FISH AND WILDLIFE SERVICE
Washington, D.C. 20240
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FISH AND WILDLIFE SERVICE
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Memorandum
| To: | Service Directorate |
| From: | Director |
| Subject: | Reimbursable Agreements: Advance Payments from Non-Federal Entities |
In the attached memorandum, Region 1 posed several major issues regarding the advance payment requirements on reimbursable agreements with State and local governments and private organizations and individuals.
In response to Region 1, the Divisions of Budget, Finance, and Contracts
and General Administration jointly prepared the attached guidance memorandum
dated January 6, 1999. Please use this guidance as the standard operating
procedures when dealing with advance payments on these types of reimbursable
agreements.
/s/ Jamie Rappaport Clark
Attachments
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FISH AND WILDLIFE SERVICE
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Memorandum
| To: | Director |
| From:: | Assistant Director - Administration
/s/ Paul W. Henne
Assistant Director - Planning and Budget /s/ Denise E. Sheehan |
| Subject: | Reimbursable Agreements: Advance Payments from Non-Federal Entities |
Region 1 has posed the following major issues and proposal:
• Whether or not state and local governments are required to make advance payments for goods and services under the Intergovernmental Cooperation Act?
• Whether or not the Service can declare the National Fish and Wildlife Foundation as a quasi-federal agency for purposes of the Economy Act, so that the Foundation can repay for goods and services provided under reimbursable agreements?
• The Service should exempt the National Fish and Wildlife Foundation from the Service's Cost Recovery Policy (waiver of indirect costs) for Foundation grants.
The attached issue paper, prepared jointly by the Divisions of Budget, Finance, and Contracts and General Administration, provides a thorough discussion of the matters raised in the Region's memorandum December 7, 1998). Based on our assessments, we find and recommend that:
• The Intergovernmental Cooperation Act and federal regulations require advance payments from state and local governments before federal agencies can incur obligations and expenditures for providing goods and services under reimbursable agreements.
• The Service must revise its manual guidance on reimbursable agreements (264 FW 3.1) to clearly require advance payments from non-federal entities, including state and local governments and private organizations and individuals.
• All Headquarters and Regional Offices should assure that new reimbursable agreements with non-federal entities conform with the advance payment requirement. If feasible, current reimbursable agreements with non- federal agencies should be renegotiated to require advance payments before further obligations and expenditures are incurred. For FY 2000, all reimbursable agreements with non-federal entities should comply with advance payment requirement.
• The Service does not have the administrative discretion to declare the National Fish and Wildlife Foundation as a quasi-federal entity for the purposes of the Economy Act. Such status would require authorizing legislation.
• While reimbursable agreements with the National Fish and Wildlife Foundation require advance payments, full payment for the entire agreement is not necessary. Advance payments may be made in installments to correspond with the schedule of work.
• The Service should exempt the National Fish and Wildlife Foundation. and continue its policy of granting waivers of indirect costs based on consideration of support requirements for specific reimbursable agreements with other private entities.
Upon your concurrence with these recommendations, we will assure that all Service employees who are delegated authority to enter into reimbursable agreements are advised of these advance payment requirements.
Attachment
Concur: /s/ Jamie Rappaport Clark
Director, U.S. Fish and Wildlife Service
Comment(s):
Major Issues: Are advance payments required under reimbursable agreements with non-federal entities, such as state and local governments and private organizations and individuals? Is the National Fish and Wildlife Foundation an eligible entity for the purposes of the Economy Act?
Background: There are two federal statutes that govern reimbursable agreements:
• Economy Act (31 U.S.C. 1535-1536) authorizes federal agencies to perform work or furnish materials for each other on a reimbursable basis. The performing agency may incur obligations or expenditures for another agency after a reimbursable agreement is executed and before payment is transferred.
• Intergovernmental Cooperation Act (31 U.S.C. 6501) authorizes federal agencies to provide specialized or technical services to state and local governments on a reimbursable basis. Under federal regulations, a federal agency must receive advance payment before incurring obligations and expenditures.
Federal agencies must have legislative authority to enter into reimbursable agreements with non- public entities (e.g. private organizations and individuals). The U.S. Fish and Wildlife Service did not have such authority, despite its extensive partnership activities with private organizations and landowners, until FY 1999. In its FY 1999 budget submission, the Service proposed the following Resource Management appropriations language to provide general authority to enter into reimbursable agreements with private entities, without amending the fundamental federal statutes and regulations:
In November 1998, the Division of Budget held a national meeting of headquarters and regional budget personnel. The agenda included a Workgroup to develop guidelines for implementing the new general authority to enter into reimbursable agreements with private entities. The Workgroup recommended that FWS Manual Part 3.1 (Reimbursable Agreements) be revised to accommodate this new authority consistent with federal statutes and regulations.
Discussion: The following addresses the specific issues raised by Region 1 in its request to the Director (December 7, 1998):
Advance Payments Required from State and Local Governments
Region 1 correctly references the Intergovernmental Cooperation Act and OMB Circular A-97 as the statutory and regulatory authorities for federal agencies to provide reimbursable specialized and technical services to state and local governments. Furthermore, Region 1 states that "OMB Circular A-34 has been incorrectly cited as requiring advance payment for State and local funding (reimbursable ] agreements."
OMB Circular A-97 (August 29, 1969) states that: "All moneys received by any Federal agency in payment of furnishing specialized and technical services under Title III of the Act shall be deposited to the credit of the principal appropriation for the cost of providing such services has been paid or is to be charged [emphasis added]." The Circular lists the conditions under which services may be provided, including under 7(e): "Such services will be provided only upon payment or provision for reimbursement to the Federal agency involved, by the unit of government making the request…[emphasis added]"
OMB Circular A-34, Budget Execution, establishes the Executive Branch policy that advance payments are required from state and local governments. OMB Circular A-34 (November 1994) stated that: "In the case of reimbursable work… provided to the public, including State and local governments, budgetary resources available for obligation are limited by the amount of the advance received…” In 1996, OMB revised Section 11.2.d.1.C. (Payments from the public.) to direct that: "Normally, obligations may be incurred [by federal agencies) against "orders" from the public provided that the order is accompanied by an advance, unless otherwise permitted by law and, in a particular case, by longstanding, generally accepted practice."
In August 1996, the Division of Budget requested that the Department ask OMB if the revision to Circular A-34 was intended to enable federal agencies to incur obligations and expenditures without advance payment. The Department confirmed that such advance payments would be required unless otherwise provided by specific statutory authority. Since the Service lacked any statutory authority to exempt us from this advance payment requirement, the Division of Budget submitted the following administrative provision to OMB as part of the proposed FY 1998 appropriations language in December 1996:
• The provision was contrary to OMB Circular A-34, which requires advance payments from state and local governments;
• The provision would extend the Intergovernmental Coordination Act and OMB Circular A- 97 to incorporate private organizations only for the purposes of the Service; and
• Such amendments to statutory authority should be submitted to the appropriate authorizing committee - not an appropriations committee - after coordination and clearance with OMB and other-federal agencies.
Conclusion: The Director does not have the administrative discretion to contradict OMB's policy determinations regarding advance payments, as requested by Region 1, especially after the Service was unsuccessful in seeking specific authority for exemption from the statutory and regulatory requirements.
Compliance with the Antideficiency Act
Under the Antideficiency Act (31 U.S.C. 1341-1519), federal agencies cannot obligate or expend more funds than the total available in the original appropriation. Reimbursable agreements provide spending authority from offsetting collections - payments and repayments authorized by law to be credited to an appropriation or fund account. Delays in repayments among federal agencies have no inherent risk of antideficiency violations because the "debits" and "credits" are offsetting in the U.S. Treasury accounts. However, a federal agency increases the risk of an antideficiency violation if it has not received advance payment from a non-federal entity under a reimbursable agreement before it has incurred obligations and expenditures for the goods and services provided.
Region 1 states that it has established practices to avoid antideficiency violations by, first, obligating the federal appropriations to provide the service, and, second, deobligating the federal appropriations after the repayment is received from a non-federal entity. While this accounting procedure may be effective, the practice uses federal appropriations for purposes for which they were otherwise intended and authorized by law. If repayment is not received, the Department of Justice would have to initiate legal action to recover the costs. If an antideficiency violation also occurred the Director would have to report this to the President and the Congress.
The OMB requirement for advance payments from non-federal entities protects against antideficiency violations, prevents misuse of federal appropriations, and avoids having the Federal Government sue state and local governments (or private organizations and individuals) for collection of repayments.
Conclusion: Region 1's practices are not consistent with the fund control standards of the Federal Government.
Service Guidance on Reimbursable Agreements
Region 1 states that "the Service's current manual chapter does not require advance payment from State and local governments,…" and identifies 17 reimbursable agreements with state and local governments in FY 1999. The Services guidance (December 30, 1996) states: "The Service may enter into reimbursable agreements that require advance payment by the outside party. Where practicable, the Service should require advance payment for goods and services provided to State and local governments [underlining added]." Region 1 appears to interpret "may" and "should" as permissive - rather than prescriptive.
Conclusion: The current Service Manual guidance is too general and open to misinterpretation, and needs to be revised for conformance to government-wide standards of financial control.
Decision Making Process and Schedule
Region 1 states that at the National Budget Meeting the issue of an advance payment requirement was "tabled" and that "no further discussion will occur." In fact, the Workgroup recommended that the Service's manual (264 FW 3. 1, Reimbursable Agreements) be updated to provide appropriate guidance. The revised chapter would be submitted for comment and clearance. Region 1 (David Patte) was informed of this process on December 4.
Conclusion: The revised manual chapter should be distributed for headquarters and regional office concurrence so that Service officials are informed of the requirements for advance payments.
Status of the National Fish and Wildlife Foundation
Region 1 requests that the Director "classify the Foundation as a quasi-Federal entity so that Foundation grants can be billed on a reimbursable basis under the authority of the Economy Act…” The Region states that the Foundation does not provide payment in advance.
The Foundation's status is established under statute (16 U.S.C.3701(a)) which states: “…The Foundation is a charitable and non-profit corporation and is not an agency or establishment of the United States."
Section IV. PAYMENT SCHEDULE of the Foundation's Federal Organization Grant Agreement establishes conditions for payments to Federal agencies. Challenge Funds are available to the Federal agency (Grantee) as soon as they are received by the Foundation. Matching Funds are available to the Grantee on a reimbursable basis. The Foundation's Federal Organization Grant Agreement does not prohibit advances, as indicated by Region 1, but provides for advances to federal agencies: “…In certain limited circumstances, the Grantee may request the NFWF to consider providing advance payment as part of the Matching Funds prior to expenditure, once the appropriate ratio of Challenge Funds have been raised. Any approval of advance payment of Matching Funds will be made at the sole discretion of the NFWF based upon an assessment of the Grantee's need."
Conclusion: Under federal statute, the Foundation is a private non-profit corporation and not an agency of the Federal Government. The Foundation's policy does provide for advance payment of funds under certain circumstances. Such advance payments could be made in installments consistent with scheduled work.
Exemption from Indirect Costs
Region 1 requests that the Director issue a "Servicewide waiver of indirect costs…for Foundation grants." Region 1 states that the Foundation does not allow indirect costs to be included in grant proposals.
The Service has confirmed that the National Fish and Wildlife Foundation's policy is not to pay for administrative and overhead costs of their grant recipients. Under the Cost Recovery Policy (FWS Manual Part 264), the Service has established indirect cost rates for full (22 percent) and reduced (11 percent) recovery of overhead expenses for reimbursable agreements in FY 1999 and FY 2000. The Assistant Director - Administration may approve waivers for exceptions to this policy on a case by case basis.
Conclusion: The Foundation should be exempted from paying indirect costs
of the Service. There may be practical reasons to exempt other private
entities, such as farmers and local conservation groups, from paying for
the Service's overhead expenses in providing services under reimbursable
agreements. The need for such exemptions can best be assessed as each reimbursable
agreement is negotiated with private parties.
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FISH AND WILDLIFE SERVICE
911 NE 11th Avenue
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DEC 8, 1998
Memorandum
| To: | Director, U.S. Fish and Wildlife Service
Washington, D.C. |
| From:: | Acting Regional Director, Region 1
Portland, Oregon |
| Subject: | Comments to the Proposed New Policy to Implement the Service's
New Authority to Enter Into Reimbursable Agreements with Private Entities ACTION: Assistant Director - Planning and Budget
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The new authority was requested by this Region 1n large part to allow the Service to receive grants from the Foundation and other entities on a reimbursable basis (existing authorities allow the Service to receive Foundation grants as donations). I urge you to classify the Foundation as a quasi-Federal entity so that grants can be billed on a reimbursable basis under the authority of the Economy Act, and that a Servicewide waiver of indirect costs be provided for Foundation grants. The Foundation does not provide payment in advance and does not allow indirect costs to be included in grant proposals. Funds cannot be provided in advance due to third party (non- Federal) match documentation requirements, among others. Currently, Field Stations that are awarded Foundation grants must have the flexibility to spend from their Resource Management accounts until funds are received as donations from the Foundation after documentation requirements have been met. Resource Management charges must then be reversed, posing an administrative burden and possible fund management complications at year-end. Also, the flexibility to hold discretionary funds aside to avoid an Anti-Deficiency situation is not available to the majority of Refuges and Hatcheries (e.g., in a worse case scenario, if the third-party match fails to materialize, the grant funding will not be provided).
State and local government agreements have incorrectly been incorporated into the proposed policies for this new authority. Federal agencies have the authority to provide reimbursable specialized and technical services to State and local governments under the Intergovernmental Cooperation Act of 1968 (P.L. 90-577; 82 Stat. 1 102) as promulgated under ONM Circular No. A-97 (Attachment 1). The OMB Circular No. A-34 has been incorrectly cited as requiring advance payment for State and local funding agreements. The section of A-34 on spending authority from offsetting collections is primarily intended to address reimbursements from other Federal agencies, revolving funds, and, the "public." The section on "public" funds specifically states that advance payment is required "unless otherwise permitted by law and, in a particular case, by longstanding generally accepted practice" (emphasis added, see Attachment 2). The Intergovernmental Cooperation Act of 1968 and OMB Circular No. A-97 specifically provides the authority for Federal agencies to provide "reimbursable specialized and technical services to State and local governments" (emphasis added; see A-97 section 2(a)3, and section 7(e)).
Further, the Service's current manual chapter (Attachment 3, section 3.5(D)) does not require advance payment from State and local governments, and it has been the current longstanding practice for the Service to enter into reimbursable agreements with State and local governments. Region 1 has 17 such agreements projected for FY 1999 and beyond for a total of $49.7 Million (Attachment 4). These include longstanding "base" agreements which provide ongoing funding support for Service employees for important fish and wildlife activities, and the remaining funding for the $50 Million Bolsa Chica agreement. To maximize the interest earned, the latter multi-agency agreement specifically provides for the California State Lands Commission to disburse monies on a reimbursable basis. This agreement is a Secretarial priority and current authorities under the Intergovernmental Cooperation Act of 1968 should continue to be recognized.
I request the assistance of the Assistant Directors for Administration,
and Planning and Budget to prepare a Service policy that continues to recognize
the authorities in the Intergovernmental Cooperation Act of 1968, and that
recognizes the Foundation as a quasi-Federal entity so that Foundation
grants can be billed on a reimbursable basis. Also, a Servicewide
waiver of indirect costs is requested for Foundation grants. If you have
any questions, please call Don Weathers, Assistant Regional Director -
Budget and Administration at (503) 231-6115, or David Patte, Chief; Division
of Budget and Finance at (503) 231-6112.
/s/ Cynthia A. Barry
Attachments