Appropriations Funding for National Institute of Allergy and Infectious Diseases Contract N01-AI-15416 With the University of California at San Francisco

Our review found that during fiscal years 2001 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-15416 (the Contract) with the University of California at San Francisco. 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 initially funded only $35.3 million of the $134.8 million Contract obligation with fiscal year 2001 appropriations. NIAID obligated a total of $99.5 million in violation of the bona fide needs rule: $19.5 million of fiscal year 2002 appropriated funds, $22.4 million of fiscal year 2003 appropriated funds, $23.4 million of fiscal year 2004 appropriated funds, $22.7 million of fiscal year 2005 appropriated funds, and $11.5 million of fiscal year 2006 appropriated funds. In addition, when it awarded a fiscal year 2007 Contract modification for nonseverable services, NIAID initially funded only $40.3 million of the $220.5 million contract obligation with fiscal year 2007 appropriations. Because the Contract was a nonseverable service contract, which represents a single undertaking and provides for a single outcome, NIAID was required to record the full amount of the Contract using fiscal year 2001 or fiscal year 2007 appropriated funds. By not doing so, NIAID potentially violated the Antideficiency Act. NIAID complied with the purpose requirements of appropriations statutes.

We recommended that NIAID (1) deobligate $99.5 million in funds for fiscal years 2002 through 2006 and record the remaining $99.5 million of the $134.8 million Contract obligation against current fiscal year appropriations; (2) report an Antideficiency Act violation if sufficient current fiscal year appropriations are not available; (3) report, in accordance with 31 U.S.C. § 1554, the adjustment to the Contract using current fiscal year appropriations; (4) deobligate $58.2 million in funds for fiscal years 2008 and 2009; (5) deobligate appropriations for subsequent fiscal years that NIAID may have obligated for the contract modification after our audit; (6) record the remaining $180.2 million of the $220.5 million contract obligation against fiscal year 2007 funds; and (7) report an additional Antideficiency Act violation if fiscal year 2007 funds are not available.

In written comments on our draft report, NIH agreed that an Antideficiency Act violation had occurred but did not concur with our findings and recommendations regarding the characterization of the Contract as a nonseverable service contract. While the Contract may contain severable elements, we maintain that, on balance, the Contract is nonseverable. We determined that the Contract was overall nonseverable based on the language describing the tasks included in the statement of work.