B-129649, DECEMBER 11, 1956, 36 COMP. GEN. 461

B-129649: Dec 11, 1956

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NO OBJECTION WILL BE MADE TO THE TRANSFER OF SUCH PROFITS TO THE ACADEMY CHAPEL FUND FOR ACQUISITION OF CHAPEL. 1956: REFERENCE IS MADE TO LETTER DATED OCTOBER 26. THE LETTER STATES THAT THE SHIP'S SERVICE STORES WERE ESTABLISHED PURSUANT TO THE AUTHORITY CONTAINED IN SECTION 216 (A) OF THE MERCHANT MARINE ACT OF 1936. PROVIDES AS FOLLOWS: THE COMMISSION IS HEREBY AUTHORIZED AND DIRECTED. SHIP'S SERVICE STORES WERE ESTABLISHED UNDER WAS SHIPPING ADMINISTRATION GENERAL ORDER NO. 23. SECTION 101 OF SUCH REGULATIONS IS AS FOLLOWS: PURPOSE. THE OBJECTS OF THE SHIP'S SERVICE DEPARTMENT ARE TO PROVIDE A CONVENIENT AND RELIABLE SOURCE FROM WHICH THE TRAINING ORGANIZATION PERSONNEL MAY OBTAIN ARTICLES AND SERVICES.

B-129649, DECEMBER 11, 1956, 36 COMP. GEN. 461

MARITIME SERVICE - SHIP'S STORES FUND - AVAILABILITY OF PROFITS IN THE ABSENCE OF CONGRESSIONAL ACTION ESTABLISHING A POLICY CONCERNING PROFITS DERIVED FROM REVENUE-PRODUCING ACTIVITIES OF THE GOVERNMENT, PROFITS DERIVED FROM THE OPERATION OF SHIP'S SERVICE STORES OPERATED FOR THE MARITIME SERVICE MAY CONTINUE TO BE USED FOR WELFARE ACTIVITIES OF THE TRAINEES OF THE MARITIME TRAINING PROGRAM, AND NO OBJECTION WILL BE MADE TO THE TRANSFER OF SUCH PROFITS TO THE ACADEMY CHAPEL FUND FOR ACQUISITION OF CHAPEL.

TO THE SECRETARY OF COMMERCE, DECEMBER 11, 1956:

REFERENCE IS MADE TO LETTER DATED OCTOBER 26, 1956, FROM THE ASSISTANT SECRETARY FOR ADMINISTRATION REQUESTING AN OPINION AS TO THE LEGALITY AND PROPRIETY OF A PROPOSED DISTRIBUTION BY THE MARITIME ADMINISTRATOR OF CERTAIN FUNDS RESULTING FROM PROFITS OF SHIP'S SERVICE STORES OF THE UNITED STATES MARITIME SERVICE.

THE LETTER STATES THAT THE SHIP'S SERVICE STORES WERE ESTABLISHED PURSUANT TO THE AUTHORITY CONTAINED IN SECTION 216 (A) OF THE MERCHANT MARINE ACT OF 1936, AS AMENDED, 46 U.S.C. (1946 USED.) 1126, WHICH IN PERTINENT PART, PROVIDES AS FOLLOWS:

THE COMMISSION IS HEREBY AUTHORIZED AND DIRECTED, UNDER SUCH RULES AND REGULATIONS AS IT MAY PRESCRIBE, TO ESTABLISH AND MAINTAIN THE UNITED STATES MARITIME SERVICE AS A VOLUNTARY ORGANIZATION FOR THE TRAINING OF CITIZENS OF THE UNITED STATES TO SERVE AS LICENSED AND UNLICENSED PERSONNEL ON AMERICAN MERCHANT VESSELS.

SHIP'S SERVICE STORES WERE ESTABLISHED UNDER WAS SHIPPING ADMINISTRATION GENERAL ORDER NO. 23, REVISED, 46 C.F.R. 310.29 WHICH READS AS FOLLOWS:

SHIP'S SERVICE STORES. SHIP'S SERVICE STORES FOR THE SALE OF TOBACCO, CANDY, TOILET ARTICLES, CLOTHING, SUPPLIES, AND SIMILAR MERCHANDISE MAY BE ESTABLISHED AND MAINTAINED AT TRAINING STATIONS, ON TRAINING SHIPS, AND OTHER UNITS OF THE MARITIME SERVICE.

IN ADDITION TO THE ABOVE-QUOTED REGULATION, SHIP'S SERVICE STORES REGULATIONS REVISED MARCH 15, 1944, PROMULGATED BY THE DIVISION OF TRAINING OF FORMER WAR SHIPPING ADMINISTRATION, CONTAIN OPERATING DIRECTIONS AS TO SUCH STORES. SECTION 101 OF SUCH REGULATIONS IS AS FOLLOWS:

PURPOSE. THE OBJECTS OF THE SHIP'S SERVICE DEPARTMENT ARE TO PROVIDE A CONVENIENT AND RELIABLE SOURCE FROM WHICH THE TRAINING ORGANIZATION PERSONNEL MAY OBTAIN ARTICLES AND SERVICES, ESSENTIAL TO THEIR WELL-BEING AND, THROUGH ACCRUED PROFITS, TO SUPPLEMENT THE WELFARE AND RECREATION FUNDS DERIVED FROM OTHER SOURCES.

THE LETTER STATES THAT SINCE THE ESTABLISHMENT OF THE SHIP'S SERVICE STORES THERE HAS ACCUMULATED A SIZEABLE SUM OF PROFITS AS A RESULT OF THEIR OPERATIONS, LARGELY DURING THE EXTENSIVE MARITIME TRAINING PROGRAM IN THE WAR YEARS. IT IS REPORTED THAT DISBURSEMENTS FROM THE PROFITS HAVE BEEN MADE OVER THE YEARS UPON AN ADMINISTRATIVE DETERMINATION THAT THEY WERE TO SUPPLEMENT THE WELFARE AND RECREATIONAL FUNDS FROM OTHER SOURCES. RECENTLY THE MARITIME TRAINING PROGRAM HAS BEEN CURTAILED WITH ALL TRAINING STATIONS BEING CLOSED EXCEPT THE UNITED STATES MERCHANT MARINE ACADEMY AT KINGS POINT, NEW YORK, WHICH IS CONSTITUTED A PERMANENT INSTITUTION UNDER PUBLIC LAW 415, 84TH CONGRESS, 70 STAT. 25, 46 U.S.C. 1126 (B). IT IS STATED THAT A NEED FOR A CHAPEL AT THE MERCHANT MARINE ACADEMY HAS LONG BEEN RECOGNIZED AND, AS THE ACADEMY HAS NOW BEEN MADE A PERMANENT INSTITUTION, THE MARITIME ADMINISTRATOR PROPOSES TO TURN OVER TO THE CHAPEL FUND THE PROFITS ACCUMULATED FROM THE OPERATION OF THE SHIP'S SERVICE STORES.

THE VIEW IS EXPRESSED IN THE ASSISTANT SECRETARY'S LETTER THAT THE CHAPEL MAY BE CONSIDERED FOR THE WELFARE OF THE ENROLLEES OF THE U.S. MARITIME SERVICE AT KINGS POINT WHICH IS THE REMAINING " TRAINING ORGANIZATION PERSONNEL" REFERRED TO IN THE ABOVE-QUOTED REGULATIONS. ALSO REFERRED TO IS THE OPINION OF THE GENERAL COUNSEL OF THE MARITIME ADMINISTRATION TO THE EFFECT THAT THE REGULATIONS PROMULGATED UNDER SECTION 216 (A) OF THE MERCHANT MARINE ACT HAVE THE FORCE AND EFFECT OF LAW; THAT THE REGULATIONS PROVIDING FOR THE DISTRIBUTION OF THE STORE'S PROFITS ARE VALID, AND THAT THE PROFITS NOW REMAINING DO NOT BELONG TO THE GOVERNMENT. THE OPINION OF THE GENERAL COUNSEL OF THE MARITIME ADMINISTRATION CONCLUDES THAT THE SHIP'S SERVICE STORE'S PROFITS MAY BE TRANSFERRED TO THE CHAPEL FUND BY THE MARITIME ADMINISTRATOR UPON HIS DETERMINATION THAT SUCH FUND IS THE PROPER RECIPIENT. YOU ASK WHETHER THE MARITIME SERVICE REGULATIONS WHICH PROVIDE FOR THE DISTRIBUTION OF THE PROFITS DERIVED FROM OPERATION OF THE SHIP'S SERVICE STORES ARE VALID AND WHETHER THE PROFITS MAY BE REGARDED AS NOT BELONGING TO THE GOVERNMENT, AND (2) WHETHER THE MARITIME ADMINISTRATOR MAY AUTHORIZE THE TRANSFER OF SUCH PROFITS TO THE ACADEMY CHAPEL FUND. IN THE EVENT THE ANSWERS TO THE FIRST TWO QUESTIONS ARE IN THE NEGATIVE, YOU ASK FURTHER (3) WHETHER WSA GENERAL ORDER 23 COULD NOW BE AMENDED TO PROVIDE SPECIFICALLY FOR THE DISTRIBUTION OF PROFITS, THUS AUTHORIZING THE MARITIME ADMINISTRATOR TO TRANSFER THE FUNDS IN QUESTION TO THE CHAPEL FUND.

SECTION 216 (A) OF THE MERCHANT MARINE ACT AUTHORIZED THE MARITIME COMMISSION TO ESTABLISH AND MAINTAIN THE MARITIME TRAINING SERVICE UNDER RULES AND REGULATIONS IT WAS AUTHORIZED TO PRESCRIBE. THE COMMISSION AND ITS SUCCESSOR AGENCIES WHICH ADMINISTERED THE MARITIME TRAINING PROGRAM UNDER EXECUTIVE ORDER NO. 9083 OF FEBRUARY 28, 1942, 7 F.R. 1609, AND EXECUTIVE ORDER NO. 9198, JULY 11, 1942, 7 F.R. 5383--- THE COAST GUARD AND THE WAR SHIPPING ADMINISTRATION POSSESSED AUTHORITY TO MAKE REGULATIONS FOR THE CONTROL OF THE SERVICE. THE AUTHORITY OF THESE AGENCIES TO MAKE REGULATIONS CONTROLLING THE SERVICE APPEAR TO BE LITTLE DIFFERENT FROM THAT POSSESSED BY SECRETARY OF THE ARMY TO MAKE REGULATIONS FOR THE "GOVERNMENT OF THE ARMY" WHICH ON SEVERAL OCCASIONS WAS HELD TO AUTHORIZE THE ESTABLISHMENT OF POST EXCHANGES. DUGAN V. UNITED STATES, 34 C.1CLS. 458, 66; STANDARD OIL CO. V. JOHNSON, 316 U.S. 481. THE REGULATIONS ISSUED BY THE SECRETARY WERE THEREIN CONSTRUED TO HAVE THE FORCE OF LAW. THE QUOTED PROVISION OF GENERAL ORDER 23 WAS ISSUED BY THE ADMINISTRATOR, WAR SHIPPING ADMINISTRATION, THE THEN SUCCESSOR TO THE MARITIME COMMISSION FOR TRAINING ACTIVITIES. THE ESTABLISHMENT OF SHIP'S SERVICE STORES APPEARS TO BE A REASONABLE AND POSSIBLY NECESSARY ACTION "TO ESTABLISH AND MAINTAIN THE UNITED STATES MARITIME SERVICE" FOR THE PURPOSES SET OUT IN 46 U.S.C. 1126. THE REGULATIONS OF THE TRAINING DIVISION WERE PUBLISHED AND AMENDED; AND, THE STORES WERE OPERATED THEREUNDER FOR A CONSIDERABLE PERIOD. EVEN THOUGH THE AUTHORITY OF THE TRAINING DIVISION TO ISSUE THEM HAS NOT BEEN SHOWN, THEY REASONABLY MAY BE CONSIDERED AS RULES AND REGULATIONS OF THE WAR SHIPPING ADMINISTRATION, THE THEN SUCCESSOR TO THE MARITIME COMMISSION REFERRED TO IN 46 U.S.C. 1126. HOWEVER, THEIR VALIDITY OTHERWISE CANNOT BE SAID TO BE FREE OF DOUBT. THE COMMISSION'S AUTHORITY UNDER THAT SECTION OF LAW IS LIMITED TO RULES AND REGULATIONS "TO ESTABLISH AND MAINTAIN THE UNITED STATES MARITIME SERVICE.' WHILE THEREUNDER THE ESTABLISHMENT OF SHIP'S SERVICE STORES REASONABLY WAS AUTHORIZED, CONSIDERABLE DOUBT EXISTS WHETHER THE AUTHORITY TO ESTABLISH THE STORES WOULD PERMIT AS WELL THE DISPOSAL OF THE PROFITS THEREFROM IN A MANNER WHICH FAILS TO RECOGNIZE THE GOVERNMENT'S INTEREST THEREIN. THESE STORES WERE OPERATED ON GOVERNMENT PROPERTY WITHOUT CHARGE FOR ITS USE OTHER THAN FOR THE UTILITIES--- LIGHT, HEAT AND POWER--- FURNISHED BY THE GOVERNMENT. ALSO, EMPLOYEES OF THE OFFICE OF MARITIME TRAINING, WHOSE SALARIES ARE PAID FROM APPROPRIATED FUNDS PARTICIPATED IN THE MANAGEMENT AND OPERATIONS OF THE STORES. THE STORE'S OPERATIONS APPEAR INCIDENTAL TO AND DEPENDENT FOR THEIR EXISTENCE UPON THE EXPENDITURE OF APPROPRIATED FUNDS IN THE ACCOMPLISHMENT BY THE TRAINING ORGANIZATIONS OF THE DUTIES ASSIGNED TO IT BY THE CONGRESS. THE INTEREST OF THE GOVERNMENT IN THE PROFITS THEREOF IS READILY APPARENT. YET THE SITUATION AS TO THE PROFITS FROM THE SHIP'S SERVICE STORES IS NOT MATERIALLY DIFFERENT FROM THOSE CONSIDERED IN OUR REPORT OF AUGUST 10, 1949, B-45101, COPY ATTACHED, TO THE CONGRESS WHEREIN WE RECOMMENDED THAT IT CONSIDER LEGISLATION TO CONTROL THE DIVERSION FROM THE TREASURY TO VARIOUS WELFARE PURPOSES OF PROFITS IN CONNECTION WITH THE CONDUCT OF REVENUE PRODUCING ACTIVITIES. THE FACT THAT PROFITS FROM THE SHIP'S SERVICE STORES WERE BEING USED FOR RECREATION AND WELFARE OF THE TRAINEES OF THE MARITIME TRAINING INSTITUTIONS AND INDEED WAS PROPOSED FOR CONTRIBUTIONS TO THE PROJECTED ACQUISITION OF A CHAPEL BY THE ADMINISTRATION WAS BROUGHT TO THE ATTENTION OF THE CONGRESS BY OUR 1952 AND 1953 AUDIT REPORT (PAGES 38-39) ON THE MARITIME ADMINISTRATION. DATE THE CONGRESS HAS NOT TAKEN ACTION IN THE MATTER. IN 32 COMP. GEN. 282, INVOLVING A SOMEWHAT ANALOGOUS SITUATION WE STATED:

WHILE THE LEGAL AUTHORITY OF ADMINISTRATIVE OFFICIALS TO HAVE AGREED TO SUCH AN ARRANGEMENT (WHERE PROCEEDS OF REVENUE RAISING MACHINES WERE TO BE RETAINED BY EMPLOYEE GROUPS FOR THEIR WELFARE) IS DOUBTFUL, IT HAS BEEN CONCLUDED THAT THIS OFFICE WILL INTERPOSE NO OBJECTION TO THE CONTINUED USE OF PROCEEDS DERIVED BY EMPLOYEES GROUPS FROM OPERATION OF SUCH MACHINES FOR EMPLOYEE GENERAL WELFARE ACTIVITIES PENDING FURTHER ACTION BY THE CONGRESS IN THE FORM OF CLARIFYING LEGISLATION AS RECOMMENDED IN THE REPORT OF THIS OFFICE TO THE CONGRESS OF AUGUST 10, 1949, B-45101.

UNDER THE CIRCUMSTANCES, WHILE WE QUESTION THE VALIDITY OF THE REGULATION INDICATING THAT THE PROFITS OF THE SHIP'S SERVICE STORES MAY BE USED FOR WELFARE PURPOSES AND WHETHER THE FUNDS DO NOT BELONG TO THE GOVERNMENT, PENDING FURTHER ACTION BY THE CONGRESS, WE WILL INTERPOSE NO OBJECTION TO THE CONTINUED USE OF SUCH PROFITS FOR WELFARE ACTIVITIES OF THE TRAINEES OF THE MARITIME TRAINING PROGRAM. QUESTION 1 IS ANSWERED ACCORDINGLY.

THE CHAPEL AT KINGS POINT WAS AUTHORIZED TO BE CONSTRUCTED BY THE ACT OF APRIL 17, 1948, 62 STAT. 172. SIMILAR CHAPELS ARE UNDERSTOOD TO BE MAINTAINED AT THE ACADEMIES ESTABLISHED FOR TRAINING OF OFFICERS OF THE DEPARTMENT OF DEFENSE. SUCH CHAPELS ARE GENERALLY REGARDED AS CONTRIBUTING TO THE TRAINING AND WELFARE OF THE CADETS. ALSO, THE MERCHANT MARINE ACADEMY AT KINGS POINT APPEARS TO CONSTITUTE THE REMAINING TRAINING ORGANIZATION OF THE MARITIME ADMINISTRATION. ACCORDINGLY, WE WILL INTERPOSE NO OBJECTION TO A TRANSFER OF THE PROFITS FROM THE SHIP'S SERVICE STORES TO THE ACADEMY CHAPEL FUND BY THE MARITIME ADMINISTRATION. QUESTION 2 IS ANSWERED ACCORDINGLY.

IN VIEW OF WHAT IS STATED ABOVE, NO ANSWER TO QUESTION 3 APPEARS TO BE REQUIRED.