B-150084, MARCH 28, 1963, 42 COMP. GEN. 537

B-150084, MARCH 28, 1963, 42 COMP. GEN. 537

FUNDS - FOREIGN - UNITED STATES-OWNED CURRENCIES - USE OF SPECIFIC PROGRAM FUNDS A PROPOSAL TO PERMIT THE USE BY OTHER AGENCIES OF UNITED STATES OWNED FOREIGN CURRENCIES WHICH ARE REQUIRED TO BE SET ASIDE FOR SPECIFIC PROGRAMS SO THAT IDENTICAL CURRENCIES WOULD NOT HAVE TO BE PURCHASED WHILE THESE CURRENCIES ARE IDLE IN FOREIGN CURRENCY ACCOUNTS WOULD CIRCUMVENT THE STATUTORY RESERVATIONS AND THE SPECIFIC LEGISLATIVE POLICY REQUIRING SEGREGATION AND EARMARKING OF FOREIGN CURRENCIES FOR SPECIFIC PROGRAMS AND, THEREFORE, THE PROPOSAL MAY NOT BE APPROVED; HOWEVER, LEGISLATION TO PERMIT THE UTILIZATION OF THE IDLE FOREIGN CURRENCIES IS RECOMMENDED FOR CONSIDERATION BY THE CONGRESS. (SECTION 508 OF THE PUBLIC WORKS APPROPRIATION ACT, 1964, APPROVED DECEMBER 31, 1963, 77 STAT. 844, 856, AUTHORIZED DURING THE FISCAL YEAR 1964 THE CARRYING OF FOREIGN CURRENCIES RESERVED OR SET ASIDE FOR SPECIFIED PROGRAMS IN UNFUNDED ACCOUNTS.)

TO THE SECRETARY OF THE TREASURY, MARCH 28, 1963:

BY LETTER OF OCTOBER 5, 1962, THE FISCAL ASSISTANT SECRETARY OF THE TREASURY REQUESTS OUR DECISION AS TO WHETHER LEGISLATIVE LANGUAGE PROVIDING THAT CERTAIN AMOUNTS OF FOREIGN CURRENCIES SHALL BE SET ASIDE OR MADE AVAILABLE FOR PURPOSES OF CARRYING OUT SPECIAL PROGRAMS REQUIRES THAT THE CURRENCIES BE ACTUALLY SEGREGATED AND CONSIDERED AS COMMITTED ONLY FOR SUCH PURPOSES.

AS EXAMPLES OF THE LEGISLATIVE PROVISIONS, THE LETTER CITES SECTIONS 104 (A) AND 104 (H) OF THE AGRICULTURAL TRADE DEVELOPMENT AND ASSISTANCE ACT OF 1954, AS AMENDED (PUBLIC LAW 480). SECTION 104 (A) AS CONTAINED IN 7 U.S.C. 1704 (A) (SUPP. III), PROVIDES, IN PERTINENT PART, THAT

TO HELP DEVELOP NEW MARKETS FOR UNITED STATES AGRICULTURAL COMMODITIES ON A MUTUALLY BENEFITING BASIS * * * NOT LESS THAN THE EQUIVALENT OF 5 PERCENTUM OF THE TOTAL SALES MADE EACH YEAR UNDER THIS SUBCHAPTER AFTER SEPTEMBER 21, 1959, SHALL BE SET ASIDE IN THE AMOUNTS AND KINDS OF FOREIGN CURRENCIES SPECIFIED BY THE SECRETARY OF AGRICULTURE AND 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 * * *.

SECTION 104 (H) CONTAINED IN 7 U.S.C. 1704 (H) PROVIDES, IN PERTINENT PART, THAT

FOR THE FINANCING OF INTERNATIONAL EDUCATIONAL EXCHANGE ACTIVITIES * * * THE SETTING ASIDE OF SUCH AMOUNTS FROM SALE PROCEEDS AND LOAN REPAYMENTS UNDER THIS SUBCHAPTER, NOT IN EXCESS OF $1,000,000 A YEAR IN ANY ONE COUNTRY FOR A PERIOD OF NOT MORE THAN FIVE YEARS IN ADVANCE, AS MAY BE DETERMINED BY THE SECRETARY OF STATE TO BE REQUIRED FOR THE PURPOSES OF THIS SUBSECTION.

THE FISCAL ASSISTANT SECRETARY STATES THAT IN GIVING EFFECT TO THE LEGISLATIVE PROVISIONS QUOTED ABOVE TO SET ASIDE CERTAIN AMOUNTS OF FOREIGN CURRENCIES FOR SPECIAL PROGRAMS, IT IS THE PRACTICE OF THE TREASURY DEPARTMENT TO ESTABLISH SUCH FUNDS IN FUNDED FOREIGN CURRENCY RESERVE ACCOUNTS PENDING PURCHASE OF THE CURRENCIES BY THE AGENCIES CONCERNED, WITHIN THE LIMITS OF DOLLAR APPROPRIATIONS, FOR USE IN CARRYING OUT THE PROGRAMS FOR WHICH THE RESERVATIONS WERE ESTABLISHED. HE FURTHER STATES THAT SINCE THESE CURRENCIES ARE NOT RESTRICTED BY INTERNATIONAL AGREEMENTS AS TO USE BY THE UNITED STATES, THEY NORMALLY WOULD BE AVAILABLE FOR GENERAL USE. HOWEVER, BECAUSE THEY ARE PHYSICALLY SET ASIDE AND EARMARKED FOR FUTURE USE, THE GOVERNMENT IS CONFRONTED IN MANY COUNTRIES WITH THE NECESSITY OF ACQUIRING CURRENCIES ON THE MARKET WHILE AT THE SAME TIME HOLDING SIMILAR CURRENCIES IDLE IN ITS FOREIGN CURRENCY ACCOUNTS.

THE FISCAL ASSISTANT SECRETARY POINTS OUT THE DEPARTMENT RECOGNIZES THAT, IN FUNDING FOREIGN CURRENCY RESERVE ACCOUNTS TO COMPLY WITH THE LEGISLATIVE PROVISIONS, THE AGENCIES ADMINISTERING THE PROGRAMS ARE ASSURED OF THE AVAILABILITY OF SUFFICIENT CURRENCIES AT THE TIME THEY ARE READY TO ACTIVATE THE SPECIAL PROGRAMS. HE SUGGESTS, HOWEVER, THAT IT IS SOMEWHAT INCONGRUOUS FOR THE GOVERNMENT TO BE PLACED IN THE POSITION OF PURCHASING THE SAME TYPE OF CURRENCIES IT IS HOLDING PENDING THEIR POSSIBLE FUTURE USE UNDER SPECIAL PROGRAMS. THIS SITUATION IS SAID TO RESULT IN THE MAKING OF UNITED STATES DOLLAR PAYMENTS ABROAD SOONER THAN OTHERWISE WOULD BE REQUIRED, THEREBY ACCELERATING THE IMPACT ON THE UNITED STATES BALANCE OF PAYMENTS AND THE DRAIN ON THE UNITED STATES TREASURY.

IN LIEU OF THE PRESENT PRACTICE OF SEGREGATING AND FUNDING FOREIGN CURRENCY RESERVE ACCOUNTS FOR SPECIFIC PROGRAM PURPOSES, IT IS PROPOSED TO ESTABLISH A SYSTEM OF ACCOUNTING CONTROLS IN THE FORM OF UNFUNDED RESERVE ACCOUNTS AND TO PRESCRIBE PROCEDURES THEREUNDER WHICH WILL GUARANTEE AGENCIES THE AVAILABILITY OF FOREIGN CURRENCIES WHEN NEEDED BY THEM TO CARRY OUT THE PROGRAMS FOR WHICH THE RESERVATIONS ARE ESTABLISHED. JUSTIFICATION OF THIS PROCEDURE, THERE ARE CITED SEVERAL LEGISLATIVE PROVISIONS IN THE DOLLAR AREA WHICH PROVIDE FOR THE SETTING ASIDE OR RESERVING OF CERTAIN RECEIPTS FOR USE IN CONNECTION WITH SPECIFIC PURPOSES. IT IS POINTED OUT WITH REFERENCE THERETO THAT IT HAS NEVER BEEN THE PRACTICE TO ACTUALLY FUND THE SPECIAL OR TRUST FUND ACCOUNTS ESTABLISHED TO IMPLEMENT SUCH LEGISLATIVE PROVISIONS.

THE PROPOSED PROCEDURE IS STATED TO HAVE NO EFFECT ON RESTRICTED CURRENCIES OR UNRESTRICTED CURRENCIES THAT ARE AUTHORIZED TO BE EXPENDED WITHOUT CHARGE TO DOLLAR APPROPRIATIONS. THE PROCEDURE IS EXPLAINED IN THE LETTER AS FOLLOWS:

AS AN ALTERNATIVE TO SEGREGATING PHYSICALLY OR EARMARKING THESE CURRENCIES, IT IS SUGGESTED THAT THE ESTABLISHMENT OF ACCOUNTING CONTROLS IN THE FORM OF UNFUNDED RESERVE ACCOUNTS, ENTAILING NO PHYSICAL SEGREGATION OF THE CURRENCIES THEMSELVES, WOULD SATISFY THE INTENT OF THE LAW. THIS PROCEDURE WOULD GUARANTEE THE AGENCIES THE USE OF THE CURRENCIES WHEN NEEDED, THOUGH DURING THE INTERIM SUCH CURRENCIES MIGHT BE USED FOR OTHER UNITED STATES PURPOSES. FURTHER, THE DOLLAR OUTLAY BY THE GOVERNMENT WOULD BE DELAYED UNTIL NECESSARY. IT IS POINTED OUT THAT THE PROPOSED PROCEDURE WOULD BE LIMITED TO THOSE SPECIAL PROGRAMS FOR WHICH APPROPRIATIONS HAVE BEEN MADE. THE PROPOSAL DOES NOT CONTEMPLATE ANY EFFECT ON RESTRICTED CURRENCIES OR UNRESTRICTED CURRENCIES WHICH ARE AUTHORIZED TO BE EXPENDED WITHOUT CHARGE TO APPROPRIATIONS. UNDER THIS ALTERNATIVE, THE DOLLAR PROCEEDS FROM THE SALES TO THE AGENCIES FOR INTERIM USE WOULD BE CREDITED IMMEDIATELY TO THE SAME RECEIPT OR FUND ACCOUNT AS WOULD BE CREDITED IF THE CURRENCIES WERE SOLD TO AGENCIES TO CARRY OUT THE PROGRAMS FOR WHICH THE ORIGINAL RESERVATION WAS ESTABLISHED. AT SUCH TIME AS THE AGENCY ACTIVATED ITS SPECIAL PROGRAM, THE REQUIRED CURRENCIES WOULD BE PURCHASED FROM SOME OTHER GOVERNMENT SOURCE, OR, IF SUCH CURRENCIES WERE NOT AVAILABLE, BY EFFECTING A MARKET TRANSACTION AT THAT TIME.

THE CITED PROVISIONS OF PUBLIC LAW 480 AUTHORIZING OR REQUIRING THE RESERVATION OF FOREIGN CURRENCIES FOR SPECIFIC PROGRAM PURPOSES MERELY FIXES A LIMIT ON THE AMOUNT OF CURRENCIES THAT CAN BE MADE AVAILABLE FOR USE BY THE AGENCIES CONCERNED. THE APPROPRIATIONS MADE TO THE AGENCIES FOR THE PURCHASE OF SUCH CURRENCIES, PURSUANT TO THE REQUIREMENT CONTAINED IN THE PROVISIONS OR UNDER THE TERMS OF 31 U.S.C. 724, WHICH PROVIDE THAT FOREIGN CREDITS OWED TO OR OWED BY THE UNITED STATES TREASURY WILL NOT BE AVAILABLE FOR EXPENDITURE AFTER JUNE 30, 1953, EXCEPT AS MAY BE PROVIDED FOR ANNUALLY IN APPROPRIATION ACTS, WHILE MADE IN DOLLARS, IN EFFECT, LIKEWISE PLACES A LIMIT ON THE AMOUNT OF FOREIGN CURRENCIES THAT MAY CURRENTLY BE USED BY THE AGENCIES.

AS INDICATED IN THE LETTER, THE ESTABLISHED FISCAL AND ACCOUNTING METHODS FOR THE HANDLING OF THE UNITED STATES DOLLAR RECEIPTS DEPOSITED IN THE TREASURY AND EARMARKED FOR SPECIAL OR TRUST FUND PURPOSES DO NOT CONTEMPLATE OR REQUIRE THE PHYSICAL SEGREGATING OF CASH FROM THE GENERAL CASH OF THE TREASURY TO FUND THE ACCOUNTS ESTABLISHED TO RECORD AND REPORT SUCH TRANSACTIONS. THUS, IT WOULD APPEAR TO REASONABLY FOLLOW, AS A MATTER OF FISCAL POLICY, THAT FOREIGN CURRENCIES BELONGING TO THE UNITED STATES AND EARMARKED FOR USE IN CARRYING OUT SPECIFIC PROGRAMS WOULD BE HANDLED SIMILARLY, THAT IS, THROUGH THE ESTABLISHMENT OF ACCOUNTING CONTROLS RATHER THAN THE PHYSICAL SEGREGATING OF CASH RESERVES FOR SUCH PROGRAMS. HOWEVER, IN ORDER TO DETERMINE WHETHER THE CONGRESS INTENDED BY USE OF THE PHRASES "SET ASIDE" AND "SETTING ASIDE," AS CONTAINED IN SECTIONS 104 (A) AND 104 (H) QUOTED ABOVE, TO ACTUALLY REQUIRE THE PHYSICAL SEGREGATING OF FOREIGN CURRENCIES FOR SPECIFIC PROGRAMS RESORT MUST BE HAD TO THE LEGISLATIVE BACKGROUND THEREOF.

SECTION 4 OF THE ACT OF SEPTEMBER 21, 1959, 73 STAT. 606, AMENDED SECTION 104 (A) OF THE AGRICULTURAL TRADE DEVELOPMENT AND ASSISTANCE ACT OF 1954, SO FAR AS HERE MATERIAL, TO PROVIDE THAT NOT LESS THAN THE EQUIVALENT OF 5 PERCENT OF THE TOTAL SALES MADE UNDER TITLE I OF THE ACT AFTER SEPTEMBER 21, 1959, SHALL BE AVAILABLE FOR AGRICULTURAL MARKET DEVELOPMENT ACTIVITIES WITH THE USE OF FUNDS SUBJECT TO DOLLAR APPROPRIATION AFTER JUNE 30, 1960. H.REPT.NO. 908, 89TH CONG., 1ST SESS., ON H.R. 8609, WHICH BECAME THE ACT OF SEPTEMBER 21, 1959, CONTAINS A STATEMENT ON PAGE 14 IN EXPLANATION OF THE AMENDMENT AS FOLLOWS:

SECTION 3 OF THE BILL IS DESIGNED TO MAKE CERTAIN THAT GREATER EMPHASIS WILL BE GIVEN TO THE DEVELOPMENT OF NEW AND EXPANDED MARKETS FOR U.S. AGRICULTURAL PRODUCTS--- ONE OF THE MAJOR OBJECTIVES OF THE ACT--- IN BOTH HARD CURRENCY AND UNDERDEVELOPED AREAS. DESPITE THE CLEAR INTENT OF CONGRESS, ADEQUATE FOREIGN CURRENCIES ARE NOT BEING MADE AVAILABLE IN THE PRINCIPAL COMMERCIAL MARKET AREAS FOR THIS IMPORTANT WORK. TO INSURE THAT SUFFICIENT AMOUNTS OF THESE FOREIGN CURRENCIES ARE USED FOR MARKET DEVELOPMENT AS AUTHORIZED UNDER SECTION 104 (A) OF TITLE I, THIS SECTION DIRECTS THAT THE EQUIVALENT OF NOT LESS THAN 5 PERCENT OF THE TOTAL SALES UNDER TITLE I BE MADE AVAILABLE FOR THIS PURPOSE. THIS WILL ELIMINATE THE DELAYS AND DIFFICULTIES WHICH HAVE BEEN INVOLVED IN THE PROCESS OF ALLOCATION BY MAKING THIS MINIMUM AMOUNT AVAILABLE TO THE SECRETARY OF AGRICULTURE FOR THIS ACTIVITY. IT IS NOT INTENDED THAT A SUM EQUIVALENT TO 5 PERCENT BE SET ASIDE IN EACH COUNTRY BUT THAT AN AMOUNT EQUIVALENT TO 5 PERCENT OF THE TOTAL SALES BE MADE AVAILABLE IN THE CURRENCY OF THE COUNTRIES IN WHICH MARKET DEVELOPMENT ACTIVITY IS TO BE CONDUCTED.

DURING THE HEARINGS HELD BY THE SUBCOMMITTEE OF THE HOUSE COMMITTEE ON APPROPRIATIONS ON THE DEPARTMENT OF AGRICULTURE APPROPRIATIONS FOR 1961, THE CHAIRMAN OF THE SUBCOMMITTEE STATED ON PAGE 185, PART 2 OF THE HEARINGS WITH REFERENCE TO THE 5 PERCENT PROVISION, AS FOLLOWS:

MR. WHITTEN. CONGRESS PASSED CERTAIN AMENDMENTS TO THE AGRICULTURE TRADE DEVELOPMENT AND ASSISTANCE ACT OF 1954, PUBLIC LAW 480. AMONG OTHER THINGS THAT LAW PROVIDED FOR A FREEZE OF APPROXIMATELY 5 PERCENT OF THE TOTAL WHICH WOULD BE SET ASIDE FOR SUCH USE AS THE SECRETARY OF AGRICULTURE MIGHT DETERMINE FOR MARKET DEVELOPMENT AND RELATED RESEARCH.

SECTION 201 (3) (D) OF THE AGRICULTURAL ACT OF 1961, APPROVED AUGUST 8, 1961, 75 STAT. 306, FURTHER AMENDED SECTION 104 (A) TO PROVIDE, SO FAR AS HERE PERTINENT, THAT NOT LESS THAN THE REFERRED TO EQUIVALENT OF 5 PERCENT OF TITLE I SALES PROCEEDS "EACH YEAR SHALL BE SET ASIDE IN THE AMOUNTS AND KINDS OF FOREIGN CURRENCIES SPECIFIED BY THE SECRETARY OF AGRICULTURE.'

THE APPROPRIATION MADE TO THE DEPARTMENT OF AGRICULTURE FOR "SALARIES AND EXPENSES (SPECIAL FOREIGN CURRENCY PROGRAM) AGRICULTURAL RESEARCH SERVICE," CONTAINED IN THE DEPARTMENT OF AGRICULTURE AND RELATED AGENCIES APPROPRIATION ACT, 1963, PUBLIC LAW 87-879, APPROVED OCTOBER 24, 1962, 76 STAT. 1204, PROVIDES IN PERTINENT PART:

FOR PURCHASE OF FOREIGN CURRENCIES WHICH ACCRUE UNDER TITLE I OF THE AGRICULTURAL TRADE DEVELOPMENT AND ASSISTANCE ACT OF 1954, AS AMENDED (7 U.S.C. 1704), FOR MARKET DEVELOPMENT RESEARCH AUTHORIZED BY SECTION 104 (A), AND FOR AGRICULTURAL AND FORESTRY RESEARCH AUTHORIZED BY SECTION 104 (K) * * * TO REMAIN AVAILABLE UNTIL EXPENDED, $5,265,000: PROVIDED, THAT THIS APPROPRIATION SHALL BE AVAILABLE, IN ADDITION TO OTHER APPROPRIATIONS FOR THESE PURPOSES, FOR THE PURCHASE OF THE FOREGOING CURRENCIES: 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

THE ACT ALSO CONTAINED A SPECIAL FOREIGN CURRENCY APPROPRIATION FOR "SALARIES AND EXPENSES (SPECIAL FOREIGN CURRENCY PROGRAM), FOREIGN AGRICULTURAL SERVICE" IN SUBSTANTIALLY SIMILAR LANGUAGE EXCEPT, OF COURSE, AS TO THE AMOUNT THEREOF. IN ACCORDANCE WITH ESTABLISHED BUDGET AND APPROPRIATION PROCEDURES, SEE THE BUDGET OF THE UNITED STATES GOVERNMENT, 1963, SPECIAL ANALYSIS J (PAGE 352), THESE APPROPRIATIONS ARE PROVIDED TO PURCHASE FOREIGN CURRENCIES REFERRED TO AS EXCESS COUNTRY CURRENCIES, AND SUPPLEMENT THE REGULAR APPROPRIATIONS MADE TO THESE BUREAUS WHICH ALSO ARE AVAILABLE TO PURCHASE FOREIGN CURRENCIES REFERRED TO AS NONEXCESS COUNTRY CURRENCIES WHERE OTHERWISE NECESSARY AND PROPER. IT IS OBSERVED THAT THIS PATTERN OF APPROPRIATION WAS FOLLOWED FOR THE FISCAL YEARS 1961 AND 1962.

THE REFERRED-TO LEGISLATION AND ITS HISTORY MAKE IT VERY CLEAR THAT THE CONGRESS INTENDED TO GIVE TO THE DEPARTMENT OF AGRICULTURE FIRST PRIORITY, OVER OTHER AUTHORIZED USES, IN THE USE OF NOT LESS THAN THE EQUIVALENT OF 5 PERCENT OF FOREIGN CURRENCIES DERIVED FROM SALES EACH YEAR UNDER TITLE I OF THE AGRICULTURAL TRADE DEVELOPMENT AND ASSISTANCE ACT OF 1954, AS AMENDED, FOR AGRICULTURAL MARKET DEVELOPMENT ACTIVITIES. TO INSURE THAT THE AMOUNTS AND KINDS OF FOREIGN CURRENCIES SPECIFIED BY THE DEPARTMENT ARE AVAILABLE WHEN NEEDED TO CARRY OUT SUCH ACTIVITIES, THE LAW MADE IT MANDATORY TO SET ASIDE THE PRESCRIBED AMOUNT OF CURRENCIES AND REQUIRED, IN THE CASE OF SPECIAL FOREIGN CURRENCY APPROPRIATIONS, THAT THE FOREIGN CURRENCIES SO SET ASIDE BE SOLD TO THE DEPARTMENT BEFORE TITLE I CURRENCIES ARE MADE AVAILABLE FOR OTHER UNITED STATES USES. AS STATED IN THE LETTER, THE ESTABLISHMENT OF UNFUNDED RESERVE ACCOUNTS FOR AGRICULTURAL MARKET DEVELOPMENT ACTIVITIES WOULD RECORD THE LIABILITY SET UP FOR THE AMOUNTS AND KINDS OF FOREIGN CURRENCIES SPECIFIED BY THE DEPARTMENT OF AGRICULTURE UNDER THE TERMS OF SECTION 104 (A). HOWEVER, THE INTERIM SALE OF SUCH CURRENCIES TO AGENCIES FOR OTHER UNITED STATES PURPOSES IN ANTICIPATION OF REPLACING THE CURRENCIES BY PURCHASE FROM SOME OTHER GOVERNMENT SOURCE OR BY PURCHASE ON THE OPEN MARKET WHEN NEEDED BY THE DEPARTMENT OF AGRICULTURE FOR THE ORIGINAL PURPOSE DOES NOT COMPLY WITH THE MANDATORY REQUIREMENT IN THE ENABLING AND APPROPRIATION LEGISLATION TO SET ASIDE OR EARMARK TITLE I CURRENCIES FOR SPECIFIC USE, THAT IS, AGRICULTURAL MARKET DEVELOPMENT ACTIVITIES. MOREOVER, IN THE CASE OF SPECIAL FOREIGN CURRENCY APPROPRIATIONS WHICH ARE MADE AVAILABLE ONLY TO PURCHASE FOREIGN CURRENCIES DERIVED FROM A SPECIFIC SOURCE, THAT IS, TITLE I CURRENCIES FOR USE IN CONNECTION WITH AGRICULTURAL MARKET DEVELOPMENT ACTIVITIES, IT IS DOUBTFUL THAT THE PURCHASE OF CURRENCIES ON THE MARKET TO REPLACE RESERVED CURRENCIES PREVIOUSLY SOLD TO AGENCIES FOR OTHER USES MAY BE CONSIDERED AS THE PURCHASE OF TITLE I CURRENCIES WITHIN THE REQUIREMENT OF THE APPROPRIATION, EVEN THOUGH SUCH PURCHASE BE INTENDED AS A REPLACEMENT OF THE RESERVED CURRENCIES SOLD FOR INTERIM USE.

WITH REFERENCE TO SECTION 104 (H) CITED ABOVE, THAT SECTION AUTHORIZES THE USE OF FOREIGN CURRENCIES RECEIVED FROM THE SALE OF SURPLUS AGRICULTURAL COMMODITIES TO OTHER NATIONS TO SUPPLEMENT THE FINANCING OF INTERNATIONAL EDUCATION EXCHANGE PROGRAMS. THE SECRETARY OF STATE IS THEREIN GIVEN A DISCRETIONARY PREFERENCE TO SET ASIDE OR RESERVE FROM SUCH SALE PROCEEDS AND LOAN REPAYMENTS NOT IN EXCESS OF $1,000,000 A YEAR IN ANY ONE COUNTRY FOR A PERIOD OF NOT MORE THAN 5 YEARS IN ADVANCE, AS HE MAY DETERMINE TO BE REQUIRED FOR SUCH PROGRAM PURPOSES.

IT IS OBSERVED THAT FOR THE FISCAL YEARS 1961 AND 1962, THE APPROPRIATIONS MADE TO THE DEPARTMENT OF STATE FOR INTERNATIONAL EDUCATIONAL EXCHANGE ACTIVITIES, AS IN THE CASE OF THE APPROPRIATIONS QUOTED ABOVE FOR THE AGRICULTURAL RESEARCH SERVICE AND THE AGRICULTURAL MARKETING SERVICE, AND IN ACCORDANCE WITH THE PREVAILING BUDGET AND APPROPRIATION PRACTICES, ALSO PROVIDED SPECIAL FOREIGN CURRENCY PROGRAM APPROPRIATIONS IN DOLLARS, TO REMAIN AVAILABLE UNTIL EXPENDED, FOR THE PURCHASE OF FOREIGN CURRENCIES DERIVED FROM THE SALE OF TITLE I AGRICULTURAL COMMODITIES TO ASSIST IN THE FINANCING OF EXCHANGE PROGRAMS.

THE APPROPRIATION MADE TO THE DEPARTMENT OF STATE FOR "MUTUAL EDUCATIONAL AND CULTURAL EXCHANGE ACTIVITIES," AS CONTAINED IN THE DEPARTMENTS OF STATE, JUSTICE, AND COMMERCE, THE JUDICIARY, AND RELATED AGENCIES APPROPRIATION ACT, 1963, APPROVED OCTOBER 18, 1962, PUBLIC LAW 87-843, 76 STAT. 1084, READS, IN PERTINENT PART, AS FOLLOWS:

FOR EXPENSES, NOT OTHERWISE PROVIDED FOR, NECESSARY TO ENABLE THE SECRETARY OF STATE TO CARRY OUT THE FUNCTIONS OF THE DEPARTMENT OF STATE UNDER THE PROVISIONS OF THE MUTUAL EDUCATIONAL AND CULTURAL EXCHANGE ACT OF 1961 * * * $41,950,000, OF WHICH NOT LESS THAN $14,515,000 SHALL BE USED TO PURCHASE FOREIGN CURRENCIES OR CREDITS OWED TO OR OWNED BY THE TREASURY OF THE UNITED STATES * * *.

THIS APPROPRIATION MAKES IT MANDATORY TO USE NOT LESS THAN $14,515,000 OF THE AMOUNT APPROPRIATED TO PURCHASE FOREIGN CURRENCIES OR CREDITS OWED TO OR OWNED BY THE TREASURY, THAT IS, FUNDS OR CREDITS AVAILABLE FOR THE GENERAL USE OF THE UNITED STATES DERIVED FROM FOREIGN SOURCES. TO THE EXTENT THAT THE AMOUNT OF $14,515,000 IS NOT USED TO PURCHASE THE FOREIGN CURRENCIES OR CREDITS THE APPROPRIATION OF $41,950,000 MUST BE REDUCED ACCORDINGLY. IF FOREIGN CURRENCIES RESERVED BY THE DEPARTMENT OF STATE FOR INTERNATIONAL EDUCATIONAL EXCHANGE ACTIVITIES UNDER THE TERMS OF SECTION 104 (H) WERE MADE AVAILABLE FOR INTERIM USE BY OTHER AGENCIES, THE QUESTION WOULD ARISE WHETHER THE REPLACEMENT OF SUCH CURRENCIES BY PURCHASE ON THE MARKET TO MEET THE NEEDS OF THE DEPARTMENT WOULD CONSTITUTE THE PURCHASE OF FOREIGN CURRENCIES OR CREDITS OWED TO OR OWNED BY THE TREASURY AS REQUIRED BY THE APPROPRIATION QUOTED ABOVE.

DURING THE HEARINGS HELD BY THE SUBCOMMITTEE OF THE SENATE COMMITTEE ON APPROPRIATIONS RELATIVE TO THIS APPROPRIATION, THERE IS NOTED THE FOLLOWING STATEMENTS APPEARING ON PAGES 314, 318:

SENATOR MCGEE. IT IS MY UNDERSTANDING THAT UNDER AUTHORITY OF THE LAW, THE SECRETARY OF STATE HAS A PRIORITY RIGHT TO RESERVE FOREIGN CURRENCIES GENERATED BY PUBLIC LAW 480 COMMODITY SALES AND BY CERTAIN OTHER ACTS, IN SUCH AMOUNTS AND IN SUCH COUNTRIES AS HE DEEMS ADVANTAGEOUS FOR USE IN THE EXCHANGE OF PERSONS AND OTHER EDUCATIONAL PROGRAMS, MERELY BY CERTIFYING THAT HE NEEDS THE MONEY FOR THIS PURPOSE. ISN-T THAT CORRECT?

MR. BATTLE. THE SECRETARY DOES HAVE THE AUTHORITY TO MAKE RESERVATIONS FOR EXCHANGE OF PERSONS PROGRAMS BUT NOT FOR OTHER EDUCATIONAL ACTIVITIES AND PROJECTS.

SENATOR MCGEE. YOUR DEPARTMENT HAS FURNISHED THIS COMMITTEE WITH A SCHEDULE REFLECTING, BY COUNTRY AND AMOUNT, THE RESERVATIONS OF FOREIGN CURRENCIES IN EFFECT AS OF THE BEGINNING OF FISCAL YEAR 1963, WHICH AGGREGATES IN EXCESS OF $116 MILLION. ALSO FURNISHED WERE THE AMOUNTS, BY COUNTRY WHERE IT IS PLANNED TO SPEND THE $11.5 MILLION IN FOREIGN CURRENCIES IN FISCAL 1963. * *

SENATOR MCGEE. ONCE YOU HAVE RESERVED THESE AMOUNTS AND THEY ARE EARMARKED FOR CULTURAL EXCHANGE PURPOSES, THEY CANNOT BE USED FOR ANYTHING ELSE, EVEN THOUGH THE UNITED STATES MAY HAVE A DEFICIT OF PAYMENTS WITH THE COUNTRY INVOLVED. IS THAT NOT SO?

MR. BATTLE. YES. * * *

IN S.REPT. NO. 2226, 87TH CONG., 2D SESS., ON THE BILL WHICH BECAME THE CITED APPROPRIATION ACT PUBLIC LAW 87-843, THERE IS NOTED THE STATEMENT WITH REFERENCE TO THIS APPROPRIATION (PAGE 7) AS FOLLOWS:

THE COMMITTEE FEELS IT IS INEXCUSABLE TO USE U.S. HARD DOLLARS FOR EXCHANGE ACTIVITIES WHICH CAN BE FINANCED THROUGH TREASURY-OWNED FOREIGN CURRENCIES ALREADY RESERVED FOR SUCH PURPOSES. IT COMMANDS THE DEPARTMENT, HOWEVER, FOR ITS PROGRAM OF UTILIZING "EXCESS" FOREIGN CURRENCIES, THROUGH CONVERSION, AND FOR THE RECENT REFORMS UNDERTAKEN TO MAKE THE MAXIMUM USE OF THE FOREIGN CURRENCIES ALREADY RESERVED. THESE REFORMS INCLUDE LIBERALIZING THE USES OF FOREIGN CURRENCIES IN BI-NATIONAL AGREEMENTS AND CURTAILING FOREIGN CURRENCY RESERVATIONS TO 1 YEAR'S ADVANCE SUPPLY, PARTICULARLY WHERE THERE IS ASSURANCE OF FUTURE AVAILABILITIES AND IN COUNTRIES WHERE THERE IS SERIOUS INFLATION. * * *

IT WOULD APPEAR FROM THE FOREGOING TO THE UNDERSTANDING OF THE SENATE SUBCOMMITTEE ON APPROPRIATIONS THAT RESERVATIONS OF FOREIGN CURRENCIES BY THE DEPARTMENT OF STATE AS AUTHORIZED BY SECTION 104 (H) FOR INTERNATIONAL EDUCATION EXCHANGE ACTIVITIES ARE SET ASIDE IN A RESERVE STATUS PENDING THEIR USE AND ARE NOT AVAILABLE FOR OTHER USES.

THE EVIDENT PURPOSE OF THE LEGISLATIVE DECLARATION TO SET ASIDE CERTAIN AMOUNTS OF TITLE I CURRENCIES FOR AGRICULTURAL MARKET DEVELOPMENT ACTIVITIES AND INTERNATIONAL EDUCATIONAL EXCHANGE ACTIVITIES BEING SO CLEAR, WE DO NOT FEEL WARRANTED IN APPROVING PROCEDURAL ACCOUNTING DEVICES WHICH COULD OPERATE TO CIRCUMVENT THAT PURPOSE. THEREFORE, WE CONCLUDE THAT, TO GIVE EFFECT TO THE LEGISLATIVE POLICY ESTABLISHED BY THE CONGRESS IN PROVIDING THAT CERTAIN AMOUNTS OF FOREIGN CURRENCIES SHALL BE SET ASIDE TO CARRY OUT SPECIFIC PROGRAMS, THE CURRENCIES SPECIFIED BY THE DEPARTMENTS OF AGRICULTURE AND STATE FOR RESERVATION UNDER AUTHORITY OF SECTIONS 104 (A) AND 104 (H), RESPECTIVELY, ARE REQUIRED TO BE SET ASIDE AND RESERVED ONLY FOR SUCH PURPOSES AND MAY NOT BE MADE AVAILABLE FOR OTHER UNITED STATES PURPOSES WITHOUT FURTHER AUTHORITY BY THE CONGRESS.

THE FOREGOING IS CONFINED TO THE SPECIFIC QUESTION PRESENTED AND IS NOT INTENDED TO INDICATE THE VIEWS OF THE GENERAL ACCOUNTING OFFICE AS TO THE DESIRABILITY OF PHYSICALLY SEGREGATING FOREIGN CURRENCIES SET ASIDE FOR SPECIAL PROGRAMS. WE AGREE WITH THE FISCAL ASSISTANT SECRETARY IN QUESTIONING WHETHER THE UNITED STATES SHOULD OWN AND HOLD LARGE SUMS OF ITS FOREIGN CURRENCIES IN RESERVE FOR FUTURE EXPENDITURE IN CONNECTION WITH SPECIFIC PROGRAMS, AND AT THE SAME TIME SHOULD SPEND DOLLARS TO BUY IDENTICAL CURRENCIES TO MEET CURRENT REQUIREMENTS. IN THIS CONNECTION, SEE OUR REPORT TO THE CONGRESS ON THE REVIEW OF THE ADMINISTRATION AND UTILIZATION OF UNITED STATES-OWNED FOREIGN CURRENCIES IN SELECTED COUNTRIES, OCTOBER 1962, COPY OF WHICH WAS FURNISHED TO YOU BY LETTER OF OCTOBER 24, 1962, B-146749. WE BELIEVE, HOWEVER, THAT THE MATTER IS NOT ONE THAT PROPERLY CAN BE SOLVED BY DECISION, BUT REQUIRES CONSIDERATION BY THE CONGRESS; AND WE WOULD BE IN FAVOR OF A LEGISLATIVE PROPOSAL WHICH WOULD PERMIT YOUR RECOMMENDATION TO BE ADOPTED. IN THIS CONNECTION, WE ARE FURNISHING COPIES OF THIS DECISION TO THE CHAIRMEN OF THE SENATE COMMITTEES ON AGRICULTURE AND FORESTRY, APPROPRIATIONS, AND FOREIGN RELATIONS; AND TO THE CHAIRMEN OF THE HOUSE OF REPRESENTATIVES COMMITTEES ON AGRICULTURE, APPROPRIATIONS, AND FOREIGN AFFAIRS.