American Federation of Government Employees, Local 1647 (Union) and United States, Department of the Army, Tobyhanna Army Depot, Tobyhanna, Pennsylvania (Agency)

[ v59 p369 ]

59 FLRA No. 51

LOCAL 1647





September 30, 2003

Before the Authority: Dale Cabaniss, Chairman, and
Carol Waller Pope and Tony Armendariz, Members [n1] 

I.     Statement of the Case

      This case is before the Authority on a negotiability appeal filed by the Union under § 7105(a)(2)(E) of the Federal Service Labor-Management Relations Statute (the Statute), and concerns the negotiability of a single proposal. The Agency filed a Statement of Position and a Reply, and the Union filed a Response.

      For the reasons that follow, we find that the proposal in dispute is outside the duty to bargain and dismiss the petition for review.

II.     Proposal

Article 32, Annual Leave
Section 4.
. . . .
If cancellation of the employee's scheduled leave is still required, the Employer will reimburse the employee for any documented loss of funds (e.g., airline tickets, hotel reservations, etc;) incurred by the employee as the result of such cancellation. Such reimbursement will be from other than appropriated funds.

III.      Background

      The Tobyhanna Army Depot (TYAD) "is the largest full-service electronics maintenance facility in the Department of Defense[.]" [n2]  Agency Statement of Position (Statement) at 5. Its "mission encompasses the repair, overhaul, modification, conversion, test, and system maintenance for a multitude of electronic systems . . . ." Id.

      The TYAD is funded by a working capital fund established pursuant to 10 U.S.C. § 2208, the Tobyhanna Army Depot Army Working-Capital Fund (TYAD AWCF). [n3]  Generally speaking, such funds provide capital for the expenses involved in the operation of the organizations covered by the fund and they are reimbursed by charges to the recipients of the goods or services provided by the organization. See, e.g., To Stephen N. Shulman, 51 Comp. Gen. 598, 600 (1972) (Shulman). The parties agree that the TYAD AWCF is this type of fund. Union Response (Response) at 1. The parties also agree that, consistent with 10 U.S.C. § 2208(b), a separate account for the TYAD AWCF has been established by the Treasury Department, which is numbered 97X4930.AAPS62. Response at 5; Reply at 4. Expenses for the operation of TYAD are paid out of that account, and reimbursement for services rendered by TYAD are deposited into the account. Statement of Position at 7-8, Reply at 6.

IV.     Positions of the Parties

A.     Agency

      The Agency contends that the proposal is inconsistent with 31 U.S.C. § 1301(a), which provides that appropriated funds shall be used only for the purposes specified by law in the appropriation. [n4]  Specifically, the Agency argues that there is no statutory authority to reimburse employees for loss of money paid for vacation activities on previously approved leave when the [ v59 p370 ] employee is required to work due to cancellation of that leave.

      The Agency agrees with the Union's explanation that the proposal would require employees to be reimbursed for lost expenses from the TYAD AWCF. The Agency maintains, however, that the TYAD AWCF constitutes appropriated funds and cannot be the source of the reimbursement required by the proposal. Specifically, the Agency asserts that the TYAD AWCF is a working capital fund and that, as such, "is a revolving fund that operates as an accounting entity in which income derived from operations (i.e., maintenance of government equipment) is available to fund on[-]going operations without fiscal year limitations." Statement of Position at 7. According to the Agency, under the TYAD AWCF, as a revolving fund, "receipts are available for expenditure for the authorized purposes of the fund without the need for further congressional action and without fiscal year limitation." Id.

      The Agency contends that "a revolving fund is an appropriation." Id. at 9. The Agency explains that "statutes which authorize the collection of fees and their deposit into a particular fund, and which make the fund available for expenditure for a specified purpose, constitute continuing or permanent appropriations; that is, the money is available for obligation or expenditure without further action by Congress." Id.

      The Agency asserts that because revolving funds are appropriated funds, "they are fully subject to 31 U.S.C. § 1301(a), which restricts the use of appropriated funds to their intended purpose(s)." Id. at 14. According to the Agency, under 31 U.S.C. § 1301(a), absent statutory authorization, payment of purely personal expenses, such as those covered by the proposal, may not be paid from appropriated funds. The Agency contends that there is no support for the proposition that "Congress appropriated funds for the purpose of reimbursing personal expenses incurred by an employee as a result of an agency's cancellation of scheduled leave." Reply at 15.

      The Agency states that it is of no consequence that the funds received from customers are "offsetting collections" because offsetting collections are appropriated funds. According to the Agency, "[o]ffsetting collections, credited to appropriation or fund accounts, are collections which, under specific statutory authority, may be deposited in an appropriation or fund account under the control of the receiving agency, and which are then available for obligation by the agency subject to the purpose and limitation of the receiving account." Reply at 5. In the specific circumstances of this case, the Agency maintains, "offsetting collections are the funds collected from TYAD customers to `offset' or provide reimbursement for the expenses/overhead incurred by TYAD during the course of providing requested goods or services to those customers." Id. at 6. The Agency states that those collections are credited to TYAD AWCF's Treasury account.

      The Agency contends that the fact that funds received by TYAD as payment for goods and services it has provided are deposited into the TYAD AWCF account in the Treasury, instead of into Treasury's general fund, does not mean that TYAD AWCF funds are not subject to statutory limits on the expenditure of appropriated funds. The Agency asserts that expenses incurred by the TYAD AWCF are recovered through billings to customers, which is a "very different" process "than direct appropriation activities who receive money to cover their projected expenses for the coming year through an annual direct appropriation approved by Congress each year." Id. at 12. The Agency states that, as a revolving fund, the TYAD AWCF "does not have a limit on how long it has to obligate, or liquidate its funds," which distinguishes the TYAD AWCF from agencies that are funded by direct appropriation and are subject to fiscal year limitations on expenditures. In this manner, the Agency distinguishes certain statements in the Department of Defense Financial Management Regulation (FMR) to the effect that revolving funds are not subject to "statutory restrictions placed on the obligational availability . . . of offsetting collections[.]" Reply at 12 (quoting FMR Paragraph 030502.A.4, page 3-14).

      The Agency also contends that the proposal is inconsistent with 5 U.S.C. § 5536, which "prohibits employees from receiving additional pay or allowances of public money that are not specifically provided for by law or appropriation." [n5]  Reply at 15. Because TYAD employees are paid through appropriated funds, the Agency explains, their salaries are set by statute or regulation.

      Finally, the Agency argues that § 7106(b)(3) of the Statute does not apply to the Union's proposal because "[n]o management right is involved in the question as to whether or not management is authorized to use TYAD AWCF for the proposed purpose . . . ." Reply at 21. The Agency also argues that even if the proposal is an arrangement for employees adversely affected by the exercise of a management right within the meaning of § 7106(b)(3), it would still be outside the duty to bargain because it is inconsistent with law. [ v59 p371 ]

B.     Union

      As explained by the Union, the proposal would require the Agency to reimburse an employee for "any documented loss of funds (e.g., airline tickets, hotel reservations, etc[.]) incurred by the employee" as the result of the Agency cancelling previously approved leave due to a mission-related situation. Petition for Review (Petition) at 4. See also Record of Post-Petition Conference at 2. The Union states that the proposal requires employee reimbursement to come from a source other than appropriated funds. In particular, the Union defines the source of the funds to be the TYAD AWCF. Response at 1.

      The Union states that the TYAD AWCF is a "revolving fund." Id. The Union also agrees with the Agency that "appropriated funds cannot be used to reimburse employees under the provisions of the disputed proposal[.]" Id. The Union argues, however, that the TYAD AWCF "is primarily made up of `other than appropriated funds' in the form of offsetting collections consisting of earned reimbursements (both collected and uncollected) and unfilled customer orders." [n6]  Id. at 3.

      The Union argues that 10 U.S.C. § 2208(b) "provides statutory authority for the establishment of a [working capital fund] account with the Treasury in order to accommodate separate accounting." Id. at 4. According to the Union, this fact makes working capital funds established under 10 U.S.C. § 2208(b) different "from other working capital funds which have traditionally been established under the general fund of the Department of the Treasury." Id. Consequently, the Union maintains, the rule that revolving funds are appropriated funds does not apply to the TYAD AWCF because TYAD AWCF funds are "not deposited in the general fund of the Treasury." Id. at 5.

      The Union asserts that "the cases referenced by the Agency were decided before" the TYAD AWCF was established. Id. at 7. The Union also asserts that the "offsetting collections" that constitute the TYAD AWCF "are specifically exempted from the various limitations and restrictions applicable to appropriated funds." Id. Specifically, the Union references FMR 030502.A.4. which provides that there are no "statutory restrictions" on the "obligational availability" of "offsetting collections." Id. at 10. The Union contends that the fact that the TYAD AWCF, because it consists of "offsetting collections," is exempt from statutory restrictions on "obligational availability" demonstrates that TYAD AWCF is not made up of appropriated funds. The Union concedes, however, that "if the Authority finds that the [TYAD AWCF] is an appropriated fund then the Union's proposal is nonnegotiable." Response at 9.

      The Union argues that 5 U.S.C. § 5536 does not bar the proposal because that statutory provision applies to the expenditure of appropriated funds. Finally, the Union contends that the proposal constitutes an appropriate arrangement under § 7106(b)(3) of the Statute. The Union states, in this regard, that it "does not see how something must violate a [m]anagement [r]ight in order to be an appropriate arrangement." Reply at 10.

V.     Analysis and Conclusions

A.     Meaning of the Proposal

      As explained by the Union, the proposal would require the Agency to disburse funds to the employee from the TYAD AWCF to reimburse an employee for any documented financial losses reported by the employee (e.g., airline tickets, hotel reservations) that resulted from cancellation of the employee's previously approved leave. The Agency agrees that the proposal is intended to require the use of the TYAD AWCF for that purpose.

      Based on the record in this case, we interpret the proposal, as explained by the Union, to require the use of the TYAD AWCF to reimburse employees for any documented financial losses reported by those employees that resulted from the cancellation of the employees' previously approved leave.

B.     The Proposal is Inconsistent with Law

      It is a well-established principle of constitutional law that "any disbursement of appropriated funds must be authorized by statute." ACT, Puerto Rico Army Chapter, 58 FLRA 318, 321 (2003) (ACT, Puerto Rico), reconsideration denied, 59 FLRA No. 2 (2003). Under 31 U.S.C. § 1301(a), appropriated funds may only be disbursed for the purposes for which the appropriations were made, unless otherwise provided by law. Id. at 322. Stated differently, appropriated funds cannot be expended for a particular program or activity unless they have been appropriated for that purpose. The Union concedes these principles and acknowledges "that appropriated funds cannot be used to reimburse employees under the provisions of the disputed proposal[.]" Union Response at 1.

      The Union maintains, however, that these principles do not apply to the proposal because the proposal would not require the use of appropriated funds. According to the Union, the TYAD AWCF does not constitute an appropriated fund. The negotiability of the proposal, therefore, turns on whether the Union is correct, [ v59 p372 ] because the Union concedes that, if the TYAD AWCF is an appropriated fund, the statute governing that fund does not contemplate that it will be used for the purposes required by the proposal. See Union Response at 9.

      The Union acknowledges that the TYAD AWCF is a revolving fund. Generally speaking, a revolving fund is one in which outflows of capital from the fund are replenished or reimbursed by funds derived from billings to the organization's customers. See, e.g., Shulman, 51 Comp. Gen. at 600. Although initial capital establishing the fund may be derived from an annual appropriation by Congress, once the fund is established, it generally operates without such appropriations. Revolving funds of this type are treated as on-going or continuing appropriations. See, e.g., MDB Communications, Inc. v. United States, 53 Fed. Cl. 245, 248-49 (Ct. Of Fed. Claims 2002); United Biscuit Co. of America v. Wirtz, 359 F.2d 206, 212 (D.C. Cir. 1965) (Wirtz). See also In re Army Self-Service Supply Centers, 60 Comp. Gen. 323, 325 (1981); To the Acting Architect of the Capital, 50 Comp. Gen. 311, 313 (1978). As such, they are considered a type of appropriated fund.

      The Union distinguishes the TYAD AWCF from other revolving funds on the grounds that: (1) the funds flowing into the TYAD AWCF are offsetting contributions; (2) the funds are not deposited into the general fund of the Treasury; and (3) the TYAD AWCF is not subject to the same statutory limitations as appropriated funds. The Union's attempt to distinguish the TYAD AWCF from those revolving funds that constitute appropriated funds is unavailing.

      The Union provides no support for its claim that the "offsetting contributions" that fund the TYAD AWCF are different from the customer reimbursements that fund revolving funds that constitute appropriated funds. In fact, the definition of "offsetting contribution" relied on by the Union interprets the meaning of the phrase in part as a "reimbursement." The Union provides no support for its claim that such reimbursements differ from the reimbursements that fund any other revolving fund.

      The Union also provides no support for its claim that the money which reimburses other revolving funds is deposited in the general fund of the Treasury. Other revolving funds that constitute appropriated funds have separate accounts in the Treasury apart from the general fund. See, e.g., Matter of: Washington National Arena Limited Partnership, 65 Comp. Gen. 25, 27 (1985); Acting Architect of the Capitol, 50 Comp. Gen. 323, 324 (1970). The accounts are dedicated to funding the programs they were designed to support and are the only source of funding for those programs. Absent some specific statutory provision to the contrary, those accounts do not draw on the general fund. The Union does not explain how the mere fact that the TYAD AWCF maintains a separate Treasury account in any manner differentiates it from other revolving accounts with similar separate Treasury accounts that are nevertheless appropriated funds.

      Further, the Union provides no support for its argument that the TYAD AWCF does not involve appropriated funds because it is funded by "offsetting collections" which are not subject to statutory limitations on the expenditure of appropriated funds. As the Agency points out, the regulatory provisions relied on by the Union refer to the fact that, because they derive their money from on-going customer reimbursement, revolving funds are continuing or on-going appropriations and are not subject to the requirement that appropriated funds must be obligated during the year for which they were appropriated. See Wirtz, 359 F.2d at 212. The "offsetting collections" which fund the TYAD AWCF constitute such a permanent appropriation. The Union provides no explanation of those regulatory provisions that disputes the Agency's interpretation that the regulations concern permanent appropriations which, like the TYAD AWCF, are not subject to the limitations on annual appropriations.

      The Union has failed to demonstrate that the TYAD AWCF does not constitute an appropriated fund. As noted above, the Union concedes that the expenditures required by the proposal are not reimburseable if the TYAD AWCF constitutes an appropriated fund. [n7]  We conclude, in these circumstances, that the proposal is contrary to law and outside the duty to bargain under § 7117(a)(1) of the Statute. [n8] 

      Accordingly, we dismiss the petition for review. [n9] 

VI.     Order

      The petition for review is dismissed. [ v59 p373 ]


      1. 10 U.S.C. § 2208 provides, in relevant part, as follows:

      § 2208. Working-capital funds

(a) To control and account more effectively for the cost of programs and work performed in the Department of Defense, the Secretary of Defense may require the establishment working-capital funds in the Department of Defense to--
(1) finance inventories of such supplies as he may designate; and
(2) provide working capital for such industrial-type activities, and such commercial type activities that provide common services within or among departments and agencies of the Department of Defense, as he may designate.
(b) Upon request of the Secretary of Defense, the Secretary of the Treasury shall establish working-capital funds established under this section on the books of the Department of the Treasury.
(c) Working-capital funds shall be charged, when appropriate, with the cost of-
(1) supplies that are procured or otherwise acquired, manufactured, repaired, issued, or used; and
(2) services or work performed;
including applicable administrative expenses, and be reimbursed from available appropriations or otherwise credited for those costs, including applicable administrative expenses and costs of using equipment.

      2. 31 U.S.C. § 1301 provides, in relevant part, as follows:

      § 1301. Application

(a) Appropriations shall be applied only to the objects for which th