PUTTING THE GENIE BACK IN THE (MUDDY) BOTTLE: CURING THE POTENTIAL ADA VIOLATION.

Author:Davidson, Michael J.
Position:Antideficiency Act
 
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  1. INTRODUCTION II. PURPOSE STATUTE A. Pure Purpose Violations--Charging Authorized Items to the Wrong Appropriation 1. The Effect of Ratification 2. The De Minimis Exception B. PURPOSE PROHIBITIONS--CHARGING UNAUTHORIZED ITEMS TO ANY APPROPRIATION 1. Waiver Provisions 2. Statutory Prohibitions 3. Outliers: Salary Prohibitions III. TIME VIOLATIONS A. Use of Closed Accounts IV. AMOUNT V. CONCLUSION I. Introduction

    The Antideficiency Act (ADA) is a mechanism by which Congress ensures enforcement of the Constitutional principle that "[n]o Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." (1) The ADA's requirements apply to federal officials, not to those with whom the federal government deals. (2) The ADA is enforced through a mandatory reporting requirement and by the potential for administrative and criminal sanctions against offending government employees. (3) Although referred to as the Antideficiency Act, the ADA is actually made up of several statutes that have developed and changed over time. (4) The ADA's primary provision prohibits an officer or employee of the United States or District of Columbia from making or authorizing "an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation; [or] ... involve either government in a contract or obligation for the payment of money before an appropriation is made unless authorized by law." (5)

    Agency violations of purpose, time, and amount restrictions on the use of appropriated funds may result in ADA violations. Fortunately, agencies may cure certain purpose and time violations before they ripen into ADA violations. Indeed, since the late 1800s the Government Accountability Office (GAO), or its predecessor The Comptroller of the Treasury, has recognized an agency's ability to cure a violation by adjusting the relevant accounts. (6) The ability to cure amount violations, however, is much more restricted than an agency's ability to cure purpose and time violations. Both the GAO and the Department of Justice's Office of Legal Counsel (OLC) have issued several decisions concerning potential ADA violations and an agency's ability to cure them, but some of these decisions suffer from a lack of clarity and on occasion the GAO and OLC have issued conflicting opinions. This article will discuss the ability of an agency to cure purpose, time, and amount violations so that such violations do not ripen into violations of the ADA.

  2. PURPOSE STATUTE

    The Purpose Statute, 31 U.S.C. [section] 1301(a), provides that "[appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law." In other words, "appropriated funds may be used only for authorized purposes." (7) The Purpose Statute "prohibits charging authorized items to the wrong appropriation, and unauthorized items to any appropriation." (8) Not all violations of the Purpose Statute, however, will result in an ADA violation. (9) Certain violations may be cured before they ripen into ADA violations. (10)

    1. Pure Purpose Violations--Charging Authorized Items to the Wrong Appropriation

      The GAO, in The Honorable Bill Alexander, United States House of Representatives, (11) determined that the Department of Defense (DoD) violated the Purpose Statute when DoD used exercise, operations, and maintenance (O&M) funds for training of Honduran military personnel, for various civic action and humanitarian assistance activities, and for construction projects in Honduras costing in excess of $200,000. (12) As a remedy, the GAO deter mined that proper funding sources should be used to reimburse the O&M appropriation. (13)

      Significantly for purposes of this article, the GAO noted that "[n]ot every violation of 31 U.S.C. [section] 1301(a) also constitutes a violation of the Antideficiency Act." (14) Ultimately, the GAO reasoned, whether the Purpose Statute violation also constituted an ADA violation depended "upon the availability of alternative funding sources." (15) If an expenditure were charged to an improper appropriation, no ADA violation for incurring an obligation in excess of or in advance of an appropriation would arise "unless no other funds were available for that expenditure." (16) An ADA violation would arise, however, if no other funds were authorized for such a purpose or, if authorized, the funds had already been obligated. (17) If an adjustment of accounts proved impossible "because alternative funding sources are already obligated," then the "expenditures improperly charged by DoD to O&M appropriations" would violate the ADA. (18) In addition, the GAO cautioned that any adjustment of accounts was subject to "ordinary rules governing the use of appropriated funds, including fiscal year limitations." (19)

      In sum, if any agency violates the Purpose Statute by charging the wrong appropriation account, it may avoid an ADA violation by adjusting the accounts so that the proper account is charged. (20) To do so, the proper account must have had sufficient funds available at the time of the purpose violation and at the time the error is corrected. (21) If the proper account lacks sufficient funds available to adjust the improperly charged account, then an ADA violation will result. (22)

      The Department of Justice's Office of Legal Counsel (OLC) has also acknowledged an agency's ability to cure a purpose violation. (23) In Applicability of the Antideficiency Act to a Violation of a Condition or Internal Cap within an Appropriation, (24) OLC noted that the Purpose Statute may be violated without also triggering an ADA violation. (25) The OLC cited the GAO opinions holding that "deliberately charging the wrong appropriation for purposes of expediency or administrative convenience, with the expectation of rectifying the situation by a subsequent transfer from the right appropriation, violates [the Purpose Statute]," but the ADA would not be violated because funds were legally available for obligation or expenditure for the purpose at issue. (26) In other words, an agency could rectify or cure the purpose violation as long as proper funds were available to do so.

      1. The Effect of Ratification

        An agency's authority to ratify an unauthorized procurement and its ability to cure an ADA violation differ significantly Further, as explained below, the presence or absence of contractual authority will determine whether an ADA violation exists.

        In Unauthorized Legal Services Contracts Improperly Charged to Resource Management Appropriation, (27) employees of the Fish and Wildlife Service (FWS) violated the Purpose Statute when they entered into contracts for legal services and then paid for the services by improperly charging its resource management appropriation. All legal work should have been charged to the Department of Interior Office of Solicitor's salaries and expenses appropriation. (28) Because the FWS lacked authority to obtain legal services, the contracts were improper and the FWS had no appropriation available for the legal work; thus, the FWS violated the ADA by incurring obligations and making expenditures in excess of available appropriations. (29)

        The GAO offered several options to "correct" the ADA violations; however, these options appeared more designed to liquidate the improper obligation rather than to cure the underlying ADA violation. Indeed, the GAO did not state that FWS had to report an ADA violation if it could not correct the improper obligation; it instead found an ADA violation, emphasized the requirement to report it, and only then discussed how to "correct" the violation. (30) Its suggestions included obtaining a deficiency appropriation from Congress and agreeing to pay the contractors on a quantum meruit basis. (31) The Solicitor was not authorized to agree to pay the contractor on a quantum meruit basis, however, unless sufficient unobligated amounts remained in that fiscal year's appropriations. (32)

        Further, the GAO suggested that "the Solicitor could ratify the contracts and cover their costs out of unobligated balances of the applicable fiscal year appropriation to the Solicitor." (33) Again, the GAO cautioned that if it elected to ratify the improper contracts, the Solicitor was still required to "determine whether sufficient unobligated funds remain in the Solicitor's appropriation for fiscal year 2001," (34) Otherwise, as explained below, ratification of the improper contract could trigger an ADA violation. Neither action would cure the ADA violation; all actions appeared limited to providing a mechanism to liquidate the improper obligation. (35)

        As a general rule, "the government is not bound by unauthorized acts of its officers or agents." (36) Further, "only an authorized officer of the United States government can enter into a contract or other binding commitment on behalf of the government." (37) Within the procurement context, "[contracting officers have the sole authority to legally bind the government to contracts and contract modifications." (38) It follows then that "if someone other than an authorized officer attempts to sign a contract or other agreement committing the government to some action, the commitment is not binding on the government." (39) Further, only an official with the authority to bind the government can ratify an unauthorized commitment. (40)

        With regard to the relationship of ratification (41) of unauthorized commitments and the ADA, both the GAO and OLC have provided additional guidance. The GAO has determined that if the agency ratifies an unauthorized action of a prior fiscal year, the ratification "authorizes a charge to the prior year's funds because the ratification relates back to the time of the initial agreement." (42) Once ratified, the obligation "is properly recorded as an obligation of the fiscal year to which the contract would have been charged had it been valid from its inception."...

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