B-141948, MAY 5, 1960, 39 COMP. GEN. 748

B-141948: May 5, 1960

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IS REGARDED AS AN OPERATING EXPENSE ITEM STEMMING DIRECTLY FROM THE PERFORMANCE OF THE PURPOSES FOR WHICH THE FUND WAS ESTABLISHED AND IS NOT TO BE REGARDED AS A DISBURSEMENT FROM THE FUND OUTSIDE OF THE PURPOSES OF THE SMALL BUSINESS ACT AND THE SMALL BUSINESS INVESTMENT ACT OF 1958 SO AS TO BE EXCLUDED IN DETERMINING THE NET AMOUNT OF CASH DISBURSEMENTS FROM THE FUND. 1960: REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 5. THE CITED SECTION 4 (C) QUOTED IN YOUR LETTER PROVIDES AS FOLLOWS: THE ADMINISTRATION IS AUTHORIZED TO OBTAIN MONEY FROM THE TREASURY OF THE UNITED STATES FOR USE IN THE PERFORMANCE OF THE POWERS AND DUTIES GRANTED TO OR IMPOSED UPON IT BY LAW. 000 ARE HEREBY AUTHORIZED TO BE MADE TO A REVOLVING FUND IN THE TREASURY.

B-141948, MAY 5, 1960, 39 COMP. GEN. 748

INTEREST - SMALL BUSINESS ADMINISTRATION - REVOLVING FUND DISBURSEMENTS THE PAYMENT OF INTEREST ON THE NET EXPENDITURES FROM THE SMALL BUSINESS ADMINISTRATION REVOLVING FUND, AS REQUIRED UNDER SECTION 4 (C) OF THE SMALL BUSINESS ACT, 15 U.S.C. 633 (C), IS REGARDED AS AN OPERATING EXPENSE ITEM STEMMING DIRECTLY FROM THE PERFORMANCE OF THE PURPOSES FOR WHICH THE FUND WAS ESTABLISHED AND IS NOT TO BE REGARDED AS A DISBURSEMENT FROM THE FUND OUTSIDE OF THE PURPOSES OF THE SMALL BUSINESS ACT AND THE SMALL BUSINESS INVESTMENT ACT OF 1958 SO AS TO BE EXCLUDED IN DETERMINING THE NET AMOUNT OF CASH DISBURSEMENTS FROM THE FUND.

TO THE ADMINISTRATOR, SMALL BUSINESS ADMINISTRATION, MAY 5, 1960:

REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 5, 1960, REQUESTING A DECISION CONCERNING THE PROVISIONS OF SECTION 4 (C) OF THE SMALL BUSINESS ACT, 72 STAT. 385, 15 U.S.C. 633 (C) AS AMENDED BY PUBLIC LAW 86-367 APPROVED SEPTEMBER 22, 1959, 73 STAT. 647, REQUIRING THE PAYMENT OF INTEREST TO THE TREASURY ON THE NET AMOUNT OF THE CASH DISBURSEMENTS MADE BY THE ADMINISTRATION FROM THE " REVOLVING FUND, SMALL BUSINESS ADMINISTRATION.'

THE CITED SECTION 4 (C) QUOTED IN YOUR LETTER PROVIDES AS FOLLOWS:

THE ADMINISTRATION IS AUTHORIZED TO OBTAIN MONEY FROM THE TREASURY OF THE UNITED STATES FOR USE IN THE PERFORMANCE OF THE POWERS AND DUTIES GRANTED TO OR IMPOSED UPON IT BY LAW, NOT TO EXCEED TOTAL OF $975,000,000 OUTSTANDING AT ANY ONE TIME. FOR THIS PURPOSE APPROPRIATIONS NOT TO EXCEED $975,000,000 ARE HEREBY AUTHORIZED TO BE MADE TO A REVOLVING FUND IN THE TREASURY. ADVANCES SHALL BE MADE TO THE ADMINISTRATION FROM THE REVOLVING FUND WHEN REQUESTED BY THE ADMINISTRATION. THIS REVOLVING FUND SHALL BE USED FOR THE PURPOSES ENUMERATED SUBSEQUENTLY IN SECTIONS 7 (A), 7 (B) AND 8 (A), AND IN THE EXERCISE OF THE FUNCTIONS OF THE ADMINISTRATION UNDER THE SMALL BUSINESS INVESTMENT ACT OF 1958. * * * THE ADMINISTRATION SHALL PAY INTO MISCELLANEOUS RECEIPTS OF THE TREASURY, AT THE CLOSE OF EACH FISCAL YEAR, INTEREST ON THE NET AMOUNT OF THE CASH DISBURSEMENTS FROM SUCH ADVANCES AT A RATE DETERMINED BY THE SECRETARY OF THE TREASURY, TAKING INTO CONSIDERATION THE CURRENT AVERAGE RATE ON OUTSTANDING INTEREST-BEARING MARKETABLE PUBLIC DEBT OBLIGATIONS OF THE UNITED STATES OF COMPARABLE MATURITIES.

YOU STATE THAT, PURSUANT TO THE TERMS OF SECTION 4 (C) QUOTED ABOVE, THE INTEREST PAYABLE TO THE TREASURY ON THE NET EXPENDITURES FROM THE REVOLVING FUND HAS BEEN PAID AT THE CLOSE OF EACH FISCAL YEAR; AND THAT SUCH INTEREST PAYMENTS HAVE BEEN ADJUSTED FOR ADVANCES MADE FROM THE REVOLVING FUND TO THE SALARIES AND EXPENSES APPROPRIATION IN ACCORDANCE WITH OUR DECISION 33 COMP. GEN. 348. THAT IS TO SAY, FOLLOWING THE HOLDING OF THE DECISION, FUNDS TRANSFERRED FROM THE REVOLVING FUND TO THE APPROPRIATIONS MADE FOR SALARIES AND EXPENSES, FOR ADMINISTRATIVE EXPENSES, AS EXPRESSLY AUTHORIZED IN THE ANNUAL SUPPLY ACTS, ARE NOT INCLUDED IN DETERMINING THE NET AMOUNT OF THE CASH DISBURSEMENTS FROM THE REVOLVING FUND ON WHICH INTEREST IS REQUIRED TO BE PAID TO THE TREASURY.

YOU FURTHER STATE THAT NET EXPENDITURES FROM THE REVOLVING FUND, AS THUS COMPUTED, INCLUDE FUNDS TRANSFERRED FROM THE REVOLVING FUND TO THE TREASURY AS REQUIRED INTEREST PAYMENTS. DETERMINING NET EXPENDITURES IN THIS MANNER, YOU SAY, CAUSES THE ADMINISTRATION TO PAY INTEREST ON MONEY WHICH IS TRANSFERRED FROM THE REVOLVING FUND SIMILAR TO THE TRANSFERS MADE THEREFROM FOR ADMINISTRATIVE EXPENSES, WHICH TRANSFERS THE CITED DECISION HELD TO BE NOT SUBJECT TO THE PAYMENT OF INTEREST. YOU CONTEND THAT INTEREST PAYMENTS ON NET EXPENDITURES FROM THE REVOLVING FUND--- LIKE TRANSFERS MADE THEREFROM FOR ADMINISTRATIVE EXPENSES--- ARE NOT IN FACT USED FOR THE PURPOSES ENUMERATED IN SECTIONS 7 (A), 7 (B) AND 8 (A) OF THE SMALL BUSINESS ACT, AS AMENDED, 15 U.S.C. 636 (A), (B) AND 15 U.S.C. 637 (A), AND IN THE EXERCISE OF THE FUNCTIONS OF THE ADMINISTRATION UNDER THE SMALL BUSINESS INVESTMENT ACT OF 1958, 72 STAT. 689, 15 U.S.C. 661, AND THAT THE EFFECT OF INCLUDING THE AMOUNT OF SUCH PAYMENTS IN THE NET EXPENDITURES MADE FROM THE REVOLVING FUND IS TO CAUSE THE ADMINISTRATION TO PAY INTEREST ON INTEREST.

THE SPECIFIC QUESTION PRESENTED FOR DECISION IS WHETHER THE AMOUNT OF INTEREST PAYABLE TO THE TREASURY ON THE NET EXPENDITURES MADE FROM THE REVOLVING FUND, PURSUANT TO SECTION 4 (C) QUOTED ABOVE, MAY BE REGARDED AS OUTSIDE THE PURPOSES ENUMERATED IN SECTIONS 7 (A), 7 (B) AND 8 (A) OF THE SMALL BUSINESS ACT, AND IN THE SMALL BUSINESS INVESTMENT ACT OF 1958 AND, THEREFORE, AN ITEM OF EXPENSE ON WHICH INTEREST IS NOT REQUIRED TO BE PAID TO THE TREASURY.

IN OUR DECISION 33 COMP. GEN. 348, WE CONSIDERED THE QUESTION AS TO WHETHER FUNDS AUTHORIZED BY THE CONGRESS IN AN APPROPRIATION ACT TO BE TRANSFERRED FROM THE REVOLVING FUND TO THE SALARIES AND EXPENSES APPROPRIATION, FOR ADMINISTRATIVE EXPENSES INCIDENT TO THE ACTIVITIES FINANCED BY THE REVOLVING FUND, WERE SUBJECT TO THE PROVISIONS OF SECTION 240 (B) OF THE SMALL BUSINESS ACT OF 1953, 67 STAT. 232, 233, SINCE AMENDED TO READ AS SECTION 4 (C) QUOTED ABOVE, REQUIRING THE PAYMENT OF INTEREST BY THE ADMINISTRATION ON ADVANCES MADE TO IT FROM THAT FUND. HELD THEREIN TO THE EFFECT THAT THE REQUIREMENT FOR THE PAYMENT OF INTEREST RELATED TO ADVANCES USED ONLY FOR THE PURPOSES ENUMERATED IN THAT STATUTE, AND THAT SINCE THE TRANSFER OF FUNDS OUT OF THE REVOLVING FUND FOR ADMINISTRATIVE EXPENSES WAS FOR AN ADDITIONAL AND SEPARATE PURPOSE NOT WITHIN THE PURVIEW OF THE STATUTE, INTEREST WAS NOT REQUIRED TO BE PAID ON THE AMOUNT OF SUCH TRANSFERS.

THE UNDERLYING FACTS CONSIDERED IN THAT CASE ARE ENTIRELY DISSIMILAR FROM THOSE INVOLVED IN THE QUESTION UNDER CONSIDERATION AND, THEREFORE, THE REASONING FOLLOWED IN THE DECISION MAY NOT BE APPLIED HERE.

UNDER THE TERMS OF SECTION 4 (C) QUOTED ABOVE, NOT TO EXCEED $975,000,000 IS AUTHORIZED TO BE APPROPRIATED TO A REVOLVING FUND FOR USE BY THE SMALL BUSINESS ADMINISTRATION IN CARRYING OUT CERTAIN ENUMERATED FINANCIAL ASSISTANCE ACTIVITIES, AND IN THE EXERCISE OF ITS FUNCTIONS UNDER THE SMALL BUSINESS INVESTMENT ACT OF 1958. THE LAST SENTENCE OF THE SECTION REQUIRES THE ADMINISTRATION TO PAY INTEREST TO THE TREASURY ON EXPENDITURES MADE FROM THE REVOLVING FUND--- OTHER THAN FOR ADMINISTRATIVE EXPENSES AS INDICATED ABOVE--- AT THE END OF EACH FISCAL YEAR. THE AMOUNT OF SUCH INTEREST, BASED UPON A RATE DETERMINED BY THE SECRETARY OF THE TREASURY, IS REQUIRED TO BE COMPUTED ON THE BASIS OF NET EXPENDITURES, THAT IS, EXPENDITURES FROM THE REVOLVING FUND NET OF ANY BALANCES OF THE FUND REMAINING IN THE TREASURY DISBURSING ACCOUNT.

THERE APPEARS NOTHING IN SECTION 4 (C) SPECIFICALLY REQUIRING THAT, IN DETERMINING THE NET AMOUNT OF THE CASH DISBURSEMENTS FROM THE REVOLVING FUND ADVANCES, THERE ARE TO BE EXCLUDED AMOUNTS OF REQUIRED INTEREST PAYMENTS; NOR IS SUCH A CONSTRUCTION REQUIRED BY NECESSARY IMPLICATION. INTEREST PAYABLE ON THE NET AMOUNT OF CASH DISBURSEMENTS FROM THE REVOLVING FUND IS AN ITEM OF OPERATING EXPENSE STEMMING DIRECTLY FROM THE PERFORMANCE OF THE PURPOSES FOR WHICH THE FUND WAS ESTABLISHED. IT IS NOT UNLIKE OTHER EXPENSES DISBURSED FROM THE FUND, SUCH AS EXPENSES INCURRED IN LOAN LIQUIDATION AND FEES PAID TO BANKS FOR SERVICING IMMEDIATE PARTICIPATION LOANS, TO SUPPORT THE AUTHORIZED ACTIVITIES OF THE SMALL BUSINESS ADMINISTRATION.

WHILE REQUIRED INTEREST PAYMENTS MAY, IN A TECHNICAL OR THEORETICAL SENSE, BE VIEWED AS EXPENDED FOR PURPOSES OUTSIDE THE PURPOSES ENUMERATED IN SECTIONS 7 (A), 7 (B) AND 8 (A) OF THE SMALL BUSINESS ACT, AND IN THE SMALL BUSINESS INVESTMENT ACT OF 1958, THEY NEVERTHELESS REPRESENT EXPENDITURES MADE DIRECTLY IN FURTHERANCE OF SUCH PURPOSES. THE REVOLVING FUND HAVING BEEN MADE AVAILABLE NOT ONLY FOR THE ACCOMPLISHMENT OF THE ENUMERATED PURPOSES BUT ALSO FOR ANY OTHER PROPER EXPENDITURE CONNECTED THEREWITH, WE BELIEVE THAT INTEREST PAYMENTS, WHEN MADE, CONSTITUTE A DISBURSEMENT FROM THE REVOLVING FUND NOT OUTSIDE THE INTENDED SCOPE OF THE ENUMERATED PURPOSES.

MOREOVER, YOUR CONTENTION THAT THE INCLUSION OF INTEREST PAYMENTS IN THE NET AMOUNT OF THE CASH DISBURSEMENTS HAS THE EFFECT OF CAUSING YOUR ADMINISTRATION TO PAY INTEREST ON INTEREST IS NOT CLEAR. IN 47 CORPUS JURIS SECUNDUM 10, COMPOUND INTEREST IS DEFINED AS "INTEREST ON INTEREST; ACCRUED INTEREST ADDED TO THE PRINCIPAL SUM AND THE WHOLE TREATED AS A NEW PRINCIPAL FOR THE CALCULATION OF INTEREST FOR THE NEXT PERIOD.' THE DEFINITION OF COMPOUND INTEREST APPEARS TO HAVE REFERENCE TO CASES WHERE THERE IS NOT AN ACTUAL PAYMENT OF INTEREST MADE BUT MERELY THE ENTERING ON BOOKS OF RECORD THE ACCRUED INTEREST AND COMPUTING THEREON ADDITIONAL INTEREST. SUCH A SITUATION APPEARS TO DIFFER FROM THAT EXISTING BETWEEN THE SMALL BUSINESS ADMINISTRATION AND THE TREASURY, SINCE IN THE LATTER CASE THERE IS A PAYMENT OF INTEREST DUE AND UPON PAYMENT THEREOF THE INTEREST SHOULD NO LONGER BE CONSIDERED AS SUCH.

FOR THE FOREGOING REASONS AND IN ANSWER TO THE QUESTION PRESENTED, YOU ARE ADVISED THAT, IN APPLYING THE INTEREST PAYMENT PROVISIONS OF SECTION 4 (C), QUOTED ABOVE, ON THE NET AMOUNT OF THE CASH DISBURSEMENTS MADE FROM THE REVOLVING FUND, DISBURSEMENTS FOR INTEREST PAYMENTS MAY NOT BE EXCLUDED THEREFROM IN THE ABSENCE OF EXPRESS STATUTORY AUTHORITY THEREFOR.