B-146101, JULY 7, 1961, 41 COMP. GEN. 20

B-146101, JULY 7, 1961, 41 COMP. GEN. 20

SURPLUS PROPERTY DONATED TO THE STATES - SALE AFTER TERMINATION OF FEDERAL RESTRICTIONS - DISPOSITION OF PROCEEDS WHEN AT THE TIME OF THE SALE OF SURPLUS FEDERAL PROPERTY DONATED TO THE STATES PURSUANT TO THE AUTHORITY IN SECTION 203 (J) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, 63 STAT. 386, THE TITLE TO THE PROPERTY HAS PASSED TO THE DONEE AND ONLY STATE IMPOSED RESTRICTIONS REMAIN TO BE FULFILLED, THE FEDERAL RESTRICTIONS HAVING BEEN TERMINATED, SUCH STATE RESTRICTIONS CANNOT BE CONSIDERED TO HAVE BEEN IMPOSED ON BEHALF OF THE FEDERAL GOVERNMENT, OR FEDERALLY ADOPTED, SO AS TO GIVE THE GOVERNMENT ANY RIGHT TO THE PROCEEDS; THEREFORE, THE PROCEEDS OF SUCH SALES NEED NOT BE REMITTED TO THE DEPARTMENT MAKING THE ORIGINAL DONATION FOR DEPOSIT TO THE TREASURY OF THE UNITED STATES.

TO THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE, JULY 7, 1961:

IN CONNECTION WITH THE PROGRAM FOR THE UTILIZATION OF SURPLUS PERSONAL PROPERTY FOR EDUCATIONAL, PUBLIC HEALTH, AND CIVIL DEFENSE PURPOSES (AUTHORIZED BY SECTION 203 (J) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, 40 U.S.C. 484 (J) (, YOUR LETTER OF JUNE 8, 1961, SUBMITS FOR OUR CONSIDERATION THE QUESTION WHETHER, IN THE CIRCUMSTANCES RELATED HEREAFTER, THE FEDERAL GOVERNMENT IS ENTITLED TO THE PROCEEDS DERIVED FROM THE SALE OF DONATED FEDERAL PROPERTY.

SECTION 203 (J) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949 AUTHORIZES THE ADMINISTRATOR OF GENERAL SERVICES TO DONATE SURPLUS PERSONAL PROPERTY FOR USE IN ANY STATE FOR EDUCATIONAL, PUBLIC HEALTH OR CIVIL DEFENSE PURPOSES. IT PROVIDES THAT THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE SHALL DETERMINE THE SURPLUS PROPERTY USABLE AND NECESSARY FOR PURPOSES OF EDUCATION AND PUBLIC HEALTH; AND THAT THE SECRETARY SHALL ALLOCATE SUCH PROPERTY ON THE BASIS OF NEEDS AND UTILIZATION FOR TRANSFER BY THE ADMINISTRATOR OF GENERAL SERVICES TO STATE AGENCIES, DESIGNATED UNDER STATE LAW, FOR DISTRIBUTION TO ELIGIBLE DONEES.

PURSUANT TO A DELEGATION OF AUTHORITY FROM THE ADMINISTRATOR OF GENERAL SERVICES ADMINISTRATION ( GSA REG. I, SEC. 1-IV-202.01), THE SECRETARY OF HEW ISSUED REGULATIONS GOVERNING THE DONATION OF SURPLUS PERSONAL PROPERTY AND ESTABLISHING MINIMUM STANDARDS OF OPERATION FOR STATE AGENCIES (45 CFR, PARTS 13 AND 14). THE REGULATIONS PROVIDE THAT TITLE TO DONABLE PROPERTY SHALL REMAIN IN THE GOVERNMENT DURING THE TIME THE STATE AGENCY HAS POSSESSION. TITLE, HOWEVER, PASSES FROM THE GOVERNMENT TO THE ELIGIBLE DONEE, WHETHER OR NOT ANY CONDITIONS OR RESTRICTIONS RELATING TO USE ARE IMPOSED BY THE FEDERAL GOVERNMENT, WHEN THE DONEE TAKES POSSESSION OF THE PROPERTY AND SIGNS THE CERTIFICATIONS AND AGREEMENTS REQUIRED. SECTION 13.7 (A) AND (B). OF SIGNIFICANCE IS THE FACT THAT CONDITIONS OR RESTRICTIONS IMPOSED BY THE REGULATIONS ON THE USE OF DONATED PROPERTY ARE APPLICABLE ONLY TO PROPERTY HAVING A SINGLE ITEM ACQUISITION COST OF $2,500 OR MORE. SECTION 13.8 (B). THIS IS IN CONSONANCE WITH SECTION 2 (A) OF PUBLIC LAW 61, 84TH CONGRESS, 69 STAT. 83, 40 U.S.C. 484, WHICH HAS THE EFFECT OF INHIBITING THE IMPOSITION OF FEDERAL CONDITIONS AND RESTRICTIONS IN THE DONATION OF PROPERTY HAVING AN ACQUISITION COST OF LESS THAN $2,500. IT APPARENTLY WAS THE INTENT OF THE CONGRESS THAT RESPONSIBILITY AS TO PROPER USAGE OF DONATED PROPERTY SHOULD BE LEFT PRIMARILY WITH THE STATES. REPORT NO. 206, HOUSE OF REPRESENTATIVES, 84TH CONGRESS, ST SESSION, ACCOMPANYING H.R. 3322, WHICH BECAME PUBLIC LAW 61.

SUBSEQUENT TO THE ENACTMENT OF PUBLIC LAW 61, MANY OF THE STATE AGENCIES, TO THE END OF ACHIEVING THE MAXIMUM UTILIZATION OF DONATED PROPERTY FOR THE DESIGNATED PURPOSES, UNDERTOOK, IN EFFECTING DISTRIBUTION TO ELIGIBLE INSTITUTIONS WITHIN THE STATE, TO IMPOSE CONDITIONS AND RESTRICTIONS UPON THE USE OF DONABLE PROPERTY. THESE RESTRICTIONS HAVE BEEN MADE APPLICABLE TO (1) PROPERTY HAVING A SINGLE ITEM ACQUISITION COST OF LESS THAN $2500, AND (2) PROPERTY HAVING A SINGLE ITEM ACQUISITION COST IN EXCESS OF $2500. IN THE LATTER CASE, THE RESTRICTIONS HAVE BEEN SPECIFIED FOR A PERIOD EXCEEDING THE DURATION OF FEDERALLY IMPOSED RESTRICTIONS (FOUR YEARS FOR MOST NON EXPENDABLE PROPERTY AND 2 YEARS FOR MOTOR VEHICLES), AND IN SOME FEW INSTANCES THEY HAVE BEEN MADE PERPETUAL. SUCH RESTRICTIONS PROHIBIT THE SALE OR DISPOSAL OF DONATED PROPERTY BY THE DONEE WITHOUT THE CONSENT OR APPROVAL OF THE STATE AGENCY WHEN IT BECOMES EXCESS TO THE NEEDS OF SUCH DONEE OR IS NO LONGER USABLE FOR THE PURPOSE FOR WHICH DONATED. IN SUCH EVENT, THE DONEE MUST NOTIFY THE STATE AGENCY WHICH WILL EITHER EFFECT RETRANSFER OF THE PROPERTY TO ANOTHER ELIGIBLE DONEE, OR IF THE PROPERTY IS NO LONGER USABLE OR NEEDED FOR ANY OF THE PURPOSES FOR WHICH DONATION MAY BE MADE, IT AUTHORIZES THE PUBLIC SALE OF THE PROPERTY. THE NET PROCEEDS FROM THE SALE OF DONATED PROPERTY WHICH WAS NEVER MADE SUBJECT TO ANY FEDERAL RESTRICTIONS BECAUSE ITS ACQUISITION COST WAS LESS THAN $2500, OR FROM THE SALE OF DONATED PROPERTY HAVING AN ACQUISITION COST IN EXCESS OF $2500 WHICH HAS BEEN UTILIZED BY THE DONEE FOR THE FULL DURATION OF FEDERALLY-IMPOSED RESTRICTIONS BUT NOT YET FREED OF THE REQUIREMENTS OF STATE-IMPOSED CONDITIONS HAVE BEEN VARIOUSLY: (1) RETAINED BY STATE AGENCIES AND DEPOSITED IN THEIR SERVICE CHARGE FUNDS WHICH FINANCE THE OPERATION OF THE PROGRAM BY STATE AGENCIES; OR (2) HAVE BEEN REMITTED TO THE DEPARTMENT WHICH HAS RECEIVED AND DEPOSITED THE PROCEEDS TO MISCELLANEOUS RECEIPTS; OR (3) RETAINED BY THE DONEES WITH THE APPROVAL OF THE STATE AGENCY. ( AND, OF COURSE, WHERE THE STATE AGENCY HAS NOT IMPOSED ANY CONDITIONS AND RESTRICTIONS, DONEES ARE FREE TO DISPOSE OF DONATED PROPERTY WITHOUT ANY PRIOR APPROVALS AND TO RETAIN THE PROCEEDS OF SALE.) HOWEVER, NO UNIFORM DISPOSITION OF SUCH PROCEEDS HAS EITHER BEEN OBSERVED OR DIRECTED BY THE DEPARTMENT.

WITH A VIEW TO ACHIEVING UNIFORMITY AMONG THE STATES IN THE DISPOSITION OF THE PROCEEDS OF DONATED PROPERTY INVOLVING SOLELY STATE IMPOSED RESTRICTIONS, THE QUESTION IS SUBMITTED AS TO THE ENTITLEMENT OF THE FEDERAL GOVERNMENT TO SUCH PROCEEDS--- WHETHER SUCH PROCEEDS MUST BE REMITTED TO THE DEPARTMENT FOR DEPOSIT TO MISCELLANEOUS RECEIPTS OF THE TREASURY.

YOU ARE ADVISED WE ARE OF THE VIEW THE GOVERNMENT HAS NO CLAIM TO THE MONEYS INVOLVED. AT THE TIME OF THE SALE TITLE TO THE PROPERTY HAD PASSED FROM THE GOVERNMENT TO THE DONEE AND NO FEDERALLY IMPOSED RESTRICTIONS EXISTED. THE SALES UNDER CONSIDERATION WERE AUTHORIZED BY THE STATE AGENCIES WHOSE RESTRICTIONS UPON THE DONATED PROPERTY CANNOT BE CONSIDERED AS HAVING BEEN IMPOSED ON BEHALF OF THE FEDERAL GOVERNMENT, OR FEDERALLY ADOPTED. AS INDICATED ABOVE, A BASIS FOR CLAIMING THE PROCEEDS FOR THE GOVERNMENT IS NOT APPARENT, AND SUCH MONEYS NEED NOT BE REMITTED TO THE DEPARTMENT FOR DEPOSIT TO THE TREASURY OF THE UNITED STATES. CF. 34 OP. ATTY. GEN. 115.