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Audit (A-03-10-03118)

09-14-2012
Appropriations Funding for National Institute of Allergy and Infectious Diseases Contract HHSN266-2005-00022C With PPD Development, LP

Executive Summary

During fiscal years 2005 through 2008, 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 HHSN266-2005-00022C (the Contract) with PPD Development, LP. 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 the bona fide needs rule when it recorded expenditures against the wrong fiscal years. NIAID recorded expenditures for each program year against funds obligated for 1 or more previous program years. NIAID may not use funds remaining from any program year for costs incurred in subsequent program years and should record expenditures for each program year against the appropriate fiscal year appropriations. Because it recorded expenditures on a first-in-first-out basis against inappropriate fiscal year funds, NIAID failed to identify and properly obligate funds for its bona fide need in any program year.

NIAID violated the Antideficiency Act by obligating funds in advance of an appropriation and may have violated the Antideficiency Act by obligating significantly less of appropriate fiscal year funds in program years 2 and 4 than required by either the Contract estimate or the actual expenditures incurred. Similarly, NIAID may have obligated less of fiscal years 2010 and 2011 funds than required for program years 6 and 7. NIAID funded the Contract in compliance with the purpose requirements of the appropriations statutes.

We recommended that NIAID (1) record expenditures for each program year against the appropriate fiscal year appropriations; (2) resolve its bona fide needs violations; (3) report an Antideficiency Act violation for obligating fiscal year 2005 funds in advance of an appropriation, if not previously reported; (4) report an Antideficiency Act violation if NIAID does not have $16.5 million (estimated) of fiscal year 2008 funds, $6.9 million of current fiscal year funds, and, if needed, appropriate fiscal years 2010 and 2011 funds for expenditures recorded after our review, if not previously reported; and (5) report, in accordance with 31 U.S.C. § 1554, any adjustment to the Contract using current fiscal year appropriations.

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. HHS reported the Antideficiency Act violation as required by 31 U.S.C. § 1351. However, NIH did not concur with our recommendations to correct the improper funding for the Contract. NIH stated that the Contract had expired and was being closed.

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