claims to be settled in the General Accounting Office. This settlement is usually accomplished when the General Accounting Office settles the accounts of disbursing officers covering all appropriations and funds, including "M" accounts.

The foregoing procedure concerning "M" accounts and their availability without time limits for the liquidation of obligations properly incurred under annual and multiple-year appropriations was established by Congress, on the recommendation of the second Hoover Commission, by the Act of July 25, 1956,98 which greatly changed the then existing law in regard to fiscal year limitations on the availability of annual and multiple-year appropriations for expenditure."9 For, under the Surplus Fund-Certified Claims Act of 1949,100 expenditures from annual and multiple-year appropriations could be made administratively only for an additional two years after the fiscal year or years for which such appropriations were available for obligation. Upon the expiration of this two-year period annual and multiple-year appropriations were said to lapse, and expenditures from lapsed appropriations could be made only if the Comptroller General first certified the payments to be lawfully due.101 This was a cumbersome procedure which led to unreasonable delays in making payments under contracts financed by annual or multiple-year appropriations where the period of contract performance extended beyond two years. These restrictions on the administrative availability of annual and multiple-year appropriations for expenditure were removed by the Act of July 25, 1958, as described above.

15. The needs theory. A basic test for the validity for obligations is that the supplies or services contracted for must be intended to serve a bona fide need of the fiscal year for which the appropriation is made. The Comptroller General has stated the principle as follows: "The general rule for lawfully obligating a fiscal year appropriation is that the supplies or services are intended to serve a bona fide need of the fiscal year in which the need arises or to replace stock used in such fiscal year." 102 Accordingly, where a need for the transportation of household effects arose in fiscal year 1940 and a valid agreement was entered into during that year with a carrier, the appropriation for fiscal year 1940 was said to be properly obligated even though the actual transportation occurred in fiscal year This rule applies even though payment may not take place,104 or the exact amount payable is not known,105 until the fol

1941.103

70 Stat. 641, 31 U.S.C. §§ 701-708 (1958).

"See H.R. REP. No. 2015, 84th Cong., 2d Sess. (1956).

100 63 Stat. 407 (1949), repealed, effective June 30, 1957, by § 7(b) of the Act of July 25, 1956, 70 Stat. 650.

101 Ibid.

103 21 COMP. GEN. 1159 (1941).

103 20 COMP. GEN. 436 (1941). 204 23 COMP. GEN. 862 (1944). 105 21 COMP. GEN. 574 (1941).

lowing fiscal year or years. Another illustration of the needs theory is afforded by contracts or obligations for services, which are normally chargeable to the appropriation for the fiscal year in which they are rendered.106 However, services in a period overlapping two fiscal years may be charged to the appropriation for the first fiscal year if there is involved only one undertaking which is determinable both as to the services needed and the price to be paid therefor at the time the contract is entered into.107 The essential distinction to be observed is whether the contract is severable or entire; if the former, the services must be charged to the appropriation current at the time they are rendered.

As previously noted, the needs theory has been extended by the Comptroller General to include stock or inventory requirements.108 On this basis, it is permissible for the Navy to maintain a two-year stock on hand of certain articles, for example, and to replace such stock from time to time as necessary, charging the appropriation then current, even though the replacements are not intended for use during that fiscal year. In other words, the replacement of the stock, rather than its actual use, is considered to serve a bona fide need of that fiscal year. However, when instead of a contract for such stock replacement an intragovernmental order or requisition is issued, it may be treated as an obligation under the then current appropriation only if it requests prompt delivery of specific available stock items for a stated consideration and is formally accepted by the supplying agency. Formal evidence of acceptance is not required for common-use standard stock items carried on hand for sale at published prices.109

Finally, leases of property to the Government are considered severable by fiscal years, unless there is specific statutory authority authorizing leases for a term longer than one year. Thus, the courts and the Comptroller General have consistently maintained that, in the absence of specific statutory authority to the contrary, the Government can execute a lease only to the end of the fiscal year concerned, and that the execution of a lease for a term of years, without statutory authority, must be construed as a lease to the end of the current fiscal year with an annual option to renew until the end of the term.110 Where leases for a term of years contained clauses providing for their termination at the end of each fiscal year if no further

100 33 COMP. GEN. 90 (1953); 24 id. 676 (1945). In these cases, the Comptroller General relied on REV. STAT. §§ 3679 and 3732 (1875), prohibiting contracts in excess of existing appropriations or in anticipation of future appropriations. See par. 10 supra. 107 23 COMP. GEN. 370 (1943).

108 See n. 102 supra.

109 32 COMP. GEN. 436 (1953). Project orders and Economy Act orders are not within this rule. See pars. 24 and 25, respectively, infra.

110 McCollum v. United States, 17 Ct. Cl. 92 (1881); Reed Smoot v. United States, 38 Ct. Cl. 418 (1903); 24 COMP. GEN. 195 (1944); 19 id. 758 (1940).

appropriations were available, the Supreme Court held that the original lease must, in effect, be adopted in each subsequent year by some affirmative act if the Government is to be bound.111

16. Fiscal year chargeable. There are several special situations involving the needs theory in which it is sometimes difficult to determine which fiscal year appropriation should be charged with a given obligation. The first of these situations occurs when a contractor defaults in the performance of a contract and the contract is relet in a succeeding fiscal year on the same basis. Under these circumstances, the appropriation obligated by the original contract remains available for payment under the new contract.112 But if the contract is canceled by mutual agreement or terminated for the convenience of the Government,113 or if there is undue delay in terminating the defaulting contractor and repurchasing against his account,114 a similar contract relet in a succeeding fiscal year is not regarded as an obligation of the prior fiscal year. And the same result will obtain where the new contract is on a different basis from the original.115 The theory which the Comptroller General has developed in this line of cases is that in the default situation the repurchase is made against the account of the defaulting contractor, who, of course, holds a valid obligation which by definition satisfies the bona fide needs of the appropriation for the earlier fiscal year. On the other hand, where the contract is canceled or terminated for convenience, or where the new contract is on a different basis, the repurchase is made against the account of the United States and must be charged to the then current appropriation.

The second special situation in which it may be difficult to determine which fiscal year appropriation is chargeable concerns the amendment of a contract after the appropriation has expired. In this connection, the first determination that has to be made is whether the contract is severable or entire.116 A severable contract must always obligate the appropriation for the fiscal year then current; while an entire or nonseverable contract, on the other hand, is chargeable in full to the appropriation current at the time the contract was entered into.117 Where it is desired to add additional funds to an entire or nonseverable contract, appropriations subsequent to those

111 Leiter v. United States, 271 U.S. 204 (1926); Goodyear Tire and Rubber Company v. United States, 276 U.S. 287 (1928). Although the Supreme Court did not construe an option into the leases in these cases, the Comptroller General has cited them as wholly supporting the option theory. 24 COMP. GEN. 195, 197 (1944).

113 34 COMP. GEN. 239 (1954); 2 id. 130 (1922).

113 24 COMP. GEN. 555 (1945).

114 32 COMP. GEN. 565 (1953). The delay in this case amounted to a total of four and one-half years from the execution of the defaulted contract to the proposal for a replacement contract.

115 19 COMP. GEN. 702 (1940); 15 id. 564 (1935).

118 See par. 15 supra.

117 23 COMP. GEN. 370 (1943).

obligated by the contract may not be used without a corresponding increase in the scope of the contract.118 The theory upon which this rule is based is that an entire contract, like any other obligation, may neither be in excess of the amount available in the appropriation concerned nor may it anticipate the enactment of subsequent appropriations. In other words, new money may not be used to pay old bills. Similarly, if a change order issued in a subsequent fiscal year does not change the scope of the contract or increase the quantity of supplies called for thereunder, the appropriation originally obligated will be available for the cost of the change order. This rule is subject to the following conditions: first, provision for the issuance of the change order must be made in the original contract and the change order must comply with the terms of the changes clause; second, the work done under the original contract must be utilized and form a part of the work to be done under the contract as changed; and third, the purpose of the change must be not to enlarge the scope of the original contract, such as by increasing the quantity of supplies called for by the original contract.119

17. Scheduling deliveries under supply contracts. In compliance with the needs theory, careful attention should be given to the schedules of deliveries called for under supply contracts to avoid extending the deliveries to such an extent that the supplies may be presumed not to satisfy a need of the fiscal year in question. Thus, where a delivery schedule for a readily obtainable item of supply called for deliveries starting one year and ending two years after the fiscal year for which the appropriation obligated by the contract was made, the Comptroller General ruled that the contract did not satisfy the bona fide needs of that fiscal year.120 Normally, deliveries should not be initially called for in a contract to be made more than two years after the expiration of the related appropriation for obligation purposes. To do so may raise a presumption that the contract does not satisfy a need of the fiscal year for which the appropriation obligated by the contract was made, and hence the contract may violate section 1 of the Surplus Fund-Certified Claim Act of 1949.121

118 17 COMP. GEN. 664 (1938). In reaching this result the Comptroller General relied on the prohibition contained in the Anti-Deficiency Act, par. 10 supra, against creating obligations in excess of existing appropriations or in anticipation of future appropriations.

119 Comptroller General Decision A-15225, September 24, 1926 (unpubl.). See 23 COMP. GEN. 943, 945 (1944).

120 33 COMP. GEN. 57 (1953).

181 Section 1 of the Surplus Fund-Certified Claims Act of 1949, 63 Stat. 407 (1949), 31 U.S.C. § 712a (1958) provides that "Except as otherwise provided by law, all balances of appropriations contained in the annual appropriation bills and made specifically for the services of any fiscal year shall only be applied to the payment of expenses properly incurred during that year, or to the fulfillment of contracts properly made within that year." (Emphasis added.) Hence when a contract is made that does not satisfy the bona fide needs of the fiscal year to which the appropriation obligated by the contract relates, payments under that contract may not be made from the appropriation thus sought to be obligated. See also 33 Comp. GEN. 57, 60, 61 (1953).

However, where unforeseen delays make it impossible to obtain deliveries under a contract obligating a one-year or multiple-year appropriation earlier than two years after the expiration of the related appropriation for obligation purposes, deliveries subsequent to that date must be accepted, and payment therefore may be accomplished through use of a successor account.122 If such unforeseen delays occur repeatedly under a particular procurement program, this program should be budgeted for under a no-year appropriation.

18. No-year appropriations. A no-year or continuing appropriation is available for an indefinite period of time, both for the purpose of incurring obligations and making expenditures. In each of the Navy appropriations of this kind, the words "to remain available until expended" appear after the indication of the sum which is appropriated. An express provision signifying continued availability is required in each case to avoid the statutory presumption in favor of one-year availability.123 The Navy's no-year appropriations are usually made for long lead-time construction and procurement programs, such as the shipbuilding, ordnance and aircraft programs, and the construction of airfields or other Navy shore facilities, where the time required for procurement will usually exceed the one-year period of availability for obligation that the one-year appropriations have. No-year appropriations, as the term suggests, continue until their funds are exhausted or until the purpose for which they were made has been fulfilled. Before 1956 it was necessary for Congress to terminate no-year appropriations by law in order to take the account off the books of the Treasury and return the funds to the general fund of the Treasury. Under the law now in effect, no-year appropriations may be terminated whenever the head of the agency concerned determines that the purpose for which the appropriation was made has been fulfilled; termination is automatic, however, whenever disbursements have not been made out of the appropriation for two full consecutive fiscal years.124

19. Appropriation symbols. In order to indicate the period during which an appropriation is available for obligation, and otherwise to identify the appropriation in contracts or elsewhere, accounting symbols have been assigned to the appropriations of the various government agencies. These symbols identify an appropriation with respect to the agency responsible for its administration, the period for which it is available for obligation, the appropriation head, and the bureau or office that has the management responsibility therefor.

12 See par. 14 supra.

1237 of the Act of August 24, 1912, 37 Stat. 487, as amended, 31 U.S.C. § 718 (1958) quoted in part in n. 88 supra.

1246 of the Act of July 25, 1956, 70 Stat. 649, 31 U.S.C. § 706 (1958).