B-203817.OM, SEP 25, 1981

B-203817.OM, SEP 25, 1981

SUBJECT: USE OF APPROPRIATIONS FOR MILITARY COMMISSARY OPERATIONS (FILE B-203817; CODE 903025)

ACTING DIRECTOR, AFMD - WILBUR D. CAMPBELL:

AS PART OF A SURVEY OF ACCOUNTING SYSTEMS USED IN THE ARMED SERVICES' COMMISSARIES, ROY TAYLOR ASKED US TO DETERMINE WHETHER IT WAS PROPER FOR THE AIR FORCE TO USE APPROPRIATED FUNDS TO PURCHASE AND MAINTAIN CERTAIN OPERATING EQUIPMENT FOR ITS COMMISSARY SYSTEM. BASED ON OUR ANALYSIS OF THE STATUTORY LIMITATION ON USE OF APPROPRIATED FUNDS FOR OPERATION AND MAINTENANCE EXPENSES OF COMMISSARIES, WE CONCLUDE THAT THE LAW PROHIBITS USE OF APPROPRIATED FUNDS TO PURCHASE AND MAINTAIN EQUIPMENT TO BE USED SOLELY IN COMMISSARY OPERATIONS, EVEN THOUGH THE EQUIPMENT WAS INTENDED TO REPLACE PERSONNEL WHO WERE PROPERLY PAID FROM APPROPRIATIONS. DIFFERENT QUESTION IS PRESENTED IF EQUIPMENT PURCHASED WITH APPROPRIATED FUNDS IS USED ONLY IN PART FOR COMMISSARY PURPOSES, BUT WE UNDERSTAND THAT THE EQUIPMENT HERE IS NOT INTENDED FOR SUCH DUAL OR COMMON USE.)

WE UNDERSTAND THAT YOU INTEND TO TREAT THIS AS A PROBLEM WHICH CAN BE RESOLVED BY A TRANSFER OF COMMISSARY FUNDS TO THE AIR FORCE, RATHER THAN BY MEANS OF A NOTICE OF EXCEPTION.

A DETAILED ANALYSIS APPEARS BELOW.

QUESTION: WAS IT PROPER FOR THE AIR FORCE TO USE APPROPRIATED FUNDS FOR THE PURCHASE AND MAINTENANCE OF PROGRAMMABLE WORK STATIONS FOR USE EXCLUSIVELY IN ITS COMMISSARY SYSTEM?

ANSWER: NO.

THE PROVISION RESTRICTING USE OF APPROPRIATED FUNDS IN CONNECTION WITH COMMISSARY OPERATIONS FIRST APPEARED AS SECTION 628 OF THE DEPARTMENT OF DEFENSE APPROPRIATIONS ACT, 1952, PUB.L. NO. 82-179, 65 STAT. 449, WHICH PROVIDES:

"NO APPROPRIATION CONTAINED IN THIS ACT SHALL BE AVAILABLE ON AND AFTER JANUARY 1, 1952, IN CONNECTION WITH THE OPERATION OF COMMISSARY STORES OF THE AGENCIES OF THE DEPARTMENT OF DEFENSE FOR THE COST OF PURCHASE (INCLUDING COMMERCIAL TRANSPORTATION IN THE UNITED STATES TO THE PLACE OF SALE BUT EXCLUDING ALL TRANSPORTATION OUTSIDE THE UNITED STATES) AND MAINTENANCE OF OPERATING EQUIPMENT AND SUPPLIES AND FOR THE ACTUAL OR ESTIMATED COST OF UTILITIES AS MAY BE FURNISHED BY THE GOVERNMENT AND OF SHRINKAGE, SPOILAGE, AND PILFERAGE OF MERCHANDISE UNDER THE CONTROL OF SUCH COMMISSARY STORES, EXCEPT AS AUTHORIZED UNDER REGULATIONS PROMULGATED BY THE SECRETARIES OF THE MILITARY DEPARTMENTS CONCERNED, WITH THE APPROVAL OF THE SECRETARY OF DEFENSE, WHICH REGULATIONS SHALL PROVIDE FOR REIMBURSEMENT THEREFOR TO THE APPROPRIATIONS CONCERNED AND, NOTWITHSTANDING ANY OTHER PROVISION OF LAW, SHALL PROVIDE FOR THE ADJUSTMENT OF THE SALES PRICES IN SUCH COMMISSARY STORES TO THE EXTENT NECESSARY TO FURNISH SUFFICIENT GROSS REVENUE FROM SALES OF COMMISSARY STORES TO MAKE SUCH REIMBURSEMENT: PROVIDED, HOWEVER, THAT UNDER SUCH REGULATIONS AS MAY BE ISSUED PURSUANT TO THIS SECTION ALL UTILITIES MAY BE FURNISHED WITHOUT COST TO THE COMMISSARY STORES OUTSIDE THE CONTINENTAL UNITED STATES AND IN ALASKA."

THAT LANGUAGE HAS BEEN INCLUDED IN EVERY DOD APPROPRIATION ACT SINCE 1952. FN1

THE ORIGINAL HOUSE BILL PROHIBITED USE OF APPROPRIATED FUNDS "FOR ANY DIRECT EXPENSE *** IN CONNECTION WITH THE MAINTENANCE, CONDUCT, OPERATION OR MANAGEMENT" OF COMMISSARY STORES. THE HOUSE REPORT STATES THAT THE PURPOSE OF THE SECTION WAS TO REQUIRE COMMISSARY SALES PRICES TO INCLUDE ALL THE DIRECT COSTS OF COMMISSARY OPERATIONS, EXCEPT OVERSEAS TRANSPORTATION. H.R.REP. NO. 790, 82D CONG., 1ST SESS. 147 (1951).

THE LANGUAGE OF THE SENATE VERSION WAS MORE LIMITED, LISTING PARTICULAR COMMISSARY EXPENSES FOR WHICH APPROPRIATED FUNDS COULD NOT BE USED. SPECIFICALLY, THE SENATE VERSION, AS DESCRIBED IN THE SENATE REPORT, REQUIRED THAT OVERHEAD COSTS, INCLUDING PURCHASE AND MAINTENANCE OF OPERATING EQUIPMENT AND SUPPLIES, BE REFLECTED IN COMMISSARY PRICES. S.REP. NO. 730, 82D CONG. 1ST SESS. 7 (1951). THE PURPOSE OF THE SECTION WAS SAID TO BE TO REQUIRE THAT ALL THE SERVICES ADOPT THE NAVY'S METHOD OF COMMISSARY OPERATIONS. FN2 ID. HOWEVER, UNLIKE THE HOUSE VERSION, THE SENATE LANGUAGE DID NOT COVER "ANY DIRECT EXPENSE" OF COMMISSARY OPERATIONS.

THE SENATE VERSION, WITH MINOR MODIFICATION, WAS ADOPTED AS THE FINAL VERSION IN THE 1952 ACT. THE CONFERENCE REPORT, CONSISTENT WITH THE HOUSE AND SENATE REPORTS, STATES THAT THE SECTION PROVIDES FOR ADJUSTMENT OF SALES PRICES TO COVER "OVERHEAD OR ADMINISTRATIVE COSTS." H.R.REP. NO. 1097, 82D CONG., 1ST SESS. 9 (1951).

DOD DIRECTIVE 1330.17 (MAY 4, 1978) IMPLEMENTS THE STATUTORY LIMITING PROVISION. SECTION IV LISTS VARIOUS COSTS WHICH MUST BE PAID FOR OUT OF SURCHARGE FUNDS. SPECIFICALLY, SECTION 4-403.3 PROVIDES:

"COMMISSARY STORE EQUIPMENT, TO INCLUDE INSTALLATION, AND CONTRACT COST OF COMMERCIAL OR GOVERNMENT MAINTENANCE (INCLUDES PREVENTIVE MAINTENANCE AND REPAIR), WILL BE PAID BY DIRECT CITATION OF OR REIMBURSED FROM FUNDS COLLECTED FROM COMMISSARY STORE PATRONS."

THE "PROGRAMMABLE WORK STATIONS" PURCHASED BY THE AIR FORCE APPEAR TO FALL SQUARELY WITHIN THE SCOPE OF THE STATUTE AND SECTION 4-403.3 OF THE DIRECTIVE. FN3 PROCUREMENT OF THE WORK STATIONS AND ASSOCIATED SOFTWARE WAS JUSTIFIED AS NEEDED "TO AUTOMATE SELECTED CONTROL SECTION FUNCTIONS" IN THE COMMISSARIES. NOTHING IN THE JUSTIFICATION GIVES A BASIS FOR CONCLUDING THAT THE WORK STATIONS WERE INTENDED FOR OTHER THAN EXCLUSIVE COMMISSARY USE. FURTHER, YOU ADVISE THAT THIS EQUIPMENT IS USED EXCLUSIVELY FOR COMMISSARY OPERATIONS, PRINCIPALLY TO PROCESS PURCHASING DATA. THEREFORE, THE WORK STATIONS CONSTITUTE EQUIPMENT USED IN CONNECTION WITH THE OPERATION OF COMMISSARY STORES, WITHIN THE MEANING OF THE STATUTE.

THE AIR FORCE, HOWEVER, AUTHORIZED USE OF APPROXIMATELY $3.6 MILLION IN APPROPRIATED FUNDS FOR THE PURCHASE AND MAINTENANCE OF THE WORK STATIONS. THE AIR FORCE JUSTIFIED ITS DECISION ON THE GROUND THAT THE WORK STATIONS, BY PERMITTING AUTOMATION OF PROCESSES THEN PERFORMED MANUALLY, ULTIMATELY WOULD ELIMINATE 174 MANPOWER SPACES. SINCE THOSE POSITIONS WERE FUNDED WITH APPROPRIATED FUNDS, THE AIR FORCE CONCLUDED THAT THE EQUIPMENT REPLACING THOSE POSITIONS ALSO COULD BE PAID FOR OUT OF APPROPRIATED FUNDS.

IT IS OUR VIEW THAT THE AIR FORCE'S CONCLUSION WAS INCORRECT. AS A PRELIMINARY MATTER, YOU FOUND THAT THE PROJECTED SAVINGS DID NOT OCCUR; ALTHOUGH MANPOWER NEEDS WERE REDUCED, THE PERSONNEL POSITIONS WERE REDISTRIBUTED WITHIN THE COMMISSARY SYSTEM, NOT ELIMINATED. EVEN IF SAVINGS HAD BEEN REALIZED, HOWEVER, THE WORK STATIONS WOULD NOT LOSE THEIR CHARACTER AS EQUIPMENT USED EXCLUSIVELY AND DIRECTLY FOR COMMISSARY OPERATIONS, WHICH MAY NOT BE PAID FOR WITH APPROPRIATED FUNDS. THE FACT THAT THE WORK STATIONS WERE INTENDED TO REPLACE EMPLOYEES WHO, UNDER THE STATUTE, WERE PROPERLY PAID FROM APPROPRIATIONS DOES NOT EXCEPT THE PURCHASE FROM THE EXPRESS PROHIBITION AGAINST USE OF APPROPRIATIONS FOR PURCHASE OF OPERATING EQUIPMENT. ACCORDINGLY, THE AIR FORCE SHOULD HAVE USED SURCHARGE FUNDS FOR THE PURCHASE AND MAINTENANCE OF THE WORK STATIONS.

FN1 SECTION 624 OF THE 1954 DOD APPROPRIATIONS ACT, PUB.L. NO. 83-179, 67 STAT. 353, RETAINED THE LANGUAGE OF THE 1952 ACT BUT EXPANDED THE PROVISION TO PROHIBIT USE OF APPROPRIATED FUNDS FOR MILITARY COMMISSARIES IN AREAS WHERE ADEQUATE COMMERCIAL FACILITIES ARE AVAILABLE. SEE S.REP. NO. 601, 83D CONG., 1ST SESS. 8 (1953). THAT PROHIBITION ALSO HAS BEEN REENACTED EACH YEAR SINCE 1954.

FN2 IN THIS REGARD YOU HAVE ADVISED US THAT THE NAVY ALWAYS HAS USED SURCHARGE FUNDS FOR ALL ITS COMMISSARY OPERATIONS.

FN3 SECTION 4-404.2 OF THE DIRECTIVE PROVIDES THAT APPROPRIATED FUNDS MAY BE USED FOR CERTAIN "COMMON SERVICES", INCLUDING PROCUREMENT, ACCOUNTING, MERCHANDISE HANDLING, SUPPLY AND FINANCIAL ADMINISTRATION, AND COMPUTER OPERATION AND MAINTENANCE. PRESUMABLY THIS REFERS TO SUCH ITEMS WHEN SHARED BY APPROPRIATED FUND AND COMMISSARY OPERATIONS, A SITUATION APPARENTLY NOT INVOLVED HERE, AND ONE WHICH WE DO NOT NOW ADDRESS.