B-136642, OCTOBER 20, 1958, 38 COMP. GEN. 316

B-136642: Oct 20, 1958

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WHICH ARE FINANCED WITH FISCAL YEAR OR NO-YEAR FUNDS NOT SUBJECT TO THE OBLIGATIONAL AUTHORITY IN SECTION 106 OF THE FEDERAL-AID HIGHWAY ACT OF 1956. ARE PAYABLE ONLY FROM APPROPRIATIONS MADE FOR THE FISCAL YEARS IN WHICH THE SERVICES ARE RENDERED OR THE EXPENSES INCURRED. IT IS STATED THAT THE BUREAU OF PUBLIC ROADS. THESE SERVICES ARE SAID TO BE NECESSARY TO ASSURE PROPER PERFORMANCE OF THE HIGHWAY CONSTRUCTION WORK. WHILE THE EXPENSES OF ADMINISTRATIVE AND ENGINEERING SERVICES ARE STATED TO BE PROPERLY CHARGEABLE. IT IS INDICATED THAT A QUESTION ARISES IN SOME CASES WITH REFERENCE TO THE OBLIGATION OF FUNDS NEEDED FOR SUCH SERVICES BEYOND THE END OF THE PERIOD FOR WHICH THE FUNDS ARE AVAILABLE FOR OBLIGATION.

B-136642, OCTOBER 20, 1958, 38 COMP. GEN. 316

APPROPRIATIONS - FISCAL YEAR - AVAILABILITY BEYOND - FEDERAL HIGHWAY CONSTRUCTION CONTRACTS - FEDERAL PERSONNEL ANTICIPATED COSTS OF ADMINISTRATIVE AND ENGINEERING SERVICES PERFORMED BY GOVERNMENT EMPLOYEES INCIDENT TO HIGHWAY CONSTRUCTION PROJECTS, WHICH ARE FINANCED WITH FISCAL YEAR OR NO-YEAR FUNDS NOT SUBJECT TO THE OBLIGATIONAL AUTHORITY IN SECTION 106 OF THE FEDERAL-AID HIGHWAY ACT OF 1956, MAY NOT BE REGARDED AS A PART OF THE CONTRACT COST TO CREATE A VALID APPROPRIATION OBLIGATION, UNDER 31 U.S.C. 712A, PRIOR TO THE AUTHORIZATION AND ACTUAL PERFORMANCE OF SUCH SERVICES AND TO RECORD AND REPORT SUCH ESTIMATED EXPENSES AS OBLIGATIONS WOULD NOT CREATE A VALID APPROPRIATION OBLIGATION UNDER SECTION 1311, SUPPLEMENTAL APPROPRIATION ACT, 1955, 31 U.S.C. 200. SALARIES AND EXPENSES OF GOVERNMENT EMPLOYEES, INCLUDING THOSE WHOSE DUTIES INVOLVE THE INSPECTION AND SUPERINTENDENCE OF CONSTRUCTION WORK IN PROGRESS AT THE CLOSE OF THE FISCAL YEAR, ARE PAYABLE ONLY FROM APPROPRIATIONS MADE FOR THE FISCAL YEARS IN WHICH THE SERVICES ARE RENDERED OR THE EXPENSES INCURRED, AND APPROPRIATIONS MAY NOT BE CONSIDERED OBLIGATED FOR SUCH EXPENDITURES TO AUTHORIZE PAYMENTS AFTER THE CLOSE OF THE FISCAL YEAR, EXCEPT BY THE ACTUAL RENDITION OF SERVICE OR THE INCURRENCE OF EXPENSES PRIOR TO THE EXPIRATION OF THE FISCAL YEAR. COMP. DEC. 517 AND 24 COMP. DEC. 487, OVERRULED; 11 COMP. GEN. 500, MODIFIED.

TO THE SECRETARY OF COMMERCE, OCTOBER 20, 1958:

BY LETTER OF JUNE 27, 1958, THE ASSISTANT SECRETARY FOR ADMINISTRATION, SUBMITTED FOR OUR DECISION A QUESTION RAISED BY THE BUREAU OF PUBLIC ROADS CONCERNING THE OBLIGATION OF CERTAIN APPROPRIATIONS TO COVER ANTICIPATED COSTS OF ADMINISTRATIVE AND ENGINEERING SUPERVISION AND INSPECTION BY BUREAU PERSONNEL INCIDENT TO THE CONSTRUCTION OF HIGHWAYS.

IT IS STATED THAT THE BUREAU OF PUBLIC ROADS, IN ADDITION TO ITS FEDERAL- AID ACTIVITIES, PERFORMS ADMINISTRATIVE AND ENGINEERING SERVICES IN CONNECTION WITH THE CONSTRUCTION OF HIGHWAYS FINANCED BY FUNDS APPROPRIATED TO THE BUREAU OF TRANSFERRED TO IT BY OTHER FEDERAL AGENCIES, SUCH AS THE DEPARTMENT OF DEFENSE AND THE DEPARTMENT OF AGRICULTURE. THESE SERVICES ARE SAID TO BE NECESSARY TO ASSURE PROPER PERFORMANCE OF THE HIGHWAY CONSTRUCTION WORK, WHICH THE BUREAU AWARDS BY CONTRACT. WHILE THE EXPENSES OF ADMINISTRATIVE AND ENGINEERING SERVICES ARE STATED TO BE PROPERLY CHARGEABLE, AS INCURRED, TO THE APPROPRIATION CHARGED WITH THE COST OF CONSTRUCTION, IT IS INDICATED THAT A QUESTION ARISES IN SOME CASES WITH REFERENCE TO THE OBLIGATION OF FUNDS NEEDED FOR SUCH SERVICES BEYOND THE END OF THE PERIOD FOR WHICH THE FUNDS ARE AVAILABLE FOR OBLIGATION.

IN EXPLANATION OF THE MATTER, THE ASSISTANT SECRETARY REFERS TO SECTION 106 OF THE FEDERAL-AID HIGHWAY ACT OF 1956, 70 STAT. 376, 23 U.S.C. 155. THE SECTION GRANTS AUTHORITY TO THE SECRETARY OF THE DEPARTMENT CHARGED WITH ADMINISTRATION OF THE FUNDS AUTHORIZED TO BE APPROPRIATED IN THE ACT FOR THE VARIOUS CATEGORIES OF FEDERAL DOMAIN ROADS "* * * TO INCUR OBLIGATIONS, APPROVE PROJECTS, AND ENTER INTO CONTRACTS UNDER SUCH AUTHORIZATIONS" AND PROVIDES THAT "HIS ACTION IN DOING SO SHALL BE DEEMED A CONTRACTUAL OBLIGATION OF THE FEDERAL GOVERNMENT FOR THE PAYMENT OF THE COST THEREOF * * *.'

HE STATES THAT PURSUANT TO SUCH AUTHORITY THE BUREAU OF PUBLIC ROADS ESTIMATES ADMINISTRATIVE AND ENGINEERING COSTS ON PROJECTS FINANCED BY FUNDS COVERED IN SECTION 106, MAKING A WRITTEN RECORD THEREOF TO ACCOMPANY THE AUTHORIZATION AND OBLIGATING FUNDS TO MEET SUCH COSTS. HE FURTHER STATES THAT APPROVAL OF THE PROJECTS, WHICH INCLUDE ESTIMATED ADMINISTRATIVE AND ENGINEERING COSTS, BY VIRTUE OF SECTION 106, ARE CONSIDERED TO MEET THE OBLIGATION RECORDING AND REPORTING REQUIREMENTS OF SECTION 1311 OF THE SUPPLEMENTAL APPROPRIATION ACT, 1955, 68 STAT. 830, 31 U.S.C., SUPP. V, 200, AND THE REGULATIONS OF THE GENERAL ACCOUNTING OFFICE GOVERNING THE OBLIGATION OF FUNDS.

THE PROBLEM OF OBLIGATING ADMINISTRATIVE AND ENGINEERING COSTS IS SAID TO ARISE IN CONNECTION WITH PROJECTS THAT ARE FINANCED WITH FUNDS TRANSFERRED TO THE BUREAU OF PUBLIC ROADS BY OTHER FEDERAL AGENCIES, WHICH FUNDS ARE LIMITED FOR OBLIGATION PURPOSES ON AN ANNUAL BASIS, AND AS TO CERTAIN FUNDS APPROPRIATED DIRECTLY TO THE BUREAU, SUCH AS ACCESS ROAD FUNDS NEITHER OF WHICH FUNDS ARE INCLUDED WITHIN THE OBLIGATIONAL AUTHORITY CONTAINED IN THE SAID SECTION 106.

IT IS POINTED OUT THAT THE ENGINEERING SERVICES PROVIDED ON PROJECTS FINANCED WITH SUCH FUNDS REQUIRE THE FULL TIME OF ONE OR MORE BUREAU ENGINEERS AT A COST OF SEVERAL THOUSAND DOLLARS FOR EACH PROJECT. ALSO, IT IS POINTED OUT THAT THERE ARE INCURRED CERTAIN ADMINISTRATIVE COSTS THROUGHOUT THE LIFE OF THE CONSTRUCTION CONTRACT WHICH, IN MANY INSTANCES, EXTEND BEYOND THE APPROPRIATION OBLIGATION LAPSING DATE. A WRITTEN CONTRACT IS SAID TO BE ENTERED INTO BETWEEN THE GOVERNMENT AND THE CONTRACTOR IN EVERY CASE, AND BY REASON OF EXPERIENCE OVER MANY YEARS INVOLVING SUCH ACTIVITIES THE BUREAU IS ABLE TO MAKE A SOUND ESTIMATE OF THE ADMINISTRATIVE AND ENGINEERING COSTS THAT WILL BE INCURRED THEREUNDER.

IN VIEW THEREOF AND AS AN OPERATING EXPEDIENT, THE BUREAU DESIRES TO TREAT SUCH ANTICIPATED COSTS OF ADMINISTRATION AND ENGINEERING, INCIDENT TO PROJECTS FINANCED WITH FISCAL OR NO-YEAR FUNDS THAT ARE NOT SUBJECT TO THE OBLIGATIONAL AUTHORITY PROVISIONS CONTAINED IN SECTION 106, AS AN INTEGRAL PART OF THE CONTRACT COSTS AND TO RECORD AND REPORT SUCH COSTS AS OBLIGATIONS SIMILARLY AS IN THE CASE OF PROJECTS FINANCED WITH FUNDS COVERED BY THAT SECTION. OUR DECISION IS REQUESTED AS TO WHETHER A WRITTEN ESTIMATE OF SUCH COSTS, ATTACHED TO THE CONTRACT AND APPROVED BY THE CONTRACTING OFFICER, WOULD MEET THE REQUIREMENTS OF SECTION 1311 OF THE SUPPLEMENTAL APPROPRIATION ACT, 1955, PROVIDING THAT ALL OBLIGATIONS BE SUPPORTED BY DOCUMENTARY EVIDENCE.

SECTION 1 OF THE ACT OF JULY 6, 1949, 63 STAT. 407, 31 U.S.C. 712A, PROVIDES:

EXCEPT AS OTHERWISE PROVIDED BY LAW, ALL BALANCES OF APPROPRIATIONS CONTAINED IN THE ANNUAL APPROPRIATION BILLS AND MADE SPECIFICALLY FOR THE SERVICE OF ANY FISCAL YEAR SHALL ONLY BE APPLIED TO THE PAYMENT OF EXPENSES PROPERLY INCURRED DURING THAT YEAR, OR TO THE FULFILLMENT OF CONTRACTS PROPERLY MADE WITHIN THAT YEAR.

AND SECTION 1311 OF THE SUPPLEMENTAL APPROPRIATION ACT, 1955, PROVIDES, IN PERTINENT PART, AS FOLLOWS:

SEC. 1311. (A)AFTER THE DATE OF ENACTMENT HEREOF NO AMOUNT SHALL BE RECORDED AS AN OBLIGATION OF THE GOVERNMENT OF THE UNITED STATES UNLESS IT IS SUPPORTED BY DOCUMENTARY EVIDENCE OF---

(1) A BINDING AGREEMENT IN WRITING BETWEEN THE PARTIES THERETO, INCLUDING GOVERNMENT AGENCIES, IN A MANNER AND FORM AND FOR A PURPOSE AUTHORIZED BY LAW, EXECUTED BEFORE THE EXPIRATION OF THE PERIOD OF AVAILABILITY FOR OBLIGATION OF THE APPROPRIATION OR FUND CONCERNED FOR SPECIFIC GOODS TO BE DELIVERED, REAL PROPERTY TO BE PURCHASED OR LEASED, OR WORK OR SERVICES TO BE PERFORMED; OR

(B) NOT LATER THAN SEPTEMBER 30 OF EACH YEAR, THE HEAD OF EACH FEDERAL AGENCY SHALL REPORT, AS TO EACH APPROPRIATION OR FUND UNDER THE CONTROL OF SUCH AGENCY, THE AMOUNT THEREOF REMAINING OBLIGATED BUT UNEXPENDED AND THE AMOUNT THEREOF REMAINING UNOBLIGATED ON JUNE 30 OF SUCH YEAR AND COPIES OF SUCH REPORT SHALL BE FORWARDED BY HIM TO THE CHAIRMAN OF THE COMMITTEE ON APPROPRIATIONS OF THE SENATE AND THE HOUSE OF REPRESENTATIVES, TO THE COMPTROLLER GENERAL OF THE UNITED STATES, AND TO THE DIRECTOR OF THE BUREAU OF THE BUDGET: PROVIDED, THAT SUCH REPORT FOR THE FISCAL YEAR ENDING JUNE 30, 1954, SHALL BE MADE NOT LATER THAN DECEMBER 31, 1954, AND SHALL INCLUDE ONLY SUCH OBLIGATIONS AS COULD HAVE BEEN RECORDED UNDER THE PROVISIONS OF SUBSECTION (A) HEREOF.

31 U.S.C. 686-1 PROVIDES:

NO FUNDS WITHDRAWN AND CREDITED PURSUANT TO SECTION 686 OF THIS TITLE, SHALL BE AVAILABLE FOR ANY PERIOD BEYOND THAT PROVIDED BY THE ACT APPROPRIATING SUCH FUNDS.

CERTAIN OF THE EARLY DECISIONS OF THE ACCOUNTING OFFICERS APPARENTLY REGARDED THE EXPENSES OF INSPECTION AND SUPERVISION BY GOVERNMENT EMPLOYEES OF CONTRACT CONSTRUCTION WORK AS SO CLOSELY CONNECTED TO THE CONTRACT WORK AS TO WARRANT THE CHARGING OF THE INSPECTION COSTS TO THE APPROPRIATIONS TO WHICH THE CONTRACT WAS PROPERLY CHARGED EVEN THOUGH SUCH INSPECTION COSTS WERE NOT INCURRED UNTIL AFTER THE FISCAL YEAR FOR WHICH THE APPROPRIATION WAS MADE. SEE 1 COMP. DEC. 517, 24 ID. 487. HOWEVER, THESE DECISIONS APPARENTLY FAILED TO RECOGNIZE THE FACT THAT THE SALARIES AND EXPENSES OF THE GOVERNMENT INSPECTORS WERE NOT ENCOMPASSED BY THE CONTRACT AND DID NOT CONSTITUTE CONTRACTUAL OBLIGATIONS OF THE GOVERNMENT. SEE 15 COMP. DEC. 578, 26 ID. 4. AND, SUCH EARLY DECISIONS LATER WERE NOT FOLLOWED. 7 COMP. GEN. 153, 16 ID. 1055, 17 ID. 111.

THE GENERAL RULE IN APPLYING SAID 31 U.S.C. 712A AND SIMILAR PRIOR PROVISIONS OF LAW IS THAT, IN THE ABSENCE OF A STATUTE PROVIDING OTHERWISE, SALARIES AND EXPENSES OF GOVERNMENT EMPLOYEES, INCLUDING THOSE WHOSE DUTIES INVOLVE THE INSPECTION AND SUPERINTENDENCE OF CONSTRUCTION WORK IN PROGRESS AT THE CLOSE OF THE FISCAL YEAR, ARE PAYABLE ONLY FROM APPROPRIATIONS MADE FOR THE FISCAL YEARS IN WHICH THE SERVICES ARE RENDERED OR THE EXPENSES INCURRED. THAT IS TO SAY, APPROPRIATIONS MAY NOT BE CONSIDERED AS OBLIGATED FOR SUCH EXPENDITURES SO AS TO AUTHORIZE PAYMENTS AFTER THE CLOSE OF THE FISCAL YEAR EXCEPT BY THE ACTUAL RENDITION OF SERVICE OR INCURRING OF EXPENSES PRIOR TO THE EXPIRATION OF THE FISCAL YEAR. SEE 27 COMP. GEN. 764, 37 ID. 861.

IN THE SITUATION PRESENTED, IT IS CLEAR THAT ANTICIPATED COSTS OF ADMINISTRATIVE AND ENGINEERING SERVICES PERFORMED BY GOVERNMENT EMPLOYEES IN THE ACCOMPLISHMENT OF HIGHWAY CONSTRUCTION ARE NOT INCLUDED IN THE CONTRACTS ENTERED INTO FOR SUCH PROJECTS. HENCE, THE ESTIMATED COST RELATIVE TO THESE ITEMS MAY NOT, OF ITSELF, BE REGARDED AS A PART OF THE CONTRACT COST SO AS TO CREATE A VALID OBLIGATION AGAINST THE APPROPRIATION FOR THE PAYMENT OF ADMINISTRATIVE AND ENGINEERING SERVICES PRIOR TO THEIR AUTHORIZATION AND ACTUAL INCURRENCE. FURTHERMORE, REGARDLESS OF THE PRIOR EARLY DECISIONS, IT CAN NOT NOW, UNDER THE CURRENT PROVISIONS OF LAW QUOTED ABOVE, BE SAID THAT THE ADMINISTRATIVE DOCUMENTATION OF THE ESTIMATED EXPENSES, EVEN THOUGH ATTACHED TO THE CONTRACT AND APPROVED BY THE CONTRACTING OFFICER, CONSTITUTES A BINDING GOVERNMENT OBLIGATION, OR IS SUFFICIENT DOCUMENTARY EVIDENCE OF A VALID OBLIGATION REQUIRED BY SECTION 1311. SEE 34 COMP. GEN. 459, 35 ID. 183. ALSO, 31 U.S.C. 686-1, WOULD PRECLUDE OBLIGATING ANY FUNDS ADVANCED UNDER SECTION 601 OF THE ECONOMY ACT AFTER THE PERIOD FOR WHICH THE FUNDS WERE MADE AVAILABLE FOR OBLIGATION BY THE ACT APPROPRIATING THEM. 31 COMP. GEN. 83.

WE MUST CONCLUDE, THEREFORE, THAT THE PROPOSAL OF THE BUREAU OF PUBLIC ROADS TO TREAT ANTICIPATED COSTS OF ADMINISTRATIVE AND ENGINEERING SERVICES TO BE PERFORMED BY ITS PERSONNEL, IN CONNECTION WITH THE CONSTRUCTION OF HIGHWAYS FINANCED WITH THE FUNDS IN QUESTION, AS A PART OF THE CONTRACT OF CONSTRUCTION AND TO RECORD AND REPORT SUCH COSTS AS OBLIGATIONS WOULD NOT BE PROPER, AND SUCH TREATMENT MAY NOT BE CONSIDERED AS CREATING A VALID APPROPRIATION OBLIGATION WITHIN THE TERMS OF 31 U.S.C. 712A, QUOTED ABOVE. CONSEQUENTLY SUCH ANTICIPATED COSTS MAY NOT PROPERLY BE RECORDED AND REPORTED AS OBLIGATIONS UNDER THE PROVISIONS OF SECTION 1311 OF THE SUPPLEMENTAL APPROPRIATION ACT, 1955.