B-202306 L/M, MAR 16, 1981

B-202306 L/M, MAR 16, 1981

SUBJECT: PROPOSED "DISENGAGEMENT" BY THE TEMPORARY COMMISSION ON FINANCIAL OVERSIGHT OF THE DISTRICT OF COLUMBIA (FILE B-202306; CODE 931108)

DIRECTOR, AFMD:

JERRY DERYDER OF YOUR STAFF ASKED US TO REVIEW, FROM A LEGAL STANDPOINT, A DOCUMENT ENTITLED "FINANCIAL OVERSIGHT COMMISSION DISENGAGEMENT PLAN OUTLINE," SUBMITTED TO GAO ON FEBRUARY 24, 1981. THE OUTLINE PROPOSES THE FORMULATION OF A PLAN FOR THE "DISENGAGEMENT" OF THE TEMPORARY COMMISSION ON FINANCIAL OVERSIGHT OF THE DISTRICT OF COLUMBIA, WHICH WAS ESTABLISHED BY THE ACT APPROVED SEPTEMBER 4, 1976, PUB. L. NO. 94-399, 90 STAT. 1205, D. C. CODE SEC. 47-101 NOTE.

I.

THE OUTLINE PROVIDES FOR THE COMMISSION TO "BECOME INACTIVE," WITH ITS FUNCTIONS BEING TAKEN OVER BY THE DISTRICT OF COLUMBIA GOVERNMENT AND GAO. ITEM I OF THE OUTLINE ENVISIONS THAT, "CONSISTENT WITH THE CONCEPT OF COMMISSION DISENGAGEMENT," THE DISTRICT GOVERNMENT WOULD TAKE THE LEAD IN DEVELOPING THE DISENGAGEMENT PLAN. THE PLAN, TO BE SIGNED BY THE MAYOR OF THE DISTRICT OF COLUMBIA, THE COMMISSION CHAIRMAN, AND THE COMPTROLLER GENERAL, WOULD -

"*** COVER COMPLETION OF OR CONTINUED OPERATIONS FOR THE FY 1981 AUDIT, FMS FINANCIAL MANAGEMENT SYSTEM OPERATIONS, DOCUMENTATION, AND OTHER PROJECTS DEEMED NECESSARY BY PLAN DRAFTERS." THE PLAN FORMAT IS TO BE -

"*** RELATIVELY EXHAUSTIVE, INCLUDING SUCH ITEMS AS DESCRIPTIONS OF PROJECTS TO BE UNDERTAKEN WITH REMAINING FUNDS, A JUSTIFICATION FOR THE EXPENDITURES, DEADLINES FOR PROJECT IMPLEMENTATION, OPERATION, AND COMPLETION, TIMETABLES FOR EXPENDITURES OF FUNDS, ESTIMATED RANGES OF COSTS BY PROJECT; RESPONSIBLE DISTRICT AGENCY AND PERSONNEL; RECOMMENDED CONTRACTORS, IF SOLE SOURCE."

AMONG OTHER THINGS, ITEM II OF THE OUTLINE PROVIDES THAT ALL COMMISSION FUNDS REMAINING AS OF APRIL 1, 1981, WOULD BE TURNED OVER TO THE DISTRICT UNDER AN INTERGOVERNMENTAL AGREEMENT MAKING THE DISTRICT THE COMMISSION'S PRIME CONTRACTOR, FN1 WITH GAO SERVING AS DISBURSING AGENT. AS PRIME CONTRACTOR, THE DISTRICT WOULD CONTRACT DIRECTLY WITH SUBCONTRACTORS PURSUANT TO THE PLAN. ITEM III PROVIDES IN PART THAT THE DISTRICT WOULD PAY SUBCONTRACTORS AS CONTRACTS ARE COMPLETED, AND GAO WOULD LATER REIMBURSE THE DISTRICT.

ITEM IV RECITES THAT THE COMMISSION "WILL BECOME INACTIVE" AFTER ITS MARCH 31, 1981, MEETING. ITEM V STATES THAT STAFF OPERATIONS WILL CEASE AS OF THAT DATE AND FUNDS WILL BE EXPENDED TO CLOSE THE COMMISSION OFFICE AND TAKE OTHER NECESSARY DISENGAGEMENT-TYPE ACTIONS. IT ALSO OUTLINES CERTAIN CONTRACT ACTIONS WHICH THE COMMISSION EXPECTS TO TAKE BY MARCH 31.

II.

FUNDAMENTALLY, WE QUESTION WHETHER THE COMMISSION'S PROPOSED "DISENGAGEMENT" IS CONSISTENT WITH PUB. L. NO. 94-399 AND CAN BE EFFECTED ABSENT ADDITIONAL LEGISLATION. SECTION 7 OF PUB. L. 94-399, 90 STAT. 1210, IS QUITE SPECIFIC AS TO WHEN THE COMMISSION TERMINATES:

"THIRTY DAYS AFTER NOTIFICATION BY THE COMPTROLLER GENERAL TO THE COMMISSION OF THE COMPLETION AND IMPLEMENTATION OF ALL PLANS AND DESIGNS UNDER THIS ACT, OR THIRTY DAYS AFTER FINAL PAYMENT OF ALL CONTRACTS ENTERED INTO PURSUANT TO SECTIONS 2 AND 3 OF THIS ACT, WHICHEVER LAST OCCURS, THE COMMISSION SHALL CEASE TO EXIST."

CLEARLY NEITHER OF THE CONDITIONS DESCRIBED IN SECTION 7 WILL BE SATISFIED BY APRIL 1, 1981.

THE OUTLINE RECOGNIZES THAT "FORMAL TERMINATION" OF THE COMMISSION UNDER SECTION 7 IS NOT POSSIBLE BY APRIL 1. THUS THE PREMISE OF THE OUTLINE SEEMS TO BE THAT THE "DISENGAGEMENT"OF THE COMMISSION BY ITS BECOMING "INACTIVE" FALLS SHORT OF A "FORMAL TERMINATION." WHILE THIS MAY BE TRUE, WE FIND NO SUPPORT IN THE STATUTE FOR SUCH AN INTERMEDIATE STATUS ON THE PART OF THE COMMISSION. RATHER, WE ASSUME THAT CONGRESS INTENDED THE COMMISSION TO CONTINUE IN A VIABLE FORM UNTIL ITS TERMINATION PURSUANT TO SECTION 7.

THE OUTLINE NOTES THAT, AS A PRACTICAL MATTER, COMMISSION OPERATIONS CEASE ONCE ALL FUNDS ARE EXPENDED EVEN IF GAO HAS NOT APPROVED ALL PLANS AND DESIGNS. WHILE THIS MAY ALSO BE ESSENTIALLY CORRECT, FN2 THE OUTLINE CLEARLY ENVISIONS THAT THE PROPOSED DISENGAGEMENT WILL OCCUR BEFORE ALL COMMISSION FUNDS ARE EXPENDED. THUS THERE WILL BE REMAINING COMMISSION OPERATIONS, WHICH WOULD NOW BE PERFORMED BY THE DISTRICT AND GAO. SECTION 1(F) OF PUB. L. 94-399, 90 STAT. 1205, AUTHORIZES THE COMMISSION TO UTILIZE DISTRICT PERSONNEL AND GAO PERSONNEL AND SERVICES. HOWEVER, WE DO NOT VIEW THIS AS AUTHORITY FOR THE COMMISSION TO TRANSFER OR CEDE ITS FUNCTIONS TO THESE AGENCIES.

III.

IN ADDITION TO THE FOREGOING OBSERVATIONS, WE HAVE SEVERAL COMMENTS ON SPECIFIC ASPECTS OF THE OUTLINE.

THE DISPOSITION OF COMMISSION FUNDS UNDER THE PROPOSED DISENGAGEMENT IS NOT ENTIRELY CLEAR. ITEM II OF THE OUTLINE STATES THAT ALL COMMISSION FUNDS REMAINING AS OF APRIL 1, 1981, "SHALL BE TURNED OVER TO THE DISTRICT ***." HOWEVER, ITEM III STATES THAT THE DISTRICT WILL PAY SUBCONTRACTORS AND "WILL BE REIMBURSED FROM EXTANT COMMISSION FUNDS BY GAO." THIS SEEMS TO SUGGEST, CONTRARY TO ITEM II, THAT GAO RATHER THAN THE DISTRICT WILL RETAIN COMMISSION FUNDS. IT ALSO SUGGESTS THAT THE DISTRICT WILL HAVE TO MAKE INITIAL CONTRACT PAYMENTS FROM ITS OWN FUNDS.

ITEM II-8 OF THE OUTLINE STATES THAT ALL SUBCONTRACTS WILL BE REVIEWED BY GAO "FOR COMPLIANCE WITH THE PLAN." PRESUMABLY THIS IS A REFERENCE TO THE DISENGAGEMENT PLAN. IT IS NOT CLEAR WHAT EFFECT THE GAO REVIEW WOULD HAVE OR HOW TO RESOLVE POSSIBLE DISAGREEMENTS BETWEEN THE DISTRICT AND GAO ON WHETHER A PROPOSED SUBCONTRACT COMPLIED WITH THE PLAN.

AS NOTED PREVIOUSLY, ITEM III OF THE OUTLINE PROVIDES FOR THE DISTRICT TO PAY SUBCONTRACTORS "AS CONTRACTS ARE COMPLETED ***." THE DISTRICT WOULD THEN BE REIMBURSED BY GAO. WE DO NOT BELIEVE IT IS DESIRABLE THAT SUBCONTRACTORS BE FULLY PAID BEFORE ALL REVIEWS OF THE ADEQUACY OF PERFORMANCE HAVE BEEN COMPLETED, INCLUDING GAO REVIEWS.

ITEM IV-E OF THE OUTLINE STATES THAT FOLLOWING THE MARCH 31, 1981, MEETING, THE COMMISSION WILL BECOME INACTIVE. WE BELIEVE THAT, AT THE VERY LEAST, THIS ITEM SHOULD INCLUDE A PROVISION FOR THE COMMISSION TO MEET THEREAFTER AT THE CALL OF THE CHAIRMAN IN CASE THE CHAIRMAN DETERMINES THAT ADDITIONAL MEETINGS BECOME NECESSARY.

DIGEST

MEMO QUESTIONS WHETHER TEMPORARY COMMISSION ON FINANCIAL OVERSIGHT OF THE DISTRICT OF COLUMBIA MAY "DISENGAGE" BY "BECOMING INACTIVE" AND TRANSFERRING ITS FUNCTIONS TO DISTRICT GOVERNMENT AND GAO. STATUTE CREATING COMMISSION SPECIFIES CONDITIONS FOR ITS TERMINATION (WHICH ARE NOT MET HERE) AND DOES NOT ENVISION INTERMEDIATE "DISENGAGED" STATUS. STATUTORY PROVISION FOR DISTRICT GOVERNMENT AND GAO TO ASSIST COMMISSION DO NOT ENVISION TRANSFER OF COMMISSION FUNCTIONS TO SUCH AGENCIES. MEMO ALSO COMMENTS ON SPECIFIC ASPECTS OF PROPOSED DISENGAGEMENT PLAN.

FN1 SECTION 2(H) OF PUB. L. NO. 94-399, AS ADDED BY SEC. 2 OF PUB. L. NO. 95-386 (SEPTEMBER 26, 1978), 92 STAT. 750, SPECIFICALLY AUTHORIZES THE COMMISSION TO CONTRACT WITH THE DISTRICT.

FN2 ON THE OTHER HAND, SECTION 2(E)(4) OF THE STATUTE, 90 STAT. 1207, PROVIDES FOR CONSULTATION BETWEEN THE COMPTROLLER GENERAL AND THE COMMISSION IN CONNECTION WITH GAO'S REVIEW OF FINANCIAL MANAGEMENT PLANS. IT IS NOT CLEAR HOW THIS CONSULTATION COULD BE ACCOMPLISHED UNDER THE PROPOSED DISENGAGEMENT.