(Editor’s Note.  Most of us have seen government representatives find quite creative ways to locate funds to pay contractors’ current year invoices, especially for various adjustments (e.g. overhead rates on contracts exceeding funding levels, unexpected closeout costs, etc.).  The following GAO report may likely inhibit these informal practices.)

The General Accounting Office issued a report and testified to Congress that the Department of Defense violated a host of laws intended to prevent it form going to the well of closed appropriations accounts to finance current-year spending.  The report said the $615 million of improper adjustments to closed appropriation accounts it found represented 28% of cost account adjustments.  Projecting the fiscal year 2000 results to the previous decade means there were over $26 billion of improper adjustments over a ten year period!  The Report recommended DOD immediately reverse and correct the $615 in improper charges and take steps to strengthen controls over closed appropriation account adjustments such as revising current procedures that allow for dipping into closed accounts and making managers accountable for violating these abuses.    

By law, an expired appropriations account remains available for five years, during which it can be used for making disbursements to liquidate obligations that are appropriately charged against the account.  After the five year period the account is closed and remaining obligated and unobligated balances cannot be used.  After it closes, obligations and adjustments that would have been charged against that account must be charged to other current available appropriation accounts but competing programs often make such practices difficult.

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