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Principles of Federal Appropriations Law, (GAO Red Book) VOL II, Chapter 6
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The Economy Act, 31 U.S.C. §§ 1535 and 1536, authorizes the inter- andintra-departmental furnishing of materials or performance of work orservices on a reimbursable basis.177 It is a statutory exception to themiscellaneous receipts statute, 31 U.S.C. § 3302(b), authorizing aperforming agency to credit reimbursements to the appropriation or fundcharged in executing its performance.178 Crediting Economy Actreimbursements to agency appropriations is not mandatory. Theperforming agency may, at its discretion, deposit reimbursements for bothdirect and indirect costs in the Treasury as miscellaneous receipts.57 Comp. Gen. 674, 685 (1978), modifying 56 Comp. Gen. 275 (1977).
There is one area in which the performing agency► has no discretion.Reimbursements may not be credited to an appropriation against which nocharges have been made in executing the order.179 This would constitute animproper augmentation of the credited appropriation(s). As noted insection E.4 of this chapter, this also applies to appropriations available indifferent time periods. See B-288142, Sept. 6, 2001. Such reimbursementsmust therefore be deposited into the General Fund as miscellaneousreceipts. ► An example would be crediting reimbursement for depreciation to an appropriation that did not bear any costs of the transaction. If theappropriation that bore the costs is no longer available, the reimbursementfor depreciation must be deposited into the Treasury as miscellaneousreceipts. 57 Comp. Gen. at 685–86. An agency must deobligate funds at theend of their availability period to the extent that obligations for EconomyAct work exceed costs incurred for that work. 31 U.S.C. § 1535(d). SeeB-286929, Apr. 25, 2001; 39 Comp. Gen. 317, 319 (1959); 34 Comp. Gen. 418, 421–22 (1955).
Likewise, where performance of an Economy Act order► extends beyond a fiscal year and is funded by more than one fiscal yearappropriation, the reimbursement must be split between the twoappropriations based on the work actually performed by each. B-301561,June 14, 2004 (nondecision letter).
Reimbursement under the Economy Act is to be made on the ► basis of“actual cost” as determined by the performing agency. 31 U.S.C. § 1535(b).Advance payments based on estimated costs are authorized, but the finalpayment amount must be adjusted to account for actual costs. 31 U.S.C.§ 1535(b), (d); B-282601, Sept. 27, 1999; B-260993, June 26, 1996. See alsoGAO, DFOH Financial Management, GAO/AIMD-96-167R (Washington,D.C.: Sept. 30, 1996).
While agencies have some flexibility in determiningcosts, ► their determinations must be reasonable in order to avoid anaugmentation. B-257823, Jan. 22, 1998; B-250377, Jan. 28, 1993.180 Inreviewing cost issues under the Economy Act, GAO’s role is to assess thegeneral accuracy and reasonableness of a performing agency’s charges, notto “recompute” those charges. B-257823, Jan. 22, 1998.
► Failure to obtain reimbursement for all required costs in a reimbursableEconomy Act transaction improperly augments the appropriations of theordering agency. 57 Comp. Gen. 674, 682 (1978). Thus, ► an ordering agencymust reimburse all appropriate costs incurred by the performing agencyeven if they exceed those agreed upon so long as the ordering agencyreceived the benefit of the added costs. B-260993, June 26, 1996. Theordering agency’s obligation to ► reimburse such additional costs remains even if those costs are not identified until years later and after theappropriation of the ordering agency originally charged for the transactionhas closed. In this event, the additional costs are payable from the orderingagency’s current appropriations for the same general purpose. B-260993,June 26, 1996. By the same token, the performing agency must return tothe ordering agency advance payments that exceeded actual costs.
72 Comp. Gen. 120 (1993).
On occasion, the costs may be so ► out of proportion as to undercut thelegitimacy of a purported Economy Act transaction altogether. In 70 Comp.Gen. 592 (1991), the Labor Department cited the Economy Act as authorityto combine funds from a number of different departmental appropriationaccounts for component agencies in order to purchase computerequipment for a department-wide network. However, the value ofequipment provided to the various components under this arrangement didnot match their contributions. For example, one component paid about► four times more than the value of the equipment it received. Accordingly,the Comptroller General held that this arrangement was not a legitimateEconomy Act transaction or reprogramming. Rather, it constituted anunauthorized transfer of appropriations that resulted in a subsidy to, andthus an improper augmentation of, the department’s central managementaccount. 70 Comp. Gen. at 594–96.
Finally, the general authority of the ► Economy Act cannot be used toovercome 31 U.S.C. § 3302(b) if the transaction in question is governed by amore specific statutory authority. In B-241269, Feb. 28, 1991, the TreasuryDepartment’s Financial Management Service asked whether it could invokethe Economy Act to retain reimbursements for training it provided toemployees of other federal ► and state agencies as well as a fewnongovernmental participants. GAO responded that the reimbursementswere governed not by the Economy Act but by other statutory authoritiesdealing specifically with federal training programs. These statutoryauthorities allowed the agency that provided training to credit itsappropriations for reimbursements on behalf of federal and othergovernmental participants. However, ► since the statutes did not covernongovernmental trainees, they could not provide an exception fromsection 3302 that applied to them. Thus, the ► fees paid by nongovernmentalparticipants must be deposited into the General Fund of the Treasury asmiscellaneous receipts.
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As pointed out earlier in our introductory comments, the augmentationtheory is relevant in a wide variety of contexts. The most commonapplications are the areas previously discussed—the spectrum of situationsinvolving the miscellaneous receipts statute and the acceptance of gifts.This portion of the discussion will present a sampling of cases to illustrateother applications of the theory.Another way of stating the augmentation rule is that when Congressappropriates funds for an activity, the appropriation represents a limitationCongress has fixed for that activity, and all expenditures for that activitymust come from that appropriation absent express authority to thecontrary. ► Thus, a federal institution is normally not eligible to receive grantfunds from another federal institution. It is not necessary for the grantstatute to expressly exclude federal institutions as eligible grantees; therule will apply based on the augmentation theory unless the grant statuteexpressly includes federal institutions. 57 Comp. Gen. 662, 664 (1978);23 Comp. Gen. 694 (1944); B-114868, Apr. 11, 1975.195
The improper treatment of reimbursable transactions may result in anaugmentation. An example of this type of transaction is an order under theEconomy Act, 31 U.S.C. § 1535.196 Thus, if a given reimbursement must becredited to the appropriation that “earned” it (i.e., that financed thetransaction), and that appropriation has expired, crediting thereimbursement to current funds is an improper augmentation. E.g.,72 Comp. Gen. 109, 110 (1993); B-242274, Aug. 27, 1991. However, a deminimis exception to this rule was recognized in 72 Comp. Gen. 63 (1992).This decision held that a ► refund of $100 or less that related to an expiredaccount could be treated as a credit against a future invoice to the partyowing the refund, and thus ► applied to a current account since the cost of processing a separate refund check would exceed the amount of therefund. The decision reasoned that this approach would save thegovernment money and have an insignificant impact on the agency’saccount integrity. Id.at 64. The decision in 72 Comp. Gen. 109 (1993),which was issued shortly thereafter, underscored that this exceptionapplied to de minimis amounts of $100 or less and ► did not apply to refundsthat regularly exceeded $1,000. 72 Comp. Gen. at 110.Some statutes give an agency the option of crediting reimbursements eitherto current funds or to the appropriation that financed the transaction. E.g.,10 U.S.C. §§ 2205 and 2210; 22 U.S.C. § 2392(c) and (d).197 Even here,however, crediting a reimbursement to an appropriation that bears norelationship to the transaction would be an unauthorized augmentation.B-132900-O.M., Nov. 1, 1977.Likewise, treating a transaction which should be reimbursed asnonreimbursable may result in an improper augmentation. For example, an agency receives appropriations to do its own work, not that of anotheragency. Accordingly, as a general proposition, interdepartmental loans of
personnel on a nonreimbursable basis improperly augment theappropriations of the receiving agency. 65 Comp. Gen. 635 (1986);64 Comp. Gen. 370 (1985). Such nonreimbursable loans also constitute amisuse of the detailing agency’s appropriation under 31 U.S.C. § 1301. B-247348, June 22, 1992.
Reimbursement by one agency to another in situations ► which are not theproper subject of an Economy Act agreement or where reimbursement isnot otherwise statutorily authorized ► is improper for several reasons: It isan unauthorized transfer of appropriations; it violates 31 U.S.C. § 1301(a)by using the reimbursing agency’s appropriations for other than theirintended purpose; and it is an improper augmentation of the appropriationsof the agency receiving the reimbursement. (The cases do not always citeall of these theories; they again illustrate the close interrelationship of thevarious concepts discussed throughout this publication.)
The situationarises, for example, when agencies attempt to use the Economy Act for a► “service” that is a normal part of the providing agency’s mission and forwhich it receives appropriations. To illustrate, an agency acquiring land cannot reimburse the JusticeDepartment for the legal expenses incurred incident to the acquisitionbecause these are regular administrative expenses of the JusticeDepartment for which it receives appropriations. 16 Comp. Gen. 333(1936). ► Similarly, an agency cannot reimburse the Treasury Department forthe administrative expenses incurred in making disbursements on itsaccount. 17 Comp. Gen. 728 (1938).Federal agencies may not reimburse the Patent Office for servicesperformed in administering the patent and trademark laws ► Since the PatentOffice is required by law to furnish these services and receivesappropriations for them. 33 Comp. Gen. 27 (1953). Nor may theyreimburse the Library of Congress for recording assignments of copyrightsto the United States. 31 Comp. Gen. 14 (1951). See also 40 Comp. Gen. 369(1960) (Interior Department may not charge other agencies for the cost ofconducting hearings incident to the validation of unpatented mining claims,although► it may charge for other services in connection with the validationwhich it is not required to furnish); B-211953, Dec. 7, 1984 (GeneralServices Administration may not seek reimbursement for costs of storingrecords which it is required by law to store and for which it receivesappropriations).
A ► client agency must bear from its own appropriations costs it incurs inassisting the Justice Department to defend it in litigation. Such supportcosts, which may include substantial temporary services provided by theagency’s staff lawyers and paralegals, cannot be billed to Justice. 73 Comp.Gen. 90 (1994), citing 39 Comp. Gen. 643 (1960).
The decision in 70 Comp. Gen. 601 (1991) provides a variant on thisprinciple. That decision approved the Army Civilian Appellate ReviewAgency’s practice of obtaining reimbursement from other Armycomponents for costs it incurred in investigating grievances filed byemployees of the other components. For one thing, both the ReviewAgency and the other components were funded from the sameappropriation in most instances; thus, there could be no augmentation.
However, even when different appropriations were involved, the othercomponent’s appropriation could be charged pursuant to 31 U.S.C. § 1534.Indeed, the decision pointed out that such charges were “precisely the kindof situation contemplated by section 1534” since the Review Agencyassisted the other components in satisfying their obligation to provide agrievance resolution process for their employees. 70 Comp. Gen. at 604.Augmentation issues also can arise when an agency is trying to decidewhich of its appropriations to use for a given object.
In 68 Comp. Gen. 337(1989), for example, the Railroad Retirement Board wanted to makeperformance awards to personnel in its Office of Inspector General (IG),and was unsure whether to charge its appropriation for the IG’s office or itsgeneral appropriation. A reasonable argument could be made to supporteither choice. Thus, the Board could make an election as long as itremained consistent thereafter. Since there was no indication that the IGappropriation was intended to be the exclusive funding source for theperformance awards, using the general appropriation would not result inan improper augmentation of the IG appropriation.
A somewhat analogous situation could arise if an agency agrees to reduceor forgo receipts to which it is entitled, and the party owing those receiptsagrees in return to make some expenditure which would otherwise have tobe borne by a separate appropriation of the same agency. GAO examinedsuch a situation in B-77467, Nov. 8, 1950, involving the leasing of landsunder the Bankhead-Jones Farm Tenant Act at reduced rentals oncondition that the lessees in return perform certain improvements to theland. There was no augmentation in that case, however, since ► the statuteexpressly authorized the leasing with or without consideration and on such terms as the Secretary of Agriculture determined would best accomplishthe purposes of the act.
The following cases illustrate other situations which GAO found wouldresult in unauthorized augmentations:
• The Customs Service may not charge the party-in-interest for travelexpenses of customs employees incurred incident to official dutiesperformed at night or on a Sunday or holiday. 43 Comp. Gen. 101(1963); 3 Comp. Gen. 960 (1924). See also 22 Comp. Dec. 253 (1915).
• Department of Energy may not use overcharge refunds collected fromoil companies to pay the administrative expenses of its Office ofHearings and Appeals. B-200170, Apr. 1, 1981.
• Proposal for airlines to reimburse Treasury to permit Customs Serviceto hire additional staff to reduce clearance delays at Miami airport wasunauthorized in that it would augment appropriations made byCongress for that service. 59 Comp. Gen. 294 (1980).
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