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Audit (A-03-10-03119)

Appropriations Funding for National Institute of Allergy and Infectious Diseases Contract HHSN266-2006-00015C With NexBio, Inc.

Executive Summary

Our review found that during fiscal years 2006 through 2009, NIH's National Institute of Allergy and Infectious Diseases (NIAID) did not comply with the time requirements and may not have complied with the amount requirements specified in appropriations statutes in administering contract HHSN266-2006-00015C (the Contract) with NexBio, 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.

NIAID funded only $19.8 million of the $49.8 million Contract obligation with fiscal year 2006 appropriations. NIAID obligated a total of $20.0 million in violation of the bona fide needs rule: $10.0 million of fiscal year 2007 appropriated funds and $10.0 million of fiscal year 2009 appropriated funds. NIAID planned to obligate future-year appropriated funds as well. Because the Contract was a nonseverable service contract (a single undertaking that provides for a single outcome chargeable to the fiscal year in which the contract is awarded), NIAID was required to record the full amount of the Contract using fiscal year 2006 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.

We recommended that NIAID (1) deobligate $10.0 million of fiscal year 2007 funds and $10.0 million of fiscal year 2009 funds, (2) record the remaining $30.0 million of the $49.8 million Contract obligation against fiscal year 2006 funds, and (3) report an Antideficiency Act violation if fiscal year 2006 funds are not available.

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. NIH did not address our recommendations to correct the improper funding for the first 4 years of the Contract.

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