Transfer of Interest of U.S. Investment in the Panama Canal

AFMD-85-63: Published: Jun 19, 1985. Publicly Released: Jun 19, 1985.

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Pursuant to a congressional request, GAO reviewed the cash flow requirements of the Panama Canal Commission to determine the most appropriate repayment schedule for interest earned on the U.S. Government's investment in the Panama Canal.

GAO noted that legislative history indicates that the Commission should transfer interest collections to the general fund of the U.S. Treasury, which would: (1) reduce the Commission's available fund balance and increase the general fund of the Treasury; (2) increase general fund revenue which is available for other appropriations; and (3) prevent a future buildup of collections in the Panama Canal Commission Fund. GAO also found that: (1) some obligations were being recorded at the beginning of each fiscal year (FY) that did not need to be recorded; (2) repayment of the interest would be possible in 1986 without detrimentally affecting Canal operations; (3) there was no potential for a shortfall of obligational authority; and (4) after the Commission transferred the interest to the Treasury, it would still have sufficient cash to cover its needs if it were to draw upon the balance being held from its original appropriation. GAO noted that the Commission could obligate an amount at any time up to the balance in the Fund as long as the obligation did not exceed its annual appropriation. GAO found that: (1) the obligation to pay $20 million to the Republic of Panama each year for the life of the Panama Canal Treaty should have been recorded at the time the commitment was made; (2) the Commission only has authority to incur obligations during a single FY; and (3) there is no need for the Commission to retain the interest collected.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Both the House and Senate versions of bills to correct the program failed. No further discussions from Congress are evident. AFMD-87-4 will discuss this issue.

    Matter: In FY 1986 Panama Canal appropriation legislation, Congress should require that $56.3 million collected, as of April 30, 1985, plus interest collected during the remainder of FY 1985, be transferred from the Commission's Fund to the general fund of the U.S. Treasury by October 1, 1985, or shortly thereafter.

  2. Status: Closed - Implemented

    Comments: Collections of interest are being transferred to the Treasury through the amendment to the Panama Canal Act of 1979.

    Matter: In FY 1986 Panama Canal appropriation legislation, Congress should require that future interest earned be transferred annually to the general fund of the Treasury to prevent accumulation of interest in the Commission's Fund.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The Commission disagreed with this recommendation. Follow-up on this issue, as part of the FY 1986 financial statement audit, revealed that this recommendation is no longer significant in view of other actions taken.

    Recommendation: The Commission should discontinue recording the annual payments to Panama as new obligations.

    Agency Affected: Panama Canal Commission

  2. Status: Closed - Not Implemented

    Comments: The Commission disagreed with this recommendation. Follow-up on this issue, as part of the FY 1986 financial statement audit, revealed that this recommendation is no longer significant in view of other actions taken.

    Recommendation: The Commission should record obligations for defense schools and early retirement either monthly or quarterly.

    Agency Affected: Panama Canal Commission

 

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