B-40134, MARCH 21, 1944, 23 COMP. GEN. 707

B-40134, MARCH 21, 1944, 23 COMP. GEN. 707

COST CONTRACTS - EVIDENCE IN SUPPORT OF PAYMENTS. IN ORDER FOR THIS OFFICE TO PERFORM ITS FUNCTION OF ASCERTAINING NOT ONLY THAT THE EXPENDITURES FOR WHICH REIMBURSEMENT IS SOUGHT UNDER COST REIMBURSEMENT CONTRACTS CONSTITUTE A PROPER CHARGE TO THE GOVERNMENT UNDER THE TERMS OF THE CONTRACT BUT, ALSO, THAT THE AMOUNT CLAIMED ACTUALLY WAS EXPENDED, THE CONTRACTOR MUST FURNISH SUBSTANTIATING DOCUMENTS AND DATA FROM WHICH A DETERMINATION OF THE CORRECTNESS OF THE CHARGES PROPERLY MAY BE MADE, AND THIS REQUIREMENT MUST BE ENFORCED NOTWITHSTANDING ANY PRIVATE POLICY OF THE CONTRACTOR TO THE CONTRARY; THE ADDITIONAL BURDEN IMPOSED ON THE CONTRACTOR; THE FACT THAT THE SERVICES ARE PERFORMED WITHOUT PROFIT; AND THE FACT THAT REIMBURSABLE COST WILL BE INCREASED. IN THE ABSENCE OF A SHOWING THAT IT IS IMPRACTICABLE OR IMPOSSIBLE TO FURNISH A DOCUMENTARY EVIDENCE IN SUPPORT OF A CLAIM FOR REIMBURSEMENT OF COSTS UNDER A COST CONTRACT, THERE MAY NOT BE SUBSTITUTED, IN LIEU OF THE FURNISHING OF SUCH EVIDENCE, A PROCEDURE WHEREBY A REPRESENTATIVE OF THE ADMINISTRATIVE AGENCY CONCERNED WOULD EXAMINE THE CONTRACTOR'S BOOKS AND RECORDS TO DETERMINE THE CORRECTNESS OF THE CHARGES BILLED AND EXAMINE PAID CHECKS TO DETERMINE THAT ALL COSTS IN CONNECTION WITH THE CONTRACTOR'S OPERATIONS UNDER THE CONTRACT WERE ACTUALLY PAID, UPON THE BASIS OF WHICH HE WOULD THEN FURNISH IN SUPPORT OF THE REIMBURSEMENT VOUCHER A CERTIFICATE REGARDING HIS FINDINGS IN THE MATTER.

COMPTROLLER GENERAL WARREN TO H. W. GRIFFIN, OFFICE FOR EMERGENCY MANAGEMENT, MARCH 21, 1944:

REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 12, 1944, AS FOLLOWS:

THERE HAS BEEN PRESENTED TO ME FOR CERTIFICATION THE ATTACHED VOUCHER BU VO. NO. 4662-4, IN FAVOR OF THE INSTITUTE OF INTERNATIONAL EDUCATION IN THE AMOUNT OF $9,117.75 COVERING REIMBURSEMENT FOR SERVICES RENDERED UNDER CONTRACT OEMCR-212.

IN SUBMITTING THIS VOUCHER FOR REIMBURSEMENT, THE CONTRACTOR DID NOT FURNISH THE USUAL RECEIPTS, AND OTHER ACCEPTABLE EVIDENCE OF EXPENDITURES ORDINARILY REQUIRED OF CONTRACTORS OPERATING UNDER A "COST" REIMBURSEMENT CONTRACT AND AS REQUIRED IN THE CITED CONTRACT, BUT IN LIEU THEREOF FURNISHED THE FOLLOWING EXPLANATION, AND CERTIFIED THAT THE AMOUNTS CHARGED WERE FAIR AND REASONABLE UNDER ALL THE CIRCUMSTANCES OF THE PARTICULAR CASE:

"IN EXPLANATION OF THE FACT THAT NO RECEIPTS ARE FURNISHED THE INSTITUTE OF INTERNATIONAL EDUCATION IS EXPENDING FUNDS UNDER A NUMBER OF CONTRACTS WITH THE COORDINATOR OF INTER-AMERICAN AFFAIRS AND EXPENDITURES ARE ALLOCATED AGAINST INDIVIDUAL CONTRACTS. THE INSTITUTE, HOWEVER, DOES NOT HAVE INDIVIDUAL RECEIPTS AGAINST EACH OF THE EXPENDITURES UNDER THE INDIVIDUAL CONTRACTS BECAUSE OFFICE SUPPLIES AND STATIONERY AND OTHER STOCK AND MATERIALS ARE PURCHASED IN QUANTITY FOR THE ENTIRE WORK OF THE INSTITUTE. ON THIS ACCOUNT, IT IS IMPOSSIBLE TO HAVE INDIVIDUAL RECEIPTS AS TO THE VALUE OF SUPPLIES WHICH WILL ULTIMATELY BE USED IN CONNECTION WITH EXPENDITURES UNDER EACH CONTRACT. THE SAME IS TRUE OF SALARY ALLOCATION, SO FAR AS RECEIPTS ARE CONCERNED, INASMUCH AS MEMBERS OF THE STAFF WORK ON DIFFERENT CONTRACTS AND OFTEN FOR VARYING PERIODS OF TIME. FURTHERMORE, SALARY PAYMENTS ARE MADE BY CHECK AND RECEIPTS ARE NOT SECURED FROM MEMBERS OF THE STAFF. THE SAME PRINCIPLE HOLDS FOR THE DIFFERENT ITEMS LISTED.'

IT IS DESIRED TO EMPHASIZE THE POINT THE CONTRACTOR MAKES THAT " THE INSTITUTE OF INTERNATIONAL EDUCATION IS A NON-PROFIT ORGANIZATION AND IS PERFORMING SERVICES FOR THE UNITED STATES GOVERNMENT IN EXCESS OF WHAT IS CHARGED.'

THIS OFFICE IS AWARE OF THE ESTABLISHED REQUIREMENTS OF THE GENERAL ACCOUNTING OFFICE REGARDING THE FURNISHING OF ORIGINAL RECEIPTED INVOICES AND BILLS IN SUPPORT OF CLAIMS FOR REIMBURSEMENT (20 C.G. 664) SUBMITTED BY COMMERCIAL FIRMS DOING BUSINESS FOR PROFIT, AND SEEKING AND DOING BUSINESS WITH THE UNITED STATES GOVERNMENT. HOWEVER, THE QUESTION ARISES AS TO WHETHER OR NOT SUCH STRINGENT REQUIREMENTS MUST BE MET BY THE CLAIMANT AND OTHER NON-PROFIT ORGANIZATIONS WHOSE SYSTEMS ARE NOT SO ORGANIZED AS TO PERMIT THE SUBMITTING OF ORIGINAL RECEIPTED BILLS AND INVOICES WHICH MUST BE RETAINED. IN SUCH CASES NON-PROFIT SERVICE ORGANIZATIONS OPERATE ON A MINIMUM OVERHEAD AND AN EXTRA BURDEN WOULD BE PLACED ON THEM IF THEY MUST ALTER THEIR PRESENTLY ESTABLISHED PRACTICES. SIMILARLY, TO REQUIRE THE SUBMISSION OF PHOTOSTATIC COPIES OF EVIDENCE OF PAYMENT, AN ADDITIONAL EXPENSE WOULD BE PLACED UPON THE GOVERNMENT IN THE CASE OF REIMBURSEMENT CONTRACTS AND, IF POSSIBLE, THIS OFFICE IS KEENLY DESIROUS OF AVOIDING SUCH ADDITIONAL EXPENSE.

IN YOUR DECISION OF DECEMBER 19, 1941 (B-22235) TO THE SECRETARY OF WAR, IT WAS DECIDED THAT IN LIEU OF REQUIRING PRIME CONTRACTORS TO FURNISH RECEIPTS FOR PAYMENTS MADE BY CHECK WHERE SUCH PROCEDURE IS NOT FOUND TO BE PRACTICABLE, A SHOWING ON THE CONTRACTOR'S PAYROLL AND VENDOR'S INVOICES OF THE DATE AND NUMBER OF CHECKS ISSUED IN PAYMENT THEREOF, SUPPORTED BY A CERTIFICATION THAT THE PAYMENTS BY CHECK WERE WITNESSED BY A GOVERNMENT REPRESENTATIVE WOULD BE ACCEPTABLE.

IN THE INSTANT CASE, IT APPEARS THAT IT WOULD BE IMPRACTICABLE FOR THE CONTRACTOR TO FURNISH ORIGINAL PAYROLLS AND VENDOR'S INVOICES SINCE THE STAFF OF THE INSTITUTE IS ENGAGED IN SEVERAL PROJECTS NOT ALL OF WHICH ARE FOR THE COORDINATOR, AND IN NO CASE DO THEY WORK FULL TIME ON OUR CONTRACTS. FURTHER, SUPPLIES, EQUIPMENT, TELEPHONE SERVICE AND SUNDRY OTHER ITEMS ARE PURCHASED FOR ALL PROJECTS OF THE INSTITUTE.

IN VIEW OF THE FOREGOING, I SHOULD APPRECIATE YOUR ADVICE AS TO WHETHER I MAY BE AUTHORIZED TO CERTIFY THE VOUCHER, AS PRESENTED, FOR PAYMENT.

IN THE EVENT YOUR DECISION IS IN THE NEGATIVE, I SHOULD APPRECIATE YOUR ADVISING ME WHETHER THE FOLLOWING PROCEDURE WOULD BE ACCEPTABLE:

UPON TERMINATION OF THE CONTRACT AND SUBMISSION BY CONTRACTOR OF HIS FINAL VOUCHER, A REPRESENTATIVE OF THIS OFFICE WILL EXAMINE THE CONTRACTOR'S BOOKS AND RECORDS TO DETERMINE THE CORRECTNESS OF ALL CHARGES THERETOFORE BILLED, AND WILL EXAMINE ALL PAID CHECKS TO DETERMINE THAT ALL COSTS IN CONNECTION WITH CONTRACTOR'S OPERATIONS UNDER THE CONTRACT WERE ACTUALLY PAID. THEREAFTER OUR REPRESENTATIVE WILL FURNISH A CERTIFICATE REGARDING HIS FINDINGS, SUCH CERTIFICATE TO BECOME A PART OF SUCH FINAL VOUCHER.

UNDER THE TERMS OF CONTRACT NO. OEMCR-212, DATED JULY 23, 1942, AS AMENDED, THE CONTRACTOR AGREED TO ESTABLISH AND MAINTAIN, FOR A PERIOD OF ONE YEAR FROM THE DATE THEREOF, A COUNSEL AND GUIDANCE CENTER FOR STUDENTS FROM THE OTHER AMERICAN REPUBLICS IN ATTENDANCE AT EDUCATIONAL INSTITUTIONS IN THE UNITED STATES, IN CONSIDERATION OF THE REIMBURSEMENT BY THE GOVERNMENT OF THE CONTRACTOR'S COSTS, AS DEFINED IN THE CONTRACT UNDER PARAGRAPH 3, THEREOF, IN PERTINENT PART, AS FOLLOWS:

THE COORDINATOR AGREES TO REIMBURSE THE CONTRACTOR FOR ITS EXPENSES IN CARRYING OUT THE PROVISIONS OF PARAGRAPHS 1 AND 2 HEREOF INCLUDING, BUT NOT BY WAY OF LIMITATION, AMOUNTS PAID BY IT FOR (A) THE SALARY OF A DIRECTOR, WHICH SALARY SHALL BE SUBJECT TO THE APPROVAL OF THE COORDINATOR OR HIS DULY AUTHORIZED REPRESENTATIVE, (B) SECRETARIAL AND STENOGRAPHIC ASSISTANCE, (C) RENT, INCLUDING LIGHT, (D) THE TRAVEL EXPENSES WITHIN THE UNITED STATES AND MAINTENANCE EXPENSES OF NOT TO EXCEED $6.00 PER DIEM WHILE ENGAGED IN TRAVEL OF THE DIRECTOR, (E) PROFESSIONAL SERVICES, (F) PRINTING AND MULTIGRAPHING, (G) FURNITURE AND FIXTURES, (H) OFFICE SUPPLIES, (I) POSTAGE AND TELEPHONE, TELEGRAPH AND CABLE CHARGES, PROVIDED, HOWEVER, THAT THE MAXIMUM TOTAL AMOUNT OF SUCH REIMBURSEMENT PAYMENTS SHALL NOT EXCEED $10,100.00 IN THE AGGREGATE LESS THE SUM OF ALL PAYMENTS PREVIOUSLY MADE TO THE CONTRACTOR PURSUANT TO THIS AGREEMENT, AND (J) MAINTENANCE, TRANSPORTATION AND OTHER EMERGENCY EXPENSES OF STUDENTS FROM THE OTHER AMERICAN REPUBLICS WHO ARE IN FINANCIAL DISTRESS, PROVIDED, HOWEVER, THAT THE MAXIMUM TOTAL AMOUNT OF SUCH EXPENSES SHALL NOT EXCEED $30,000 IN THE AGGREGATE LESS THE SUM OF ALL PAYMENTS PREVIOUSLY MADE TO THE CONTRACTOR PURSUANT TO THIS AGREEMENT.

THE VOUCHER INVOLVED COVERS CLAIM IN THE AMOUNT OF $9,117.75, BY THE INSTITUTE OF INTERNATIONAL EDUCATION, NEW YORK, NEW YORK, FOR REIMBURSEMENT OF EXPENSES OF THE NATURE SET FORTH UNDER SECTIONS (A) TO (I), INCLUSIVE, OF PARAGRAPH 3, QUOTED ABOVE, AND CERTAIN MISCELLANEOUS EXPENDITURES, DESIGNATED AS TRAVEL EXPENSE OF THE ASSISTANT DIRECTOR, INSTITUTE OF INTERNATIONAL EDUCATION, STUDENT ORIENTATION CONFERENCES, PLANNING CONFERENCES, AND INCIDENTALS, ALLEGED TO HAVE BEEN INCURRED IN THE PERFORMANCE OF, AND CHARGEABLE TO, THE INSTANT CONTRACT.

UNDER THE TYPE OF CONTRACT HERE INVOLVED, WHICH PROVIDES FOR THE REIMBURSEMENT BY THE GOVERNMENT OF THE COSTS INCURRED BY THE CONTRACTOR IN THE PERFORMANCE THEREOF, THE AUDIT FUNCTION OF THIS OFFICE IS TO ASCERTAIN NOT ONLY THAT THE EXPENDITURES FOR WHICH REIMBURSEMENT IS SOUGHT CONSTITUTE A PROPER CHARGE TO THE GOVERNMENT UNDER THE TERMS OF THE CONTRACT, BUT, ALSO, THAT THE AMOUNT CLAIMED ACTUALLY WAS EXPENDED; AND, IN ORDER TO ENABLE THIS OFFICE TO PERFORM THAT FUNCTION, IT WOULD APPEAR AXIOMATIC THAT THE CONTRACTOR FURNISH SUBSTANTIATING DOCUMENTS AND DATA FROM WHICH A DETERMINATION OF THE CORRECTNESS OF THE CHARGES PROPERLY MAY BE MADE. WHILE IT IS APPRECIATED THAT THE FURNISHING OF EVIDENCE IN SUPPORT OF THE ALLEGED EXPENDITURES WILL IMPOSE SOME BURDEN ON THE CONTRACTOR, NEITHER THIS FACT NOR THE FACT THAT THE CONTRACTOR'S SERVICES ARE PERFORMED WITHOUT PROFIT AFFORDS ANY PROPER BASIS FOR DEVIATION FROM THE WELL-SETTLED RULE WHICH THIS OFFICE--- IN THE DISCHARGE OF THE DUTY AND RESPONSIBILITY WITH WHICH IT IS ENTRUSTED--- IS REQUIRED TO ENFORCE IN THE AUDIT OF ALL CLAIMS FOR REIMBURSEMENT OF EXPENDITURES CHARGEABLE TO PUBLIC FUNDS, NAMELY THAT THE RECORD AFFIRMATIVELY ESTABLISH THAT THE ITEMS INVOLVED REPRESENT REIMBURSABLE EXPENDITURES ACTUALLY MADE. AND THIS RULE IS FOR APPLICATION REGARDLESS OF ANY PRIVATE POLICY OF THE CONTRACTOR TO THE CONTRARY. ALSO, WHILE THE CONTRACTOR'S SUBSTANTIATION OF THE CHARGES CLAIMED MAY ENTAIL AN ADDED REIMBURSABLE ITEM OF COST, IT IS THE VIEW OF THIS OFFICE THAT, IN THE ULTIMATE ANALYSIS, THE SLIGHT ADDITIONAL EXPENSE SO INCURRED IS NEGLIGIBLE AS COMPARED TO THE RESULTING BENEFITS TO THE GOVERNMENT IN THE PROTECTION OF ITS INTERESTS IN THE MATTER.

WITH REFERENCE TO THE REASON ASSIGNED BY THE CONTRACTOR FOR ITS FAILURE TO FURNISH ANY EVIDENCE IN SUPPORT OF THE AMOUNT ALLEGED TO BE DUE, THE FACT THAT CERTAIN OF THE EXPENDITURES INVOLVED--- STATED BY THE CONTRACTOR IN ITS LETTER OF JANUARY 3, 1944, SUBMITTED WITH YOUR LETTER, AS APPLYING TO THE ITEMS OF "SALARIES, GENERAL OFFICE STOCKS AND SUPPLIES, MULTIGRAPHING, POSTAGE, RENT AND LIGHT"--- ARE OF A MIXED NATURE, IN THAT THEY APPLY IN VARYING PROPORTIONS AS TO THE CONTRACTOR'S OTHER OPERATIONS AS WELL AS TO THE PERFORMANCE OF THE INSTANT CONTRACT, WOULD NOT APPEAR TO PREVENT A SHOWING AS TO THE TOTAL AMOUNT EXPENDED ON EACH SUCH ITEM OF COST, AS TO THE PAYMENT THEREOF, AND AS TO THE BASIS UPON WHICH SUCH COSTS WERE ALLOCATED TO THE CONTRACT INVOLVED; AND, OBVIOUSLY, AFFORDS NO COGENT REASON FOR NOT FURNISHING THE USUAL DOCUMENTARY EVIDENCE IN SUPPORT OF THOSE EXPENDITURES, THE TOTAL AMOUNT OF WHICH HAS BEEN CHARGED TO THIS CONTRACT. EVIDENCE OF THIS NATURE IS DEEMED ESSENTIAL TO A DETERMINATION OF THE PROPRIETY OF PAYMENT IN THE AMOUNT CLAIMED.

ACCORDINGLY, SINCE THE PRESENT RECORD IS INSUFFICIENT NOT ONLY TO ESTABLISH THAT THE EXPENDITURES COVERED BY THE VOUCHER CONSTITUTE PROPER CHARGES TO THE GOVERNMENT UNDER THE TERMS OF THE CONTRACT, BUT, ALSO, THAT THE AMOUNTS FOR WHICH REIMBURSEMENT IS CLAIMED ACTUALLY WERE EXPENDED, CERTIFICATION OF THE VOUCHER FOR PAYMENT IS NOT AUTHORIZED.

WITH RESPECT TO THE PROPOSED PROCEDURE UNDER WHICH, IN LIEU OF FURNISHING DOCUMENTARY EVIDENCE IN SUPPORT OF THE CONTRACTOR'S EXPENDITURES, A REPRESENTATIVE OF YOUR OFFICE WOULD EXAMINE THE CONTRACTOR'S BOOKS AND RECORDS TO DETERMINE THE CORRECTNESS OF THE CHARGES BILLED AND EXAMINE PAID CHECKS TO DETERMINE THAT ALL COSTS IN CONNECTION WITH THE CONTRACTOR'S OPERATIONS UNDER THE CONTRACT WERE ACTUALLY PAID, UPON THE BASIS OF WHICH HE THEN WOULD FURNISH A CERTIFICATE REGARDING HIS FINDINGS IN THE MATTER, THE BEST EVIDENCE OF THE CONTRACTOR'S EXPENDITURES FOR SALARIES, MATERIALS, SUPPLIES, ETC., ARE THE APPLICABLE INVOICES, RECEIPTS, CANCELED CHECKS, EXCERPTS FROM PAY ROLLS, OR OTHER APPROPRIATE SUPPORTING DOCUMENTS AND, GENERALLY, SUCH EVIDENCE IS REQUIRED. WHILE, IN A PARTICULAR CASE, IF IT SHOULD PROVE IMPRACTICABLE OR IMPOSSIBLE TO FURNISH SOME PART OF THE REQUIRED EVIDENCE, CONSIDERATION IS GIVEN TO ALTERNATIVE SUGGESTIONS TO THE END THAT THERE MAY BE PROMPT PAYMENT OF AMOUNTS DUE THE CONTRACTOR AS WELL AS A PROPER SAFEGUARDING OF THE GOVERNMENT'S INTEREST IN THE MATTER, NO CHANGE IN THE USUAL AUDIT PROCEDURE APPEARS WARRANTED WHERE, AS HERE, THE USUAL DOCUMENTARY EVIDENCE IS LARGELY AVAILABLE. FURTHER, THE PROPOSED PROCEDURE, IN EFFECT, WOULD SUBSTITUTE THE DETERMINATION TO BE MADE BY A REPRESENTATIVE OF YOUR OFFICE AS TO WHETHER THE AMOUNT CLAIMED BY THE CONTRACTOR CONSTITUTES A PROPER CHARGE TO THE GOVERNMENT UNDER THE TERMS OF THE CONTRACT FOR THAT WHICH THIS OFFICE IS REQUIRED TO MAKE IN THE MATTER. IN THIS CONNECTION, WHILE IT IS THE DUTY AND OBLIGATION OF THE ADMINISTRATIVE OFFICERS OF THE AGENCY INVOLVED TO DETERMINE IN THE FIRST INSTANCE WHETHER THE AMOUNT CLAIMED AS COSTS INCURRED IN THE PERFORMANCE OF THE CONTRACT ARE PROPERLY REIMBURSABLE, SINCE THIS OFFICE IS REQUIRED TO MAKE AN INDEPENDENT DETERMINATION WITH RESPECT THERETO, THE PROPOSED ADMINISTRATIVE CERTIFICATION MAY NOT BE ACCEPTED IN LIEU OF, OR BE SUBSTITUTED FOR, EVIDENCE SATISFACTORILY ESTABLISHING THE CONTRACTOR'S CLAIM AND LEGAL LIABILITY OF THE UNITED STATES FOR THE PAYMENT THEREOF.

FOR THE REASONS STATED, I AM CONSTRAINED TO WITHHOLD APPROVAL OF THE ADOPTION OF THE PROPOSED PROCEDURE FOR THE REIMBURSEMENT OF THE CONTRACTOR'S EXPENDITURES.