Denali Commission--Overobligation of Apportionment
B-316372, Oct 21, 2008
The Inspector General of the Denali Commission has requested GAO's decision on whether the Commission violated the Antideficiency Act (Act) in December 2005 when it recorded an obligation of $400,000 for a grant to the Alaska Department of Commerce, Community and Economic Development. The Commission incurred an obligation for the grant on August 27, 2005, when the Commission transmitted a Financial Assistance Award to the Alaska Department of Commerce, Community and Economic Development, although it failed to properly record the obligation.
When the Denali Commission incurred an obligation on August 27, 2005, for a Financial Assistance Award to the Alaska Department of Commerce, Community and Economic Development, it had an apportionment sufficient to cover the obligation. Accordingly, it did not violate the Antideficiency Act. The Commission, however, failed to record the obligation in accordance with the 31 U.S.C. 1501.
B-316372, Denali Commission--Overobligation of Apportionment, October 21, 2008
The Inspector General of the Denali Commission has requested our decision on whether the Commission violated the Antideficiency Act (Act) in December 2005 when it recorded an obligation of $400,000 for a grant to the Alaska Department of Commerce, Community and Economic Development. Letter from Mike Marsh, Inspector General, Denali Commission, to Susan Poling, Managing Associate General Counsel, GAO, Mar. 12, 2008 (Request Letter). As explained below, the Commission incurred an obligation for the grant on
Our usual practice when rendering decisions is to request the views of the relevant federal agency to establish a factual record and to elicit the agency's legal position on the subject matter of the request. GAO, Procedures and Practices for Legal Decisions and Opinions, GAO-06-1064SP (
Congress established the Denali Commission (Commission) in the Denali Commission Act of 1998. Pub. L. No. 105-277, sections 301–308, 112 Stat. 2681-637 to 2681-641 (Oct. 21, 1998). The Commission operates exclusively in, and for the benefit of, the state of Alaska and has three purposes. One is to deliver federal services in the most cost-effective manner by reducing administrative and overhead costs. Another is to provide training and economic development services in rural communities. The third purpose is to provide infrastructure needs such as power generation and transmission facilities, modern communication systems, water and sewer systems. Id. sect. 302. The Commission is composed of seven members, who are appointed by the Secretary of Commerce. Six members are Alaskans, including the Governor of Alaska (or her nominee), who serves as the State Cochairperson. The seventh member is a federal official, who serves as the Federal Cochairperson. Id sect. 303. One way in which the Commission carries out its mission is to make grants to Alaska state departments to implement specific projects. Request Letter.
In September 2006, when the Commission submitted its fiscal year 2007 apportionment request to the Office of Management and Budget (OMB) for that appropriation, OMB advised the Commission that it may have violated the Antideficiency Act (ADA)  because, in December 2005, when the Commission recorded the obligation against the appropriation, the Commission had an apportionment of only $164,480. Subsequently, the Commission adjusted its accounts to record the obligation against no-year appropriations for which it had an apportionment. E-mail from Corrine Eilo, Director of Administration,
The question the Inspector General posed is whether the Commission violated the Antideficiency Act when it recorded an obligation in December 2005 for $400,000 against the 3-year appropriation for which it had only $164,480 apportioned. As posed, the answer would be yes. If an agency overobligates its apportionment, even though there may be an adequate appropriation, the agency violates the Antideficiency Act. 31 U.S.C. sect. 1517(a)(1). However, in examining the facts here, as explained below, the Commission incurred the obligation not in December, but in August 2005, when it first transmitted the Grant Award to the Alaska Department. At that time, the Commission had sufficient funds apportioned in a no-year account to cover the obligation. The no-year account was the account to which the Commission ultimately charged the grant obligation after adjusting accounts in September 2006. Eilo E-mail.
An agency incurs an obligation when it makes a definite commitment that creates a legal liability on the part of the government or takes an action that could mature into a legal liability by virtue of actions on the part of the other party beyond the control of the
This approval and award of grant . . . shall constitute an obligation to make such grant. Such obligation may be terminated without further cause, however, if the grantee shall fail to affirm its timely utilization of the grant by signing and returning to the Economic Development Administration within 30 days its affirmation of intent as set forth below.
B-126652, at 2 (emphasis added). With this language, EDA incurred an obligation because EDA accepted the grant application, specified the project approved and the amount of funding, and imposed a timeframe for affirmation by the grantee.
The language in the Denali Financial Assistance Award has the same key terms upon which we based our conclusion that the EDA Offer of Grant established an obligation. Like the EDA Offer,
This Financial Assistance Award . . . constitutes an obligation of federal funding. By signing . . ., the Recipient agrees to comply with the Award provisions indicated below and attached. . . . If not signed and returned without modification by the Recipient within 30 days of receipt, the Federal Co-Chair may unilaterally terminate this Award.
Award No. 194-05, at 2 (emphasis added).
Accordingly, the Commission incurred a $400,000 obligation on
According to the Commission, in August 2005, it had three appropriations available to it. In the Consolidated Appropriations Act for Fiscal Year 2005, Congress appropriated $67,000,000 to the Commission for its expenses for fiscal year 2005, providing that $2,500,000 of that amount was to remain available until expended. Pub. L. No. 108-447, 118 Stat. at 2961. Congress also appropriated $1,300,000 of 3'year funds available until
The Commission should examine its policies and procedures to ensure that it is recording its grant obligations properly, in accordance with 31 U.S.C. sect. 1501, and that it has appropriate controls in place to ensure that it has an apportionment at the time of obligation. Without appropriate controls, the Commission has no assurance that it complied with the Antideficiency Act as it incurred grant obligations. When the Commission adjusts its records to reflect this obligation as of
When the Denali Commission incurred an obligation on
Gary L. Kepplinger
 Consolidated Appropriations Act, 2005, Pub. L. No. 108-447, 118 Stat. 3300, 3302 (
 See SF 132 Apportionment and Reapportionment Schedule, Appropriation Account 9505071200, signed by OMB
 See SF 132 Apportionment and Reapportionment Schedule, Appropriation Account 95X1200, signed by OMB
 Of course, after the expiration of the 30-day deadline for affirmation of the grant, the Co-Chair may terminate the award and deobligate the funds.
 Pub. L. No. 108-447, 118 Stat. at 3302. See note 1 above.
 When the Commission adjusted its accounts in 2006 in response to OMB's query regarding its available apportionment, it charged the $400,000 obligation to the no-year appropriation. Eilo E-mail.