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Audit (A-03-10-03117)

09-21-2011
Appropriations Funding for National Institute of Allergy and Infectious Diseases Contract N01-AI-3-0052 With Avecia Biologics Limited

Executive Summary

Our review found that during fiscal years 2003 through 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 N01-AI-3-0052 (the Contract) with Avecia Biologics Limited. 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 funded only $40.0 million of the $71.3 million initial Contract obligation with fiscal year 2003 appropriations. NIAID obligated a total of $31.3 million in violation of the bona fide needs rule: $26.0 million of fiscal year 2004 appropriated funds and $5.3 million of fiscal year 2005 appropriated funds. Because the Contract was for nonseverable services, NIAID was required to record the full amount of the Contract using fiscal year 2003 appropriated funds. By not doing so, NIAID 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.)

NIAID complied with the purpose requirements of appropriations statutes. NIAID correctly funded two modifications for additional work with $8.4 million of fiscal year 2006 appropriated funds and $38.0 million of fiscal year 2007 appropriated funds. In April 2009, NIAID transferred the remaining Contract balance totaling $32.5 million of fiscal year 2007 funds to the Biomedical Advanced Research and Development Authority (BARDA), and BARDA correctly obligated those funds to the Contract.

We recommended that NIAID (1) deobligate $26.0 million of fiscal year 2004 appropriations and $5.3 million of fiscal year 2005 appropriations and return the canceled funds to the Treasury, (2) record the remaining $31.3 million of the $71.3 million Contract obligation against current fiscal year appropriations, (3) report an Antideficiency Act violation if sufficient current-year appropriations are not available, and (4) report the adjustment to the Contract using current fiscal year appropriations.

NIH concurred with the findings that the Contract is nonseverable and that it should have been funded at the time the Contract was awarded. NIH said that the Department of Health and Human Services would report the violation, as required.

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