying 
officer for reimbursement even though some other agency employee may 
be liable to the certifying officer under administrative regulations. 
32 Comp. Gen. 332 (1953); 15 Comp. Gen. 962 (1936). The fact that a 
certifying officer receives instructions from superiors to make the 
improper payment does not relieve him from liability. B-271021, Sept. 
18, 1996. Also, the certifying officer's liability does not depend on 
the government's ability or lack of ability to recoup from the 
recipient of the improper payment. 31 Comp. Gen. 17 (1951); 28 Comp. 
Gen. 17, 20 (1948). What this means is that the government is not 
obligated to seek first to recoup from the recipient, although it 
frequently does so, and of course any recovery from the recipient will 
reduce the certifying officer's liability, at least in most cases. 

Occasionally there may be two certifying officers involved with a 
given payment, so-called "successive certifications." The rule is that 
the responsibility of the certifying officer certifying the basic 
voucher is not diminished by the subsequent action. GAO stated the 
principle as follows in a letter to the Secretary of the Treasury, B-
142380, Mar. 30, 1960: 

"Where the certifying officer who certifies the voucher and schedule 
of payments is different from the certifying officer who certifies the 
basic vouchers, ... the certifying officer who certifies the basic 
vouchers is responsible for the correctness of such vouchers and the 
certifying officer who certifies the voucher-schedule is responsible 
only for errors made in the preparation of the voucher-schedule." 

See also 67 Comp. Gen. 457 (1988). 

An illustration of how this principle may apply is 55 Comp. Gen. 388 
(1975), involving the liability of General Services Administration 
certifying officers under interagency service and support agreements 
with certain independent agencies. Under the arrangement in question, 
the agency would assume certification responsibility for the basic 
expenditure vouchers, but they would be processed for final payment 
through GSA, with GSA preparing and certifying a master voucher and 
schedule to be accompanied by a master magnetic tape. Again quoting 
the above passage from B-142380, GAO concluded that the legal 
liability of the GSA certifying officer would be limited to errors 
made in the final processing. See also 72 Comp. Gen. 279 (1993), where 
a State Department certifying officer could certify an "emergency 
extraordinary expense voucher," submitted by a Defense Attaché, which 
was not accompanied by supporting documentation because of security 
considerations. The certifying officer was only responsible for errors 
made on his own processing of the voucher and not for the underlying 
propriety of the certification by the Defense Attaché. 

Similarly, the statutory accountability does not apply to an official 
who certifies an "adjustment voucher" used to make adjustments between 
accounts or funds in the Treasury in respect of an obligation already 
paid and which therefore does not involve paying money out of the 
Treasury to discharge an obligation. 23 Comp. Gen. 953 (1944). 
Although certification even in this situation should not be reduced to 
a "matter of form," the accountability would attach to the certifying 
officer who certified the basic payment voucher. See 23 Comp. Gen. 
181, 183-84 (1943). 

The function of certification is not perfunctory, but involves a high 
degree of responsibility. 55 Comp. Gen. 297, 299 (1975); 20 Comp. Gen. 
182, 184 (1940). This responsibility is not alleviated by the press of 
other work. B-147747, Dec. 28, 1961.[Footnote 53] It also involves an 
element of verification, the extent of which depends on the 
circumstances. For example, a voucher for goods or services should be 
supported by evidence that the goods were received or the services 
performed. 39 Comp. Gen. 548 (1960). Agencies are authorized to 
implement fast pay processes using certain controls to pay vendors 
subject to post-payment verification of the receipt and acceptance of 
goods and services ordered and the accuracy of invoices received. 
Federal Acquisition Regulation (FAR), 48 C.F.R. pt. 13 (2005); GAO, 
Policy and Procedures Manual for Guidance of Federal Agencies, title 
7, § 7.4.D (Washington, D.C.: May 18, 1993). Generally, an independent 
investigation of the facts is not contemplated. E.g., B-257334, June 
30, 1995; 28 Comp. Gen. 571 (1949). Similarly, where proper 
administrative safeguards exist, certifying officers need not examine 
time, attendance, and leave records in order to certify the 
correctness of amounts shown on payrolls submitted to them. 31 Comp. 
Gen. 17 (1951).[Footnote 54] A 1982 decision, 61 Comp. Gen. 477, 
reviewed the safeguards proposed by a Bonneville Power Administration 
certifying officer for certifying recurring payments to a regional 
planning body and found them adequate to satisfy 31 U.S.C. § 3528. In 
the case of a compensatory damages award in settlement of an employee 
discrimination claim, certifying officers needed to ensure that all 
the items covered in the lump sum payment were statutorily 
permissible, that the amount of the payment did not exceed statutory 
limits, and that correct administrative procedures were followed. B-
257334, June 30, 1995. 

An example of the role of a certifying officer in verifying a payment 
is in B-301184, Jan. 15, 2004, in which certifying officers twice 
questioned payment for the cost of food at a program that was offered 
to employees at their permanent duty station for which appropriated 
funds were not available. In the decision, it was stated that: 

"In matters such as this, we carefully consider the views of 
certifying officers who request a decision pursuant to 31 U.S.C. § 
3529(a)(2), in addition to those positions advanced by the agency's 
program officials, because the agency's certifying officers are the 
agency officials who, statutorily, are responsible for the propriety 
of all expenditures. 31 U.S.C. § 3528(a)(3) CA certifying official 
certifying a voucher is responsible for ... the legality of a proposed 
payment under the appropriation or fund involved'). Unlike other 
agency officials, certifying officers are personally financially 
liable for improper payments that they certify. 31 U.S.C. § 3528(a)(4) 
CA certifying official certifying a voucher is responsible for ... 
repaying a payment ... (A) illegal, improper or incorrect because of 
an inaccurate or misleading certificate; (B) prohibited by law; or (C) 
that does not represent a legal obligation under the appropriation or 
fund involved')." 

Whatever else the certifying officer's verification burden may or may 
not involve, it certainly involves questioning items on the face of 
vouchers or supporting documents, which simply do not look right. For 
example, a certifying officer who certifies a voucher for payment in 
the full amount claimed, disregarding the fact that the accompanying 
records indicate an outstanding indebtedness to the government against 
which the sum claimed is available for offset, is accountable for any 
resulting overpayment. 28 Comp. Gen. 425 (1949). Similarly, certifying 
a voucher in the full amount within a prompt payment discount period 
without taking the discount will result in liability for the amount of 
the lost discount. However, a certifying officer is not liable for 
failing, even if negligently, to certify a voucher within the time 
discount period. 45 Comp. Gen. 447 (1966). 

A clear illustration of a certifying officer's responsibility and 
liability occurred when a Department of Transportation employee 
fraudulently misappropriated more than $850,000 in 1977. The fraud was 
discovered by virtue of the employee's ostentatious purchases, 
including several luxury automobiles and a "topless" bar in 
Washington, D.C. The employee was found guilty and sent to jail. 
However, investigation revealed negligence on the part of a Department 
certifying officer. The employee had perpetrated the fraud by 
inserting his own name on six payment vouchers for Urban Mass 
Transportation Administration grants. Each voucher contained a list of 
approximately ten payees with individual amounts, and the total 
amount, and each had been certified by the certifying officer. The 
negligence occurred in one of two ways. If the employee inserted his 
own name and address on the voucher before presenting it to the 
certifying officer, the certifying officer was negligent in not 
spotting the name of an individual (whose name he should have known) 
with an address in suburban Maryland on a list of payees the rest of 
which were mass transit agencies. If the employee presented a partial 
voucher and added his own name after it was certified, the total as 
presented to the certifying officer could not have agreed with the sum 
of the individual amounts, and the certifying officer was negligent in 
not verifying the computation. GAO raised exceptions to the certifying 
officer's account, and advised the Department of Transportation that 
it must proceed with collection action against the certifying officer 
for the full amount of the excepted payments less any amounts 
recovered from the employee or through the sale of assets, like the 
topless bar, which the Justice Department seized. See B-194727,
Oct. 30, 1979. Apparently in view of the clear negligence, relief was 
never requested. 

At this point, it should be noted that no one involved in the process 
remotely expects that the government will be able to recover several 
hundred thousand dollars from a certifying officer, or from any other 
accountable officer, except perhaps one who has him(her)self stolen 
the money. However, the burden of having to repay even a portion in 
cases of losses of this size sends an important message and reinforces 
the certain if indeterminable deterrent effect of the statute. 

Certifying officers should not certify payment vouchers that are 
unsupported by pertinent documentation indicating that procedural 
safeguards regarding payment have been observed. Vouchers that are 
deficient in this regard should be returned to the appropriate 
administrative officials for proper approvals and supporting 
documents. B-257334, June 30, 1995; B-179916, Mar. 11, 1974. 

An area in which a certifying officer's duty to question is minimal is 
payments to a contractor determined under a statutory or contractual 
disputes procedure. In the absence of fraud or bad faith by the 
contractor, a payment determination made under a disputes clause 
procedure is final and conclusive and may not be questioned by a 
certifying officer, GAO, or the Justice Department. S&E Contractors, 
Inc. v. United States, 406 U.S. 1 (1972); B-201408, Apr. 19, 1982. It 
does not follow that any administrative settlement is entitled to the 
same effect. In B-239592, Aug. 23, 1991, GAO found that an "informal 
settlement" of a personnel action between an agency and one of its 
employees was without legal authority and found the certifying officer 
liable for the unauthorized payments. (A subsequent letter, B-
239592.2, Sept. 1, 1992, clarified that this meant the authorized 
certifying officer, not an official who had signed certain documents 
as "approving official" but was not responsible for determining the 
legality of the payment.) 

A different issue involving an administrative settlement arose in
67 Comp. Gen. 385 (1988). After an investigation by federal and state 
officials, the Forest Service determined that it was responsible for a 
fire in a national forest in Oregon, and reimbursed the state for fire 
suppression expenses incurred under a cooperative agreement. 
Subsequently, a private landowner sued for damages resulting from the 
same fire, and the court made a finding of fact that the Forest 
Service was not liable. The certifying officer was concerned that the 
court's finding might have the effect of invalidating the prior 
payment to Oregon and making him liable for an erroneous payment. The 
decision concluded that the payment was proper when made, and that the 
court finding did not impose any duty on the certifying officer to 
reopen and reexamine it. See also B-262110, Mar. 19, 1997, where the 
Environmental Protection Agency used a cooperative agreement to 
provide for payment of the costs of travel and related expenses by 
nonfederal attendees of an EPA conference. If EPA had used a 
procurement agreement, as required, these costs would not have been 
allowable. Relief was granted the certifying officer and recipient of 
the funding because both acted in good faith in fulfilling obligations 
and had no basis for questioning the use of the inappropriate 
agreement. 

A certifying officer has the statutory right to seek and obtain an 
advance decision from the Comptroller General regarding the lawfulness 
of any payment to be certified. 31 U.S.C. § 3529.[Footnote 55] This 
procedure will insulate the certifying officer against liability. 
Following the advice of agency counsel, on the other hand, does not 
guarantee protection against liability. E.g., 55 Comp. Gen. 297 
(1975). Having said this, we do not wish to imply that consulting 
agency counsel is a pointless gesture. See B-257893, June 1, 1995 
(certifying officer's good faith was demonstrated, in part, by 
reliance on agency counsel approval of settlement agreement). On the 
contrary, it is to be encouraged. Seeking internal legal advice prior 
to certification of matters on which the certifying officer is unsure 
will in many cases obviate any need for an advance decision. In other 
cases it may help define those situations in which consulting GAO may 
be desirable. 

As a final note, the Treasury Department has published a supplement to 
the Treasury Financial Manual entitled Now That You're a Certifying 
Officer (revised March 2005), which can be found at 
www.fmstreas.gov/publications.html (last visited September 15, 2005). 
Written expressly for certifying officers, it provides a good overview 
of the importance of the job and the responsibilities which accompany 
it. 

b. Applicability of 31 U.S.C. § 3528: 

There are two major exceptions to 31 U.S.C. § 3528(a). First, it 
applies only to the executive branch. While section 3528(a) is not 
limited by its terms to the executive branch, 31 U.S.C. § 3325(a), the 
basic requirement that disbursing officers disburse only upon duly 
certified vouchers, is expressly limited to the executive branch, and 
sections 3325(a) and 3528(a) originated as sections 1 and 2 of the 
same 1941 enactment. Thus, GAO has concluded that 31 U.S.C. § 3528(a) 
does not apply to the legislative branch. 21 Comp. Gen. 987 (1942); B-
191036, July 7, 1978; B-236141.2, Feb. 23, 1990 (internal memorandum). 
See also B-39695, Mar. 27, 1945. It has also been held that 31 U.S.C. 
§ 3325(a) does not apply to the judicial branch. B-6061, A-51607, Apr. 
27, 1942. It follows that section 3528(a) would be equally 
inapplicable to the judicial branch. B-236141.2, cited above. In 1996, 
the United States Code was amended to authorize the designation and 
appointment of certifying and disbursing officers within the 
Department of Defense. See National Defense Authorization Act for 
Fiscal Year 1996, Pub. L. No. 104-106, thy. A, title IX, subtitle B, § 
913, 110 Stat. 186, 410-12 (Feb. 10, 1996). Previously, 31 U.S.C. § 
3528 specifically exempted military departments from its applicability 
except for departmental pay and expenses in the District of Columbia. 

Some legislative branch agencies now have their own legislation 
patterned after 31 U.S.C. § 3528. See statutes listed in section E.1.b 
of this chapter. Until recently, GAO decisions indicated that agencies 
that do not have their own legislation, including legislative branch 
agencies, nevertheless had the authority, within their discretion, to 
create their own certifying officers and to make them accountable by 
administrative regulation. The 1990 memorandum cited above, B-
236141.2, contains a detailed discussion. See also B-247563.3, Apr. 5, 
1996; B-260369, June 15, 1995; 21 Comp. Gen. at 989. These decisions 
reasoned that such liability, duly imposed by regulation, could be 
regarded as part of the employee's "employment contract." However, in 
B-280764, May 4, 2000, GAO reconsidered its position in a case 
involving the Department of Defense (DOD) and held that accountable 
officer status and liability can only be created by statute. GAO found 
no authority that would permit DOD to impose pecuniary liability by 
regulation on officials whom it refers to as "accountable officials" 
(but who are not certifying or disbursing officers) for erroneous 
payments resulting from information that they "negligently provide" to 
certifying officers. The 2000 decision overruled prior inconsistent 
decisions, which would include those applying to legislative branch 
agencies. There is a further discussion of B-280764 in section B.2 of 
this chapter. 

c. Relief: 

Informally known as the Certifying Officers' Relief Act, 31 U.S.C. § 
3528(b) establishes a mechanism for the administrative relief of 
certifying officers governed by 31 U.S.C. § 3528(a).[Footnote 56] 
There are two standards for relief. The Comptroller General may 
relieve a certifying officer from liability for an illegal, improper, 
or incorrect payment upon determining that: 

* the certification was based on official records and the certifying 
officer did not know, and by reasonable diligence and inquiry co