B-212151, JUL 11, 1983

B-212151, JUL 11, 1983

PRECIS-UNAVAILABLE

THE HONORABLE TED STEVENS, CHAIRMAN, SUBCOMMITTEE ON DEFENSE, COMMITTEE ON APPROPRIATIONS, UNITED STATES SENATE:

BY LETTER OF JUNE 8, 1983, YOU ASKED ABOUT THE LEGALITY AND POTENTIAL IMPLICATIONS OF DRAFT LEGISLATION AUTHORIZING THE TRANSFER OF $125 MILLION FROM THE AIR FORCE "M" ACCOUNT FOR MILITARY PERSONNEL COSTS (57M3500) TO THE UNITED STATES EXPORT-IMPORT BANK (BANK) IN EXCHANGE FOR FIVE DC-10 AIRCRAFT AND ASSOCIATED SPARE PARTS. THE LEGISLATION IS INTENDED FOR INCLUSION IN A FORTHCOMING DEFENSE APPROPRIATION OR AUTHORIZATION BILL. WE WERE INFORMED BY YOUR STAFF THAT YOU ARE CONCERNED THAT THE TRANSFER WOULD BE IMPROPER SINCE "M" ACCOUNT BALANCES MAY ONLY BE USED TO LIQUIDATE OBLIGATIONS PROPERLY INCURRED AGAINST ANY OF THE APPROPRIATIONS FROM WHICH "M" ACCOUNTS ARE DERIVED, AND, IN ANY EVENT, THE TRANSFER WOULD NOT REPRESENT A "FREE" TRANSFER OF FUNDS TO THE BANK WITHOUT BUDGET IMPACT, AS APPARENTLY INTENDED. FOR THE REASONS GIVEN BELOW, WE AGREE WITH YOUR CONCERNS AND RECOMMEND THAT THE DRAFT LEGISLATION NOT BE ENACTED.

YOUR STAFF INFORMS US THAT THE BANK ACQUIRED THE DC-10 AIRCRAFT AS A RESULT OF A DEFAULT BY LAKER AIRLINES. AS THE AIR FORCE NEEDS THE AIRCRAFT AND HAS A LARGE BALANCE IN "M" ACCOUNT 57M3500, FN1 THE PROPONENTS OF THE LEGISLATION DECIDED THAT IT WOULD BE IN THE INTERESTS OF BOTH THE AIR FORCE AND THE BANK TO TRANSFER $125 MILLION FROM THE "M" ACCOUNT TO THE BANK IN EXCHANGE FOR THE AIRCRAFT. THIS EXCHANGE APPEARS TO HAVE BEEN CONSIDERED TO BE A "FREE" TRANSACTION FOR THE GOVERNMENT, THAT IS, THE "M" ACCOUNT BALANCE WAS UNDERSTOOD AS REPRESENTING PREVIOUSLY APPROPRIATED MONIES THAT ARE PRESENTLY AVAILABLE FOR EXPENDITURE. THIS WAS APPARENTLY THOUGHT TO BE SO NOTWITHSTANDING THAT FUNDS HAD PREVIOUSLY NEVER BEEN AUTHORIZED OR APPROPRIATED FOR THE AIRCRAFT. THE DRAFT LEGISLATION READS AS FOLLOWS:

"BY 30 SEPTEMBER 1983, THE EXPORT-IMPORT BANK OF THE UNITED STATES SHALL TRANSFER TO THE DEPARTMENT OF THE AIR FORCE FIVE DC-10 AIRCRAFT AND ASSOCIATED SPARE PARTS IN THE POSSESSION OF THE EXPORT-IMPORT BANK AS A RESULT OF A DEFAULT OF A BORROWER FROM THE EXPORT-IMPORT BANK, PROVIDED THAT $125,000,000 SHALL BE TRANSFERRED FROM AIR FORCE ACCOUNT 57M3500 TO U. S. TREASURY ACCOUNT NUMBER 4984 FOR THE EXPORT-IMPORT BANK. FURTHER, IN THE EVENT THE AIR FORCE DETERMINES THAT THE CURRENT PRESIDENTIAL AIRCRAFT (AIR FORCE 1 AND 2) REQUIRE REPLACEMENT, ANY SUCH REPLACEMENT WILL BE DONE ONLY AFTER FULL CONSIDERATION OF ALL POTENTIAL CANDIDATE AIRCRAFT."

THE PROCEDURES FOR ACCOUNTING FOR APPROPRIATIONS AFTER THEY HAVE EXPIRED ARE SET FORTH IN 31 U.S.C. SECS. 1551-57 (FORMERLY 31 U.S.C. SECS. 701- 08. FN2 ONCE AN APPROPRIATION EXPIRES IT IS NO LONGER AVAILABLE FOR OBLIGATION. NEVERTHELESS, THE OBLIGATED BALANCES OF ANNUAL AND MULTIPLE- YEAR APPROPRIATIONS REMAIN AVAILABLE TO LIQUIDATE OBLIGATIONS PROPERLY INCURRED PRIOR TO EXPIRATION. IN THIS REGARD, OBLIGATED BALANCES RETAIN THEIR FISCAL YEAR IDENTITY FOR 2 FULL FISCAL YEARS FOLLOWING THE EXPIRATION DATE OF AN APPROPRIATION. ON SEPTEMBER 30 OF THE SECOND FULL FISCAL YEAR AFTER EXPIRATION, ANY REMAINING OBLIGATED BUT UNEXPENDED BALANCE IS TRANSFERRED TO A CONSOLIDATED SUCCESSOR ACCOUNT WHERE IT IS MERGED WITH THE OBLIGATED BALANCES OF ALL OTHER APPROPRIATION ACCOUNTS OF THE SAME DEPARTMENT OR AGENCY FOR THE SAME GENERAL PURPOSE. 31 U.S.C. SEC. 1552(A)(1). THIS SUCCESSOR ACCOUNT IS KNOWN AS THE "M" ACCOUNT. FUNDS IN AN "M" ACCOUNT ARE AVAILABLE INDEFINITELY TO LIQUIDATE OBLIGATIONS PROPERLY INCURRED AGAINST ANY OF THE APPROPRIATIONS FROM WHICH THE ACCOUNT IS DERIVED. ID. SEC. 1553(A). IF AS A RESULT OF ADJUSTMENTS OR DEOBLIGATIONS OF OBLIGATIONAL AUTHORITY IN THE "M" ACCOUNT THE AMOUNT THEREIN EXCEEDS THE AMOUNT NECESSARY TO LIQUIDATE ACTUAL OBLIGATIONS, THE LAW REQUIRES THE WITHDRAWAL OF THIS EXCESS AND ITS REVERSION TO THE GENERAL FUND OF THE TREASURY. ID. SEC. 1554.

APPLYING THE ABOVE PRINCIPLES TO THE DRAFT LEGISLATION, IT IS CLEAR THAT THE PROPOSED TRANSFER OF $125 MILLION FROM THE AIR FORCE "M" ACCOUNT FOR MILITARY PERSONNEL COSTS TO THE EXPORT-IMPORT BANK IN EXCHANGE FOR THE FIVE DC-10S WOULD NOT BE IN ACCORD WITH EXISTING STATUTORY REQUIREMENTS. AS INDICATED, THE "M" ACCOUNT BALANCE DOES NOT REPRESENT MONIES OR APPROPRIATIONS PRESENTLY AVAILABLE FOR OBLIGATION OR EXPENDITURE IN A NEW TRANSACTION. IT IS MERELY THE OBLIGATED BALANCE OF APPROPRIATIONS THAT HAVE EXPIRED, AND MAY ONLY BE USED TO LIQUIDATE OBLIGATIONS WHICH HAVE ALREADY BEEN CHARGED TO THE EXPIRED APPROPRIATIONS FOR MILITARY PERSONNEL COSTS. TO CONCLUDE OTHERWISE WOULD CONFLICT WITH THE CONGRESSIONAL LIMITATIONS ON PURPOSE AND PERIOD OF AVAILABILITY THAT WERE PLACED ON THE EXPIRED APPROPRIATIONS WHEN THEY WERE ORIGINALLY ENACTED. IT FOLLOWS THAT AS PART OF AN "M" ACCOUNT BALANCE THE $125 MILLION IS NOT PRESENTLY AVAILABLE MONEY OR OBLIGATIONAL AUTHORITY THAT CAN BE TRANSFERRED TO THE BANK FOR THE AIRCRAFT. FN3

ADDITIONALLY, AND PERHAPS MORE IMPORTANTLY, THE PROPOSED LEGISLATION WOULD FAIL TO EFFECT THE INTENDED "FREE" TRANSFER OF FUNDS FROM THE AIR FORCE TO THE BANK. AS THERE ARE NO MONIES IN THE "M" ACCOUNT THAT CAN BE USED FOR "PURCHASE" OF THE AIRCRAFT, THE LEGISLATION WOULD HAVE TO BE CONSTRUED AS AN APPROPRIATION AND TRANSFER OF $125 MILLION OF OBLIGATIONAL AUTHORITY CONSIDERED TO BE EXCESS TO THE NEEDS OF THE AIR FORCE TO THE BANK FOR FISCAL YEAR 1983. IN THIS REGARD, WE HAVE SAID THAT AN ACT OF CONGRESS PROVIDING LEGAL AUTHORITY TO USE EXCESS OBLIGATIONAL AUTHORITY APPEARING IN AN "M" ACCOUNT BEFORE IT IS WITHDRAWN CREATES NEW BUDGET AUTHORITY FOR THE FISCAL YEAR FOR WHICH IT IS AUTHORIZED. THE SAME IS TRUE OF AMOUNTS WITHDRAWN TO THE MERGED SURPLUS OF EXPIRED UNOBLIGATED BALANCES. AFMD-81-39 AT 2. UNDER THE DRAFT LEGISLATION, THE GOVERNMENT WOULD BE EXPENDING $125 MILLION IN NEW BUDGET AUTHORITY FOR THE AIRCRAFT, A RESULT, AS WE UNDERSTAND IT, DIRECTLY AT VARIANCE WITH THE "FREE" TRANSFER INTENDED.

IN SUM, FOR THE REASONS GIVEN, WE RECOMMEND THAT THE LEGISLATION, AS WELL AS ANY SIMILAR PROPOSALS INTENDING TO USE "M" ACCOUNT OR MERGED SURPLUS BALANCES AS APPROPRIATIONS AVAILABLE FOR NEW OBLIGATIONS, NOT BE ENACTED.

WE HOPE WE HAVE BEEN OF ASSISTANCE.

FN1 AS WE UNDERSTAND IT, THE BALANCE IS FAR IN EXCESS OF $125 MILLION.

FN2 FOR YOUR INFORMATION WE ENCLOSE A COPY OF AFMD-81-39, B-201110, MARCH 16, 1981, CONCERNING THE USE OF "M" ACCOUNTS AND RELATED MERGED SURPLUS AUTHORITY IN THE DEPARTMENT OF DEFENSE.

FN3 TO THE EXTENT THAT THE $125 MILLION REPRESENTS EXCESS OBLIGATIONAL AUTHORITY UNNECESSARY TO LIQUIDATE OBLIGATIONS, IN ACCORDANCE WITH 31 U.S.C. SEC. 1554, IT SHOULD BE WITHDRAWN FROM THE "M" ACCOUNT AND SHOULD REVERT TO THE GENERAL FUND OF THE TREASURY.