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NICHD initially funded only $31.0 million of the $164.7 million contract obligation with fiscal year 2003 appropriations. NICHD obligated a total of $133.7 million in violation of the bona fide needs rule: $33.2 million of fiscal year 2004 appropriated funds, $33.3 million of fiscal year 2005 appropriated funds, $33.5 million of fiscal year 2006 appropriated funds, and $33.7 million of fiscal year 2007 appropriated funds. Because the Contract was a nonseverable service contract (a single undertaking that provides for a single outcome chargeable to the fiscal year in which the contract was awarded), NICHD was required to record the full amount of the Contract using fiscal year 2003 appropriated funds. By not doing so, NICHD potentially violated the Antideficiency Act. (When services are severable, they are continuing and recurring and chargeable to the fiscal year in which the services are provided.) NICHD complied with the purpose requirements of appropriations statutes.
We recommended that NICHD (1) deobligate $33.2 million of fiscal year 2004 funds and $33.3 million of fiscal year 2005 funds and return the canceled funds to the Treasury; (2) deobligate $33.5 million of fiscal year 2006 funds and $33.7 million of fiscal year 2007 funds; (3) record the remaining $133.7 million of the $164.7 million contract obligation against current fiscal year appropriations; (4) report an Antideficiency Act violation if sufficient current year appropriations are not available; and (5) report, in accordance with 31 U.S.C. � § 1554, the adjustment to the Contract using current fiscal year appropriations. NIH agreed that a bona fide needs violation had occurred and admitted violating the Antideficiency Act but disagreed with our characterization of the Contract as a nonseverable service contract. While the statement of work may contain severable elements, we maintain that, on balance, the Contract is nonseverable.
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