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B. 2. Future
Years’ Needs
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An appropriation may not be used for
the needs of some time period
subsequent to the expiration of its period of availability. With
respect to
annual appropriations, a more common statement of the rule is that
an
appropriation for a given fiscal year is not available for the needs
of a
future fiscal year.9 Determining the year to which a need relates is
not
always easy. Some illustrative cases are listed below:
-
The balance of an appropriation for salaries remaining unexpended
at
the end of one fiscal year could not be used to pay salaries for
services
rendered in the following fiscal year. 18 Op. Att’y Gen. 412 (1886).
-
The Department of Housing and Urban Development recorded certain
obligations for public housing subsidies on an estimated basis. At
the
end of the fiscal year, obligations were found to be in excess of
actual
needs. It was held improper to send excess funds to the state
agency’s
operating reserve to offset the subsidy for the following year,
since this
amounted to using the funds for the needs of a subsequent year. The
proper course of action was to deobligate the excess.
64 Comp.
Gen. 410 (1985).
-
Rent on property leased by the National
Park Service from the National Park Foundation could be paid in
advance, but the lease could not cross fiscal year lines. The
proposal was for the lease to run from May 1 through April 30 and
for the full annual rent to be paid in advance on May 1. However,
appropriations available as of May 1 could not be used for the
period from October 1 through April 30 since rent for these months
constituted a need of the following fiscal year.
B-207215, Mar.
1, 1983.
Any discussion of obligating for future
years’ needs inevitably leads to the question of year-end spending.
Federal agencies as a fiscal year draws to a close are often likened
to sharks on a feeding frenzy, furiously thrashing about to gobble
up every appropriated dollar in sight before the ability to obligate
those dollars is lost. The Comptroller of the Treasury stated the
legal principle very simply in an early decision:
“An appropriation should not be used
for the purchase of an article not necessary for the use of a
fiscal year in which ordered merely in order to use up such
appropriation. This would be a plain violation of the law.”
8 Comp. Dec. 346, 348 (1901).
Thus, where an obligation is made
toward the end of a fiscal year and it is clear from the facts and
circumstances that the need relates to the following fiscal year,
the bona fide needs rule has been violated. The obligation is
not a proper charge against the earlier appropriation, but must be
charged against the following year’s funds. This was the result, for
example, in 1
Comp. Gen. 115 (1921), in which an order for gasoline had been
placed 3 days before the end of fiscal year 1921, with the gasoline
to be delivered in monthly installments in fiscal year 1922. The
Comptroller General stated:
“It is not difficult to understand how
the need for an article of equipment, such as a typewriter,
might arise during the fiscal year 1921 and its purchase be
delayed until the latter part of June [the end of the fiscal
year in 1921], but as to supplies that are consumed as used,
such as gasoline, it can not be held that they were purchased to
supply a need of the fiscal year 1921 when the contract is made
late in the month of June and expressly precludes the
possibility of delivery before July 1, 1921.”
Id. at 118 (explanatory
information provided). See also 4 Comp. Dec. 553 (1898)
(cement ordered late in one fiscal year to be delivered several
months into the following fiscal year).10
An interesting situation involving a contract
with renewable options arose in
B-308026, Sept. 14, 2006. The
National Labor Relations Board (NLRB) entered into a contract with
Electronic Data Systems for the acquisition of ongoing operational
and technical support for its automated Case Activity Tracking
System. The contract’s initial performance period was October 1,
2001, through September 30, 2002, with options through
September 30, 2015. On September 30, 2005, NLRB exercised option
four, specifying a performance period of October 1, 2005, through
September 30, 2006, and charged the obligation to its fiscal year
2005 appropriation. In a June 2006 report, the NLRB Inspector
General concluded that NLRB had improperly obligated its fiscal year
2005 appropriation because obligating the fiscal year 2005
appropriation for the performance of severable services that would
occur entirely in fiscal year 2006 was a violation of the
bona fide needs rule. The Inspector General said that NLRB should
charge the obligation against its fiscal year 2006 appropriation.
NLRB proposed to remedy its improper obligation by modifying the
contract to have the performance period of the contract run from
September 30, 2005, through September 29, 2006, instead of October
1, 2005, through September 30, 2006. NLRB explained that it had
intended a performance period commencing
September 30, 2005, but due to an inadvertent ministerial error this
was not reflected in the contract. GAO agreed with the Inspector
General. GAO said that, given the terms of the contract, NLRB had
incurred an obligation against its fiscal year 2006 appropriation
and that NLRB should adjust its accounts accordingly. NLRB could not
remedy its improper obligation by adjusting its contract’s
performance period instead of its accounts.
“It is one thing for an agency to take full advantage of
available appropriations, maximizing the
effectiveness of federal funds entrusted to its use; it
is quite another thing, however, for an agency to alter
executed contracts in order to reach expired funds—funds that Congress appropriated for agency
programs and activities of the previous fiscal year.
That is what NLRB proposes to do. Were NLRB to
adjust the fourth option’s performance period, its sole
reason for doing so would be to reach fiscal year 2005
appropriations because, in September 2005, that is
what NLRB had intended to do. However, NLRB’s
fiscal year 2005 appropriation has expired.
“. . . Instead of adjusting its obligations to reflect
what actually occurred, NLRB would revise what
actually occurred so that it can finance option four
with fiscal year 2005 funds. . . . The account
adjustment authority of [31 U.S.C. § 1553(a)] is not a
palliative for errors of this sort.”
B-308026, Sept. 14, 2006, at 5–6 (footnote omitted).
In 2007, GAO considered how this related to seven end-of-the-fiscal
year subscription renewals. The National Labor Relations Board
(NLRB) purchased seven Web site database subscriptions to support
the work of its attorneys and other professionals.
B-309530, Sept.
17, 2007. In September 2006, NLRB placed orders to renew each of
these subscriptions with the respective vendors, stating that it
needed to have the orders placed for the renewal before the existing
subscriptions expired in order to ensure uninterrupted delivery.
Each order placed was for a period of 1 year beginning on the day
following the expiration of the existing subscription and, for each,
the agency obligated its fiscal year 2006 annual appropriation. For
five subscriptions, the performance period was from October 1, 2006,
to September 30, 2007; for two subscriptions, the performance period
was from November 1, 2006, to October 31, 2007. Id. GAO determined
that NLRB did not violate the bona fide needs rule for the five Web
site database subscription renewals that it needed to have in place
on October 1, 2006, the first day of fiscal year 2007. Even though
delivery of the renewed subscriptions would occur entirely in fiscal
year 2007, NLRB reasonably determined that the renewal orders needed
to be placed in fiscal year 2006 to ensure continued receipt of the
subscriptions past the expiration of the existing subscriptions on
September 30, 2006. Id. However, NLRB violated the bona fide needs
rule when it obligated fiscal year 2006 funds to renew the two Web
site database subscriptions that were not due to expire until
October 31, 2006. These subscription renewals were a bona fide need
of fiscal year 2007 for which fiscal year 2007 appropriations should
have been used. Id.
Yet, this is only one
side of the coin. The other side is illustrated in another passage
from 8 Comp. Dec. at 348:
“An appropriation is just as much
available to supply the needs of the [last day] of a particular
year as any other day or time in the year.”
Thus, a year-end obligation perhaps
raises the possibility that the agency is trying to “dump” its
remaining funds and warrants a further look, but the timing of the
obligation does not, in and of itself, establish anything improper.
38 Comp. Gen. 628,
630 (1959); 6 Comp. Dec. 815, 818 (1900). See also
B-322455, Aug. 16,
2013 (reiterating that an agency must have a bona fide need to
support a year-end obligation, “not a mere need to use up remaining
dollars before the end of the fiscal year”).
GAO has conducted several studies of
year-end spending and has consistently reported that year-end
spending is not inherently more or less wasteful than spending at
any other time of the year. In one report, GAO suggested that
year-end spending surges are really symptomatic of a larger
problem—inadequate management of budget execution—and that the
apportionment process could be more effectively used to provide the
desired management. U.S. General Accounting Office,
Federal Year-End
Spending: Symptom of a Larger Problem, GAO/PAD-81-18 (Oct. 23, 1980),
pp. 7–9.11
GAO also noted in its
October 1980 report that there are several reasons for year-end
spending, some of which are perfectly valid. For example, some
programs have predictable 4th quarter surges due to
cyclical or seasonal fund requirements. If, for example, you are
administering a fire suppression program, you should expect a 4th
quarter surge because the 4th quarter of the federal
fiscal year is the major fire season in many states.
GAO/PAD-81-18 at 3.
In other situations, it may be desirable to delay obligations to
have funds available for emergencies that may arise during the year.
Id. at 4.
In evaluating a year-end obligation, it
is important to determine exactly what the need is from the agency’s
perspective. In one case, for example, the Small Business
Administration (SBA) awarded cooperative agreements to certain Small
Business Development Centers on the last day of a fiscal year. The
Centers then provided management and technical assistance to small
businesses, all of which would obviously be done in the following
year. GAO found no bona fide needs violation because the
need, from the perspective of implementing SBA’s appropriation, was
merely to provide assistance to the Centers, and there was no reason
this could not be done on the last day of the year.
B-229873, Nov. 29,
1988. See also
B-289801, Dec. 30, 2002; section B.5 of this chapter.
One device Congress has employed to
control year-end spending surges is legislation limiting the amount
of obligations that may be incurred in the last month or 2-month
period or quarter of the fiscal year. For example, the Defense
Department’s 1990 appropriation contained a provision limiting
obligations during the last 2 months of the fiscal year to not more
than 20 percent of the total fiscal year appropriations.12
In comments on legislative proposals of this type,
GAO has pointed out that they are difficult to administer, but has
supported them as temporary measures pending more fundamental
improvements in budget execution management and procurement
planning.13 In
addition, there is the risk that limitations of this type may have
the effect of simply moving the spending surges back a few months,
accomplishing nothing. |
