Anti-Deficiency Act

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The Anti-Deficiency Act is meant to prevent federal organizations from obligating more funds than they are actually allowed to or spend funds before they have received any funds to spend.  The code states that executive agencies and their subordinates cannot:

  1. Obligate more funds than are made available to them in an appropriation or in a formal subdivision of funds (allocation, allotment, sub-allotment, or other formal designation of a limitation). 31 U.S.C. § 1341(a)(1)(A).
  2. Make obligations that exceed the amount permitted by agency actions/regulations. 31 U.S.C. § 1341(a)(1)(B).
  3. Obligate funds in advance of receiving an appropriation or allotment. 31 U.S.C. § 1342.
  4. Accepting voluntary services for the United States, or employing personal services not authorized by law, except in cases of emergency involving the safety of human life or the protection of property. 31 U.S.C. § 1517 (a); 31 U.S.C. § 1514(a)..

The upshot for government contractors is: (1) they must take measures to ensure that sufficient funds have been appropriated for their contracts; and (2) they must not provide voluntary or gratuitous goods and services to the government without involving legal counsel to ensure compliance with the Anti-Deficiency Act.

Congressional appropriations are typically only made on an annual basis for the ensuing fiscal year.  Thus, contractors should ensure that the ceiling on their cost reimbursable contracts or the total price on their fixed price contracts is sufficiently covered by appropriations.  The contracting officer is supposed to ensure that the contract does not violate the Anti-Deficiency Act and mistakes of this kind by contracting officers are rare.  However, a contractor is well-advised to check the government work as the contractor may not be able to recover money owed which exceeds the level of appropriations.

If a contractor wishes to provide goods or services without pay to the government, it may be possible to do so.  Some agencies are specifically permitted to accept gratuities and even those that may be able to accept them in certain circumstances.

The law also requires that the head of each agency to establish an administrative control system to ensure obligations are kept within appropriated levels and enable the agency to fix responsibility for violations.

Agencies that violate the Anti-Deficiency Act must report to the President and Congress all relevant facts and a statement of actions taken. Agencies must also transmit a copy of each report to the Comptroller General on the same date the report is transmitted to the President and Congress.

If a federal employee violates the Anti-Deficiency Act, he or she is subject to two types of sanctions: administrative and penal. 31 U.S.C. § 1349; 31 U.S.C. § 1350. Administrative sanctions include potential suspension from duty without pay or removal from office. 31 U.S.C. § 1349. Penal sanctions include a fine of up to $5,000, imprisonment of up to two years, or both. 31 U.S.C. § 1350.

If there has been a violation of 31 U.S.C. §§ 1341(a), 1342, or 1517(a), the agency head or the Mayor of the District of Columbia “shall report immediately to the President and Congress all relevant facts and a statement of actions taken.” 31 U.S.C. §§ 1351, 1517(b). The report from the agency head or the Mayor will be forwarded through the Director of Office of Management and Budget to the President. OMB Circular No. A-11, Preparation, Submission, and Execution of the Budget, § 145 (June 21, 2005).

The heads of the executive agencies and the Mayor of the District of Columbia shall also transmit “[a] copy of each report . . . to the Comptroller General on the same date the report is transmitted to the President and Congress.” 31 U.S.C. §§ 1351, 1517(b).

The OMB issued OMB Circular No. A-11, Preparation, Submission, and Execution of the Budget, § 145 (June 21, 2005). This Circular provides instructions for what the report should contain, including all pertinent facts of the violation and a statement of discipline taken (e.g. administrative discipline and/or referral to the Justice Department). The report should also include any additional actions taken, including any new safeguards to prevent the violation from recurring.

If the GAO suspects a violation, the report must be made even if the agency thinks the GAO is incorrect in its assessment. OMB Circular No. A-11, Preparation, Submission, and Execution of the Budget, § 145 (June 21, 2005). If the agency disagrees a violation occurs, the agency must include an explanation of its position within the required report.

 

 

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