Obligation of Revolving Funds Requiring Reimbursement from Time-Limited Funds Under the Anti-Deficiency Act ( 2013 )

Obligation of Revolving Funds Requiring
Reimbursement from Time-Limited
Funds Under the Anti-Deficiency Act
The Anti-Deficiency Act prohibits an agency from awarding a severable services contract
that lasts longer than one year and obligates revolving funds that must be reimbursed
with time-limited funds.
The Anti-Deficiency Act violation caused by awarding such a contract is not undone by
subsequently modifying the contract’s term so as not to exceed one year.
October 21, 2013
MEMORANDUM OPINION FOR THE GENERAL COUNSEL
GENERAL SERVICES ADMINISTRATION *
The Anti-Deficiency Act prohibits “officer[s] or employee[s] of the
United States Government” from “involv[ing] . . . [the] government in a
contract or obligation for the payment of money before an appropriation
is made unless authorized by law.” 31 U.S.C. § 1341 (2006). You have
asked whether an agency violates the Anti-Deficiency Act (codified at
31 U.S.C. §§ 1341–1342, 1349–1351, 1511–1519) (“ADA” or “Act”)
when it awards a severable services contract with a performance period
that exceeds one year and the contract obligates revolving funds that an
agency has a legal obligation to reimburse with time-limited funds. 1 If
we conclude that such an action violates the ADA, you have also asked
whether an agency can cure the violation by modifying the contract so
that the performance period lasts only one year.
In federal appropriations law, services are considered “severable” if
they are continuing and confer a benefit each time they are rendered.
Section 3902(a) of title 41 of the U.S. Code allows a contract for severa-
* Editor’s Note: This is a revised version of an opinion issued on July 8, 2013. See
infra note 7.
1 See Letter for Virginia A. Seitz, Assistant Attorney General, Office of Legal Counsel,
from Kris E. Durmer, General Counsel, General Services Administration (Aug. 29, 2012)
(“GSA Letter”). In preparing this opinion, we also considered views provided by the
Department of Homeland Security. See Letter for Virginia A. Seitz, Assistant Attorney
General, Office of Legal Counsel, from Audrey J. Anderson, Deputy General Counsel,
Department of Homeland Security (Nov. 29, 2012) (“DHS Letter”).
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Obligation of Revolving Funds Requiring Reimbursement from Time-Limited Funds
ble services that obligates time-limited funds to extend beyond the period
of availability of those funds, provided that the total length of the contract
for such services does not exceed one year. 41 U.S.C. § 3902(a) (2006 &
Supp. V 2012). By contrast, a contract that obligates only revolving funds
would not generally be subject to this one-year limit. 31 U.S.C. § 1502(a).
Thus, to resolve your first question, we must consider whether the statuto-
ry rule that contracts for severable services be limited to one year applies
to contracts that obligate revolving funds in circumstances where an
agency must reimburse those revolving funds with time-limited funds that
are unavailable for obligation beyond a one-year period. In our view, it
does. In such a case, the contract has the effect of obligating those time-
limited funds for reimbursement in advance of an appropriation and thus
violates the Anti-Deficiency Act. Id. § 1341.
We also conclude that an agency cannot cure an ADA violation of this
type by subsequently shortening the contract’s performance period. We
recognize that an agency can cure the type of ADA violation that occurs
when an expenditure is charged to the wrong account, so long as funds
were legally available at the time of obligation. In the example you have
described, however, no funds were legally available at the time of obliga-
tion to reimburse payments on a greater-than-one-year contract. In cir-
cumstances such as these, the violation can be limited but not cured.
I.
We begin by noting that the practice of this Office is to address only
general legal questions having prospective application. We thus set forth
and analyze the following information, such as the agreement between the
Department of Homeland Security (“DHS”) and the General Services
Administration (“GSA”) and the subsequent contractual arrangements and
findings of GSA’s Office of the Inspector General, solely for illustrative
purposes and to provide relevant context. We describe these contractual
arrangements as they have been presented to us and do not make any
factual findings or determinations regarding these specific contracts.
GSA entered into a series of contractual arrangements that have led to
your questions. In the American Recovery and Reinvestment Act of
2009 (“Recovery Act”), Congress designated $200 million for DHS to
use in “planning, design, construction costs, site security, information
technology infrastructure, fixtures, and related costs to consolidate the
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37 Op. O.L.C. 78 (2013)
Department of Homeland Security headquarters.” Pub. L. No. 111-5,
div. A, tit. VI, 123 Stat. 115, 162 (2009). To implement DHS’s plan for
a new, consolidated headquarters, DHS and GSA’s Northern Capital
Region Public Buildings Service (“GSA-PBS”) entered into an agree-
ment “provid[ing] GSA access to $198.9 million” of DHS’s Recovery
Act funds to pay for various elements of the consolidation project (here-
inafter “DHS-GSA Agreement”). See GSA Letter att. 1, at 2. 2 The Re-
covery Act provided that DHS’s funds were time-limited; after Septem-
ber 30, 2010, they would expire and no longer be available for obliga-
tion. See id. at 1; see also Recovery Act div. A, § 1603, 123 Stat. at 302.
As part of the consolidation project, GSA-PBS sought to secure two
contracts for severable services, which would ultimately be funded with
the time-limited Recovery Act funds that GSA-PBS had authority to
obligate. GSA Letter at 1–2. As noted, severable services are services that
are continuing in nature, and from which a benefit is received each time
the service is rendered, such as the maintenance of landscaping or repair
work. 3 Severable services contracts funded with time-limited funds are in
certain respects governed by rules different from those applicable to other
types of contractual arrangements.
For example, government contracts are generally governed by the “bo-
na fide needs rule,” but there is a limited exception to that rule for severa-
ble services contracts. The bona fide needs rule provides that an agency
generally may obligate appropriations that Congress makes available for a
limited period of time only to pay for “bona fide needs” incurred during
that period of availability. See 31 U.S.C. § 1502(a); 1 General Accounting
Office, Principles of Federal Appropriations Law 5-11 (3d ed. 2004)
(“Federal Appropriations Law”). For a service such as routine landscap-
2 The DHS-GSA Agreement indicated that GSA would use the money to obtain non-
severable services, GSA Letter att. 1, at 1, but all agree that GSA ultimately entered into
contracts to obtain severable services under the Agreement. We have not considered and
do not address whether the DHS-GSA Agreement’s original characterization of the money
as restricted to contracts for nonseverable services was erroneous or what the conse-
quences of any such error would be.
3 In contrast, nonseverable, or entire, services are those for which the entire benefit
is received at the time the service is completed, such as building construction or other
projects that yield a final product. All agree that the relevant contracts here (between
GSA’s agent—the Federal Acquisition Services component of GSA’s Northern Capital
Region—and the third party contractors) were for severable services.
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Obligation of Revolving Funds Requiring Reimbursement from Time-Limited Funds
ing work, for example, the need arises when grass needs to be cut or
hedges need to be trimmed; thus, an agency ordinarily could not enter into
a contract for cutting or trimming that would occur after current funds
cease to be available. Under a statutory exception, however, agencies may
obligate time-limited appropriations for “contract[s] for the procurement
of severable services for a period that begins in one fiscal year and ends in
the next fiscal year if (without regard to any option to extend the period of
the contract) the contract period does not exceed one year.” 41 U.S.C.
§ 3902. In other words, an agency could use Fiscal Year (“FY”) 2013
funds, available for obligation only during FY 2013, to enter into a land-
scaping contract that lasted into FY 2014, so long as the total contractual
period did not exceed one year.
To obtain the severable services contracts, GSA-PBS entered into an
agreement with the Federal Acquisition Services component of GSA’s
Northern Capital Region (“GSA-FAS”). GSA Letter att. 2. The agree-
ment specified that GSA-FAS, acting on behalf of GSA-PBS, would
acquire technology services from a contractor. Id. §§ B.2, B.6. GSA-FAS
would pay the contractor’s charges upfront with money from the Acquisi-
tion Services Fund, a fund established by statute that GSA uses to pro-
cure services on behalf of other federal agencies. Id. §§ A.7, B.8, B.13;
see 40 U.S.C. § 321(c). The Acquisition Services Fund is a revolving
fund, meaning that it is both a receipt account and an expenditure account,
such that collected receipts are available for expenditure without the need
for further appropriations from Congress and without fiscal year limita-
tion. 3 Federal Appropriations Law at 12-87, 12-88 (3d ed. 2008). The
statute governing the use of the Acquisition Services Fund requires agen-
cies for which GSA expends money from the fund either to pay into the
fund in advance or to “prompt[ly] reimburse” the fund for expenditures
made on their behalf. 40 U.S.C. § 321(d)(3). Consistent with this statutory
requirement, the agreement between GSA-PBS and GSA-FAS provided
that GSA-FAS would pay the contractor’s charges from the Acquisition
Services Fund, and then GSA-PBS would reimburse GSA-FAS from the
Recovery Act funds DHS had set aside for GSA-PBS’s use. GSA Letter
att. 2, §§ B.8, B.12. The agreement made GSA-PBS “responsible for
prompt payment of all billings” for reimbursement, set forth criteria for
determining when billings would become delinquent, and established
that delinquency in reimbursement could result in certain consequences
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37 Op. O.L.C. 78 (2013)
for GSA-PBS. Id. § A.7. The agreement also stated that “[GSA-FAS’s]
acceptance of this document creates an obligation on the part of [GSA-
PBS].” Id. § B.18.
Under the authority of its agreement with GSA-PBS, GSA-FAS award-
ed two task orders for severable services on September 30, 2010, the last
day that Recovery Act funds were available for obligation. See GSA
Letter at 2. At least one of the task orders indicated that the performance
period would extend from September 30, 2010 to November 2011, longer
than the one-year period permitted by the statute that allows agencies to
use time-limited funds for severable services contracts crossing fiscal
years. 4 Id. Midway through the contract, in the summer of 2011, GSA-
FAS modified the task orders so that the performance periods of both task
orders ended on September 29, 2011, within a year after they began. Id.
GSA’s Office of the Inspector General conducted a limited scope audit
of both task orders and concluded, among other things, that the initial task
orders violated both the bona fide needs rule and the Anti-Deficiency
Act. 5 The Inspector General concluded that the revolving fund money
GSA-FAS obligated by entering into the task orders had “the same pur-
pose and time limitations” as the time-limited Recovery Act funds desig-
nated to reimburse the revolving fund. OIG Reports at 3. Because GSA-
PBS could not use Recovery Act funds to reimburse GSA-FAS for any
charges incurred beyond the first twelve months of the contract, the In-
spector General concluded that GSA-FAS had obligated money in ad-
vance of an appropriation and thereby violated the Anti-Deficiency Act.
The Inspector General further concluded that GSA-FAS could not cure
the violation by modifying the task orders’ performance periods so that
they did not exceed one year.
4 We understand that GSA believes that the performance period for the other task order
never clearly extended beyond one year. GSA Letter at 2. We do not resolve that issue.
5 See Office of Inspector General, General Services Administration, Report No.
A110024/Q/A/P12006, Limited Scope Audit of Task Order NP4700101050 Funded by
the American Recovery and Reinvestment Act of 2009 (May 2, 2012); see also Office of
Inspector General, General Services Administration, Report No. A110024/Q/A/P12007,
Limited Scope Audit of Task Order NP4700101051 Funded by the American Recovery
and Reinvestment Act of 2009 (May 2, 2012) (collectively, “OIG Reports”). Because the
relevant content of the two reports is identical, citations to “OIG Reports” should be
understood as citations to the specified pages in both reports.
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II.
As stated above, the Anti-Deficiency Act prohibits “officer[s] or em-
ployee[s] of the United States Government” from “involv[ing] . . . [the]
government in a contract or obligation for the payment of money before
an appropriation is made unless authorized by law.” 6 31 U.S.C. § 1341.
GSA agrees that an ADA violation occurs when an agency obligates
time-limited funds by entering into a severable services contract that
exceeds one year. See 1 Federal Appropriations Law at 5-40 (violation of
bona fide needs rule can also violate the ADA). Because there is a statu-
tory prohibition on obligating time-limited funds beyond their period of
availability for greater-than-one-year severable services contracts, an
agency entering into such a contract would have no funds legally availa-
ble at the time of obligation to pay for the services it would receive
beyond the one-year mark. So, for example, if a landscaping contract
obligated FY 2013 funds for a period of time lasting into FY 2014, the
FY 2013 funds would be legally available for the first twelve months of
that contract. But at the end of that twelve months, FY 2013 funds would
no longer be available. If the contract continued beyond that point, it
would therefore have effectively obligated FY 2014 funds “before an
appropriation is made.” 31 U.S.C. § 1341.
The difference between this hypothetical landscaping contract and a
contract like the one GSA describes is that, under the latter, the agency
does not obligate time-limited funds outright; instead, it obligates revolv-
ing funds that will later be reimbursed by time-limited funds. As GSA
sees it, this arrangement does not violate the ADA. GSA reasons that an
agency generally may obligate revolving funds to pay for severable ser-
vices for any period of time, so long as money in the revolving fund
remains available for obligation. GSA argues that, even though a contract
may indicate that particular time-limited funds will reimburse the revolv-
ing fund, the reimbursing agency could defer repayment until new time-
limited funds become available. 7
6 The Anti-Deficiency Act applies not only to contracts between a government agency
and a private party, but also to contracts between one government agency and another.
See, e.g., Public Printer—Four-Year Contract for Purchase of Paper for Postal Cards,
27 Op. Att’y Gen. 584 (1909).
7 After we issued the initial version of this opinion, GSA requested that we reconsider
our conclusion. See Letter for Virginia A. Seitz, Assistant Attorney General, Office of
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37 Op. O.L.C. 78 (2013)
GSA correctly notes that the one-year limit on severable services
contracts does not generally apply to revolving funds. But we do not
believe that general rule applies when an agency obligates money from
a revolving fund under an arrangement in which the fund must be
reimbursed with time-limited funds. In our view, money from a revolv-
ing fund like the Acquisition Services Fund, which agencies are legally
required to reimburse, can be obligated only to the extent that the rele-
vant appropriations are legally available for the expenditures made by
the fund. 8 See Memorandum for the Files from Stephen J. Wilkinson,
Office of Legal Counsel, Re: Federal Register Publication on Novem-
ber 23, 1981 (Dec. 4, 1981). Restrictions on the availability or use of
the designated reimbursement funds limit an agency’s ability to obli-
Legal Counsel, from Kris E. Durmer, General Counsel, General Services Administration
(Aug. 28, 2013) (“Reconsideration Request”). The Reconsideration Request argues that,
at least with respect to one of the task orders, any contractual obligation exceeding the
twelve-month period for which Recovery Act funds were available for reimbursement
was, on the particular facts, not an impermissible obligation of Recovery Act funds, but
solely an obligation of the revolving funds in the Acquisition Services Fund. Id. at 2. On
that view, no Anti-Deficiency Act violation occurred because GSA-PBS would have had
no obligation to reimburse the Acquisition Services Fund for services that GSA-FAS
contracted for on GSA-PBS’s behalf that extended beyond the twelve-month period.
We are not in a position to evaluate the particular facts that GSA identified in its Re-
consideration Request, including whether the particular contracts at issue obligated GSA-
PBS to reimburse the revolving fund for expenses beyond the twelve-month period, in
light of our practice to address only general legal questions that have prospective applica-
tion. We accordingly reach no conclusion as to how GSA should apply our opinion to
each of its past contractual arrangements. Our opinion is confined to those circumstances
in which one government entity obligates revolving funds that another government entity
is legally obligated to reimburse with time-limited funds. We defer to GSA’s determina-
tion of whether those circumstances arose in its past contracts.
8 GSA points out that the statute requires the Administrator of GSA to establish rates
for services it provides customer agencies and to set those rates “at levels sufficient to
recover . . . so far as practicable” certain costs, 40 U.S.C. § 321(d)(2). See GSA Letter
at 5 n.9. We understand the “so far as practicable” language as an accommodation to the
reality that GSA may not always be able to quantify precisely the costs associated with
“inventory losses,” “amortization . . . of equipment,” “transportation cost,” and the other
costs listed in section 321(d)(2). We do not read this language to suggest that customer
agencies must only reimburse GSA to the extent that they have funds available, or that
GSA may obligate money from the Acquisition Services Fund that it does not expect to
recoup. The phrase “so far as practicable” qualifies the requirement that the GSA Admin-
istrator establish prices, not the requirement that agencies reimburse the GSA for obliga-
tions GSA undertakes on their behalf.
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gate the revolving funds; otherwise, the restrictions on the use of funds
could be circumvented simply by channeling their expenditure through
a revolving fund. The one-year limit on the obligation of funds for
purchase of severable services thus continues to apply when those funds
are used to fulfill a legal obligation to reimburse a revolving fund for
payment for severable services.
This conclusion is consistent with prior advice of our Office. In No-
vember 1981, Executive Branch entities experienced a lapse in appropri-
ations when the President vetoed a continuing resolution. Id. at 1. The
Office of the Federal Register, an Executive Branch entity, asked
whether, notwithstanding the lapse in appropriations, it could request
that the Government Printing Office (“GPO”), a Legislative Branch
entity, print the Federal Register the following day. Id. It explained that
GPO charges the cost of printing the Federal Register to a revolving
fund, which agencies must, by statute, reimburse. Id. We reasoned that
“[b]ecause the agencies are required to reimburse the revolving fund
from their own appropriations, at some point in the process the printing
of the Federal Register creates an obligation within the meaning of . . .
the Antideficiency Act.” Id. We advised the Office of the Federal Regis-
ter that printing the Federal Register would violate the Act if doing so
“called for the obligation created by the printing process to be charged
to appropriations not yet enacted.” Id. at 2.
The Comptroller General has taken a similar view. 9 See Chemical
Safety and Hazard Investigation Board—Interagency Agreement with the
General Services Administration, B-318425, 2009 WL 5184705 (Comp.
Gen. Dec. 8, 2009) (“Chemical Safety Board ”). In Chemical Safety
Board, the Comptroller General rejected a proposed interagency agree-
ment in which GSA would have used the Acquisition Services Fund to
pay for an open-ended severable services contract, which the Chemical
Safety Board would later reimburse through some combination of FY
2009 funds and future funds. Id. at *1, *4. The Comptroller General
reasoned that pledging future-year appropriations to reimburse GSA for
the obligations it incurred under the interagency agreement would “obli-
9The Comptroller General’s views often provide helpful guidance on appropriations
matters and related issues, although they do not bind the Executive Branch. See Use of
Appropriated Funds to Provide Light Refreshments to Non-Federal Participants at EPA
Conferences, 31 Op. O.L.C. 54, 55 n.1 (2007).
85
37 Op. O.L.C. 78 (2013)
gate [the Chemical Safety Board] to pay for severable services to be
performed in future fiscal years” and thereby violate the Anti-Deficiency
Act. Id. at *4. That GSA would use a revolving fund to pay expenses at
the outset made no difference, for “[a]n interagency agreement . . . that
is funded through an intragovernmental revolving fund, is akin to a
contract and the obligational consequences are the same as if it were a
contract.” Id. at *1 n.6.
Our analysis would not change even if the contracting agency did not
actually spend revolving-fund money when reimbursement funds were
unavailable, but only entered into a contract to do so. The Anti-Deficiency
Act prohibits “involv[ing] . . . [the] government in a contract or obligation
for the payment of money before an appropriation is made,” meaning that
the violation occurs when the agency enters into the contract, even if it
never spends the money it obligated. See Public Printer—Four-Year
Contract for Purchase of Paper for Postal Cards, 27 Op. Att’y Gen. 584,
587 (1909) (advising that it would violate a predecessor version of the
Anti-Deficiency Act to enter into a four-year paper contract, even though
“[t]he four-year contract proposed would . . . not require any expenditure
in excess of the appropriation” for the current fiscal year, because “there
is no appropriation” for any “paper contracted to be furnished after” the
date that current-year funds expire); see also Online Terms of Service
Agreements with Open-Ended Indemnification Clauses Under the Anti-
Deficiency Act, 36 Op. O.L.C. 112, 125 (2012) (acknowledging that
commitments made in violation of the ADA cannot be legally enforced,
but advising that “[t]he mere fact that commitments made in violation of
the ADA are not legally enforceable does not somehow erase the ADA
violation”).
Our conclusion is not at odds with the Comptroller General’s statement
that “a naked contractual obligation that carries with it no financial expo-
sure to the government does not violate the Antideficiency Act.” See DHS
Letter at 3 (quoting Funding of Maintenance Contract Extending Beyond
Fiscal Year, B-259274, 1996 WL 276377, at *4 (Comp. Gen. May 22,
1996) (“Maintenance Contract ”)). In Maintenance Contract, the Comp-
troller General concluded that an agency did not violate the ADA by
leaving eight months of a twelve-month severable services contract un-
funded at the time of the award where that contract included a clause
making the government’s obligation for the unfunded months “contingent
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Obligation of Revolving Funds Requiring Reimbursement from Time-Limited Funds
upon the contracting officer notifying the contractor in writing that funds
were available for continued performance and that the contractor continue
work.” 1996 WL 276377, at *1. Because the agency had made the contin-
uation of the contract contingent on the availability of funds, it had not
involved the government in an obligation for which funds were not yet
available; it had merely given the government the option to continue the
contract should funds become available. When no such contractual con-
tingency exists, an agency violates the Anti-Deficiency Act when it enters
into a contract that obligates the government to make payments beyond
the period in which funds are available to reimburse those expenditures.
III.
GSA, joined by DHS, urges that, even if entering into a greater-than-
one-year severable services contract would violate the ADA, an agency
can cure, if not altogether avoid, the violation by modifying the contract
so that the performance period does not exceed one year.10 While shorten-
ing a severable services contract’s period of performance may terminate
an ongoing ADA violation, it would not undo the violation that occurred
when the contracting agency obligated revolving funds in advance of an
appropriation for reimbursement funds.
The Comptroller General has long taken the view that an ADA viola-
tion can be cured under certain circumstances. See 2 Federal Appropria-
tions Law at 6-80 to 6-82 (3d ed. 2006). If an agency charges an obliga-
tion to the wrong appropriation account, and funds are available in the
correct account, the agency may adjust its accounts by charging the obli-
gation to the correct one. Id. As long as sufficient appropriated funds
were available when the obligation occurred and remain available in the
10 For the purposes of this opinion, we use the word “cure” to mean taking some ac-
tion after an ADA violation has occurred that retroactively eliminates the violation and
makes a report to Congress unnecessary. We use the word “avoid” to mean preventing
the violation from occurring in the first place. And we use the word “terminate” to mean
taking some post-violation action that stops an ongoing ADA violation but does not
eliminate the original violation and accordingly does not discharge the violating agency
from its responsibility to report to Congress. We do not suggest that these words are
terms of art in appropriations law, but rather define them to make sure our analysis here
is clear.
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37 Op. O.L.C. 78 (2013)
correct account at the time of the adjustment, the agency does not have
to report its initial improper obligation as a violation of the ADA. Id.A critical feature of a curable ADA violation, however, is the exist-
ence of legally available funds to cover the expenditure when the obliga-
tion occurs. If funds are not legally available, the agency cannot simply
adjust its accounts and thereby correct the improper obligation, because
the agency lacked authority to enter into the obligation at the outset.
Thus, for example, when an agency charges an appropriation account for
a purpose other than that specified in the appropriation, and no existing
account is legally available for the charged purpose, the agency violates
the ADA in a way that it cannot cure. Id. at 6-82. Similarly, when an
agency violates the ADA by entering into a contract with an impermis-
sible indemnification provision that exposes the government to unlim-
ited financial liability, the agency cannot cure that violation, because it
did not have funds legally available for the obligation when it was
incurred. See Department of the Army—Escrow Accounts and the Mis-
cellaneous Receipts Statute, B-321387, 2011 WL 1178327 (Comp. Gen.
Mar. 30, 2011) (“Escrow Accounts”). In the latter situation, a contractual
modification that removes the impermissible provision may terminate an
ongoing ADA violation, but it does not undo the violation that occurred
when the agency involved the government in a contract for which ap-
propriations were unavailable. See id. at *9.
Thus, in assessing whether the ADA violations resulting from a con-
tractual arrangement in which one federal entity obligates revolving funds
that another entity legally must reimburse with time-limited funds, we
would examine whether funds were legally available to cover the obliga-
tion to reimburse when the contractual obligation arose. In our judgment,
contractual arrangements in which time-limited funds are obligated for
reimbursement beyond the twelve-month period permitted by 31 U.S.C.
§ 1502(a) resemble contracts with impermissible indemnification clauses:
No funds are legally available to cover the pertinent obligation at the time
it is incurred. The statute governing obligations of the revolving fund
requires that the revolving fund be reimbursed, and the contract providing
for reimbursement of the fund specifies the use of time-limited funds that
could not be obligated for any part of a contract that extended beyond one
year.
The Comptroller General decisions that GSA and DHS identify as sup-
port for their arguments do not conflict with our view. In one of the deci-
88
Obligation of Revolving Funds Requiring Reimbursement from Time-Limited Funds
sions, the Comptroller General concluded that a three-year requirements
contract violated “the statutory prohibitions against obligating the gov-
ernment in advance of appropriations,” with no indication that the agency
could cure the violation. See Appropriations—Availability—Contracts—
Future Needs, 42 Comp. Gen. 272, 272 (1962) (“1962 Decision”); see
also Contracts—Federal Supply Schedule—Multi-Year Procurement, 48
Comp. Gen. 497, 499 (1969) (explaining that the 1962 Decision conclud-
ed that a violation of the ADA had occurred). The Comptroller General
allowed the contracting agency to complete the contract “in view of the
circumstances of the award,” which appeared to include the fact that the
contract provided services to a military base on a remote island, but he did
not suggest that a contractual modification could cure the violation. 1962
Decision, 42 Comp. Gen. at 278. The Maintenance Contract decision,
discussed above, does not address whether an agency can cure a violation;
rather, it concludes that a contractual arrangement that does not result in
any financial exposure for the government does not violate the ADA.
Maintenance Contract, 1996 WL 276377, at *4.
The remaining three decisions address situations in which no ADA
violation occurred or any ADA violation could be cured, but none in-
volves a contractual arrangement similar to the one that we have de-
scribed. In one decision, the Comptroller General concluded that entering
into a lease without legal authority to do so did not result in an ADA
violation (though it violated other laws) because appropriations were
available to pay for leases at the time of the obligation, and the agency
recorded the obligation in the correct account. See Interagency Agree-
ments—Use of an Interagency Agreement between the Counterintelli-
gence Field Activity, Department of Defense, and GovWorks to Obtain
Office Space, B-309181, 2007 WL 2389756 (Comp. Gen. Aug. 17,
2007). In another, the Comptroller General concluded that an agency
could cure an improper obligation of expired funds if it had sufficient
current-year funds at the time of obligation to cover the obligation.
Expired Funds and Interagency Agreements between GovWorks and the
Department of Defense, B-308944, 2007 WL 2120292 (Comp. Gen.
July 17, 2007). In the final decision, the agency improperly divided
payments under a nonseverable services contract over the course of two
years, and the Comptroller General concluded that the agency could
cure an ADA violation if it could adjust accounts so that it recorded the
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37 Op. O.L.C. 78 (2013)
entire contract as an obligation for the first fiscal year, and had sufficient
funds available to do so. Financial Crimes Enforcement Network—
Obligations under a Cost-Reimbursement, Nonseverable Services Con-
tract, B-317139, 2009 WL 1621304 (Comp. Gen. June 1, 2009). In each
decision, the agency’s ability either to avoid or to cure an ADA violation
turned on whether sufficient funds were legally available at the time the
obligation occurred. When funds are not legally available at the time of
obligation so that the agency could correct the violation through an
adjustment of accounts, the ADA violation cannot be cured.
We appreciate that modifying an impermissible contract term may pre-
vent an ADA violation from continuing and may prevent the government
from actually spending the funds that it obligated in advance of an appro-
priation. But a contractual modification that prevents improper spending
does not by itself cure an initial improper obligation. See Escrow Ac-
counts, 2011 WL 1178327, at *9. For that reason, and those explained
above, we conclude that an agency cannot cure an ADA violation that
occurs when it enters into a greater-than-one-year severable services
contract by modifying the contract’s performance period.
VIRGINIA A. SEITZ
Assistant Attorney General
Office of Legal Counsel
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