The following discussion continues the topic of interagency transactions raised in my previous column [FCW, Aug. 23]. Many government agencies are authorized to use revolving funds to support specific operations. Agencies have the authority to use these funds without regard to fiscalyear limitatio
The following discussion continues the topic of interagency transactions raised in my previous column [FCW, Aug. 23].
Many government agencies are authorized to use revolving funds to support specific operations. Agencies have the authority to use these funds without regard to fiscal-year limitations. Also, Congress may give some agencies special contract authority that lets them enter into contracts for activities supported by these funds in advance of appropriations. As addressed below, these special rules are important, but they can be quite confusing.
A revolving fund is a special account into which money is deposited for expenditure without regard to fiscal-year limitations. Sometimes a fund of this sort may be called a working capital fund, an industrial fund or something similar. An agency has no authority to establish a fund of this type unless specifically authorized by Congress.
The establishment of a revolving fund is a special exception to the general rule that Congress appropriates funds for an agency's use on a fiscal-year basis. Accordingly, their administration and use are limited strictly to the terms of the act that establishes them. As a consequence, there are many differences among revolving funds.
However, there are similarities as well. Money left in a revolving fund at the end of the year remains available for use the following year. The money does not revert back to the general treasury as would ordinary, unused fiscal-year appropriations.
Furthermore, as noted in a recent e-mail from a reader, 31 U.S.C. & Sect; 1516 grants agency heads the authority to exempt revolving funds from the normal rules by which appropriations are apportioned by time periods of less than a year or by activities, functions, projects or objects.
Even so, money in a revolving fund does not otherwise lose its identity as "appropriated funds." This is true whether the money is put into the fund directly from congressional appropriations or by transfers from other agencies. (See, for example, Saint Lawrence Seaway Development Corp., B-193573, Dec. 19, 1979.)
As a consequence, revolving funds are subject to the restrictions of the Antideficiency Act just like any other appropriated funds. In essence, the Antideficiency Act prohibits an agency from entering into a contract that would obligate more money than the agency has available for its use. In U.S. Army Corps of Engineers Civil Works Revolving Fund (B-242974.8, Dec. 11, 1992), the General Accounting Office ruled that a revolving fund activity is required to recognize and record as incurred obligations the values of all contracts it awards. Moreover, an Antideficiency Act violation would occur if doing so could exceed the money available in the fund.
Occasionally, Congress may grant an agency a limited exemption from the Antideficiency Act by giving the agency "contract authority." Contract authority in this context is different from authority to contract. By implication of its creation, every agency has the authority to contract for goods and services in support of its statutory purpose to the extent that funds are available. In addition, though, Congress has given some agencies a separate contract authority allowing them to enter into binding contracts even though they do not have sufficient funds available for obligation. All such grants of contract authority are strictly and narrowly construed.
For example, in 1997, Congress amended the statute authorizing the Defense Working Fund (DWF), under which most Defense Department revolving funds operate. The amendment provided that "a contract for the procurement of a capital asset financed by a working capital fund may be awarded in advance of the availability of funds in the working capital fund for the procurement."
This authority extended to minor military construction projects, automatic data processing equipment, software and other capital improvements. [See National Defense Authorization Act, 1998, Pub. L. No. 105-85, & Sect; 1011(a), 111 Stat. 1629, 1873 (1997).] However, the authority is limited to assets that will be used by the DWF itself. It cannot be used to acquire assets for a customer. [See, for example, DOD Regulation 7000-14R, Volume 11B, Chapter 9, C.4.b, which states, "Software developed or acquired for a specific customer order should be charged to and reimbursed by the requesting customer."); Chapter 58, D.3 (same rule).]
When a contract is awarded pursuant to an agency's contract authority, the contractor ordinarily would expect Congress to appropriate sufficient funds in future years, as needed, to assure that the contractor gets paid. However, there is no enforceable right to payment if funds run short and Congress chooses not to make them up. [See Shulman, 51 Comp. Gen. 598 (1972).] Some companies may decide to forgo contracting opportunities of this kind, but others may take the risk.
For most interagency transactions it does not really matter whether the servicing agency uses a revolving fund. From the perspective of the requiring agency, purchasing through an interagency transaction is not much different from awarding its own contract.
--Peckinpaugh is a member of the government contracts section of the law firm Winston & Strawn, Washington, D.C.
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