               Mechanisms for Funding Intelligence Centers
Agencies may use the Economy Act to pay for facilities and services provided by the Terrorist Threat
  Integration Center and the Terrorist Screening Center.
It is within the reasonable discretion of fiscal officers to compute the “actual cost” to be charged for
    those facilities and services.

                                                                                      March 19, 2004

                    MEMORANDUM OPINION FOR THE LEGAL ADVISER
                             DEPARTMENT OF STATE

   You have asked for our opinion about the legality of certain mechanisms for
funding two intelligence centers—the Terrorist Threat Integration Center (“TTIC”)
and the Terrorist Screening Center (“TSC”). Letter for Jack L. Goldsmith III,
Assistant Attorney General, Office of Legal Counsel, from William H. Taft, IV,
Legal Adviser, Department of State (Dec. 12, 2003) (“State Letter”). We believe
that it would be lawful for the agencies taking part in these centers to make
payments reflecting the services and other benefits that the centers provide to
them. We further believe that the precise formulas for computing the payments
from each agency are, as a legal matter, left to the reasonable discretion of fiscal
officers.

                                                  I.

   Both TTIC and TSC are designed to bring together employees from various
agencies of the government and to combine and organize the intelligence gathered
by those agencies, so that it can best be used against the threats posed by terrorists.
TTIC is “an interagency joint venture that . . . integrate[s] and analyze[s] terrorist
threat-related information, collected domestically or abroad, and disseminate[s]
such information to appropriate recipients.” Director of Central Intelligence
Directive 2/4, Terrorist Threat Integration Center at 1 (May 14, 2003) (“DCID
2/4”). It was created through the Director of Central Intelligence’s DCID 2/4, at
“the direction of the President, as articulated in his State of the Union Address on
28 January 2003” and elsewhere. Id. TTIC is housed at the Central Intelligence
Agency (“CIA”) and is overseen by the Director of Central Intelligence, as head of
the intelligence community. Id. at 2; State Letter at 1. The members of TTIC
include the CIA, Department of State, Department of Justice/Federal Bureau of
Investigation (“FBI”), Department of Homeland Security, and various intelligence
entities of the Department of Defense. DCID 2/4, at 2.
   The President provided for TSC in Homeland Security Presidential Directive 6,
Integration and Use of Screening Information (Sept. 16, 2003) (“HSPD-6”).
HSPD-6 ordered the Attorney General to create TSC “to consolidate the Govern-
ment’s approach to terrorism screening and provide for the appropriate and lawful



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                     Mechanisms for Funding Intelligence Centers


use of Terrorist Information in screening processes.” Id. TSC is to maintain a
database related to terrorism and to respond to inquiries from federal, state and
local, and foreign governments and possibly from private entities. State Letter at 2.
The agencies involved in operating this joint venture, which is housed at the FBI,
include the Department of State, Department of Justice/FBI, and Department of
Homeland Security. Id.
   As we understand the arrangements for funding in the current fiscal year, “all
agencies that are assigning staff and relocating relevant operations to the two
projects [would] pay a share of the costs based on the proportion of staff being
assigned.” State Letter at 2. The funds for TTIC would go to the Director of
Central Intelligence’s Community Management Staff; for TSC, the funds would
go to the FBI. Id. You have asked whether these funding arrangements are lawful.
In particular, you have asked whether the Economy Act, 31 U.S.C. § 1535 (2000),
which allows agencies to purchase goods and services from other agencies, would
authorize the arrangements or whether they would conflict with an appropriations
rider forbidding the use of any appropriation for “interagency financing of boards
(except Federal Executive Boards), commissions, councils, committees, or similar
groups (whether or not they are interagency entities),” unless the interagency
entities have “prior and specific statutory approval to receive financial support
from more than one agency or instrumentality.” Consolidated Appropriations Act,
2004, Pub. L. No. 108-199, § 610, 118 Stat. 3, 351. You have also asked whether,
assuming the Economy Act may be used, the formulas for allocating the costs here
would be lawful. State Letter at 2.
   The Justice Management Division submitted a memorandum arguing that the
funding arrangements, including the allocation formulas, comply with the law.
Memorandum for M. Edward Whelan III, Principal Deputy Assistant Attorney
General, Office of Legal Counsel, from Stuart Frisch, General Counsel, Justice
Management Division, Re: Interagency Funding of the Terrorist Threat Integra-
tion Center and the Terrorist Screening Center (Jan. 23, 2004) (“JMD Memoran-
dum”). The Office of Management and Budget endorsed the JMD Memorandum.
Letter for M. Edward Whelan III, Principal Deputy Assistant Attorney General,
Office of Legal Counsel, from Jennifer G. Newstead, General Counsel, Office of
Management and Budget (Feb. 20, 2004).

                                         II.

   At both TTIC and TSC, the host agency provides goods and services to the
other participating agencies so that those agencies can carry out their own
functions more effectively. Each center provides a location where employees of
the agencies can exchange and organize information. The centers offer physical
infrastructure, such as office space and computers. They also offer such services as
access to databases that pool information supplied by the various agencies and
other sources. JMD Memorandum at 3–4. Under the contemplated arrangements,



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                     Opinions of the Office of Legal Counsel in Volume 28


participating agencies would pay for these goods and services under the Economy
Act.
   The Economy Act provides that the head of one agency “may place an order
with . . . another agency for goods or services” if
        (1) amounts are available;
        (2) the head of the ordering agency . . . decides the order is in the
        best interest of the United States Government;
        (3) the agency . . . to fill the order is able to provide or get by con-
        tract the ordered goods or services; and
        (4) the head of the agency decides ordered goods or services cannot
        be provided by contract as conveniently or cheaply by a commercial
        enterprise.
31 U.S.C. § 1535(a). The amount to be paid must be the “actual cost of goods or
services provided.” Id. § 1535(b). Payment may be made in advance, with “proper
adjustment” later to meet the “actual cost” requirement. Id.
    As long as the participating agencies pay the “actual cost of goods or services
provided,” a subject we discuss below, these requirements of the Economy Act
would be met. Because participating agencies use TTIC and TSC to carry out their
own functions, the agencies’ appropriations may be spent on the goods and
services that the centers provide, see 31 U.S.C. § 1301(a) (2000) (appropriations
may “be applied only to the objects for which the appropriations were made”), and
their funds are thus “available” under 31 U.S.C. § 1535(a)(1), as long as the
amounts of those funds remain sufficient. The President has determined that the
operations of TTIC and TSC are important for protecting the nation against
terrorists, and the head of a participating agency thus could “decide[] the order [for
goods and services] is in the best interest of the United States Government,” as
required by 31 U.S.C. § 1535(a)(2). The CIA and FBI are able to provide these
goods and services. Id. § 1535(a)(3). And the heads of participating agencies could
reasonably determine, under 31 U.S.C. § 1535(a)(4), that no commercial enterprise
could offer the same services as “conveniently” or perhaps even at all.
    As shown by the Comptroller General’s opinion in To the Secretary of Com-
merce, 38 Comp. Gen. 36 (1958),1 the Executive Branch has before put in place
somewhat similar arrangements under the Economy Act. There, the Comptroller
General concluded that the Weather Bureau could not allow a private company to

     1
       “The opinions and legal interpretations of the General Accounting Office and the Comptroller
General often provide helpful guidance on appropriations matters and related issues” but “are not
binding upon departments, agencies, or officers of the Executive Branch.” Applicability of Government
Corporation Control Act to “Gain Sharing Benefit” Agreement, 24 Op. O.L.C. 212, 216 n.3 (2000)
(citing Bowsher v. Synar, 478 U.S. 714, 727–32 (1986)).




                                                 64
                     Mechanisms for Funding Intelligence Centers


connect with a natural gas line that the Weather Bureau maintained. In explaining
one ground for this decision, the Comptroller General wrote “that the funds used
for construction of the natural gas line and distribution system were advanced to
the Weather Bureau by the several agencies to be benefited from the facilities
under section 601 of the Economy Act of 1932.” 38 Comp. Gen. at 38 (citations
omitted). Therefore, he reasoned, “such facilities must be regarded as property
under the control of those agencies on a pro rata basis even though presently in the
custody of the Weather Bureau under the involved arrangement,” and the Weather
Bureau therefore could not “limit, restrict, reduce, abridge, or encumber in any
manner the pro rata interests of the other agencies in the facilities.” Id. (citations
omitted). Although the Comptroller General did not directly address the legality of
the agency payments under the Economy Act, he appears to have assumed the
legality of those arrangements by concluding that the various agencies had
acquired interests that the Weather Bureau could not lawfully abridge. Similarly,
the agencies taking part in TTIC and TSC would be paying for joint facilities they
have the right to use, as well as for services of mutual benefit. The JMD Memo-
randum argues that they may even acquire the same sort of property interests as
recognized in the Comptroller General’s decision. Id. at 11. In any event, the
Economy Act would permit the arrangements.
    The Economy Act requires that an ordering agency pay only the “actual cost”
of the ordered goods or services. 31 U.S.C. § 1535(b). Payment under the Econo-
my Act must ensure that “the performing agency is reimbursed for its costs,”
Letter for David P. Holmes, Acting General Counsel, Central Intelligence Agency,
B-250,377, 1993 WL 35613, at *2 (Comp. Gen. Jan. 28), but “any retention of
amounts in excess of actual costs . . . would result in an improper augmentation of
the [performing agency’s] appropriations,” In re Bureau of Land Management—
Disposition of Water Resources Council Appropriations Advanced Pursuant to the
Economy Act, 72 Comp. Gen. 120, 122 (1993) (citation omitted). The assignment
of costs requires an element of judgment. “While the Economy Act requires
recovery of ‘actual costs,’ . . . the term has a flexible meaning and recognizes
distinctions or differences in the nature of the performing agency, and the purposes
or goals intended to be accomplished.” In re Washington National Airport;
Federal Aviation Administration; Intra-Agency Reimbursements Under 31 U.S.C.
686 (1970), 57 Comp. Gen. 674, 685 (1978). The question of cost computation is
“one primarily for administrative consideration, to be determined by agreement
between the agencies concerned.” Reimbursement for Interagency Services, 22
Comp. Gen. 74, 78 (1942).
    You have raised questions about two particular aspects of the cost allocation
formulas for TTIC and TSC: first, the allocation of costs according to the number
of employees that each agency situates at TTIC or TSC; and, second, the inclusion
in the assigned costs during a single year of capital expenditures for facilities to be
used over a number of years. State Letter at 3–6. The JMD Memorandum suggests
a rationale for each of these elements in the cost formula. As to the assignment of



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                 Opinions of the Office of Legal Counsel in Volume 28


costs per capita, the JMD Memorandum argues that “[w]ith respect to operations
such as TTIC and TSC, where unit pricing of outputs is not realistic, per capita and
similar approaches are widely used and embraced by accountants and auditors
alike.” Id. at 9. The JMD Memorandum also contends that the number of employ-
ees assigned to each center is a reasonably accurate basis for estimating the costs
of providing facilities and equipment for these employees and for estimating the
“interest” (and, we take it, the demands) of the agency with respect to overhead
resources. Id. at 10. As to capital expenditures, the JMD Memorandum argues that
the “actual costs” are whatever the host agency pays in a particular year and that
the State Department would obtain an ownership interest in the capital resources
commensurate with its cost allocation. Id. at 11. We do not need to resolve these
issues. At least as long as a cost assignment method is reasonable, we believe that
the fiscal experts are free to use or reject it: “As long as the amount agreed upon
[by the agencies] results from a bona fide attempt to determine the actual cost and,
in fact, reasonably approximates the actual cost,” there should be “no objection to
payment in the amount agreed upon.” To Mr. Neal J. Price, Authorized Certifying
Officer, International Cooperation Administration, B-133,913, 1958 WL 2065,
at *1 (Comp. Gen. Jan. 21). We believe that the methods to be used here would
rest on “a bona fide attempt to determine the actual cost” and would be reasonable.

                                         III.

   We also believe that the proposed arrangements would not violate the bar
against “interagency financing” in section 610 of the Consolidated Appropriations
Act, 2004, Pub. L. No. 108-199, 118 Stat. 3, 351:
      No part of any appropriation contained in this or any other Act shall
      be available for interagency financing of boards (except Federal Ex-
      ecutive Boards), commissions, councils, committees, or similar
      groups (whether or not they are interagency entities) which do not
      have a prior and specific statutory approval to receive financial sup-
      port from more than one agency or instrumentality.
We believe that this appropriations rider would not bar transactions under the
Economy Act in connection with an intelligence center, staffed by employees of
several agencies, that supplies goods and services that the constituent agencies use.
To the extent that agencies would pay an intelligence center for goods and
services, they would not “financ[e]” the center. In the ordinary meaning of the
word, consumers do not “finance” a seller when they buy its products or services.
See Webster’s Third New International Dictionary 851 (1993) (examples of use of
term meaning “to raise or provide funds or capital for” include no instances of a
consumer’s providing funds through a purchase). Moreover, even if orders under
the Economy Act could be said to provide “interagency financing,” the Economy
Act is a “prior and specific statutory approval to receive financial support from



                                         66
                    Mechanisms for Funding Intelligence Centers


more than one agency or instrumentality” within the meaning of this provision.
While the Economy Act does not “specific[ally]” address interagency groups as a
class, let alone any particular group, it does set up a mechanism by which a single
agency may supply goods and services to several other agencies.
   We note that this interpretation accords with decisions of the Comptroller
General. Shortly after Congress first enacted riders on interagency financing in
1969, the Comptroller General considered application of such a rider to the
Interagency Institutes for Federal Hospital Administrators. To the Administrator,
Veterans Administration, 49 Comp. Gen. 305 (1969). The Veterans Administration
had contracted for the services of a director of this interagency venture, and the
agency members then shared the costs of the contract. The Comptroller General
found that the arrangement violated the rider, but he did not rule that the Economy
Act would be unavailable for the purchase of goods or services from an interagen-
cy entity. Instead, he pointed to a peculiarity of the Economy Act at the time.
Under the version then in effect, the Economy Act specifically named those
agencies that could obtain goods or services from a supplying agency that
contracted for goods or services from an outside seller, rather than providing them
directly. One of the agencies involved in the particular case was not named in the
statute and thus lacked the necessary authority to obtain goods and services that
the supplying agency had obtained by contract:
      Concerning the use of the authority contained in section 601 of the
      Economy Act as a basis for the proposed arrangement, we note that
      that section permits only certain enumerated agencies to place orders
      with other agencies for services which the latter agencies may be in a
      position to procure by contract. Since the Department of Health, Ed-
      ucation, and Welfare is not one of the enumerated agencies, [the
      Veterans Administration] may not obtain any services by that con-
      tract for that department under the authority of [the Economy Act].
49 Comp. Gen. at 307 (citation omitted). Accordingly, the Economy Act was
unavailable because its terms had not been met, not because the rider precluded its
use.
    In a later opinion, the Comptroller General wrote that “[g]enerally, the re-
striction [against interagency financing] prohibits agencies from making voluntary
contributions or payments in support of interagency ventures.” In the Matter of
U.S. Equal Employment Opportunity Commission—Reimbursement of Registra-
tion Fees for Federal Executive Board Training Seminar, 71 Comp. Gen. 120, 121
(1991) (citation omitted). Accordingly, he concluded that the restriction
      does not . . . prohibit an agency from paying a registration fee to
      permit an employee to attend a Federal Executive Board sponsored
      EEO training seminar if, as is the case here, the fee appears to rea-
      sonably and accurately reflect the cost incurred by the Board for the



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                     Opinions of the Office of Legal Counsel in Volume 28


        employee to attend the seminar. So long as the payment of such a fee
        directly benefits the agency making the payment and the fee does not
        include an element designed to capture more than the costs of spon-
        soring the seminar, we would not view the expenditures at hand as
        interagency financing.
Id. at 121–22 (citation omitted). This analysis largely tracks ours here. While the
appropriations rider bars agencies, in the Comptroller General’s phrase, from
making “voluntary contributions or payments in support of interagency ventures,”
it does not forbid otherwise lawful transactions in which agencies pay for the costs
of goods or services that they receive from interagency groups. See also In the
Matter of Career Service Awards Program, 70 Comp. Gen. 16, 17 n.3 (1990).2
    This interpretation is not undermined by the treatment of other appropriations
riders in the Consolidated Appropriations Act that refer to the ban against
interagency financing. These riders state that “notwithstanding . . . section 610,”
funds “shall be available for interagency funding” of specific ventures, or they use
similar formulations.3 If the funding arrangements under these provisions neces-
sarily involved cost-based transactions under the Economy Act in which several
agencies paid, it might be argued that the separate exceptions were necessary to
overcome the bar on “interagency financing” under section 610 and that the
Economy Act therefore did not constitute “a prior and specific statutory approval
to receive financial support from more than one agency or instrumentality” within
the meaning of section 610. However, the Office of Management and Budget
informs us that, so far as it is aware, the allocation of costs to agencies under these
provisions is not based on actual cost of goods or services supplied. For example,
the funding for interagency councils under section 627 comes from contributions

     2
       In another opinion, the Comptroller General disputed the use of a cost allocation method that
“does not necessarily relate” to the goods and services actually provided and “do[es] not identify what
goods or services each participant actually receives.” In re Invoice to IRS for That Agency’s Share of
CFC Solicitation Expenses Incurred in Northern Utah in 1985, 67 Comp. Gen. 254, 258 (1988). The
State Letter observes that the opinion first found the rider to forbid the arrangement in question and
then concluded that “[e]ven if one could successfully argue that this restriction did not apply to the
voucher in question, payment on this voucher would still have to satisfy” the restrictions of the
Economy Act and the other statutory restrictions on the transfer of funds. CFC Solicitation Expenses,
67 Comp. Gen. at 257. As the State Department reads the opinion, “the Comptroller General . . . dis-
cusses the Economy Act, but only as imposing additional requirements that would have to be satisfied,
if the prohibition on inter-agency funding did not apply.” State Letter at 2. We believe that the
Comptroller General’s later opinion on fees for equal employment opportunity training, discussed in
text, more accurately states the governing legal principles.
     3
       Section 615 covers certain “national security and emergency preparedness telecommunications
initiatives”; section 626 deals with the Joint Financial Management Improvement Program; section 627
concerns the Policy and Citizen Services account at the General Services Administration; section 630
applies to “specific projects, workshops, studies, and similar efforts to carry out the purposes of the
National Science and Technology Council”; and section 648 deals with the transfer of money for the
operation of Midway Atoll Airfield. Consolidated Appropriations Act, 2004, Pub. L. No. 108-199, 118
Stat. 3, 353, 356, 357, 362.




                                                  68
                          Mechanisms for Funding Intelligence Centers


under a formula according to which twenty percent of the funding is drawn from
identical contributions from all twenty-four agencies involved, forty percent of the
funding is based on each agency’s information technology spending as a percent-
age of the total for the twenty-four agencies, and another forty percent is based on
each agency’s discretionary budgetary authority as a percentage of the total for the
twenty-four agencies. The “notwithstanding” provisions in the statute thus permit
funding arrangements that otherwise would constitute “interagency financing” as
we have interpreted that term here—the payment of contributions that do not
reflect actual costs. In any event, even if the funding arrangements under some or
all of these provisions did necessarily involve cost-based transactions under the
Economy Act in which several agencies paid, we do not believe that this fact
would overcome the other arguments establishing that use of the Economy Act in
cost-based transactions is not “interagency financing.”4
    We therefore conclude that agencies may use the Economy Act to pay for
facilities and services offered by TTIC and TSC and that it is within the reasonable
discretion of fiscal officers to compute the “actual cost” to be charged for those
facilities and services.

                                                    M. EDWARD WHELAN III
                                             Principal Deputy Assistant Attorney General
                                                       Office of Legal Counsel




    4
      We do not believe that the authority under section 648, which concerns the Midway Atoll Air-
field, is being used at all. We understand that the Department of Transportation has used the Economy
Act to place an order with the Department of Interior for operation of the facility. In this instance, the
agencies did not use the authority in section 648 to engage in “interagency financing” under any
plausible understanding of the term, because only one agency bore the entire cost. The arrangement,
therefore, does not illuminate what the bar on “interagency financing” might mean.




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