B-10084, JUNE 27, 1940, 19 COMP. GEN. 1030

B-10084: Jun 27, 1940

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ON ACCOUNT OF MISUSE OF MATERIAL FURNISHED BY THE GOVERNMENT ARE NOT COLLECTIONS OF DAMAGES OR PENALTIES. ARE NOT REQUIRED TO BE CHARGED TO THE APPROPRIATION AND DEPOSITED FOR COVERING INTO THE TREASURY AS MISCELLANEOUS RECEIPTS. 1940: THERE WAS RECEIVED YOUR LETTER OF MAY 3. AS FOLLOWS: THERE IS TRANSMITTED HEREWITH THE APPLICATION FOR PAYMENT SUBMITTED BY T. GOWEN WAS FURNISHED 600 POUNDS OF TRIPLE SUPERPHOSPHATE AS A GRANT OF AID BY THE AGRICULTURAL ADJUSTMENT ADMINISTRATION. WHENEVER MATERIALS ARE FURNISHED TO A PRODUCER BY THE AGRICULTURAL ADJUSTMENT ADMINISTRATION A DEDUCTION FOR THE VALUE OF THE MATERIAL WILL BE MADE FROM THE PAYMENT OTHERWISE EARNED. THE BULLETIN FURTHER PROVIDES THAT MATERIALS SHALL ONLY BE FURNISHED UNDER THE PROGRAM PURSUANT TO A PRODUCER'S REQUEST AND AGREEMENT THAT IF THE PRODUCER USES THE MATERIALS IN A MANNER WHICH IS NOT IN SUBSTANTIAL ACCORD WITH THE PURPOSES FOR WHICH SUCH MATERIALS WERE FURNISHED.

B-10084, JUNE 27, 1940, 19 COMP. GEN. 1030

AGRICULTURAL CONSERVATION PAYMENTS - DEDUCTIONS FOR MISUSE OF GOVERNMENT MATERIALS AMOUNTS DEDUCTED FROM CASH PAYMENTS TO AGRICULTURAL PRODUCERS PARTICIPATING IN THE 1939 AGRICULTURAL CONSERVATION PROGRAM, ON ACCOUNT OF MISUSE OF MATERIAL FURNISHED BY THE GOVERNMENT ARE NOT COLLECTIONS OF DAMAGES OR PENALTIES, AND ARE NOT REQUIRED TO BE CHARGED TO THE APPROPRIATION AND DEPOSITED FOR COVERING INTO THE TREASURY AS MISCELLANEOUS RECEIPTS.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF AGRICULTURE, JUNE 27, 1940:

THERE WAS RECEIVED YOUR LETTER OF MAY 3, 1940, AS FOLLOWS:

THERE IS TRANSMITTED HEREWITH THE APPLICATION FOR PAYMENT SUBMITTED BY T. E. GOWEN, NITRO, WEST VIRGINIA, UNDER THE 1939 AGRICULTURAL CONSERVATION PROGRAM.

THE DATA ON THIS APPLICATION SHOW THAT MR. GOWEN WAS FURNISHED 600 POUNDS OF TRIPLE SUPERPHOSPHATE AS A GRANT OF AID BY THE AGRICULTURAL ADJUSTMENT ADMINISTRATION. IN ACCORDANCE WITH SECTION 15 OF THE 1939 AGRICULTURAL CONSERVATION PROGRAM BULLETIN, WHENEVER MATERIALS ARE FURNISHED TO A PRODUCER BY THE AGRICULTURAL ADJUSTMENT ADMINISTRATION A DEDUCTION FOR THE VALUE OF THE MATERIAL WILL BE MADE FROM THE PAYMENT OTHERWISE EARNED. THE BULLETIN FURTHER PROVIDES THAT MATERIALS SHALL ONLY BE FURNISHED UNDER THE PROGRAM PURSUANT TO A PRODUCER'S REQUEST AND AGREEMENT THAT IF THE PRODUCER USES THE MATERIALS IN A MANNER WHICH IS NOT IN SUBSTANTIAL ACCORD WITH THE PURPOSES FOR WHICH SUCH MATERIALS WERE FURNISHED, THE DEDUCTION WITH RESPECT TO THE MATERIALS MISUSED SHALL BE TWICE THE REGULAR RATE OF DEDUCTION IN ORDER TO COMPENSATE THE GOVERNMENT FOR DAMAGES BECAUSE OF SUCH MISUSE.

IN THE INSTANT CASE, THE DEDUCTION, HAD THERE BEEN NO MISUSE OF MATERIAL, WOULD HAVE BEEN AT THE RATE OF ?015 PER POUND AND THE TOTAL DEDUCTION WOULD HAVE BEEN $9.00. THE COMMITTEE MADE A FINDING, WHICH FINDING, SUBJECT TO RIGHT OF APPEAL BY THE PRODUCER, IS FINAL, TO THE EFFECT THAT 300 POUNDS OF TRIPLE SUPERPHOSPHATE WERE NOT USED IN SUBSTANTIAL ACCORD WITH THE AGREEMENT UNDER WHICH IT WAS FURNISHED. ACCORDINGLY, THE TOTAL DEDUCTION IS $13.50 RATHER THAN $9.00. THE ACTION PROPOSED BY THE CERTIFYING OFFICER IN THIS CASE IS LEAVING IN THE APPROPRIATION THE AMOUNT WITHHELD AS LIQUIDATED DAMAGES.

IT WILL BE APPRECIATED IF YOU WILL ADVISE US WHETHER A PROCEDURE DIFFERENT FROM THAT PRESCRIBED IN YOUR DECISION OF MARCH 11, 1930, ADDRESSED TO THE SECRETARY OF WAR, 9 COMP. GEN. 398, SHOULD BE FOLLOWED IN CASES WHERE AMOUNTS ARE DEDUCTED FROM PAYMENTS OR ARE OTHERWISE COLLECTED AS LIQUIDATED DAMAGES FOR THE MISUSE OF MATERIALS FURNISHED AS GRANTS OF AID UNDER AGRICULTURAL CONSERVATION PROGRAMS.

THE QUESTION PRESENTED IS UNDERSTOOD TO BE WHETHER AMOUNTS DEDUCTED FROM SOIL-CONSERVATION PAYMENTS FOR MISUSE OF GRANTED MATERIALS ARE REQUIRED TO BE CHARGED TO SOIL-CONSERVATION APPROPRIATIONS AND DEPOSITED FOR COVERING INTO THE TREASURY AS MISCELLANEOUS RECEIPTS. THE CITED DECISION, 9 COMP. GEN. 398, CONSIDERED THE MATTER OF DISPOSITION OF AMOUNTS DEDUCTED AS LIQUIDATED DAMAGES UNDER GOVERNMENT STANDARD FORM CONTRACTS, AND IS NOT PARTICULARLY RELEVANT TO THE MATTER HERE INVOLVED.

SECTION 8 OF THE SOIL CONSERVATION AND DOMESTIC ALLOTMENT ACT, AS AMENDED BY THE ACT OF FEBRUARY 16, 1938, 52 STAT. 31, PROVIDES:

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

(D) ANY PAYMENT OR GRANT OF AID MADE UNDER SUBSECTION (B) SHALL BE CONDITIONED UPON THE UTILIZATION OF THE LAND, WITH RESPECT TO WHICH SUCH PAYMENT IS MADE, IN CONFORMITY WITH FARMING PRACTICES WHICH THE SECRETARY FINDS TEND TO EFFECTUATE ANY ONE OR MORE OF THE PURPOSES SPECIFIED IN CLAUSE (1), (2), (3), (4), OR (5) OF SECTION 7 (A). ( ITALICS SUPPLIED.)

UNDER THESE PROVISIONS PAYMENTS OR OTHER GRANTS OF AID TO AGRICULTURAL PRODUCERS ARE NOT MADE AS A MATTER OF STATUTORY OR CONTRACTUAL RIGHT ( UNITED STATES V. BUTLER ET AL., 297 U.S. 1), BUT ARE IN THE NATURE OF REWARDS IN SUCH AMOUNTS AS MAY BE DETERMINED BY THE SECRETARY TO BE FAIR AND REASONABLE TO INDUCE AGRICULTURAL PRACTICES TO EFFECTUATE THE PURPOSES OF THE ACT. THE AMOUNTS ALLOWED MAY BE EITHER IN CASH OR GRANTS OF OTHER AID, OR BOTH, AND, OF COURSE, THE AMOUNT OF CASH PAYMENT WHICH MIGHT OTHERWISE BE MADE MAY BE REDUCED BY THE VALUE OF OTHER AID GRANTED, OR FOR FAILURE TO COMPLY FULLY WITH THE CONDITIONS AND REGULATIONS GOVERNING THE ALLOWANCES. SUCH REDUCTIONS MADE IN DETERMINING THE AMOUNT OF FAIR AND REASONABLE PAYMENT IN A PARTICULAR CASE DO NOT CONSTITUTE DAMAGES, LIQUIDATED OR OTHERWISE, OR PENALTIES, COLLECTED FOR THE USE OF THE UNITED STATES, BUT MERELY RESULT FROM MATTERS PROPERLY TAKEN INTO CONSIDERATION IN ADMINISTRATIVELY DETERMINING THE NET AMOUNT OF CASH TO BE ALLOWED AND PAID UNDER THE APPROPRIATIONS PROVIDED FOR CARRYING INTO EFFECT THE PROVISIONS OF THE SAID SOIL CONSERVATION AND DOMESTIC ALLOTMENT ACT.

IN THE CASE SUBMITTED IT IS PROPOSED TO REDUCE THE CASH PAYMENT WHICH OTHERWISE MIGHT BE ALLOWED MR. GOWEN BY THE AMOUNT OF $13.50 FOR 600 POUNDS OF FERTILIZER FURNISHED AS A GRANT OF AID. SUCH DEDUCTION IS COMPUTED AT THE RATE OF $0.015 A POUND FOR 300 POUNDS OF SUCH FERTILIZER IMPROPERLY USED BY THE RECIPIENT. IT IS SAID THAT SUCH FURTHER DEDUCTION IS IN ACCORDANCE WITH SECTION 15 OF THE 1939 AGRICULTURAL CONSERVATION PROGRAM BULLETIN PROVIDING THAT SUCH MATERIALS SHALL ONLY BE FURNISHED PURSUANT TO A PRODUCER'S REQUEST AND AGREEMENT THAT THE DEDUCTION WITH RESPECT TO MISUSED MATERIALS "SHALL BE TWICE THE REGULAR RATE OF DEDUCTION IN ORDER TO COMPENSATE THE GOVERNMENT FOR DAMAGES BECAUSE OF SUCH MISUSE.' WHILE THE WORDS "AGREEMENT" AND "DAMAGES" ARE USED, THERE WAS ACTUALLY NO SALE OF THE MATERIAL OR ANY CONTRACTUAL STATUS CREATED, IN VIEW OF THE STATUTORY PROVISIONS INVOLVED. IN ACTUAL EFFECT THE " AGREEMENT" IS NO MORE THAN A RECOGNITION BY THE PRODUCER OF THE SECRETARY'S CONDITIONS THAT ANY CASH PAYMENT WHICH MIGHT OTHERWISE BE ALLOWED--- NOT AS A MATTER OF RIGHT, BUT AS A REWARD FOR COMPLIANCE--- WOULD BE REDUCED FOR GRANTS OF OTHER AID FURNISHED, AND FURTHER REDUCED IN THE EVENT OF MISUSE OF THE MATERIALS GRANTED. UNDER THESE CONDITIONS THE EXTRA DEDUCTION IS NOT "DAMAGES" OR A PENALTY ACCRUING TO, AND COLLECTIBLE BY, THE UNITED STATES, BUT IS MERELY AN ELEMENT ENTERING INTO THE ADMINISTRATIVE DETERMINATION OF THE FAIR AND REASONABLE AMOUNT OF CASH PAYMENT TO BE ALLOWED UNDER THE PARTICULAR CIRCUMSTANCES. IT FOLLOWS THAT THE EXTRA AMOUNT SO DEDUCTED IN COMPUTING THE NET CASH PAYMENT IS NOT A COLLECTION OF DAMAGES OR PENALTY FOR THE USE OF THE UNITED STATES, AND, ACCORDINGLY, YOU ARE ADVISED THAT SUCH AMOUNTS ARE NOT REQUIRED TO BE CHARGED TO THE APPROPRIATION AND DEPOSITED FOR COVERING INTO THE TREASURY AS MISCELLANEOUS RECEIPTS.

THE APPLICATION AND ACCOMPANYING PAPERS TRANSMITTED WITH YOUR LETTER ARE RETURNED HEREWITH.