B-129579, DEC. 7, 1956

B-129579: Dec 7, 1956

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

TO SUCH DEPARTMENT OR AGENCY SOLELY FOR EXPENDITURE FOR THE LIQUIDATION OF OBLIGATIONS LEGALLY INCURRED AGAINST SUCH APPROPRIATION DURING THE PERIOD FOR WHICH SUCH APPROPRIATION WAS LEGALLY AVAILABLE FOR OBLIGATION: PROVIDED. THAT CONTINUATION IS NECESSARY FOR REASONS OF ECONOMY OR IN THE NATIONAL INTEREST.'. CERTAIN APPROPRIATIONS OF THE NAVY DEPARTMENT WHICH WOULD OTHERWISE LAPSE FOR EXPENDITURE PURPOSES WERE CONTINUED AVAILABLE TO JUNE 30. NUMEROUS CONTRACTS WERE CERTIFIED FOR CONTINUATION AFTER JUNE 30. IT APPEARS THAT THE REMAINDER OF THE CONTRACTS CHARGEABLE TO SUCH CONTINUED FUNDS SHOULD HAVE BEEN TERMINATED NOT LATER THAN JUNE 30. CERTAIN OF THE CONTRACTS WERE NOT SO TERMINATED.

B-129579, DEC. 7, 1956

TO THE SECRETARY OF THE NAVY:

BY A LETTER DATED OCTOBER 2, 1956, THE ASSISTANT SECRETARY OF THE NAVY (FINANCIAL MANAGEMENT) RETURNED, FOR RECONSIDERATION IN THE LIGHT OF OUR DECISION OF SEPTEMBER 26, 1956, B-128260, SEVERAL CLAIMS SUPPORTED BY VOUCHERS INVOLVING APPROPRIATIONS SUBJECT TO THE PROVISIONS OF SECTION 731 -1/2 OF THE DEPARTMENT OF DEFENSE APPROPRIATION ACT, 1955, 68 STAT. 356.

THE LETTER OF OCTOBER 2, 1956, INDICATES OUR REFERRED-TO DECISION DETERMINED THAT SUCH CLAIMS WOULD BE ADJUDICATED (SETTLED DIRECTLY) IN THE GENERAL ACCOUNTING OFFICE. HOWEVER, THIS APPEARS TO BE BASED UPON A MISUNDERSTANDING OF THAT DECISION.

SECTION 731-1/2 OF THE DEPARTMENT OF DEFENSE APPROPRIATION ACT PROVIDES:

"THOSE APPROPRIATIONS OR FUNDS AVAILABLE TO THE DEPARTMENT OF DEFENSE OR ANY AGENCY THEREOF WHICH WOULD OTHERWISE LAPSE FOR EXPENDITURE PURPOSES ON JUNE 30, 1954, AND DESIGNATED BY THE SECRETARY OF DEFENSE NOT LATER THAN JULY 31, 1954, SHALL REMAIN AVAILABLE UNTIL JUNE 30, 1955, TO SUCH DEPARTMENT OR AGENCY SOLELY FOR EXPENDITURE FOR THE LIQUIDATION OF OBLIGATIONS LEGALLY INCURRED AGAINST SUCH APPROPRIATION DURING THE PERIOD FOR WHICH SUCH APPROPRIATION WAS LEGALLY AVAILABLE FOR OBLIGATION: PROVIDED, THAT THE DEPARTMENT OF DEFENSE SHALL MAKE A REVIEW OF ALL CONTRACTS ENTERED INTO UNDER SUCH APPROPRIATIONS OR FUNDS AND OUTSTANDING ON JUNE 30, 1954, AND REPORT TO THE APPROPRIATIONS COMMITTEES OF THE SENATE AND THE HOUSE OF REPRESENTATIVES BY JANUARY 31, 1955, (A) THE TOTAL VALUE OF CONTRACTS CANCELLED, (B) THE TOTAL VALUE OF CONTRACTS ADJUSTED AND THE RESULTANT SAVINGS THEREFROM, AND (C) THE TOTAL VALUE OF CONTRACTS CONTINUED ON THE BASIS OF DETERMINED NEED: PROVIDED FURTHER, THAT ANY SUCH CONTRACT SHALL BE TERMINATED NO LATER THAN JUNE 30, 1955, UNLESS THE SECRETARY OF THE DEPARTMENT CONCERNED CERTIFIES PRIOR TO JANUARY 1, 1955, THAT CONTINUATION IS NECESSARY FOR REASONS OF ECONOMY OR IN THE NATIONAL INTEREST.'

PURSUANT TO THIS PROVISION BY ALNAV STA 7 OF JULY 7, 1954, CERTAIN APPROPRIATIONS OF THE NAVY DEPARTMENT WHICH WOULD OTHERWISE LAPSE FOR EXPENDITURE PURPOSES WERE CONTINUED AVAILABLE TO JUNE 30, 1955. ALSO, PURSUANT TO THE PROVISION, NUMEROUS CONTRACTS WERE CERTIFIED FOR CONTINUATION AFTER JUNE 30, 1955. IT APPEARS THAT THE REMAINDER OF THE CONTRACTS CHARGEABLE TO SUCH CONTINUED FUNDS SHOULD HAVE BEEN TERMINATED NOT LATER THAN JUNE 30, 1955, BUT BECAUSE THE INFORMATION AVAILABLE TO THE DEPARTMENT INDICATED PERFORMANCE WOULD BE COMPLETED BY THAT DATE, THROUGH OVERSIGHT OR OTHERWISE, CERTAIN OF THE CONTRACTS WERE NOT SO TERMINATED. THE INTENT OF SECTION 731-1/2 OF THE APPROPRIATION ACT APPEARS TO HAVE BEEN TO CAUSE THE DEPARTMENT OF DEFENSE TO REVIEW ANY CONTRACT OBLIGATION PREVIOUSLY INCURRED UNDER THE APPROPRIATIONS CONTINUED AND TO REQUIRE ALL SUCH CONTRACTS NOT CERTIFIED BY THE SECRETARY OF THE DEPARTMENT AS "NECESSARY FOR REASONS OF ECONOMY OR IN THE NATIONAL INTEREST" TO BE TERMINATED NOT LATER THAN JUNE 30, 1955. A COMPLIANCE WITH SUCH INTENT WOULD THUS HAVE RESULTED IN THE CANCELLATION OF THE CONTRACTS NOT CERTIFIED FOR CONTINUANCE AND THE FREEING OF THE CONTINUED APPROPRIATIONS OF THE OBLIGATIONS WHICH PREVIOUSLY HAD BEEN INCURRED AGAINST THEM BY THE MAKING OF THE CONTRACTS INVOLVED. IF ANY SUPPLIES AND SERVICES SUCH AS CONTEMPLATED BY THE CONTRACTS DIRECTED TO BE TERMINATED WERE NECESSARY, THEY WOULD HAVE TO BE PROCURED FROM THE APPROPRIATIONS CURRENT AT THE TIME A NEW CONTRACTUAL OBLIGATION FOR THEIR PROCUREMENT AROSE. TO PERMIT THE CHARGING OF THE OBLIGATION INCURRED UNDER THE ORIGINAL CONTRACTS AGAINST THE CONTINUED APPROPRIATIONS OR THEIR SUCCESSOR ACCOUNTS, THE PAYMENT OF CERTIFIED CLAIMS ACCOUNT OR THE SUCCESSOR AGENCY ACCOUNTS PROVIDED FOR IN THE ACT OF JULY 25, 1956, PUBLIC LAW 798, 70 STAT. 647, WOULD FRUSTRATE THE INTENTION OF CONGRESS IN ENACTING SECTION 731-1/2 OF THE DEFENSE DEPARTMENT APPROPRIATION ACT IN THAT IT WOULD ENABLE THE DEPARTMENT OF DEFENSE TO CHARGE TO THE CONTINUED FUNDS, OR THEIR SUCCESSOR ACCOUNTS, OBLIGATIONS WHICH, HAD THE DIRECTIONS OF THE CONGRESS BEEN CARRIED OUT, WOULD HAVE BEEN CANCELED.

ACCORDINGLY, IN ANSWER TO THE FIRST TWO QUESTIONS WHICH WERE THE SUBJECT OF OUR DECISION OF SEPTEMBER 26, 1956, WE STATED:

"* * * WE ARE OF THE OPINION THAT THE REQUIRED TERMINATION OF ANY FISCAL YEAR 1952 MILITARY CONTRACT WHICH HAD NOT BEEN CERTIFIED FOR CONTINUANCE BEYOND JUNE 30, 1955, PROHIBITS THE USE OF FUNDS TRANSFERRED TO THE "PAYMENT OF CERTIFIED CLAIMS" ACCOUNT, OR TO THE SUCCESSOR AGENCY ACCOUNTS AS PROVIDED FOR IN THE ACT OF JULY 25, 1956, PUBLIC LAW 798, 84TH CONGRESS, FOR THE PAYMENT OF ANY AMOUNT TO THE CONTRACTOR FOR PERFORMANCE AFTER JUNE 30, 1955.'

WE RECOGNIZED, HOWEVER, THAT THE DIRECTION TO TERMINATE CONTRACTS NOT CERTIFIED BY THE SECRETARY FOR CONTINUANCE ON THE BASIS OF NEED IN THE INTEREST OF ECONOMY OR NATIONAL DEFENSE WAS NOT SELF-EXECUTING AND THE CONTRACTOR HAD A RIGHT TO PAYMENT. ALSO, IF THE DIRECTION TO THE DEPARTMENT OF DEFENSE HAD BEEN CARRIED OUT SUCH PAYMENT WOULD BE CHARGEABLE TO FUNDS CURRENT AT THE TIME OF THE INCURRING OF A NEW CONTRACTUAL OBLIGATION OR THE RENDITION OF THE SERVICE. WE, THEREFORE, STATED IN ANSWER TO THE THIRD QUESTION THERE RAISED:

"* * * WE PERCEIVE NO OBJECTION TO THE PAYMENT OF REASONABLE AMOUNTS FOR DELIVERIES MADE SUBSEQUENT TO JUNE 30, 1955, UNDER A CONTRACT WHICH SHOULD HAVE BEEN TERMINATED AS OF THAT DATE, OUT OF APPROPRIATIONS MADE AVAILABLE FOR OBLIGATION AND EXPENDITURE DURING THE PERIODS IN WHICH SUCH DELIVERIES WERE ACCOMPLISHED.'

THE PARTICULAR PAYMENTS INVOLVED IN THAT DECISION WERE FOR WORK WHICH HAD BEEN PERFORMED BUT NOT DELIVERED AS OF JUNE 30, 1955, AND IN VIEW OF THE REPORT THAT UNDER THE PROVISIONS OF THE CONTRACT THE CONTRACTOR WOULD BE PAID TERMINATION CHARGES FOR WORK COMPLETED UP TO JUNE 30, 1955, IF THE CONTRACT HAD BEEN TERMINATED ON THAT DATE, WE CONCLUDED THAT SUCH AMOUNT WASA PROPER CHARGE ON THE 1952 FUNDS. WE STATED THAT SUCH CLAIM WOULD BE SETTLED HERE. THIS WAS IN ACCORDANCE WITH PARAGRAPH 4/B) OF GENERAL REGULATIONS 131 DATED AUGUST 7, 1956, WHICH PROVIDES THAT CLAIMS RECEIVED IN THE GENERAL ACCOUNTING OFFICE THROUGH AUGUST 31, 1956, WHICH ARE CHARGEABLE TO LAPSED APPROPRIATION ACCOUNTS WILL BE ADJUDICATED HERE. HOWEVER, THERE WAS NO INTENTION TO REQUIRE THAT THERE BE FORWARDED HERE FOR DIRECT SETTLEMENT CLAIMS WHICH UNDER B-128260 WOULD BE CHARGEABLE TO CURRENT APPROPRIATIONS NOR TO LAPSED APPROPRIATIONS--- NOW UNDER CONTROL OF THE NAVY DEPARTMENT--- UNLESS THE CLAIM WAS RECEIVED HERE PRIOR TO AUGUST 31, 1956.

THE ONLY CLAIM RETURNED BY THE ASSISTANT SECRETARY'S LETTER WHICH APPEARS ANALOGOUS TO THAT CONSIDERED IN B-128260 IS THAT OF THE AIR COOLED MOTORS, INC., WHERE PERFORMANCE WAS COMPLETED PRIOR TO JUNE 30, 1955. THE REMAINING CLAIMS INVOLVE CASES WHERE PERFORMANCE WAS COMPLETED AFTER JUNE 30, 1955, AND WHICH UNDER THAT DECISION ARE CHARGEABLE TO CURRENT FUNDS. THERE WAS NO APPARENT REASON FOR FORWARDING SUCH CLAIMS HERE FOR ADJUDICATION. HOWEVER, THE CLAIMS HAVE ALREADY BEEN BACK AND FORTH BETWEEN OUR OFFICE AND YOUR DEPARTMENT ON SEVERAL OCCASIONS AND NO REASON SUGGESTS ITSELF WHY PAYMENT TO THE CONTRACTORS WHO ARE PRESSING FOR SETTLEMENT SHOULD ANY LONGER BE DELAYED. OUR CLAIMS DIVISION, THEREFORE, TODAY HAS BEEN INSTRUCTED TO ALLOW THE CLAIMS, IF OTHERWISE PROPER, ON THE BASIS INDICATED ABOVE; THAT IS, WHERE THE PERFORMANCE WAS COMPLETED PRIOR TO JUNE 30, 1955, AND THE CONTRACT PROVIDES UPON TERMINATION FOR PAYMENT FOR THE WORK PERFORMED TO DATE OF TERMINATION TO ALLOW THE CLAIMS FROM THE 1952 APPROPRIATION OR ITS SUCCESSOR; OTHERWISE TO CHARGE THE AMOUNTS TO THE APPLICABLE APPROPRIATION CURRENT AT THE TIME OF DELIVERY OF THE SERVICE OR INCURRING OF THE COSTS. FURTHERMORE, SIMILAR ACTION WILL BE TAKEN ON OTHER CLAIMS NOW PENDING IN OUR OFFICE. HOWEVER, UNLESS A DOUBTFUL QUESTION OF LAW OR FACT IS INVOLVED IN A PARTICULAR CASE, WE PERCEIVE NO NECESSITY FOR FORWARDING SIMILAR CLAIMS HERE AND SUCH VOUCHERS MAY BE PROCESSED ADMINISTRATIVELY.

WE TRUST WHAT IS SAID HEREIN WILL SERVE ADEQUATELY TO CLARIFY ANY MISUNDERSTANDING AS TO THE MEANING OF AND BASIS FOR OUR DECISION OF SEPTEMBER 26, 1956.