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In performing a contract the contractor collects payments/money on behalf of the Govt. The contractor accounts for the money collected as a credit on their invoices. So the contractor's total cost (this is a cost type contract) is off-set (reduced) by the amount of money collected on behalf of the Govt.

FAR 52.230-2, Allowable Cost and Payment, paragraph (H)(2), states the contractor shall pay to the Govt any refunds, credits or other amounts received by the contractor.

So is it appropriate that the contractor include the money collected on behalf of the Govt as an off-set (reduction) to the costs on thier invoices?

Does anyone else have a contract or situation where a contractor collects money on behalf of the Govt?

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Guest carl r culham

I am concerned that the information provided in the initial post and the discussion found in another thread entitled "Determining Incentive Fee" found under the Contract Administration area are not providing enough information on which to base appropriate response. In my view the question raised in this thread is more an appropriations law question than it is a FAR question. Specifically I question the appropriateness of the collections offsetting amounts due to the contractor under the augmentation of appropriation principles.

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In performing a contract the contractor collects payments/money on behalf of the Govt. The contractor accounts for the money collected as a credit on their invoices. So the contractor's total cost (this is a cost type contract) is off-set (reduced) by the amount of money collected on behalf of the Govt.

FAR 52.230-2, Allowable Cost and Payment, paragraph (H)(2), states the contractor shall pay to the Govt any refunds, credits or other amounts received by the contractor.

So is it appropriate that the contractor include the money collected on behalf of the Govt as an off-set (reduction) to the costs on thier invoices?

Does anyone else have a contract or situation where a contractor collects money on behalf of the Govt?

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I am concerned that the information provided in the initial post and the discussion found in another thread entitled "Determining Incentive Fee" found under the Contract Administration area are not providing enough information on which to base appropriate response. In my view the question raised in this thread is more an appropriations law question than it is a FAR question. Specifically I question the appropriateness of the collections offsetting amounts due to the contractor under the augmentation of appropriation principles.

What additional information do you need to provide a response? I am not completely clear regarding your comment on appropriations law. Is there a law that requires the contractor to pay the Govt any monies collected on behalf of the Govt? If so I would greatly appreciate more information on this. Thanks for your comments. I plan on researching appropriations law and discussing this with my Comptroller.

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Is there a law that requires the contractor to pay the Govt any monies collected on behalf of the Govt? If so I would greatly appreciate more information on this.

One law you should consider is the Miscellaneous Receipts Act (see 31 U.S.C. 3302), which states, in subsection (B), "an official or agent of the Government receiving money for the Government from any source shall deposit the money in the Treasury as soon as practicable without deduction for any charge or claim."

One exception to this general rule is at 31 U.S.C. 3718(d) - "Notwithstanding section 3302(B) of this title, a contract under subsection (a) or (B) of this section may provide that a fee a person charges to recover indebtedness owed, or to locate or recover assets of, the United States Government is payable from the amount recovered."

Is your contract one that was awarded under subsection (a) or (B) of 31 U.S.C. 3718?

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I don't believe that the original poster is using "credit" as that term is used in FAR 31.201-5 or in the allowable cost and payment clause. A credit is an amount that accrues to the contractor and which must be passed on to the government as a cost reduction or cash refund. What the poster described is a procedure in which the contractor collects money owed to the government and is permitted to keep the money as reimbursement for all or part of its allowable costs. The government's costs are not "reduced." The government is still paying for the cost, but doing so by allowing the contractor to keep money that the contractor collected on its behalf rather than by cutting a check. The payment is not a cost reduction or cash refund.

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Augmentation of appropriation is the specific area of appropriations law. See the GAO "Redbook" at Volume II Chapter 6 starting at page 6-162. You can find the Volume here. http://www.gao.gov/special.pubs/d06382sp.pdf

Thank you very much for the information and the web link. I am researching this and will let you know what my thoughts are.

My situation can be considered a GOCO - Govt. Owned/Contractor Operated facility. I am researching whether there are any exceptions for GOCOs?

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One law you should consider is the Miscellaneous Receipts Act (see 31 U.S.C. 3302), which states, in subsection (:D, "an official or agent of the Government receiving money for the Government from any source shall deposit the money in the Treasury as soon as practicable without deduction for any charge or claim."

One exception to this general rule is at 31 U.S.C. 3718(d) - "Notwithstanding section 3302(B) of this title, a contract under subsection (a) or (B) of this section may provide that a fee a person charges to recover indebtedness owed, or to locate or recover assets of, the United States Government is payable from the amount recovered."

Is your contract one that was awarded under subsection (a) or (B) of 31 U.S.C. 3718?

I looked over subsections (a) adn (B) and no the contract was not awarded under one of these subsections. The contract is more like a GO/CO - Govt owned/Contractor Operated facility. I am still researching to see if /how the MRA (Miscellaneous Receipts Act) does not apply to the contract.

Thanks for your input. I'll keep you posted on my research.

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I don't believe that the original poster is using "credit" as that term is used in FAR 31.201-5 or in the allowable cost and payment clause. A credit is an amount that accrues to the contractor and which must be passed on to the government as a cost reduction or cash refund. What the poster described is a procedure in which the contractor collects money owed to the government and is permitted to keep the money as reimbursement for all or part of its allowable costs. The government's costs are not "reduced." The government is still paying for the cost, but doing so by allowing the contractor to keep money that the contractor collected on its behalf rather than by cutting a check. The payment is not a cost reduction or cash refund.

Thanks for correcting me. The term credit is not correct for the situation I describe. Simply put the contractor is collecting money on behalf of the Govt.

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I have a similar question: On one of our contracts (for monkeys), the contractor is supposed to sell excess monkeys for the government and then apply the proceeds of the sale against future invoices. However, if the monkey takes 3 years to raise, under a cost reimbursement contract, would it not be augmenting an appropriation to apply the entire proceeds of the sale to invoices in that last year? Would you not have to determine which costs were incurred in each year and apply the proper percentage back against the previous year's line items (which were already invoiced against, so that would essentially end up being 'dead' money)?

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If you have determined that this is not a miscellaneous receipts situation as described by NavyContracting, you need a lot more information to get the right answer. First, this is likely a fiscal law issue. Some questions. What is the money collected for? What type of funding supports the contract? Appropriated? Non-Appropriated? Usually, when an agency collects monies for whatever: fees, tax payments, rents, to use some possible examples, the collected funds are required to be deposited in a specific Treasury account for those revenues.

Does the agency have specific authority to deposit those funds and commingle them with its appropriated fund? If not, then there may be a violation of fiscal law and it may be a purpose (what the collected funds were to be used for) violation or an anti-deficiency through augmentation violation, or both, and/or others.

You must get the correct answers to these questions in order to determine if it is a proper situation (keep the money in lieu of the Gov writing a check as Vern describes) by virtue of an authorization to keep the funds and commingle them with the fund source supporting the contract. If you do not find that this is the case, then you may have a sticky situation on your hands.

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I do not believe it is a miscellaneous receipts question. As I read it, the misc. receipts act applies when the government receives money. In my situation, the government never actually receives the money, they simply receive a reduced invoice in that amount.

The money is collected for the sale of extra monkeys (the contract itself is for monkey breeding/care) in order to offset some of the costs of the contract. It is appropriated 1-year funding.

In my case, as noted, the government never actually collects the money. The contractor raises and cares for the monkey, and, if it is determined that the monkey(s) are not needed, the contractor sells them and applies the profits from sale against the current invoice.

I could not find any specific authority relevant to this topic. We have authority to sell them, but our guidance is vauge about the rest of it.

We are not comingling funds or depositing them because we never receive them. My concern is that if we are offsetting the cost of current year expenditures with profits gained from the sale of something developed with previous year funds, are we augmenting our appropriation for the current year?

If I am appropriated $10/year for monkeys, and I spend $5/year raising it, for 3 years, and in year 3 sell it for $10 and apply that 10 back against the costs for year 3, I now effectively can spend $20 on monkeys in year 3--twice the original $10 appropriated.

Does that make sense or make it more confusing?

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On one of our contracts (for monkeys), the contractor is supposed to sell excess monkeys for the government and then apply the proceeds of the sale against future invoices.

Scenario: The government buys monkeys from the contractor. Sometimes there are extra monkeys. The government tells the contractor to sell the extra monkeys and give the government a credit against its obligations to the contractor? Right?

(How does it happen that there are "excess" monkeys? How does it happen that the government owes the contractor for more monkeys than it needs?)

I don't think that the credit augments appropriations. This is no different than selling scrap and crediting the government for the proceeds of the sale. I think the credit should be applied to the appropriation for the year in which the excess monkeys happened. But why is the contractor crediting the government only for the profit? It should credit the government for the entire proceeds of the sale, since the government paid to breed and raise the money.

You wouldn't have this problem if you didn't use oversexed monkeys.

Do you realize how this would come across if the press got hold of it?

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No, the government owns the monkeys. The contractor cares for them and breeds them. If directed by the government, the contractor sells them, then applies the proceeds against the current invoice.

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"But why is the contractor crediting the government only for the profit? It should credit the government for the entire proceeds of the sale."

I'm sorry, there I mispoke. As the contractor was getting paid (cost reimbursement) for the care of the monkey, all proceeds would be profit to the contractor.

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