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The Department of the Army violated the Miscellaneous Receipts Statute when it directed a private developer to deposit cash rent payments in an escrow account. Section 2667 of Title 10 authorizes the Secretary of each Armed Service to lease real property that DoD does not currently need to a private developer in exchange for cash payments or "in-kind services." If DoD elects to receive cash, then the statute requires that the cash payments go to a special account in the Treasury where it may not be used without being appropriated to DoD at a later time. The Army entered into an Enhanced Use Lease for Piccatinny Army Arsenal (Picatinny EUL) and directed that the cash rent payments be deposited in an escrow account and then used to pay a third-party contractor to provide services to the Army. GAO concluded that the Army received cash consideration, which was not "in-kind services," and violated section 2667 when it did not deposit the funds in the special account in the Treasury as required. Depositing money "received for the government" in the escrow account also violated the Miscellaneous Receipts Statute. The Army used the funds as if they were permissible in-kind consideration. As a consequence, the Army also augmented its appropriation. To remedy this situation, the Army must deposit the proceeds from the Picatinny EUL into the special account in the Treasury. To date, the Army has expended substantially all of the cash rent payments. The Army should adjust its accounts by transferring funds from an Army account available to pay for services to property to the special account in the Treasury. If the Army finds that it lacks sufficient budget authority to cover the adjustment, it should report a violation of the Antideficiency Act. We also note that the Army amended the Picatinny EUL to remove an open-ended indemnification provision but has not yet reported an Antideficiency Act violation as required by the 31 U.S.C. 1351.

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