B-58303, OCTOBER 24, 1966, 46 COMP. GEN. 356

B-58303, OCTOBER 24, 1966, 46 COMP. GEN. 356

VIRGIN ISLANDS - CORPORATE ASSETS DISPOSAL - MISCELLANEOUS RECEIPTS V. SPECIAL ACCOUNT. UPON SALE OF THE VIRGIN ISLANDS CORPORATION'S ELECTRIC POWER AND WATER DISTILLATION FACILITIES TO THE VIRGIN ISLANDS GOVERNMENT AND TRANSFER OF THE CORPORATION'S CURRENT RECEIVABLES, MORTGAGES, AND LONG TERM ACCOUNTS TO THE SECRETARY OF THE INTERIOR FOR COLLECTION AND DEPOSIT TOGETHER WITH THE CASH BALANCE IN THE TREASURY AS MISCELLANEOUS RECEIPTS TO OFFSET THE GOVERNMENT'S EQUITY AND TERMINATE THE CORPORATION'S ACTIVITIES, ALTHOUGH THE ADMINISTRATIVE APPARATUS OF THE CORPORATION NEED NOT BE MAINTAINED, THE PROCEEDS FROM THE SALE OF SURPLUS CORPORATE ASSETS MAY NOT BE COVERED INTO THE LAND AND WATER CONSERVATION FUND UNDER 16 U.S.C. 460L-5/B) ON THE BASIS THE CORPORATION'S REVOLVING FUND CEASED TO EXIST. CLOSING THE BOOKS OF THE CORPORATION FOR ADMINISTRATIVE CONVENIENCE DOES NOT CONSTITUTE A CHANGE FROM THE REQUIREMENT THAT CORPORATE CASH RECEIVED FROM ANY SOURCE, INCLUDING THE SALE OF SURPLUS CORPORATE ASSETS, IS FOR DEPOSIT TO MISCELLANEOUS RECEIPTS FOR APPLICATION TO THE INVESTMENT OF THE GOVERNMENT.

TO THE SECRETARY OF THE INTERIOR, OCTOBER 24, 1966:

WE HAVE YOUR LETTER OF OCTOBER 5, 1966, IN RESPONSE TO OURS OF AUGUST 24 CONCERNING THE CONTEMPLATED DISPOSITION TO BE MADE OF PROCEEDS REALIZED FROM THE SALE OF THE VIRGIN ISLANDS CORPORATION'S ELECTRIC POWER AND WATER DISTILLATION FACILITIES TO THE VIRGIN ISLANDS GOVERNMENT.

THE VIRGIN ISLANDS CORPORATION, AS STATED IN YOUR LETTER, HAS TERMINATED ALL OF ITS PROGRAM RESPONSIBILITIES AS OF JUNE 30, 1966, IS WITHOUT EMPLOYEES, AND ANTICIPATES NO FURTHER EXPENDITURES OF FUNDS OTHER THAN THOSE OBLIGATED BY THAT DATE. IN LIGHT OF THESE CIRCUMSTANCES, THE APPENDIX TO THE BUDGET FOR FISCAL YEAR 1967 STATES GENERALLY AT PAGE 688 THAT ALL CURRENT RECEIVABLE, MORTGAGES AND LONG TERM ACCOUNTS WILL BE TRANSFERRED TO THE SECRETARY OF THE INTERIOR FOR COLLECTION AND DEPOSIT TOGETHER WITH ANY CASH BALANCE INTO THE TREASURY AS MISCELLANEOUS RECEIPTS AND THAT THESE TRANSFERS WILL OFFSET THE GOVERNMENT EQUITY AND COMPLETELY TERMINATE ALL ACTIVITIES OF THE CORPORATION.

YOU POINT OUT THAT ALTHOUGH THE VIRGIN ISLANDS CORPORATION ACT, 48 U.S.C. 1407, PROVIDES FOR SUCCESSION UNTIL 1969, YOU DO NOT CONSIDER THIS TO BE A LEGAL REQUIREMENT THAT AN UNNECESSARY ADMINISTRATIVE APPARATUS BE MAINTAINED AFTER TERMINATION OF THE CORPORATION'S PROGRAM RESPONSIBILITIES. WE WOULD AGREE THAT UNDER THE CIRCUMSTANCES, THERE IS NO NEED TO KEEP OPEN THE BOOKS OF THE CORPORATION FOR THE SOLE PURPOSES OF RECORDING RECEIPTS TO BE COLLECTED OR TO RETAIN ANY CASH BALANCE IN THE CORPORATE NAME. ACCORDINGLY, WE HAVE NO OBJECTION TO RECOGNIZING EXPIRATION OF THE CORPORATION'S ACTIVITIES AS SET FORTH IN THE APPENDIX TO THE BUDGET FOR 1967, SUBJECT, OF COURSE, TO VARIATIONS IN THE ACCOUNT BALANCES WHICH HAVE OCCURRED SINCE PREPARATION OF THE STATEMENTS CONTAINED IN THE BUDGET.

HOWEVER, WE CANNOT AGREE, AS SUGGESTED IN YOUR LETTER, THAT ANY PART OF THE PROCEEDS FROM THE SALE OF CORPORATE ASSETS MAY PROPERLY BE COVERED INTO THE LAND AND WATER CONSERVATION FUND UNDER AUTHORITY OF THE PROVISIONS CODIFIED AT SECTION 460L-5/B), TITLE 16, U.S.C. THAT SECTION PROVIDES FOR DEPOSIT INTO THE LAND AND WATER CONSERVATION FUND:

ALL PROCEEDS (EXCEPT SO MUCH THEREOF AS MAY BE OTHERWISE OBLIGATED, CREDITED, OR PAID UNDER AUTHORITY OF THOSE PROVISIONS OF LAW SET FORTH IN SECTION 485/B/-/E), TITLE 40, OR THE INDEPENDENT OFFICES APPROPRIATION ACT 1963 (76 STAT. 725) OR IN ANY LATER APPROPRIATION ACT) HEREAFTER RECEIVED FROM ANY DISPOSAL OF SURPLUS REAL PROPERTY AND RELATED PERSONAL PROPERTY UNDER THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, NOTWITHSTANDING ANY PROVISION OF LAW THAT SUCH PROCEEDS SHALL BE CREDITED TO MISCELLANEOUS RECEIPTS OF THE TREASURY. * * *

THE ONE PERTINENT EXCEPTION REFERRED TO IN THE QUOTED PORTION IS THAT CODIFIED AT SECTION 485/C) OF TITLE 40, U.S. CODE, AS FOLLOWS:

ALL PROCEEDS UNDER THIS SUBCHAPTER FROM ANY TRANSFER OF EXCESS PROPERTY TO A FEDERAL AGENCY FOR ITS USE, OR FROM ANY SALE, LEASE, OR OTHER DISPOSITION OF SURPLUS PROPERTY, SHALL BE COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS, EXCEPT AS PROVIDED IN SUBSECTIONS (B/-/E) OF THIS SECTION.

(C) WHERE THE PROPERTY TRANSFERRED OR DISPOSED OF WAS ACQUIRED BY THE USE OF FUNDS EITHER NOT APPROPRIATED FROM THE GENERAL FUND OF THE TREASURY OR APPROPRIATED THEREFROM BUT BY LAW REIMBURSABLE FROM ASSESSMENT, TAX, OR OTHER REVENUE OR RECEIPTS, THEN THE NET PROCEEDS OF THE DISPOSITION OR TRANSFER SHALL BE CREDITED TO THE REIMBURSABLE FUND OR APPROPRIATION OR PAID TO THE FEDERAL AGENCY WHICH DETERMINED SUCH PROPERTY TO THE EXCESS: PROVIDED, THAT THE PROCEEDS SHALL BE CREDITED TO MISCELLANEOUS RECEIPTS IN ANY CASE WHEN THE AGENCY WHICH DETERMINED THE PROPERTY TO BE EXCESS SHALL DEEM IT UNECONOMICAL OR IMPRACTICAL TO ASCERTAIN THE AMOUNT OF NET PROCEEDS. AS USED IN THIS SUBSECTION, THE TERM "NET PROCEEDS OF THE DISPOSITION OR TRANSFER" MEANS THE PROCEEDS OF THE DISPOSITION OR TRANSFER MINUS ALL EXPENSES INCURRED FOR CARE AND HANDLING AND DISPOSITION OR TRANSFER.

WITH RESPECT TO SO MUCH OF THE CORPORATE ASSETS AS RELATE TO SALES OF SURPLUS PROPERTY YOU TAKE THE POSITION THAT THE PROVISIONS OF SECTION 460L -/B) ARE APPLICABLE WITHOUT REGARD TO THOSE OF SECTION 485/C). YOU STATE THAT:

PRIOR TO JUNE 30, 1966, THERE CAN BE NO QUESTION BUT THAT THE QUOTED PROVISIONS (40 U.S.C. 458 (A) AND (C/) WOULD HAVE REQUIRED THE DEPOSIT OF THE PROCEEDS OF THE CONTEMPLATED SALE INTO THE VIRGIN ISLANDS CORPORATION'S REVOLVING FUND. THE INTENT OF CONGRESS IN PROVIDING THIS EXCEPTION TO THE GENERAL TREATMENT OF THE PROCEEDS FROM THE SALE OF GOVERNMENT SURPLUS PROPERTY IS ALSO CLEAR. SPECIAL FUNDS AND REVOLVING FUNDS WERE NOT TO BE DEPLETED IN A MANNER INCONSISTENT WITH THE PURPOSES FOR WHICH THEY WERE CREATED. TO HAVE ALLOWED ANOTHER RESULT WOULD HAVE BEEN TO DEFEAT THE PURPOSE OF CONGRESS IN REMOVING THE ACTIVITIES FINANCED FROM SUCH FUNDS FROM THE USUAL APPROPRIATION PROCESS. CONVERSELY, WHEN A REVOLVING FUND BECOMES INACTIVE AND IS NO LONGER NEEDED FOR THE PURPOSES FOR WHICH IT WAS CREATED THERE IS NO LONGER A NEED TO PROTECT THE INTEGRITY OF THE FUND AND NO LONGER ANY RATIONALE TO SUPPORT THE EXCEPTION FROM THE GENERAL RULES CONCERNING THE DISPOSITION OF THE PROCEEDS FROM THE SALE OF SURPLUS PROPERTY ACQUIRED FROM THAT FUND.

ON THE BASIS THAT THE NEED FOR THE VIRGIN ISLANDS CORPORATION REVOLVING FUND CEASED TO EXIST SINCE JUNE 30, 1966, YOU CONCLUDE THAT THE EFFECT OF THE STATEMENTS CONTAINED IN THE 1967 BUDGET APPENDIX OPERATES AS A DETERMINATION THAT THE REVOLVING FUND BALANCE HAS BEEN REDUCED TO ZERO. AND FROM THIS YOU FURTHER CONCLUDE THAT THERE IS NO OTHER OPTION WITH RESPECT TO CASH REALIZED FROM THE SALE OF SURPLUS CORPORATE ASSETS BUT TO COMPLY WITH THE PROVISIONS OF SECTION 460L-5/B) CALLING FOR DEPOSITS INTO THE LAND AND WATER CONSERVATION FUND.

THIS RATIONALE RESULTS FROM A MISCONCEPTION OF THE NATURE OF THE CORPORATION'S ACCOUNTABILITY FOR THE UNITED STATES INVESTMENT AND OF THE PURPOSE FOR "CLOSING OUT" THE CORPORATE RECORDS AS SET FORTH IN THE BUDGET APPENDIX. THE REVOLVING FUND IS AUTHORIZED AT 48 U.S.C. 1407E IN THE FOLLOWING TERMS:

(A) THE CORPORATION IS AUTHORIZED TO OBTAIN MONEY FROM THE TREASURY OF THE UNITED STATES, FOR USE IN THE PERFORMANCE OF THE POWERS AND DUTIES GRANTED TO OR IMPOSED UPON IT BY LAW, NOT TO EXCEED A TOTAL OF $15,000,000 OUTSTANDING AT ANY ONE TIME. FOR THIS PURPOSE APPROPRIATIONS NOT TO EXCEED $15,000,000 ARE AUTHORIZED TO BE MADE TO A REVOLVING FUND IN THE TREASURY. ADVANCES SHALL BE MADE TO THE CORPORATION FROM THE REVOLVING FUND WHEN REQUESTED BY THE CORPORATION. NOT TO EXCEED A TOTAL OF $2,750,000 SHALL BE APPROPRIATED UNDER ANY AUTHORITY CONTAINED IN SECTIONS 1407-1407I OF THIS TITLE FOR THE PERIOD ENDING JUNE 30, 1951, COMPRISING THE FISCAL YEARS 1950 AND 1951.

(B) AS THE CORPORATION REPAYS THE AMOUNTS THUS OBTAINED FROM THE TREASURY, THE REPAYMENTS SHALL BE MADE TO THE REVOLVING FUND.

SUBSECTION (B), 48 U.S.C. 1407E/B), MAKES CLEAR THAT CREDIT BALANCES IN THE FUND REPRESENTING ADVANCES FROM THE TREASURY TO THE CORPORATION ARE TO BE REPAID TO THE EXTENT THAT CORPORATE ASSETS PERMIT. SEE ALSO 48 U.S.C. 1407G REQUIRING REPAYMENT OF THE GOVERNMENT'S INVESTMENT FROM CORPORATE FUNDS EXCESS TO ITS CURRENT NEEDS, AND SECTION 1407C/P) REQUIRING REPAYMENT OF AUTHORIZED BORROWINGS FROM THE TREASURY FOR CERTAIN PURPOSES.

IF THE CORPORATE BOOKS WERE TO BE KEPT "OPEN" THERE IS NO QUESTION BUT THAT ANY CASH AVAILABLE TO THE CORPORATION FROM WHATEVER SOURCE DERIVED WOULD BE REQUIRED TO BE APPLIED AGAINST THE VARIOUS ACCOUNTS REPRESENTING THE GOVERNMENT'S INVESTMENT. THAT A PORTION OF SUCH CASH MIGHT BE RELATED TO SALES OF SURPLUS ASSETS DOES NOT SERVE TO REMOVE THAT AMOUNT FROM THE CORPORATION'S CASH FOR WHICH IT IS ACCOUNTABLE TO THE GOVERNMENT UNDER THE ACCOUNTS INVOLVED. NOR DOES THE FACT THAT CORPORATE ACTIVITIES HAVE CEASED APART FROM FURTHER COLLECTIONS OF ACCOUNT RECEIVABLE ITEMS SERVE TO REDUCE IN ANY WAY THE CORPORATION'S ACCOUNTABILITY FOR REPAYMENT OF THE GOVERNMENT'S INVESTMENT.

THE PROCEDURE OUTLINED IN THE BUDGET APPENDIX RECOGNIZES THAT IN THE FINAL ANALYSIS,"CLOSING OUT" THE CORPORATE RECORDS AND DEPOSITING ALL CASH REALIZED FROM CORPORATE ASSETS INTO THE TREASURY AS MISCELLANEOUS RECEIPTS WILL ACCOMPLISH THE SAME PRACTICAL RESULT AS WOULD OBTAIN THROUGH KEEPING THE CORPORATE RECORDS OPEN AND PASSING ALL SUCH TRANSACTIONS THROUGH THE VARIOUS ACCOUNTS INVOLVED. BUT THAT WOULD NOT BE THE CASE IF A PORTION OF THE CASH REALIZED WERE COVERED INTO THE LAND AND WATER CONSERVATION FUND. IF THE BOOKS WERE KEPT OPEN THERE WOULD NOT BE ANY BASIS FOR CREDITING THE LAND AND WATER CONSERVATION FUND WITH AMOUNTS REPRESENTING CORPORATE CASH. WE FAIL TO SEE HOW CLOSING THE BOOKS FOR ADMINISTRATIVE CONVENIENCE MAY BE SAID TO CONSTITUTE A BASIS FOR REACHING A DIFFERENT RESULT. INDEED, THE BUDGET APPENDIX STATEMENT CONTEMPLATES COVERING AMOUNTS RECEIVED FROM THE CORPORATION INTO THE TREASURY AS MISCELLANEOUS RECEIPTS WITHOUT CONSIDERATION OF THE LAND AND WATER CONSERVATION FUND; AND, ANY DEPOSIT OF CORPORATE ASSETS INTO THE LAND AND WATER CONSERVATION FUND WOULD THUS VIOLATE THE VERY TERMS OF THE STATEMENT ITSELF.

ACCORDINGLY, IF THE CORPORATE BOOKS OF ACCOUNT ARE "CLOSED OUT" AS CONTEMPLATED, WE MUST ADVISE THAT ALL CASH DERIVING FROM CORPORATE ACTIVITIES INCLUDING THE SALE OF SURPLUS CORPORATE ASSETS IS TO BE COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS WITHOUT TRANSFER TO THE LAND AND WATER CONSERVATION FUND.

COPIES OF THIS LETTER ARE BEING FURNISHED TO THE DIRECTOR OF THE BUREAU OF THE BUDGET, THE SECRETARY OF THE TREASURY AND TO CONGRESSMAN JACK BROOKS.