B-154552, JUL. 23, 1964

B-154552: Jul 23, 1964

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TRANSMITTED FOR OUR CONSIDERATION AND SUCH ACTION AS WE CONSIDER APPROPRIATE THE FILE ON A CLAIM FOR THE VALUE OF FOOD COMMODITIES DONATED BY THE GOVERNMENT UNDER THE DIRECT DISTRIBUTION PROGRAM WHICH WERE LOST WHILE IN THE POSSESSION OF PULASKI COUNTY. COMMODITIES WERE BEING SOLD BY COUNTY PRISONERS WHO WERE USED TO DISTRIBUTE THEM AND NEEDY PEOPLE WHO RECEIVED COMMODITIES WERE REQUIRED TO RECEIPT FOR LARGER QUANTITIES THAN THEY ACTUALLY RECEIVED IN AN ATTEMPT TO CONCEAL SHORTAGES. A SUBSEQUENT OFFER BY THE STATE AGENCY TO PAY 50 PERCENT OF THE CLAIM WAS REFERRED TO THE DEPARTMENT OF JUSTICE. THE MATTER WAS AGAIN REFERRED TO THE DEPARTMENT OF JUSTICE. THE MATTER WAS SUBMITTED HERE BY THE LETTER OF MAY 8.

B-154552, JUL. 23, 1964

TO THE SECRETARY OF AGRICULTURE:

BY LETTER DATED MAY 8, 1964, MR. J. Q. HUEY, ACTING DIRECTOR, BUDGET AND FINANCE DIVISION, AGRICULTURAL MARKETING SERVICE, U.S. DEPARTMENT OF AGRICULTURE, TRANSMITTED FOR OUR CONSIDERATION AND SUCH ACTION AS WE CONSIDER APPROPRIATE THE FILE ON A CLAIM FOR THE VALUE OF FOOD COMMODITIES DONATED BY THE GOVERNMENT UNDER THE DIRECT DISTRIBUTION PROGRAM WHICH WERE LOST WHILE IN THE POSSESSION OF PULASKI COUNTY, ARKANSAS.

THE FILE TRANSMITTED TO OUR OFFICE INDICATES THAT YOUR DEPARTMENT HAS AN AGREEMENT WITH THE ARKANSAS STATE DEPARTMENT OF PUBLIC WELFARE WHEREBY THAT AGENCY ADMINISTERS THE DIRECT DISTRIBUTION PROGRAM WITHIN THE STATE. THE AGREEMENT, BY SPECIFIC REFERENCE, INCORPORATES THE REGULATIONS GOVERNING THE PROGRAM (6 CFR 503) AS PART THEREOF. THE STATE AGENCY IN TURN HAS AGREEMENTS WITH RECIPIENT AGENCIES, INCLUDING PULASKI COUNTY WELFARE OPERATIONS, WHICH MAKE THE ACTUAL DISTRIBUTIONS.

THE FILE FURTHER INDICATES THAT AN INVESTIGATION CONDUCTED UPON REPORT OF IRREGULARITIES IN PULASKI COUNTY'S FOOD DISTRIBUTION PROGRAM REVEALED WEAKNESSES IN THE COUNTY'S CONTROL OVER DONATED COMMODITIES. COMMODITIES WERE BEING SOLD BY COUNTY PRISONERS WHO WERE USED TO DISTRIBUTE THEM AND NEEDY PEOPLE WHO RECEIVED COMMODITIES WERE REQUIRED TO RECEIPT FOR LARGER QUANTITIES THAN THEY ACTUALLY RECEIVED IN AN ATTEMPT TO CONCEAL SHORTAGES. AN AUDIT BY THE AGRICULTURAL MARKETING SERVICE REVEALED SHORTAGES OF COMMODITIES VALUED AT $8,632.42.

WHEN ADVISED THAT RESTITUTION WOULD BE REQUIRED IN ACCORDANCE WITH THE REGULATIONS, THE STATE AGENCY UNSUCCESSFULLY ATTEMPTED TO COLLECT FROM THE COUNTY. A SUBSEQUENT OFFER BY THE STATE AGENCY TO PAY 50 PERCENT OF THE CLAIM WAS REFERRED TO THE DEPARTMENT OF JUSTICE, WHICH REFUSED TO ACCEPT THE OFFER, DECLINED TO INSTITUTE CIVIL FRAUD ACTION, AND RETURNED THE MATTER TO YOUR DEPARTMENT FOR ADMINISTRATIVE COLLECTION. THE STATE AGENCY THEREUPON AGAIN ATTEMPTED COLLECTION FROM THE COUNTY, WHICH AGAIN DENIED LIABILITY. THE STATE, WHICH HAS A POLICY AGAINST SUING COUNTIES IN CASES OF THIS NATURE, INDICATED THAT, SINCE IT HAD ACTED IN GOOD FAITH AND HAD EXHAUSTED ITS REMEDIES AGAINST THE COUNTY, IT WISHED TO ASSIGN THE CLAIM TO YOUR DEPARTMENT AS PROVIDED BY THE REGULATIONS. THE MATTER WAS AGAIN REFERRED TO THE DEPARTMENT OF JUSTICE, WHICH AGAIN DECLINED TO INSTITUTE LEGAL ACTION, CALLED ATTENTION TO WEAKNESSES IN YOUR CLAIM, AND SUGGESTED THAT IT BE REFERRED TO THIS OFFICE FOR POSSIBLE SETOFF. PURSUANT TO THIS SUGGESTION, THE MATTER WAS SUBMITTED HERE BY THE LETTER OF MAY 8, 1964.

THE PROGRAM HERE IN QUESTION IS GOVERNED BY PART 503 OF CHAPTER V, TITLE 6, CODE OF FEDERAL REGULATIONS. SUBPART 503.6 (1) THEREOF, CONCERNING THE IMPROPER DISTRIBUTION OR LOSS OF OR DAMAGE TO COMMODITIES, PROVIDES IN PART HERE PERTINENT AS FOLLOWS:

"* * *IF A DISTRIBUTING AGENCY IMPROPERLY DISTRIBUTES OR USES ANY COMMODITY, OR CAUSES LOSS OF OR DAMAGE TO A COMMODITY THROUGH ITS FAILURE TO PROVIDE PROPER STORAGE, CARE, OR HANDLING, THE DISTRIBUTING AGENCY SHALL, AT THE DEPARTMENT'S OPTION, * * * (2) PAY TO THE DEPARTMENT THE VALUE OF THE COMMODITY AS DETERMINED BY THE DEPARTMENT. UPON THE HAPPENING OF ANY EVENT CREATING A CLAIM IN FAVOR OF A DISTRIBUTING AGENCY AGAINST A SUBDISTRIBUTING AGENCY, RECIPIENT AGENCY, WAREHOUSEMAN, CARRIER, OR OTHER PERSON, FOR THE IMPROPER DISTRIBUTION OR USE OR LOSS OF, OR DAMAGE TO, A COMMODITY, THE DISTRIBUTING AGENCY SHALL TAKE ALL ACTION NECESSARY TO OBTAIN RESTITUTION. * * * DISTRIBUTING AGENCIES WHICH FAIL TO PURSUE CLAIMS ARISING IN THEIR FAVOR, OR FAIL TO PROVIDE FOR THE RIGHT TO ASSERT SUCH CLAIMS, OR FAIL TO REQUIRE THEIR SUBDISTRIBUTING AGENCIES AND RECIPIENT AGENCIES TO PROVIDE FOR SUCH RIGHTS, SHALL BE RESPONSIBLE TO THE DEPARTMENT FOR REPLACING THE COMMODITY OR PAYING THE VALUE THEREOF IN ACCORDANCE WITH THE PROVISIONS OF SUBPARAGRAPHS (1) OR (2) OF THIS PARAGRAPH. HOWEVER, DISTRIBUTING AGENCIES SHALL NOT BE HELD LIABLE FOR ANY FAILURE TO PURSUE CLAIMS IF THE DEPARTMENT DETERMINES THAT THEY ACTED IN GOOD FAITH AND THAT THERE WAS NO FRAUD, GROSS NEGLIGENCE OR CONTINUED INEFFICIENCY ON THEIR PART. THE DEPARTMENT MAY, AT ITS OPTION, REQUIRE ASSIGNMENT TO IT OF ANY CLAIM ARISING FROM THE DISTRIBUTION OF COMMODITIES.'

THUS, THE REGULATIONS REQUIRE PAYMENT OF THE VALUE OF THE LOST COMMODITIES BY THE RESPONSIBLE AGENCY; REQUIRE A DISTRIBUTING AGENCY TO PURSUE ACTION AGAINST A SUBDISTRIBUTING AGENCY WHICH LOSES COMMODITIES; AND MAKE THE DISTRIBUTING AGENCY ITSELF RESPONSIBLE IF IT FAILS TO PURSUE SUCH ACTION. HOWEVER, THE QUOTED REGULATION ALSO RELIEVES DISTRIBUTING AGENCIES OF SUCH LIABILITY IF YOUR DEPARTMENT DETERMINES THAT THEY ACTED IN GOOD FAITH AND WITHOUT FRAUD, GROSS NEGLIGENCE OR CONTINUED INEFFICIENCY.

IN THIS CONNECTION, THE LETTER OF MAY 8, 1964, STATES AS FOLLOWS:

"IN VIEW OF THE STATE'S POLICY OF NOT SUING COUNTIES, WE CONSIDER THAT THE STATE HAS TAKEN ALL ACTION PRACTICABLE UNDER THE CIRCUMSTANCES. ALSO, THERE IS NO EVIDENCE OF FRAUD, GROSS NEGLIGENCE OR CONTINUED INEFFICIENCY ON THE PART OF THE STATE IN THIS CASE OR EVIDENCE THAT IT DID NOT ACT IN GOOD FAITH. * * *"

IT APPEARS FROM THE INFORMATION PRESENTED TO OUR OFFICE THAT THE ARKANSAS STATE DEPARTMENT OF PUBLIC WELFARE HAS NO LIABILITY UNDER THE QUOTED REGULATION FOR THE LOSS OF COMMODITIES HERE INVOLVED. HENCE, WE DO NOT PROPOSE TO TAKE ANY FURTHER COLLECTION ACTION AGAINST THAT AGENCY IN THIS MATTER. ALSO, IT APPEARS FROM THE QUOTED REGULATION THAT THE QUESTION AS TO WHETHER TO REQUIRE THE STATE AGENCY TO ASSIGN ITS CLAIM AGAINST PULASKI COUNTY TO YOUR DEPARTMENT SO THAT THE GOVERNMENT MAY INSTITUTE ACTION DIRECTLY AGAINST THE COUNTY, IS A MATTER FOR ADMINISTRATIVE DETERMINATION BY YOUR DEPARTMENT.