B-164879 December 5, 1973

B-164879 December 5, 1973

Major General David S. Parker President, Panama Canal Company Balboa Heights, Canal Zone

Dear General Parker:

Reference is made to your letter of March 14, 1973, in response to requests by our Office that your Company reimburse the Treasury for amounts paid to certain employees of the Canal Zone Government (CZG) pursuant to several Court of Claims judgments.

The judgments involved were entered by the Court of Claims when the Department of Justice refused to defend the claims of the employees for additional pay (tropical differential). The amounts of such judgments were paid from the permanent appropriation for the payment of judgments, established by 31 U.S.C. 724a.

As noted in our letter to you of October 5, 1972, 2 Canal Zone Code 62(2), 76A Stat. 10, provides in pertinent part as follows:

"The Panama Canal Company is further obligated to pay into the Treasury as miscellaneous receipts amounts sufficients to reimburse the Treasury * * * for the * * * net costs of operation of the agency known as the Canal Zone Government."

In view of such provision of law we stated it to be our opinion that the amounts of those judgments, representing additional pay for the employees of the Canal Zone Government, constituted a cost of operating the Canal Zone Government and, consequently, the Panama Canal Company was required to reimburse the Treasury for the amounts so paid.

We further indicated that the amounts of the judgments represented costs of operating and maintaining the Panama Canal and should be taken into consideration in prescribing toll rates as provided by 2 Canal Zone Code 412(b), 76A Stat. 27.

While you apparently agree that administrative payments of claims for additional pay similar in all respects to those included in the judgments are reimbursable by the Panama Canal Company, you state it to be your position that payments of the judgments here involved having been made from the permanent appropriation for the payment of judgments under 31 U.S.C. 724a are not "costs of operation" of the Canal Zone Government and accordingly reimbursement of such costs is not required.

You base your position, in part on your understanding that:

"* * * consistent with the objectives of 31 U.S.C. 724a, it is not the practice of the General Accounting Office to seek recoupment from the funds or appropriations of the particular agencies involved nor to treat these expenditures in its accounting procedures as costs which are chargeable as operating costs of such agencies. In the Company's view, costs of operation of the Canal Zone Government which are subject to reimbursement by the Company under 2 C.Z.C. 62(g)(2) are limited to expenditures made by the Canal Zone Government directly from its own appropriations and that accordingly, disbursements from a Government-wide appropriation, such as the 'Court of Claims' funds, are excluded from the scope of this statutory directive. Unless an expenditure from Treasury funds is subject to recording for accounting purposes as a charge against Canal Zone Government appropriations, we submit that the Company is without authority to treat it as a reimbursable cost under 2 C.Z.C. $62(g)(2) * * *."

Concerning your reference to the fact that recoupment is not required of other Government agencies, it should be noted that agency funds generally are not available for the payment of judgments and consequently, recoupment would not be authorized. See 40 Comp. Gen. 95 (1960); 34 id. 221 (1954); 15 id. 933 (1936); and 2 id. 821 (1923). However, with respect to a judgment involving activities of a Government Corporation, see 37 Comp. Gen. 691, 695 (1958).

As to your statement that a cost is not a reimbursable cost under 2 Canal Zone Code 62(g)(2) unless it is subject to recording for accounting purposes as a charge against Canal Zone Government appropriations, we note that the comptroller of the Panama Canal Company recorded the estimated liability for the $1.3 million in question in the Canal Zone Government's accounts during fiscal year 1971. Through the accounting mechanics by which the Company absorbs the net cost of the Canal Zone Government, the amount was reflected in the Company's Statement of Revenue and Expenses for fiscal year 1971 as part of the operating expense for the "net cost of the Canal Zone Government." The offsetting credit accounting entry was to a Company liability account, accounts payable "Due U.S. Treasury." We understand the amount is still recorded in the Company's accounts as a liability due the U.S. Treasury.

In addition, you point out that the Canal Zone Government opposed the manner in which judgment was entered in the cases involved, and sugguestion is made that the decision of the Department of Justice not to defend the suits was bsed on policy considerations not directly related to personnel administration in the Canal Zone.

Even assuming such to be the case, we fail to see, nor do you suggest, how much matter would have any effect on the Company's liability to reimburse the Treasury for the amounts of the judgments. Inasmuch as the judgments arose out of activities of the Canal Zone Government we think it cannot seriously be argued that the judgment amounts do not represent a cost of operation of that agency.

Accordingly, we again request that you take such action as may be necessary to reimburse the United States the amounts of the judgments involved.

A copy of this letter is being forwarded to the Secretary of the Army.

Sincerely yours,

R.F. KELLER [Deputy] Comptroller General of the United States