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Appropriations Funding for National Institute on Drug Abuse Contract HHSN271-2007-00009C With Charles River Laboratories, Inc.

Our review found that during fiscal years 2007 through 2009, NIH's National Institute on Drug Abuse (NIDA) did not comply with the time and amount requirements specified in appropriations statutes in administering contract HHSN271-2007-00009C (the Contract) with Charles River Laboratories, Inc. 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.

NIDA violated both the bona fide needs rule and the Antideficiency Act by obligating funds in advance of an appropriation. The initial contract action obligated funds only for program year 1 (July 9, 2007, through July 8, 2008). However, NIDA twice modified the contract to obligate fiscal year 2007 funds through July 8, 2010, and May 1, 2011, respectively. Because the Contract was for severable services, NIDA should have obligated only those fiscal year 2007 funds needed for program year 1.

Additionally, NIDA 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, NIDA must resolve these violations by deobligating $14.9 million ($20.2 million less $5.3 million) of fiscal year 2007 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 NIDA does not have adequate fiscal year funds available, it will violate the Antideficiency Act for these fiscal years as well.

Furthermore, although NIDA estimated that it would require $5.3 million for program year 1 and $5.2 million for program year 2, at the time of our audit, it had expended only $5.0 million and $4.4 million program years 1 and 2, respectively. NIDA may not use the remaining funds for costs incurred in subsequent program years. Rather, NIDA will need to deobligate an additional $0.3 million ($5.3 million less $5.0 million) of fiscal year 2007 appropriations and $0.8 million ($5.2 million less $4.4 million) of fiscal year 2008 appropriations if it is determined that they are no longer needed during their period of availability.

Our audit also determined that the NIH Office of Financial Management erroneously paid an invoice for $111,000 against the Contract. NIDA funded the Contract in compliance with the purpose requirements of appropriations statutes.

We recommended that NIDA (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 expending fiscal year 2007 funds in advance of an appropriation, (4) report an Antideficiency Act violation if adequate fiscal year 2009 and subsequent year funds are unavailable to cover obligations for subsequent program years, (5) return funds that were not required for program years 1 and 2, and (6) reverse the expenditure to the Contract for the $111,000 erroneous payment and charge the correct contract accordingly.

In written comments on our draft report, 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 said that HHS would report the Antideficiency Act violation and stated that the NIH Office of Financial Management corrected the erroneously paid invoice by reversing the $111,000 payment.

NIH did not address our recommendations to correct the improper funding for the first 3 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.

Filed under: Center for Medicare and Medicaid Services