Opinion on Two Questions Concerning GSA's General Supply Fund

The General Counsel of the General Services Administration (GSA) requested an opinion as to whether: (1) a provision of the Antideficiency Act should be applied to the General Supply Fund, and (2) it is proper for GSA to pass on the costs of terminating contracts for the purchase of furniture to the agencies which cancelled their furniture orders with the General Supply Fund. GSA has a statutory duty to procure personal property and nonpersonal services for the use of Federal agencies. Congress established the General Supply Fund to assist GSA in carrying out this duty. Through the Fund, GSA makes consolidated and bulk purchases of goods and services that are commonly used by the agencies. The General Supply Fund frequently has cash flow problems and these problems have recently become acute because of an extraordinary demand placed on it to provide funds for disaster and refugee relief in advance of reimbursement, a general decrease in customer orders for items already in the inventory, and a congressional rescission of funds available for the purchase of furniture. This rescission means that agencies which ordered furniture through the General Aupply Fund will be unable to pay for their orders or will be required to seek the return of the advances they made to the Fund. GSA wanted to know if a violation of the Antideficiency Act provision occurs at the moment when cash assets, including advances, of the General Supply Fund are exceeded by the amount of obligations which the Fund has to its suppliers. GSA believes that the amount available for obligation in the Fund includes inventory and, when the value of the inventory is treated as an asset, the total value of the Fund's assets easily exceeds the obligations at any given time. GAO does not believe that GSA can obligate against the value of inventory in the General Supply Fund nor that obligations can be charged against anticipated proceeds from the sale of property. A violation of the provision occurs at the moment that obligations are incurred which exceed available budgetary resources. If agencies cancel existing orders, no violation for previously recorded obligations occurs. GSA may in that case terminate contracts on the strength of ordering agency orders, and such termination costs may be passed on to the ordering agency. On the other hand, the Fund should bear the termination costs when it cancels orders entered into in anticipation of agency needs.