In Architect of the Capitol, the GAO found that a federal agency's participation in an employee fringe benefit plan would violate the Antideficiency Act (ADA). (42) In this case, the Architect of the Capitol (AOC) (43) asked the GAO if its taking part in such an employee benefit plan would violate the ADA. (44) The GAO found that the AOC's participation in the plan would violate the ADA because it would commit the government to an indefinite future liability. (45)
The AOC attempted to provide fringe benefits (46) to its temporary employees (47) in a manner similar to its federal wage grade employees. (48) After the AOC negotiated with the temporary employees' unions, the unions informed the AOC that the employees would only accept these benefits if "AOC entered into a participation agreement and became a member of their multiemployer defined benefit plans." (49) These multiemployer benefit plans are governed by the Employee Retirement Income Security Act (ERISA). (50)
The AOC was concerned that its participation such a benefit plan could subject the AOC to "withdrawal liability" and consequently, would violate the ADA. (51) Under ERISA, "withdrawal liability" is the amount of money that an employer must pay to fund its employees' benefits if that employer later withdraws from a multiemployer benefit plan. (52) Effectively, this means that an employer's obligation to such an employee benefit plan continues even after the employer withdraws from the plan. (53) Thus, the AOC's potential withdrawal liability would be indefinite at the time that the AOC entered into an agreement to participate in such an employee benefit plan. (54) Because of this concern, the AOC asked the GAO if its participation in this benefit plan would violate the ADA. (55)
Generally speaking, the ADA prohibits federal officials from obligating funds in advance or in excess of an appropriation. (56) For example, the GAO has interpreted the ADA to prohibit agencies from entering into contracts where termination costs are uncertain, or from entering into contracts with open-ended indemnification agreements. (57) Such contracts violate the ADA because they potentially commit the government to an indefinite future liability. (58)
Likewise, in Architect of the Capitol, the GAO found that the AOC could not enter into the agreement to participate in the multiemployer-defined benefit plan without violating the ADA. (59) The GAO stated that the possibility of withdrawal liability exposed the AOC to an obligation of undetermined amount at an undetermined time in the future. (60) If the AOC entered into this agreement and then later withdrew from the plan, then the AOC would be required to fund its proportionate share of the employees' benefits. (61) As such, the AOC's responsibility under the agreement could obligate funds in advance or in excess of an appropriation. (62) The GAO concluded that "since AOC has no assurance that appropriations will be available to cover this liability, the ADA would prohibit entering into a participation agreement that could subject the government to an indefinite withdrawal liability." (63)
Architect of the Capitol illustrates a potential ADA pitfall of which federal agency practitioners should be aware. Obligation of appropriated funds in advance of or in excess of their availability violates the ADA. Because withdrawal liability is a type of indefinite future liability that could obligate funds in advance of or in excess of their availability, the ADA clearly prohibits an agency from agreeing to an arrangement.
GAO: There Are No Federal Funds for Publicity and Propaganda
On 17 February 2005, the GAO issued a memorandum to the heads of all federal agencies advising that expenditure of appropriated funds for publicity or propaganda purposes violates the ADA. (64) The objective of GAO's memorandum was to emphasize the publicity and propaganda prohibition--especially with regard to prepackaged news stories. (65) The GAO stated that during the year preceding its memorandum, it found some federal agencies violated the publicity and propaganda prohibition and also the ADA by obligating appropriated funds to purchase prepackaged news stories. (66) Nevertheless, the GAO further advised that agencies could avoid violating the ADA if the news stories contained an appropriate disclaimer. (67)
Congress has prohibited the use of appropriated funds for publicity or propaganda in each of its annual appropriations acts since 1951. (68) Consequently, because there are no appropriated funds available for this purpose, any expenditure of appropriated funds--even one dollar--would necessarily violate the ADA's prohibition against obligating funds in excess of the amount available in an appropriation. (69)
Prepackaged news stories are made-for-television audio or video presentations intended to appear as if they had been prepared by independent news organizations. (70) In these news stories, actors reading scripts portray "reporters" who look and sound like actual news reporters. (71) These news stories are then broadcast on television or radio, oftentimes without referring to the source of the presentations. (72)
Some federal agencies have commissioned private contractors to develop prepackaged news stories promoting the agencies' official functions. (73) When an agency spends appropriated funds for such a prepackaged news story, the GAO considers the expenditure violative of the "publicity and propaganda" prohibition, unless the story contains a clear disclaimer that it was prepared by the particular agency. (74) The GAO considers the absence of the disclaimer in a pre-packaged news story promoting a particular agency to constitute "coven propaganda" because the news story could mislead the audience regarding the source of the presentation. (75) Thus, since Congress has appropriated no funds for "covert propaganda," an agency's expenditure of appropriated funds for prepackaged news stories also violates the ADA, unless the news story contains the above-described disclaimer. (76)
The GAO stated that in a single year, it issued two opinions finding that agencies violated the "publicity and propaganda" prohibition by improperly obligating appropriated funds for pre-packaged news stories. (77) In the first case, the GAO stated that the Centers for Medicare and Medicaid Services' expenditure of funds for the production of prepackaged new stories promoting changes to Medicare violated the publicity and propaganda prohibition. (78) In the second case, the GAO opined that the Office of National Drug Control Policy's expenditure of funds to produce eight prepackaged news stories aimed at dissuading viewers from illicit drug use also violated the publicity and propaganda prohibitions. (79) In both cases, the news stories failed to disclose the fact that the news stories were produced by the very agencies upon which the stories focused. (80) The GAO cautioned agency officials to carefully examine such prepackaged news stories to ensure that the agency is making the necessary disclaimers before expending appropriated funds. (81)
... But Department of Justice Disagrees
In a memorandum dated 1 March 2005, Mr. Steven Bradbury, Principal Deputy Assistant Attorney General, instructed executive branch general counsels that the Department of Justice (DOJ) disagrees with the GAO's position (82) regarding the publicity and propaganda prohibition as it applies to prepackaged new stories. (83) The DOJ reminded agencies that GAO opinions are not binding on executive branch agencies because the GAO is a legislative branch organization. (84) Specifically, although the DOJ agrees that a prepackaged news story could violate the publicity and propaganda provisions of the appropriations acts, the controlling factor is whether the story advocates a particular viewpoint--not whether the story notifies the audience of the source of the story. (85) Therefore, a purely informational prepackaged news story (versus one advocating a particular opinion), would not violate the publicity and propaganda prohibition, even if the story did not contain a notice that an agency prepared it. (86)
Thus, although the DOJ agrees with the GAO that purchasing prepackaged news stories with appropriated funds could violate the publicity and propaganda prohibition, unlike the GAO, the DOJ does not contend that the absence of a disclaimer is the key issue. The DOJ argues that the central issue is whether the news story advocates a particular position--regardless of whether it contains a disclaimer. When reviewing the use of appropriated funds for prepackaged news stories, agency practitioners should proceed with caution due to opposing views from the GAO and from DOJ.
Major Marci Lawson, USAF
(42) Architect of the Capitol, B-303961, 2004 U.S. Comp. Gen. LEXIS 257 (Dec. 6, 2004).
(43) The Architect of the Capitol, http://www.aoc.gov/aoc/responsibilities/index.cfm (last visited Nov. 6, 2005). The Architect of the Capitol is a federal agency whose mission is to operate and maintain certain federal buildings designated by Congress. Id.
(44) Id. at *1. The purpose of the Employee Retirement Income Security Act (ERISA) is to protect the integrity of employee pension plans insuring that employers pay vested pension benefits to their employees. 29 U.S.C.S. [section] 1001(a) (LEXIS 2005).
(45) Architect of the Capitol, 2004 U.S. Comp. Gen. LEXIS 257, at *l.
(46) Id. at. at *2. The fringe benefits included life insurance, health insurance, and retirement.
(47) Id. at *2-3. The Architect of the Capitol traditionally hired temporary employees, represented by trade unions, to perform much of the construction or repair work involved in carrying out its mission. These temporary employees were ineligible for federal benefits. At the time the agency requested the GAO's opinion, it employed eighty-five temporary employees including masons, plumbers, electricians, carpenters, and ironworkers. Id.
(48) Id. at *3-4. Congress required the Architect of the Capitol to provide fringe benefits to its temporary employees that were similar to federal civilian employees. See Legislative Branch Appropriations Act, Fiscal Year 2002, Pub. L. No. 107-68, [section] 133(a), 115 Star. 560, 581-2 (Nov. 12, 2001).
(49) Id. at *5. A "multiemployer defined benefit plan" is a type of benefit plan that guarantees a fixed return on the employee's investment; thus, the employer bears the risk of loss. In this case, a group of "employers" (the five unions representing the eighty-five employees and some other private employers) maintained five separate benefit plans in which they asked the agency to participate. The unions wanted the agency to make a "lump sum contribution for each of the temporary employees" to the unions who would then distribute the funds into each employee's benefit plan.
(50) Id. at *6 (citing 29 U.S.C.S. [section] 1001-1461). The purpose of the Employee Retirement Income Security Act (ERISA) is to protect the integrity of employee pension plans by insuring that employers pay vested pension benefits to their employees. See 29 U.S.C.S. [section] 1001(a) (LEXIS 2005).
(51) Id. at *7.
(52) Id. (citing 29 U.S.C.S. [section] 1381, 1391). The ERISA requires an employer, like the Architect of the Capitol, to continue funding a multiemployer benefit plan if that employer withdraws from the plan. Thus, an employer's liability under such a plan continues even if that employer withdraws from the plan. See 29 U.S.C.S. [section] 1381, 1391 (LEXIS 2005).
(53) Id. at *7-8
(55) Id. at *9.
(56) 31 U.S.C.S. [section] 1341. The "Antideficiency Act" (ADA) is a series of statutes starting at 31 U.S.C.S. [section] 1341. It provides that an officer or employee of the United States government may not "make ... an expenditure or obligation exceeding an amount available in an appropriation ..." and may not involve the government "in a contract or obligation for the payment of money before an appropriation is made ..." [italics added] Id.
(57) Architect of the Capitol, 2004 U.S. Comp. Gen. LEX1S 257, at *10.
(59) Id. at *11.
(62) Id. at *23.
(64) Prepackaged News Stories, B-304272, 2005 U.S. Comp. Gen. LEXIS 29 (Feb. 17, 2005).
(65) Id. at *1.
(66) Id. at *3-4.
(67) Id. at *1.
(68) Id. at *3-4 (citing Pub. L. No. 108-447, [section] 601, 118 Star. 2809 (2004) [hereinafter FY 2005 Consolidated Appropriations Act]. The FY 2005 Consolidated Appropriations Act states, "No part of any appropriation contained in this Act shall be used for publicity or propaganda purposes within the United States not authorized by the Congress." The FY 2005 Department of Defense Appropriations Act contains identical language. See Pub. L. No 108-287, [section] 8001,118 Star. 951 (2004).
(70) Id. at *2.
(73) Id. at *3-4.
(74) Id. at *2.
(75) Id. See also Office of National Drug Control Policy--Video News Release, B-303495, 2005 U.S. Comp. Gen. LEXIS 8 (Jan. 4, 2005) (explaining that "covert propaganda" violates the publicity and propaganda prohibition because it conceals the source of the information).
(76) Prepackaged News Stories, 2005 U.S. Comp. Gen. LEXIS 29, at *2.
(77) Department of Health and Human Services, Centers for Medicare & Medicaid Services (Medicare and Medicaid Svs.)--Video News Releases, B-302710, 2004 U.S. Comp. Gen. LEXIS 102 (May 19, 2004); Office of National Drug Control Policy--Video News Release, B-303495, 2005 U.S. Comp. Gen. LEXIS 8 (Jan. 4, 2005).
(78) Department of Health and Human Services, Centers for Medicare & Medicaid Services--Video News Releases, B-302710, 2004 U.S. Comp. Gen. LEXIS 102 (May 19, 2004), at *35.
(79) Office of National Drug Control Policy. 2005 U.S. Comp. Gen. LEXIS 8, at *36-37.
(80) Medicare and Medicaid Servs., 2004 U.S. Comp. Gen. LEXIS 102, at *35 and Office of National Drug Control Policy, 2005 U.S. Comp. Gen. LEXIS 8, at *36-37.
(81) Prepackaged News Stories. 2005 U.S. Comp. Gen. LEXIS 29, at *3.
(82) Id. at *2. As stated above, the GAO contends that an agency's use of appropriated funds to purchase prepackaged news stories promoting the agency's mission violates the publicity and propaganda prohibition unless the story contains a notice that it was prepared by the agency. Id.
(83) Memorandum, Principal Deputy Assistant Attorney General, to General Counsels of Executive Branch, subject: Whether Appropriations May Be Used for Informational Video News Releases (1 Mar. 2005). The DOJ memo is available at http://omb.gov. The DOJ memo was disseminated throughout the federal executive branch by the OMB as an attachment to a letter dated 11 Mar. 2005. Memorandum, Office of Management and Budget, subject: Use of Government Funds for Video News Releases (11 Mar 2005). The OMB memo containing the DOJ memo is also available at http://omb.gov.
(84) Id. at 1.
(85) Id. at 2.
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|Title Annotation:||employee fringe benefit plans|
|Author:||Lawson, Marci A.|
|Date:||Jan 1, 2006|
|Next Article:||Construction funding.|