The purpose of this Instructional Memorandum (IM) is to provide clarification regarding the deobligation requirements of the Economy Act and suggested steps for cost centers to follow in regards to current Economy Act agreements.

When the Economy Act (31 U.S.C. 1535 and 1536) is cited as the authority on an interagency agreement with another Federal Agency or a bureau/office within the Department of the Interior, the agreement is subject to the Economy Act’s provisions.

Key provisions of the Economy Act are provided in Attachment A for your reference. This IM discusses the deobligation provisions of the Economy Act in more detail.

31 U.S.C. 1535 (d), which only applies to Economy Act agreements, states:

“An order placed or agreement made under this section obligates an appropriation of the ordering agency or unit. The amount obligated is deobligated to the extent that the agency or unit filling the order has not incurred obligations, before the end of the period of availability of the appropriation, in—

(1) providing goods or services; or

(2) making an authorized contract with another person to provide the requested
goods or services.”

Simply stated, 31 U.S.C. 1535(d) requires the performing agency to incur obligations or expenses to fill an Economy Act order or agreement within the period of availability of the appropriation being used. Otherwise, the ordering (funding) agency must deobligate its funds, making them no longer available for use by the performing agency.

Therefore, the deobligation requirement DOES NOT apply when the ordering agency obligates: (a) no-year funds or (b) multi-year funds which remain available for a period of performance cited in the Economy Act agreement which extends into a subsequent fiscal year. For example, if the ordering agency uses two-year funds which are appropriated for the FY 2005/ FY 2006 fiscal years, the funds are not subject to deobligation as of September 30, 2005; however, the agreement’s period of performance would need to end during FY 2006. If the period of performance does not extend into FY 2006, any remaining funds would be subject to deobligation as of the end of FY 2005.

The deobligation requirement DOES apply if the ordering agency obligated annual or one-year funds (e.g., FY 2005 funds) or if the ordering agency obligated multi-year funds which expire as of the end of the current fiscal year (e.g., if the ordering agency obligated FY 2004/FY 2005 two year funds). Any funds which the performing agency has not either expended or obligated (e.g., awarded a contract for equipment), must be deobligated and returned to the ordering agency before the end of the fiscal year. It does not matter what the period of performance is for the Economy Act agreement or whether or not the performing agency is providing goods or severable or non-severable services. If the ordering agency used funds which expire at the end of the current fiscal year, the ordering agency is required by law to deobligate any funds which the performing agency has either not expended or not obligated. This is not a change in law, requirements or previously provided advice or information regarding the use of authorities and agreements.

It is suggested that USGS cost centers perform the following actions in regards to Economy Act agreements for which USGS is the agency providing goods and services:

(1) Determine the period of availability of appropriated funds obligated by the ordering agency. The agency’s appropriation symbol and accounting data should be referenced in the agreement. If the funding is no-year funding, this data will include an “X”. If the funding is multi-year funding, this data will include the fiscal years for which the multi-year funding is available (e.g., 05/06, with 06 being the last year of funding availability). Additional information pertaining to appropriation symbols and accounting data is provided in Attachment B. If the agreement does not include the appropriation symbol and/or accounting data, contact the fiscal or administrative officer listed on the agreement and request that the funding agency advise you as to the period of funding availability.

(2) If the ordering agency’s funds are no-year or multi-year extending beyond FY 2005, check that the agreement’s period of performance extends into FY 2006 or later. If so, no further action is required. If the ordering agency’s funds are no-year or multi-year extending beyond FY 2005 but the period of performance ends during FY 2005, contact the ordering agency and negotiate a period of performance which extends beyond FY 2005. Document the extended period of performance via an e-mail or other written confirmation (e.g., initials on the agreement by the extended period of performance).

(3) If the ordering agency’s funds are either multi-year or annual funds which expire as of the end of FY 2005, contact the ordering agency to see if the authority can be changed to an authority other than the Economy Act. The Economy Act’s deobligation requirement only pertains to agreements which cite the Economy Act as an authority. Therefore, use of another authority would permit the ordering agency’s multi-year or annual funds to remain available (i.e., the amount of funds the ordering agency obligated would not be subject to deobligation at the end of FY 2005) provided that the type of services USGS is providing fulfills a bonafide need of the agency in the year the agreement was signed. Attachment C provides examples of authorities which can be used to enter into agreements with other Interior bureaus and/or other Federal agencies. If additional assistance is needed in determining an appropriate authority, contact Louie Pectol, Chief, Office of Policy and Analysis, who may be reached at 703-648-6616 or by e-mail at mpectol@usgs.gov.

(4) If another authority is identified which is acceptable to the ordering agency, initiate an amendment to the agreement which states what the new authority is and that this authority is replacing the reference to the Economy Act on the existing agreement. The amendment should be signed by both the appropriate USGS and funding agency officials.

(5) If another authority cannot be identified and USGS is unable to either expend or award contracts for the remaining funds available on the agreement, contact the funding agency and advise them of the need to deobligate the remaining funds. This should be done as soon as possible so that the ordering agency has an opportunity to use any remaining funds for their agency’s needs.

________________________ Date September 08, 2005
Carol Aten
Associate Director, Administrative Policy and Services