B-143175, AUGUST 9, 1960, 40 COMP. GEN. 81

B-143175: Aug 9, 1960

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WHICH IS EARNED BETWEEN THE TIME THE DEPARTMENT OF AGRICULTURE ADVANCES CASH TO AGRICULTURAL COOPERATIVES PURSUANT TO SECTION 104 OF THE AGRICULTURAL TRADE DEVELOPMENT AND ASSISTANCE ACT OF 1954. AN EQUIVALENT AMOUNT IS PURCHASED WITH DOLLARS AND THE UNUSED INTEREST IS DEPOSITED TO THE FOREIGN CURRENCY ACCOUNT. SHALL BE MADE AVAILABLE IN ADVANCE FOR USE AS PROVIDED BY THIS SUBSECTION OVER SUCH PERIOD OF YEARS AS THE SECRETARY OF AGRICULTURE DETERMINES WILL MOST EFFECTIVELY CARRY OUT THE PURPOSE OF THIS SUBSECTION. * * * THE ASSISTANT SECRETARY STATES THAT THE FOREIGN AGRICULTURAL SERVICE HAS ENTERED INTO COOPERATIVE AGREEMENTS WITH ABOUT 50 TRADE AND AGRICULTURAL GROUPS OR ASSOCIATIONS REPRESENTING VARIOUS INDUSTRIES IN THE UNITED STATES.

B-143175, AUGUST 9, 1960, 40 COMP. GEN. 81

AGRICULTURE FOREIGN TRADE PROGRAM - INTEREST ON FOREIGN CURRENCIES - USE INTEREST ON FOREIGN CURRENCIES DEPOSITED IN FOREIGN BANKS, WHICH IS EARNED BETWEEN THE TIME THE DEPARTMENT OF AGRICULTURE ADVANCES CASH TO AGRICULTURAL COOPERATIVES PURSUANT TO SECTION 104 OF THE AGRICULTURAL TRADE DEVELOPMENT AND ASSISTANCE ACT OF 1954, 7 U.S.C. 1704, AND THE TIME THE COOPERATORS ACTUALLY USE THE ADVANCES, MAY BE CONSIDERED AS RECEIPTS FOR THE BENEFIT OF THE UNITED STATES WHICH, UNDER SECTION 3617, R.S., 31 U.S.C. 484, MUST BE DEPOSITED IN THE TREASURY TO THE CREDIT OF MISCELLANEOUS RECEIPTS AND MAY NOT BE USED FOR SECTION 104 (A) PURPOSES; HOWEVER, FOR SIMPLIFICATION OF ADMINISTRATION, A CLAUSE MAY BE INCLUDED IN THE AGREEMENTS TO PERMIT THE COOPERATIVES TO USE THE INTEREST, PROVIDED THAT, PURSUANT TO THE SPECIAL FOREIGN CURRENCY PROVISIONS IN THE DEPARTMENT OF AGRICULTURE AND FARM CREDIT APPROPRIATION ACT, 1961, 74 STAT. 232, AN EQUIVALENT AMOUNT IS PURCHASED WITH DOLLARS AND THE UNUSED INTEREST IS DEPOSITED TO THE FOREIGN CURRENCY ACCOUNT.

TO THE SECRETARY OF AGRICULTURE, AUGUST 9, 1960:

BY LETTER OF JUNE 10, 1960, THE ASSISTANT SECRETARY FOR MARKETING AND FOREIGN AGRICULTURE REQUESTED OUR OPINION AS TO THE PROPRIETY OF UTILIZING INTEREST EARNED ON FOREIGN CURRENCIES ADVANCED UNDER COOPERATIVE AGREEMENTS FOR THE DEVELOPMENT OF NEW MARKETS PURSUANT TO SECTION 104 OF PUBLIC LAW 480, THE AGRICULTURAL TRADE DEVELOPMENT AND ASSISTANT ACT OF 1954, AS AMENDED, 7 U.S.C. 1704.

SECTION 104, QUOTING FROM THE CODE, PROVIDES IN PERTINENT PART THAT:

NOTWITHSTANDING SECTION 724 OF TITLE 31, OR ANY OTHER PROVISION OF LAW, THE PRESIDENT MAY USE OR ENTER INTO AGREEMENTS WITH FRIENDLY NATIONS OR ORGANIZATIONS OF NATIONS TO USE THE FOREIGN CURRENCIES WHICH ACCRUE UNDER THIS SUBCHAPTER FOR ONE OR MORE OF THE FOLLOWING PURPOSES:

(A) TO HELP DEVELOP NEW MARKETS FOR UNITED STATES AGRICULTURAL COMMODITIES ON A MUTUALLY BENEFITING BASIS. FROM SALES PROCEEDS AND LOAN REPAYMENTS UNDER THIS SUBCHAPTER NOT LESS THAN THE EQUIVALENT OF 5 PERCENTUM OF THE TOTAL SALES MADE UNDER THIS SUBCHAPTER AFTER SEPTEMBER 21, 1959, SHALL BE MADE AVAILABLE IN ADVANCE FOR USE AS PROVIDED BY THIS SUBSECTION OVER SUCH PERIOD OF YEARS AS THE SECRETARY OF AGRICULTURE DETERMINES WILL MOST EFFECTIVELY CARRY OUT THE PURPOSE OF THIS SUBSECTION. * * *

THE ASSISTANT SECRETARY STATES THAT THE FOREIGN AGRICULTURAL SERVICE HAS ENTERED INTO COOPERATIVE AGREEMENTS WITH ABOUT 50 TRADE AND AGRICULTURAL GROUPS OR ASSOCIATIONS REPRESENTING VARIOUS INDUSTRIES IN THE UNITED STATES, PURSUANT TO WHICH AGREEMENTS THE SERVICE MAKES FOREIGN CURRENCY AVAILABLE TO HELP DEVELOP NEW MARKETS AND THE COOPERATOR CONTRIBUTES THE NECESSARY DOLLAR AMOUNTS AS WELL AS SERVICES OF PERSONNEL, PROPERTY AND OTHER ITEMS. UNDER THE AGREEMENTS, CASH ADVANCES MAY BE MADE TO THE COOPERATOR OR HIS DESIGNEE, UPON FURNISHING OF A BOND, FOR EXPENSES AUTHORIZED IN CONNECTION WITH THE AGREEMENT. AFTER WORK UNDER THE AGREEMENT OR A PART THEREOF HAS BEEN DONE, THE UNITED STATES COOPERATOR CERTIFIES THAT THE EXPENSES INCURRED WERE NECESSARY AND REASONABLE AND ARE SUPPORTED BY DETAILED RECORDS ATTACHED TO ITS BILLING OR AVAILABLE FOR INSPECTION AND AUDIT.

SINCE A FEW MONTHS MAY ELAPSE BETWEEN THE TIME THE SERVICE ADVANCES FOREIGN CURRENCY AND THE TIME THE CURRENCY IS ACTUALLY EXPENDED BY THE COOPERATOR OR HIS DESIGNEE, THE POSSIBILITY EXISTS THAT INTEREST MAY BE EARNED ON THESE ADVANCES THROUGH DEPOSITS MADE IN FOREIGN BANKS. THE ASSISTANT SECRETARY STATES THAT THE AMOUNT OF SUCH INTEREST WOULD NORMALLY BE SMALL AND REQUESTS OUR OPINION ON THE SPECIFIC QUESTION OF WHETHER, IN ORDER TO SIMPLIFY OPERATIONS, THE FOLLOWING CLAUSES MAY PROPERLY BE INSERTED IN EACH OF THE COOPERATIVE AGREEMENTS:

IF ANY PART OF A CASH ADVANCE MADE BY FAS PURSUANT TO THIS AGREEMENT IS DEPOSITED SO AS TO EARN INTEREST, THE AMOUNT OF SUCH INTEREST MAY BE UTILIZED BY THE COOPERATOR FOR THE PURPOSE OF THIS AGREEMENT AND SHALL BE ACCOUNTED FOR BY BILLINGS IN ACCORDANCE WITH ARTICLE II, A, 5.

IN SUPPORT OF THE PROPRIETY OF INCLUDING A PROVISION IN THE AGREEMENTS FOR USING INTEREST EARNED ON DEPOSITS, THE ASSISTANT SECRETARY CONTENDS THAT UPON THE ADVANCE OF FOREIGN CURRENCY BY THE UNITED STATES TO THE COOPERATOR AS A CONTRIBUTION TOWARD ACHIEVING A PROJECT GOAL, TITLE TO THE CURRENCY PASSES TO THE COOPERATOR. AND SINCE TITLE TO THE CURRENCY PASSES, INTEREST EARNED THEREON ACTUALLY BELONGS TO THE COOPERATOR, THE EFFECT OF UTILIZING THE INTEREST BEING AN ADDITIONAL CONTRIBUTION BY THE COOPERATOR TO THE PROJECT. AS TO THE REQUIREMENT OF SECTION 3617, REVISED STATUTES, 31 U.S.C. 484, THAT ALL MONEYS RECEIVED FROM WHATEVER SOURCE FOR THE USE OF THE UNITED STATES SHALL BE PAID INTO THE TREASURY, IT IS CONTENDED THAT SINCE UNDER THE PROPOSED CLAUSE THE AMOUNT OF INTEREST WOULD NOT BE "RECEIVED * * * FOR THE USE OF THE UNITED STATES," R.S. 3617 DOES NOT APPLY.

UNDER THE AGREEMENTS INVOLVED, FUNDS ADVANCED BY THE FOREIGN AGRICULTURAL SERVICE TO A COOPERATOR--- WHETHER THE TRANSACTION BE CONSIDERED A LOAN OR A GRANT--- MAY BE USED ONLY FOR CERTAIN SPECIFIED PURPOSES AND ANY BALANCE REMAINING UNEXPENDED MUST BE RETURNED TO THE SERVICE. IT IS EVIDENT, THEREFORE, IRRESPECTIVE OF THE QUESTION AS TO PASSAGE OF TITLE, THAT FUNDS SO ADVANCED ARE IMPRESSED WITH A DEFINITE TRUST. IN SIMILAR CIRCUMSTANCES INVOLVING GRANTS TO STATES THIS OFFICE HAS CONSISTENTLY HELD THAT INTEREST ACCRUING ON THE ADVANCED FUNDS BELONGS TO THE UNITED STATES AND THAT SUCH INTEREST PAYMENTS ARE RECEIPTS FOR THE BENEFIT OF THE UNITED STATES WHICH UNDER SECTION 3617, REVISED STATUTES, ARE REQUIRED TO BE DEPOSITED IN THE TREASURY TO THE CREDIT OF MISCELLANEOUS RECEIPTS. 24 COMP. DEC. 403; 1 COMP. GEN. 652; 2 ID. 684; 3 ID. 956; 20 ID. 610; AND A--- 46031 DATED JANUARY 16, 1933, CITED IN THE ASSISTANT SECRETARY'S LETTER. WE FIND NO BASIS UPON WHICH THE AGREEMENT HERE INVOLVED MAY PROPERLY BE DISTINGUISHED FROM THE CIRCUMSTANCES CONSIDERED IN THE CASES CITED. OTHER DECISIONS OF THIS OFFICE CITED BY THE ASSISTANT SECRETARY AS HOLDING T FUNDS GRANTED TO STATES BECAME STATE FUNDS WHEN PAID TO THEM DID NOT CONSIDER THE QUESTION OF ACCOUNTING FOR INTEREST EARNINGS AND ARE NOT CONTROLLING. (25 COMP. GEN. 868; 28 ID. 54; 37 ID. 85.)

TO HOLD THAT INTEREST WHEN EARNED ON ADVANCES MADE TO A COOPERATOR CONSTITUTES AN INCREMENT TO PUBLIC LAW 480 SALES PROCEEDS AND IS THEREFORE AVAILABLE ON THE SAME BASIS AS THE PROCEEDS THEMSELVES WOULD BE TO IGNORE THE TRUE NATURE OF THE INTEREST ACCRUAL. THERE IS NO QUESTION BUT THAT INTEREST EARNED ON PUBLIC LAW 480 FUNDS DEPOSITED IN BANKS BY UNITED STATES TREASURY REPRESENTATIVES IS NOT AVAILABLE GENERALLY FOR SECTION 104 PURPOSES BUT, RATHER, MUST BE PURCHASED WITH APPROPRIATED DOLLARS; AND INTEREST ON SUCH DEPOSIT IS, IN FACT, SEGREGATED IN THE TREASURY ACCOUNTS FROM PUBLIC LAW 480 FUNDS. CF. 39 COMP. GEN. 513. MOREOVER, SUBSEQUENT TO THE ASSISTANT SECRETARY'S SUBMISSION THE DEPARTMENT OF AGRICULTURE AND FARM CREDIT ADMINISTRATION APPROPRIATION ACT, 1961, PUBLIC LAW 86-532, 74 STAT. 232, FOR THE FIRST TIME, PROVIDED UNDER THE HEADING FOREIGN AGRICULTURAL SERVICE, SALARIES AND EXPENSES ( SPECIAL FOREIGN CURRENCY PROGRAM):

FOR PURCHASE OF FOREIGN CURRENCIES WHICH ACCRUE UNDER TITLE I OF THE AGRICULTURAL TRADE DEVELOPMENT AND ASSISTANT ACT OF 1954, AS AMENDED (7 U.S.C. 1704), FOR THE PURPOSES OF MARKET DEVELOPMENT ACTIVITIES UNDER SECTION 104 (A) OF THAT ACT, $13,621.000, AND FOR THE PURPOSES OF SECTION 104 (M) OF THAT ACT, RELATING TO AGRICULTURAL AND HORTICULTURAL FAIR PARTICIPATION AND RELATED ACTIVITIES, $1,000,000, TO REMAIN AVAILABLE UNTIL EXPENDED: PROVIDED, THAT THE DOLLAR VALUE OF THE UNEXPENDED BALANCES, AS OF JUNE 30, 1960, OF ALLOCATIONS OF FOREIGN CURRENCIES HERETOFORE MADE AVAILABLE TO THE FOREIGN AGRICULTURAL SERVICE FOR THE FOREGOING PURPOSES OF SUCH SECTIONS 104 (A) AND (M) IS APPROPRIATED AS OF THAT DATE AND SHALL BE MERGED WITH THIS APPROPRIATION: PROVIDED FURTHER, THAT FUNDS APPROPRIATED HEREIN SHALL BE USED TO PURCHASE SUCH FOREIGN CURRENCIES AS THE DEPARTMENT DETERMINES ARE NEEDED AND CAN BE USED MOST EFFECTIVELY TO CARRY OUT THE PURPOSES OF THIS PARAGRAPH, AND SUCH FOREIGN CURRENCIES SHALL, PURSUANT TO THE PROVISIONS OF SECTION 104 (A), BE SET ASIDE FOR SALE TO THE DEPARTMENT BEFORE FOREIGN CURRENCIES WHICH ACCRUE UNDER SAID TITLE I ARE MADE AVAILABLE FOR OTHER UNITED STATES USES.

EVEN CONCEDING ARGUENDO THAT INTEREST EARNED ON PUBLIC LAW 480 FUNDS CONSTITUTES FUNDS ACCRUING UNDER THE ACT IT IS CLEAR, NOW THAT FOREIGN CURRENCIES TO BE UTILIZED UNDER THE AGREEMENTS IN QUESTION WILL BE PURCHASED WITH APPROPRIATED DOLLARS, THAT USE OF INTEREST ACCRUALS BELONGING TO THE UNITED STATES, WITHOUT CHARGE TO THE APPROPRIATION, WOULD BE AN UNAUTHORIZED AUGMENTATION OF THE APPROPRIATION. ALSO, SINCE ANY INTEREST NOT USED BY A COOPERATOR AND RETURNED TO THE UNITED STATES WOULD OBVIOUSLY, UNDER PUBLIC LAW 86-532, NOT BE AVAILABLE FOR FURTHER USE WITHOUT CHARGE TO THE APPROPRIATION, IT WOULD BE ANOMALOUS NOT TO REQUIRE A CHARGE TO THE APPROPRIATION IN THOSE CASES WHERE THE INTEREST IS RETAINED BY THE COOPERATOR.

ACCORDINGLY, FOR REASONS SET FORTH ABOVE, ANY INTEREST EARNED ON PUBLIC LAW 480 MONEYS ADVANCED UNDER THE VARIOUS COOPERATIVE AGREEMENTS MAY NOT BE USED FOR SECTION 104 (A), 7 U.S.C. 1704 (A), PURPOSES. HOWEVER, SHOULD YOU DETERMINE THAT INSERTION OF THE PROPOSED CLAUSE IN THE AGREEMENTS WOULD SIMPLIFY ADMINISTRATION OF THE AGREEMENTS, WE WOULD NOT BE REQUIRED TO OBJECT TO USE OF THE CLAUSE, PROVIDED THAT WHERE INTEREST IS EARNED BY A COOPERATOR AND USED, AN EQUIVALENT AMOUNT OF FOREIGN CURRENCIES WHICH ACCRUE UNDER TITLE I OF PUBLIC LAW 480 WILL BE PURCHASED WITH DOLLARS FROM THE CITED APPROPRIATION AND TRANSFERRED FROM THE PUBLIC LAW 480 FUND ACCOUNTS TO THE GENERAL FOREIGN CURRENCY ACCOUNTS OF THE TREASURY. ANY INTEREST UNUSED AND PAID TO THE UNITED STATES WOULD, OF COURSE, BE FOR ULTIMATE DEPOSIT IN THE GENERAL FOREIGN CURRENCY ACCOUNTS ALSO. IN VIEW OF THE SMALL AMOUNTS OF SUCH INTEREST ACCRUALS EXPECTED, THE REQUIRED TRANSFERS BETWEEN FUND ACCOUNTS MAY BE MADE PERIODICALLY AT REASONABLE INTERVALS RATHER THAN SIMULTANEOUSLY WITH THE ACCRUAL, USE, OR PAYMENT TO THE UNITED STATES OF THE INTEREST AMOUNTS INVOLVED.

AS THE PROPOSED CLAUSE IS PRESENTLY WORDED, THE STATUS OF INTEREST EARNED BY A COOPERATOR ON ADVANCES MADE TO HIM IS NOT CLEAR. TO AVOID ANY QUESTION AS TO UNITED STATES OWNERSHIP OF SUCH INTEREST, WE WOULD SUGGEST THAT THE FOLLOWING SENTENCE BE ADDED TO THE CLAUSE:

ANY AMOUNT OF SUCH INTEREST NOT SO UTILIZED AND ACCOUNTED FOR MUST BE PAID TO FAS.