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Audit (A-03-10-03115)

10-31-2011
Appropriations Funding for National Institute of Allergy and Infectious Diseases Contract HHSN272-2008-00013C With The EMMES Corporation

Executive Summary

Our review found that during fiscal years 2008 and 2009, NIH's National Institute of Allergy and Infectious Diseases (NIAID) did not comply with the time and amount requirements specified in appropriations statutes in administering contract HHSN272-2008-00013C (the Contract) with The EMMES Corporation. An agency may obligate appropriations for goods and services when (1) the purpose of the obligation or expenditure is authorized, (2) the obligation occurs within the time limits for which the appropriation is available, and (3) the obligation and expenditure are within the amounts provided by Congress. Federal statutes specify that a fiscal year appropriation may be obligated only to meet a legitimate, or bona fide, need arising in or continuing to exist in the appropriation's period of availability. The Antideficiency Act prohibits an agency from obligating or expending funds in advance of or in excess of an appropriation unless specifically authorized by law.

NIAID violated both the bona fide needs rule and the Antideficiency Act by obligating funds in advance of an appropriation. The initial contract action obligated fiscal year 2008 funds for a period of approximately 14 months (March 1, 2008, through April 30, 2009). Subsequent modifications obligated fiscal year 2008 and 2009 funds through May 31, 2011. Because the Contract was for severable services, NIAID should have obligated only those fiscal year 2008 funds needed for program year 1 and only those fiscal year 2009 funds needed for program year 2.

Additionally, NIAID violated the bona fide needs rule by obligating more funds than it needed for program year 1 and using those funds to pay for costs incurred after program year 1. Using the program year estimates provided in the Contract as evidence of the bona fide need, NIAID must resolve these violations by deobligating $16.9 million ($23.7 million less $6.8 million) of fiscal year 2008 funds that were obligated in excess of the agency's bona fide need for program year 1 and obligating the appropriate fiscal year funds for the program years in which the services were provided. If NIAID does not have adequate fiscal year funds available, it will violate the Antideficiency Act for these fiscal years as well.

Furthermore, although NIAID estimated that it would require $6.8 million for program year 1, at the time of our audit, it had expended only $4.9 million. NIAID may not use the remaining funds for costs incurred in subsequent program years. Rather, NIAID will need to deobligate an additional $1.9 million ($6.8 million less $4.9 million) of fiscal year 2008 appropriations if it is determined that they are no longer needed during their period of availability. NIAID funded the Contract in compliance with the purpose requirements of appropriations statutes.

We recommended that NIAID (1) record the correct obligation for each program year against the appropriate fiscal year appropriations, (2) record expenditures for each program year against the appropriate fiscal year appropriations, (3) report an Antideficiency Act violation for obligating fiscal year 2008 funds in advance of an appropriation, (4) report an Antideficiency Act violation if adequate fiscal year 2009 and appropriate subsequent year funds are unavailable to cover obligations for subsequent program years, and (5) return funds that were not required for program year 1 if it is determined that they are no longer needed during their period of availability. NIH concurred with the findings and agreed that the Contract is severable and should have been funded with the appropriation that was current when the services were performed.

NIH did not address our recommendations to correct the improper funding for the first 2 program years of the Contract. Until NIH makes these adjustments, HHS cannot report the correct amount of its Antideficiency Act violation. Therefore, we continue to recommend that NIH record the correct Contract obligations and expenditures against the correct fiscal year funds.

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