ed.) In the circumstances presented here, NEH may use these funds to cover the audit costs.

Background

NEH provides monetary grants to individuals and organizations for various humanities projects and programs authorized by the National Foundation on the Arts and Humanities Act of 1965. 20 U.S.C. § 956 et seq. NEH states that many of its grantees are institutions of higher education and other nonprofit institutions that are subject to the audit requirement in Office of Management and Budget (OMB) Circular No. A-133 (March 8, 1990). Circular A-133 requires nonprofit institutions that receive at least $25,000, but less than $100,000, annually in federal grants to have an audit made in accordance with A-133 or other federal laws and regulations governing the program in which they participate. The purpose of the audit is to determine whether the nonprofit institution has an internal control structure that provides reasonable assurance that the institution is managing federal awards in compliance with applicable laws, regulations, and grant terms, and that federal funds are safeguarded.

NEH states that 822 grants were awarded to nonprofit institutions in fiscal year 1990 and 801 grants were awarded in fiscal year 1991. According to NEH, the grant agreements specifically stated that the "grant is subject to the audit requirements of OMB Circular A-133" and the grantees were also notified, in writing, at the grant approval stage that grant expenditures were subject to A-133.1

NEH states, however, that the budgets of approved grant applications from nonprofit institutions for these fiscal years did not provide for audit costs because OMB Circular A-133 was issued on March 8, 1990, after NEH had completed its budgeting for those years.2 Consequently, some grantees, who were awarded grants in fiscal years 1990 and 1991, do not have sufficient grant funds available to cover A-133 audit costs.

NEH explains that, as a matter of policy, it funds audit costs and it assists nonprofit grant applicants with budgeting for those costs. NEH states that the policy is necessitated by the fact that nonprofit institutions have difficulty generating private funds to pay for the audits, and that budgeting for these costs is also difficult because the costs cannot be determined with certainty until the audit is undertaken after project completion. NEH estimates that approximate

1 Although the grant agreements specifically provide that the grants are subject to the requirements of OMB Circular A-133, NEH apparently never intended that the grantees would be encumbered with these costs.

2 We should note that the audit was not a new requirement. Circular A-133 continued and elaborated on an audit requirement that was included in OMB Circular A-110, "Uniform Administrative Requirements for Grants and Other Agreements with Institutions of Higher Education, Hospitals and Other Nonprofit Organizations," which was published in the Federal Register on July 30, 1976. 41 Fed. Reg. 32018. NEH informally advised that since, in its view, A-110 did not clearly require an audit for nonprofit institutions, NEH grant agreements prior to fiscal year 1990 did not require an audit and, thus, NEH never budgeted for audit costs. It was not able to provide adequate grant funds for audits in fiscal years 1990 and 1991 since it learned of the mandatory audit requirement in A-133 only after completion of its budgeting for those 2 fiscal years.

ly $296,489 in fiscal year 1990 funds and $299,477 in fiscal year 1991 funds may have to be provided to cover audit costs. NEH proposes to use unexpended and deobligated excess grant funds carried in the two fiscal years' expired accounts as unobligated funds for the purpose of funding the audit costs of those grantees with insufficient funds.

Discussion

The NEH proposal raises two issues: (1) may NEH increase the amounts awarded grantees in order to cover audit costs that were not funded by the original awards? and, (2) if so, may NEH use expired appropriations for that purpose? We answer both questions in the affirmative.

NEH has the authority to provide grant funds to nonprofit institutions to cover allowable costs under grants. The cost of a grant audit is an allowable cost under OMB Circular A-133, as well as Circular A-122, "Cost Principles for Nonprofit Organizations" (May 27, 1987). Where a grantor agency determines that costs incurred by the grantee in excess of the amount awarded under the grant constitute a reasonable cost element of the grant project, the grantor agency may make additional funds available to the grantee to cover the excess costs. 47 Comp. Gen. 756 (1968). Since NEH would have provided funds to the underfunded grantees had it earlier realized that the audit requirement was mandatory, we see no reason why NEH cannot now increase the size of its award to grantees who may require additional moneys to cover their audit costs.

We conclude, also, that expired fiscal years 1990 and 1991 funds may be used for this purpose. The availability of these funds depends on whether their application is for a purpose within the original scope of the grant agreement. A federal grant which is made in one fiscal year based upon specific objectives and estimates of project costs gives rise to a definite and maximum obligation of the government, and the enlargement of the grant beyond its original scope creates an additional obligation that must be regarded as a new grant. 39 Comp. Gen. 296 (1959). The new obligation is chargeable to the appropriation available at the time the new obligation is created. Id. Where, as here, a grant amendment does not enlarge the grant's scope but rather is necessary to carry out an original purpose of the grant, a new grant is not created by the amendment. 58 Comp. Gen. 676, 681 (1979). In that situation, prior year funds originally obligated for the grant may be used to fund the amendment. Id.; see also 55 Comp. Gen. 768, 773 (1976) (liabilities and expenditutes attributable to a contract made within the period of availability of a fixed period appropriation3 remain chargeable to that appropriation).

Since the amendment of the grant agreements at issue here to provide additional funds to cover audits would not expand the scope of the original grant agreements, the expired appropriations which were originally obligated for the grants are available to fund the amendments.

3 NEH's fiscal years 1990 and 1991 appropriations were available for only one fiscal year.

In the future, in order to assure the availability of adequate funds to cover A-133 audit costs, NEH proposes to allow grant applicants, who cannot estimate their audit costs with any reasonable degree of certainty, to budget a "provisional cost rate" subject to upward or downward adjustment. OMB Circular A-122 provides for "provisional rates" which are temporary indirect cost rates. If NEH determines that its grantees meet the requirements of A-122, provisional indirect cost rates may be used in their grant agreements.

B-249795, May 12, 1993
Appropriations/Financial Management

Appropriation Availability

Purpose availability

Specific purpose restrictions

Meals

Appropriated funds are not available to pay the cost of meals at quarterly managers meetings of the U.S. Army Corps of Engineers. These expenses do not fall under the training exception of 31 U.S.C. § 4109 merely because of the presence of speakers. The sessions also do not fall under the meetings exception of 31 U.S.C. § 4110 since this provision has little or no bearing on purely internal business meetings or conferences sponsored by government agencies.

Matter of: Army Corps of Engineers-Use of Appropriated Funds to Pay for Meals

This decision responds to a request from the Finance and Accounting Office of the Pacific Ocean Division, U.S. Army Corps of Engineers (Pacific Division), regarding the propriety of payment for meals served at certain management meetings. As explained in further detail below, we conclude that appropriated funds are not available to pay for meals at the meetings described by the Pacific Division.

Background

According to the Pacific Division, it sponsors quarterly meetings of its Mid Managers Council (MMC). The MMC consists of approximately 60 managers who are all permanent duty station staff. The meetings are typically one day in length and are held in the officer's club at the attendees' permanent duty station. The programs start with morning working sessions structured as "open forums," during which topics, issues, and suggestions regarding the Corps of Engineers business and management are discussed. During lunch, a guest speaker gives a

4 NEH states that its proposed approach is in accord with our decision in 48 Comp. Gen. 186 (1968). That decision is not relevant here. A provisional cost rate was at issue in 48 Comp. Gen. 186 because the Department of Health, Education and Welfare, which wanted to include a provisional cost rate in its grants, was prohibited by law from making funds available to a project after the conclusion of the project period specified in the grant. Id. at 187.

presentation, which the Pacific Division describes as "training." In the afternoon, a speaker makes a presentation on subjects similar to the luncheon topic which the Pacific Division also considers "training." According to the Pacific Division, the first quarterly meeting featured an external consultant who was a motivational speaker. The speakers at subsequent quarterly meetings were either the Commander or the Chief of Staff. The Commander of the Pacific Division determines the subject matter of the planned "training" programs. The luncheon is considered mandatory for all members of the Council in order to achieve the objectives of a training program. (We have been informally advised, however, that only 30 to 40 managers typically attend the luncheon.)

The Pacific Division also asks a series of hypothetical questions aimed at identifying circumstances under which the cost of meals at MMC meetings would be allowable. Our discussion of the facts presented adequately responds to the hypothetical questions.

Analysis

We have consistently held that in the absence of statutory authority, the government may not furnish meals or refreshments to employees within their official duty stations. 65 Comp. Gen. 508, 509 (1986). Thus, we have held that free food and refreshments normally cannot be justified as a "necessary expense" under an appropriation since such expenses are considered personal expenses that government employees are expected to bear from their own salaries. Id. We have recognized, however, limited exceptions to this general prohibition. The Government Employees Training Act (the Act), 5 U.S.C. § 4109, authorizes agencies to reimburse necessary subsistence expenses incurred by those who attend training programs at their duty stations. 50 Comp. Gen. 610 (1971). We have stated in the past that merely referring to a meeting or event as training is insufficient to invoke the training exception. B-168774, Sept. 2, 1970. The event must comply with the Act's definition of "training," 5 U.S.C. § 4101(4), and we will look behind an agency characterization of an event as training to determine whether such an event qualifies. Id.

The Act also provides the basis for an exception that is not strictly limited to training situations. Under 5 U.S.C. § 4110, we have permitted payment for meals when a determination is made that the meal is (1) incidental to the conference or meeting, (2) that attendance at the meal is necessary to full participation, (3) that the employees are not free to take meals elsewhere without missing essential formal discussions, lectures, or speeches concerning the purpose of the meeting, and (4) that the meal is part of a formal conference or meeting that includes not only functions such as speeches or business carried on during a seating at a meal, but also includes substantial functions taking place separate from the meal. B-233807, Aug. 27, 1990.

We have held, however, that this exception does not authorize the payment of meal expenses in connection with internal business meetings or conferences

sponsored by government agencies. For example, in 68 Comp. Gen. 606 (1989), the U.S. Army used some of the same arguments made by the Pacific Division to support its use of appropriated funds for meals in connection with day long quarterly supervisors meetings. In denying payment, we noted that there is a clear distinction between the payment of meals incidental to formal conferences or meetings, typically externally organized or sponsored, involving topical matters of general interest to governmental and nongovernmental participants, and internal business or information meetings primarily involving the day-to-day operations of government. Id.

Accordingly, we will continue to scrutinize closely situations that reflect an attempt to manipulate the content of meetings to fit one of our established exceptions rather than furthering a legitimate training function. We note that the purpose of our exceptions to the general rule prohibiting the use of appropriated funds for meals is to allow for better and more efficiently trained and informed government employees by covering the cost of meals received as an incident to training sessions or to conferences or meetings. The purpose of our exceptions is not to feed government employees by using a "training" or "meeting" rubric as a convenient vehicle to achieve that result.

Although the Pacific Division refers to these quarterly meetings as "training," based on the record before us, we are not persuaded that the quarterly meetings qualify as training. Merely providing an open forum to discuss "topics, suggestions, issues, problems. . . relative to the business/management" of the Corps of Engineers in a scheduled and structured atmosphere does not, in our opinion, qualify the meeting "as a program of instruction or training" as used in the Act's definition of training. See 68 Comp. Gen. 606 (1989) (denying payment of meal voucher for quarterly Army supervisor meetings). This is particularly true when the afternoon speakers have, invariably, been the Commander or his Chief of Staff and the topics discussed relate to general business/management "topics, suggestions, issues, problems" of the organization. If such a meeting were to qualify under the exceptions outlined above, then every staff briefing or meeting on any matter regarding the business/management of the Corps would qualify as training. Again, the Act is intended to allow the use of appropriations to pay for the training or provide for meals that are incidental to training, not to provide food for government employees at general meetings.

With respect to the Pacific Division's meetings, we think they resemble the Army's quarterly meetings at issue in 68 Comp Gen. 606. We opined in that decision that the training act has little bearing. Accordingly, we conclude that the Pacific Division's meetings fall within the same standards discussed in 68 Comp. Gen. 606.