Securities and Exchange Commission-Reduction of

B-265727 Jul 19, 1996 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights Which were forwarded to the United States Treasury. The landlord will accept directly from a sublessee the payments a sublessee is required to make. The landlord credits the sublessee's payments to the rental the SEC is otherwise required to pay and the SEC's future rental payments to the landlord are reduced by the amounts so credited. The sublease was amended on April 11. The amended sublease explicitly provides that the SEC is responsible for authorizing and issuing the applicable parking permits to RWA. The term of the sublease is month-to-month and the sublease can be terminated by either the SEC or the RWA. The SEC determines the amount RWA will pay for such spaces. The SEC's legal rights and obligations vis-a-vis the landlord are in substance unaffected by the sublease. View Decision Matter of: Securities and Exchange Commission-Reduction of Obligation of Appropriated Funds Due to a Sublease File: B-265727 Date: July 19, 1996 The United States Securities and Exchange Commission (SEC) may not reduce its obligation of appropriated funds resulting from a lease, and correspondingly increase its available appropriations, by subleasing space and arranging for the sublessee to make its payments directly to the landlord. The SEC should deposit the amount paid by its sublessee, whether paid to the SEC or the landlord, into the Treasury as miscellaneous receipts. DECISION The United States Securities and Exchange Commission (SEC) requests our opinion on whether it may reduce its obligation of appropriated funds for a lease to reflect the reduced rent the SEC pays as a result of a sublease. Consistent with SEC's lease with the landlord, the landlord accepts payments from the SEC's Recreation and Welfare Association (RWA) under its sublease with the SEC, and the SEC reduces its rental payments to the landlord by the amount the RWA pays. The SEC has been reducing its obligation of appropriated funds by the amount its sublessee pays the landlord to in effect reflect the SEC's net rental payment instead of the rental payment required by the lease. As discussed below, we conclude that under the terms of the current lease, the SEC's treatment of its sublessee's payments improperly augments its appropriation and the SEC should deposit the reduction in its rental payments into the Treasury as miscellaneous receipts. Background A lease between the SEC and the Judiciary Plaza Limited Partnership (landlord) included the entire parking garage beneath its headquarters office building. The SEC did not intend to use the entire garage but wanted for security reasons to limit access to the garage and hence the building to SEC employees. The lease became effective October 1, 1993, and currently expires December 31, 1997. Prior to the SEC leasing the entire parking garage, the RWA, a nonprofit corporation made up exclusively of SEC employees, had an agreement for a certain number of discounted rate parking spaces with the company operating the parking garage. The RWA then made these spaces available to SEC employees on a first-come, first-served basis. Of the amount it charged the employees, the RWA retained an administrative fee and paid the balance to the parking garage operator. After the SEC leased the entire parking garage, the SEC provided free parking to employees with severe disabilities, executives and employees eligible based on job-related requirements, and SEC carpools and contractors. The SEC also agreed to accommodate the 45 employees who had been paying $100 per month to park through the RWA. From October 1993 through March 1994, the RWA held in a separate account the $100 per month it continued to collect from each employee parking in the garage through the RWA. After deducting a 15 percent administrative fee for running the parking program and paying certain taxes, the RWA subsequently paid the remaining funds to the SEC, which were forwarded to the United States Treasury. A new arrangement began in April 1994. The SEC's lease allows the SEC to sublease and provides that at the SEC's request, the landlord will accept directly from a sublessee the payments a sublessee is required to make. The landlord credits the sublessee's payments to the rental the SEC is otherwise required to pay and the SEC's future rental payments to the landlord are reduced by the amounts so credited. The RWA entered into a month-to-month sublease with the SEC for up to 70 parking spaces for $85 per month. The RWA would continue to charge SEC employees $100 a month and retain $15 per month. However, under the sublease, the RWA would pay the remaining $85 directly to the landlord. The sublease was amended on April 11, 1995, to reduce RWA's payment to the landlord to $80 per space per month.