B-205154.2, MAY 31, 1983, 62 COMP.GEN. 411

B-205154.2, MAY 31, 1983, 62 COMP.GEN. 411

GENERAL ACCOUNTING OFFICE - AUDITS - AUTHORITY - FOREIGN ASSISTANCE ACT ACTIVITIES PURSUANT TO THE BUDGET AND ACCOUNTING ACT, 1921, AS AMENDED, 31 U.S.C. 712, 716(A) (FORMERLY 31 U.S.C. 53(A)), AND THE LEGISLATIVE REORGANIZATION ACT OF 1970, AS AMENDED, 31 U.S.C. 716(B) (FORMERLY 31 U.S.C. 1154(A)), THE GENERAL ACCOUNTING OFFICE (GAO) IS AUTHORIZED TO CONDUCT COMPREHENSIVE AUDITS OF ACTIVITIES UNDER SEC. 607(A) OF THE FOREIGN ASSISTANCE ACT, AS AMENDED, 22 U.S.C. 2357(A), WHERE FEDERAL AGENCIES DIRECTLY PARTICIPATE IN CARRYING OUT INTERNATIONAL AGREEMENTS, SUCH AS THOSE OF THE UNITED STATES- SAUDI ARABIA JOINT COMMISSION ON ECONOMIC COOPERATION. OUR AUDIT AUTHORITY EXTENDS TO JOINT COMMISSION PROCUREMENTS AND CONTRACTS EVEN THOUGH THE FUNDING IS WHOLLY PROVIDED BY SAUDI ARABIA. CONTRACTS - PROTESTS - AUTHORITY TO CONSIDER - UNITED STATES - SAUDI ARABIA JOINT COMMISSION ON ECONOMIC COOPERATION PROCUREMENTS THE GAO IS NOT AUTHORIZED TO SETTLE AND ADJUST THE DOLLAR ACCOUNT USED TO HOLD SAUDI ARABIAN MONIES COVERING JOINT COMMISSION PROJECT COSTS, AND THUS, WILL NOT ENTERTAIN BID PROTESTS OF JOINT COMMISSION PROCUREMENTS WHERE, AS IN ALL JOINT COMMISSION PROJECTS EXCEPT ONE, NO UNITED STATES FUNDS ARE INVOLVED AT ANY STAGE OF THE PROCUREMENT. THE HOLDING IN MANDEX, INC., B-204415, OCT. 13, 1981 IS AFFIRMED. FOREIGN MILITARY SALES PROCUREMENTS ARE DISTINGUISHED.

TO THE HONORABLE DOUGLAS BARNARD, HOUSE OF REPRESENTATIVES, MAY 31, 1983:

THIS FURTHER RESPONDS TO LETTERS OF OCTOBER 6 AND 27, 1981, JUNE 2, 1982 AND OCTOBER 26, 1982, FROM THE LATE BENJAMIN S. ROSENTHAL CONCERNING THE GENERAL ACCOUNTING OFFICE'S AUTHORITY TO AUDIT THE PROCUREMENTS AND CONTRACTS OF PROJECTS CARRIED OUT UNDER THE AEGIS OF THE UNITED STATES- SAUDI ARABIA JOINT COMMISSION ON ECONOMIC COOPERATION (JOINT COMMISSION), AND ITS CORRESPONDING RIGHT TO OBTAIN ACCESS TO ALL RECORDS WHICH, IN GAO'S JUDGMENT, ARE NECESSARY TO CONDUCT THE AUDIT. HE WAS ALSO INTERESTED IN OUR RECONSIDERATION OF THE OFFICE'S HOLDING IN MANDEX, INC., B-204415, OCTOBER 13, 1981, IN WHICH WE DECLINED TO CONSIDER A BID PROTEST OF A JOINT COMMISSION PROCUREMENT. FINALLY, HE ASKED A SERIES OF QUESTIONS PERTAINING TO THE APPLICABILITY OF UNITED STATES LAWS AND REGULATIONS TO JOINT COMMISSION CONTRACTS. WE UNDERSTAND FROM YOUR STAFF THAT THE SUBCOMMITTEE IS STILL INTERESTED IN OUR OPINION ON ALL THESE TOPICS.

WE CONCLUDE THAT GAO IS AUTHORIZED TO AUDIT JOINT COMMISSION ACTIVITIES, INCLUDING ITS PROCUREMENTS AND CONTRACTS, AND THEREFORE HAS A RIGHT OF ACCESS TO ANY BOOKS, DOCUMENTS, PAPERS, OR RECORDS NECESSARY TO PERFORM THE AUDIT. ON THE OTHER HAND, WE SUSTAIN OUR CONCLUSION IN MANDEX, SUPRA, THAT WE ARE WITHOUT AUTHORITY TO ENTERTAIN BID PROTESTS OF PROCUREMENTS SUPPORTING JOINT COMMISSION PROJECTS SINCE THE GOVERNING AGREEMENT BETWEEN THE UNITED STATES AND SAUDI ARABIA PROVIDES BOTH FOR FULL FUNDING OF THOSE PROJECTS OF SAUDI ARABIA IN ADVANCE OF ANY COMMITMENT BEING MADE BY THE UNITED STATES, AND FOR HOLDING THE UNITED STATES HARMLESS AGAINST ANY AND ALL CLAIMS ARISING FROM PROJECT WORK.

WITH REGARD TO THE REMAINING INQUIRY, WE WOULD POINT OUT THAT ABSENT A CONTRACTUAL PROVISION TO THE CONTRARY, UNITED STATES LAW GENERALLY WOULD GOVERN JOINT COMMISSION PROJECT CONTRACTS PERFORMED IN THE UNITED STATES, BUT WOULD NOT APPLY TO CONTRACTS EXECUTED AND PERFORMED IN SAUDI ARABIA. IT ALSO APPEARS FROM THE CONTRACTS WE HAVE REVIEWED THAT VARIOUS UNITED STATES LAWS AND REGULATIONS ARE SPECIFICALLY INCORPORATED IN THE CONTRACTS. THE DETAILED ANALYSIS OF ALL THE CONTRACTS IS NOT YET COMPLETE AND WILL BE PROVIDED AT A LATER TIME. THIS OPINION WILL ANSWER THE QUESTIONS ABOUT THE EXTENT OF OUR AUDIT AND BID PROTEST AUTHORITY.

I. BACKGROUND

SECTION 607(A) OF THE FOREIGN ASSISTANCE ACT OF 1961, AS AMENDED, 22 U.S.C. 2357(A), AUTHORIZES UNITED STATES AGENCIES, UPON PRESIDENTIAL DETERMINATION, TO FURNISH SERVICES AND COMMODITIES TO FRIENDLY COUNTRIES ON AN ADVANCE OF FUNDS OR REIMBURSEMENT BASIS. PURSUANT THERETO, IN FEBRUARY 1975 THE UNITED STATES ENTERED INTO A 5-YEAR TECHNICAL COOPERATION AGREEMENT WITH SAUDI ARABIA, /1/ TIAS 8072, TO FACILITATE THE FURNISHING OF TECHNICAL AND ADVISORY SERVICES. THE AGREEMENT WAS INTENDED TO IMPLEMENT THE GOALS OF THE UNITED STATES SAUDI ARABIA JOINT COMMISSION ON ECONOMIC COOPERATION ESTABLISHED BY JOINT STATEMENT OF THE UNITED STATES AND SAUDI ARABIA ON JUNE 8, 1974. TIAS 7974. THE JOINT COMMISSION IS HEADED BY THE UNITED STATES SECRETARY OF THE TREASURY AND THE SAUDI ARABIAN MINISTER OF STATE FOR FINANCE AND NATIONAL ECONOMY.

PURSUANT TO THE AGREEMENT, FEDERAL AGENCIES, WITH THE TREASURY DEPARTMENT ACTING AS THE ADMINISTERING AGENCY, ENTER INTO PROJECT AGREEMENTS WITH THE RESPECTIVE SAUDI ARABIAN MINISTRIES. THESE AGREEMENTS INVOLVE SAUDI ARABIA PAYING TREASURY AND OTHER FEDERAL AGENCIES SUBSTANTIAL SUMS OF MONEY FOR THE SERVICES PROVIDED BY THE AGENCIES; PREDOMINANTLY THE SERVICES OF AGENCY EMPLOYEES. /2/ THUS FAR, TWENTY-THREE PROJECT AGREEMENTS HAVE BEEN CONCLUDED; EIGHTEEN PROJECTS CURRENTLY ARE UNDER WAY.

THE AGREEMENT INTENDS THAT SAUDI ARABIA PROVIDE ALL THE FUNDING FOR THE PROJECTS. THUS, SECTION 5(A) CALLS FOR SAUDI ARABIA TO ESTABLISH IN THE UNITED STATES TREASURY A DOLLAR ACCOUNT INTO WHICH IT ADVANCES THE FULL AMOUNT OF FUNDS NECESSARY TO COVER JOINT COMMISSION PROJECT COSTS; SUBSECTION (D) STATES THAT THE UNITED STATES SHALL NOT BE OBLIGATED TO PROVIDE SERVICES FOR WHICH FUNDS ARE NOT AVAILABLE IN THE TRUST ACCOUNT; AND BY SECTION 9(A) SAUDI ARABIA AGREES TO HOLD THE UNITED STATES HARMLESS AGAINST ANY AND ALL CLAIMS ARISING FROM THE SERVICES FURNISHED UNDER THE AGREEMENT.

THE UNITED STATES AGENCIES PROVIDING SERVICES TO THE PARTICULAR JOINT COMMISSION PROJECTS, INCLUDING THE SERVICES OF AGENCY EMPLOYEES, DETERMINE WHETHER THEY ARE TO BE REIMBURSED OR ADVANCED FUNDS FROM THE ACCOUNT FOR A PARTICULAR PROJECT, DEPENDING ON THEIR BUDGET AND FISCAL PROCEDURES. WHEN FUNDS ARE ADVANCED TO AN AGENCY, THEY ARE CREDITED TO THE APPROPRIATION ACCOUNTS USED TO COVER PROJECT EXPENDITURES; WHEN THEY ARE REIMBURSED, THEY REPLENISH AGENCY APPROPRIATIONS ALREADY EXPENDED ON A PROJECT. OUR KNOWLEDGE, WITH ONE EXCEPTION, ALL JOINT COMMISSION PROJECTS WERE FULLY FUNDED BY SAUDI MONIES IN THE DOLLAR ACCOUNT. THE EXCEPTION, THE SOLERAS PROJECT, IS EQUALLY FUNDED BY THE DEPARTMENT OF ENERGY AND THE SAUDI ARABIAN NATIONAL CENTER FOR SCIENCE AND TECHNOLOGY.

ALTHOUGH THERE IS SOME VARIATION IN HOW JOINT COMMISSION PROCUREMENTS ARE UNDERTAKEN, DEPENDING ON THE SIZE OF THE PROCUREMENT AND THE AGENCY INVOLVED, AS WE UNDERSTAND IT, MOSTLY THEY ARE CONDUCTED EITHER BY THE TREASURY DEPARTMENT ITSELF OR BY ANOTHER IMPLEMENTING UNITED STATES AGENCY, WITH SAUDI ARABIA PROVIDING FINAL APPROVAL OF MOST PLANNED PROCUREMENTS OVER $10,000. TREASURY PROCUREMENTS, AND MOST PROCUREMENTS OF OTHER FEDERAL AGENCIES, ARE CONDUCTED IN ACCORDANCE WITH THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, 40 U.S.C. 471 ET SEQ., AND THE POLICIES AND FEDERAL PROCUREMENT REGULATIONS PRESCRIBED THEREUNDER, TO THE MAXIMUM EXTENT PRACTICABLE. SEE TD 70-06.G, MAY 17, 1982. TREASURY INFORMS US THAT OCCASIONALLY PROCUREMENTS ARE UNDERTAKEN DIRECTLY BY SAUDI ARABIA. THESE PROCUREMENTS ALSO ARE FUNDED THROUGH THE DOLLAR ACCOUNT.

II. LEGAL DISCUSSION

A. AUDIT AUTHORITY AND ACCESS TO RECORDS

IN ITS COMMENTS TO US, TREASURY ARGUES THAT OUR DECISION IN MANDEX, INC., B-204415, OCTOBER 13, 1981, IN WHICH WE DECLINED TO CONSIDER A BID PROTEST INVOLVING A JOINT COMMISSION PROCUREMENT BECAUSE THE FUNDS INVOLVED WERE NOT APPROPRIATED FUNDS, WAS CORRECT, BOTH FROM A LEGAL AND POLICY STANDPOINT. TREASURY CONCLUDES THAT WE HAVE NEITHER BID PROTEST NOR AUDIT AUTHORITY OVER FUNDS DEPOSITED IN THE DOLLAR ACCOUNT, DESCRIBED ABOVE. THEREFORE DETERMINED THAT IT WAS INAPPROPRIATE TO GRANT GAO ACCESS TO ITS FILES FOR THE PURPOSE OF CONDUCTING A FORMAL AUDIT OF PROCUREMENTS UNDERTAKEN ON BEHALF OF THE JOINT COMMISSION OR TO PROCESS BID PROTESTS FILED BY INDIVIDUAL BIDDERS. ON THE OTHER HAND, TREASURY STATES THAT IT RECOGNIZES GAO'S GENERAL AUTHORITY TO REVIEW AND EVALUATE GOVERNMENT PROGRAMS AND THAT IT WILL COOPERATE WITH THIS PROCESS IN EVERY WAY POSSIBLE WITHIN THE LAW.

TREASURY'S POSITION WITH REGARD TO OUR AUDIT AUTHORITY APPEARS TO BE BASED ON TWO ERRONEOUS ASSUMPTIONS: (1) OUR AUDIT AND BID PROTEST AUTHORITIES ARE EQUALLY EXTENSIVE, AND SINCE WE DO NOT HAVE AUTHORITY TO ENTERTAIN BID PROTESTS OF JOINT COMMISSION PROCUREMENTS, IT FOLLOWS THAT WE ARE UNAUTHORIZED TO FORMALLY AUDIT THEM; AND (2) A PROGRAM AUDIT OF JOINT COMMISSION ACTIVITIES, PURSUANT TO 31 U.S.C. 717(B) (FORMERLY 31 U.S.C. 1154(A)) AND THE CORRESPONDING RIGHT OF ACCESS TO RECORDS SUPPORTING SUCH AN AUDIT IS LESS EXTENSIVE THAN AND WOULD NOT INCLUDE A FORMAL AUDIT OF JOINT COMMISSION PROCUREMENTS AND CONTRACTS.

THE GENERAL ACCOUNTING OFFICE IS A PRINCIPAL MEANS BY WHICH THE CONGRESS CONDUCTS OVERSIGHT OF EXECUTIVE BRANCH PROGRAMS AND EXPENDITURES. THE CONGRESS RELIES ON THE GAO TO INSURE THAT "(1) FUNDS ARE USED FOR THEIR INTENDED PURPOSES, (2) AGENCY RESOURCES ARE MANAGED EFFECTIVELY AND ECONOMICALLY, AND (3) PROGRAMS ARE ACHIEVING THE OBJECTIVES SET FORTH BY LAW." S. REP. NO. 570, 96TH CONG., 1ST SESS. 1 (1980) (HEREINAFTER REFERRED TO AS S. REP.). OVER THE YEARS, AS A RESULT OF THE COMPLEX ECONOMIC, SOCIAL, POLITICAL AND MILITARY ISSUES FACING THE CONGRESS, TO A GREAT EXTENT, GAO HAS REFOCUSED ITS ATTENTION AND RESPONSIBILITIES FROM TRADITIONAL FINANCE AND ACCOUNTING ACTIVITIES TO ASSESSMENTS OF THE ECONOMY, EFFICIENCY AND EFFECTIVENESS OF AGENCY AND PROGRAM MANAGEMENT AND OPERATION. ID. AT 2.

THE AUTHORITY AND RESPONSIBILITY OF THE GAO FOR MAKING AUDITS AND CONDUCTING INVESTIGATIONS OF GOVERNMENT AGENCIES AND ACTIVITIES ARE STATED IN A NUMBER OF LAWS. THE BUDGET AND ACCOUNTING ACT, 1921, AS AMENDED, AUTHORIZES THE COMPTROLLER GENERAL TO "INVESTIGATE ALL MATTERS RELATED TO THE RECEIPT, DISBURSEMENT, AND USE OF PUBLIC MONEY." 31 U.S.C. 712 (FORMERLY 31 U.S.C. 53(A)). THE SENATE REPORT ACCOMPANYING THE GENERAL ACCOUNTING OFFICE ACT OF 1980, PUB. L. NO. 96-226, 94 STAT. 311, HAS CHARACTERIZED THIS AUTHORITY AS EXTENDING NOT ONLY TO ACCOUNTING AND FINANCIAL AUDITING BUT ALSO TO ADMINISTRATION, OPERATIONS, AND PROGRAM EVALUATION. S. REP. AT 2. THE ACT ALSO PROVIDES, AS CURRENTLY CODIFIED IN 31 U.S.C. 716(A) (FORMERLY 31 U.S.C. 54(A)) THAT "(EACH AGENCY SHALL GIVE THE COMPTROLLER GENERAL INFORMATION THE COMPTROLLER GENERAL REQUIRES ABOUT THE DUTIES, POWERS, ACTIVITIES, ORGANIZATION, AND FINANCIAL TRANSACTIONS OF THE AGENCY * * * ."

SECTION 204(A) OF THE LEGISLATIVE REORGANIZATION ACT OF 1970, AS AMENDED, 31 U.S.C. 717(B), PROVIDES THAT THE "COMPTROLLER GENERAL SHALL EVALUATE THE RESULTS OF A GOVERNMENT PROGRAM OR ACTIVITY THE GOVERNMENT CARRIES OUT UNDER EXISTING LAW * * * ." THE LEGISLATIVE HISTORY SHOWS THAT THE SECTION WAS INTENDED TO CONFER NEW AUTHORITY ON THE GAO. THUS, THE ACCOMPANYING HOUSE REPORT STATED: "(PROGRAM REVIEW IN THE CASE OF GAO * * * (IS A) REASONABLE (EXTENSION) OF THE WORK (IT) PRESENTLY PERFORMS. THE BILL * * * ASSIGNS TO THE COMPTROLLER GENERAL NEW STATUTORY AUTHORITY TO REVIEW AND ANALYZE THE RESULTS OF GOVERNMENT PROGRAMS AND ACTIVITIES." H.R. REP. NO. 1215, 91ST CONG., 2ND SESS. 18 (1970). ALTHOUGH THE SENATE BILL, S. 844, DID NOT HAVE THE SAME PROVISION, THE SENATE REPORT ALSO INDICATED THAT THE ACT WAS INTENDED TO EXPAND GAO'S FUNCTIONS. IN THIS REGARD, IT SAID: "S. 844 WOULD (1) ENLARGE THE SCOPE AND FUNCTIONS OF THE GENERAL ACCOUNTING OFFICE TO ENABLE IT TO SUPPLY A VARIETY OF BUDGETARY AND FISCAL DATA TO THE CONGRESS * * * ." S. REP. NO. 202, 91ST CONG., 1ST SESS. 11 (1969). NOTHING IN THE ACT ITSELF OR THE COMMITTEE REPORTS SUGGESTS THAT THE NEW AUTHORITY WAS DEPENDENT ON OUR AUTHORITY TO SETTLE AND ADJUST THE ACCOUNTS OF FEDERAL AGENCIES AND DEPARTMENTS, THE BASIS FOR OUR PREVIOUS AUDIT AUTHORITIES.

RECOGNITION THAT THE ACT PROVIDED NEW AUTHORITY IS SHOWN EXPLICITLY IN THE GAO GENERAL POLICY MANUAL, AND, BY INFERENCE, IN THE GAO POLICY AND PROCEDURES MANUAL. THE FORMER STATES THAT THE ACT SUBSTANTIALLY EXPANDED GAO'S AUDIT RESPONSIBILITY, GENERAL POLICY MANUAL 1-5 (OCT. 1981), AND THE LATTER DESCRIBES OUR AUDIT AUTHORITY, AS EXTENDING, WITHIN CERTAIN LIMITATIONS, TO ALL ACTIVITIES, FINANCIAL TRANSACTIONS, AND ACCOUNTS OF THE FEDERAL GOVERNMENT, GENERAL ACCOUNTING OFFICE POLICY AND PROCEDURES MANUAL, TITLE I, SEC. 7.2.

IN VIEW OF THE ABOVE, WE THINK THAT OUR AUDIT AUTHORITY IS CONSIDERABLY BROADER THAN OUR AUTHORITY TO SETTLE AND ADJUST THE ACCOUNTS OF FEDERAL AGENCIES. (SEE LATER DISCUSSION ABOUT THE BASIS FOR OUR BID PROTEST AUTHORITY.) ALTHOUGH MOST AGENCY ACTIVITIES ARE SUPPORTED BY APPROPRIATED FUNDS, WE THINK OUR AUDIT AUTHORITY EXTENDS TO ACTIVITIES OF FEDERAL AGENCIES, SUCH AS THOSE AUTHORIZED BY SECTION 607(A) OF THE FOREIGN ASSISTANCE ACT, WHERE AGENCIES ARE DIRECT PARTICIPANTS IN INTERNATIONAL AGREEMENTS, INCLUDING ACTIVITIES WHOLLY SUPPORTED BY FOREIGN GOVERNMENT MONIES. THIS IS SO EVEN THOUGH THE ACCOUNT USED TO HOLD THE FOREIGN GOVERNMENT'S FUNDS UNTIL NEEDED, SUCH AS THE SAUDI DOLLAR ACCOUNT, IS NOT SUBJECT TO OUR SETTLEMENT AUTHORITY.

BASED ON THE ABOVE, WE CONCLUDE THAT OUR AUDIT AUTHORITY COVERS JOINT COMMISSION ACTIVITIES. AS DESCRIBED IN DETAIL IN THE BACKGROUND SECTION, THOSE ACTIVITIES INVOLVE SAUDI ARABIA PAYING TREASURY AND OTHER FEDERAL AGENCIES, PURSUANT TO INTERNATIONAL AGREEMENTS, SUBSTANTIAL SUMS OF MONEY FOR THE SERVICES PROVIDED BY THE AGENCIES, PREDOMINANTLY THE SERVICES OF AGENCY EMPLOYEES. FEDERAL AGENCIES CONDUCT MOST JOINT COMMISSION PROCUREMENTS, TO THE MAXIMUM EXTENT PRACTICABLE IN COMPLIANCE WITH UNITED STATES LAWS AND FEDERAL PROCUREMENT REGULATIONS. JOINT COMMISSION PROJECTS AND PROCUREMENTS, AND JOINT COMMISSION ARRANGEMENTS ALSO SERVE PARTICULAR INTEREST OF THE UNITED STATES IN ADDITION TO THE GENERAL FOREIGN POLICY INTERESTS DESCRIBED IN SUBCHAPTER 1 OF THE FOREIGN ASSISTANCE ACT, 22 U.S.C. 2151, ET SEQ. AT LEAST THREE PROJECT AGREEMENTS PROVIDE THE UNITED STATES WITH SOME FORM OF PATENT RIGHTS TO INVENTIONS ARISING FROM PROJECT WORK. THE COMPTROLLER GENERAL'S REVIEW AND AUDIT AUTHORITY THUS CLEARLY EXTENDS TO THESE ACTIVITIES WHICH ARE CARRIED OUT DIRECTLY BY THE FEDERAL AGENCIES AND WHICH ALSO INVOLVE OTHER RIGHTS AND INTERESTS OF THE UNITED STATES. WE ALSO THINK THAT TREASURY'S SUGGESTION THAT OUR "PROGRAM" AUDIT AUTHORITY IS SOMEHOW LESS ENCOMPASSING THAN OUR "NORMAL" AUDIT AUTHORITY IS BASED ON A MISCONCEPTION. OUR AUTHORITY TO REVIEW THE EXECUTION OF GOVERNMENT PROGRAMS IS MERELY ONE ASPECT OF OUR COMPREHENSIVE AUDIT AUTHORITY. OUR AUTHORITY EXTENDS BOTH TO ACCOUNTING AND FINANCIAL AUDITING AS WELL AS ADMINISTRATION, OPERATIONS, AND PROGRAM EVALUATION. ALTHOUGH WE MAY CHOOSE TO LIMIT AN AUDIT TO, OR, TO EMPHASIZE, PROGRAM EVALUATION AND OPERATIONS INSTEAD OF ACCOUNTING AND FINANCIAL AUDITING IN PARTICULAR CASES, THIS IS NOT DUE TO A LACK OF AUTHORITY BUT RATHER TO INTERNAL CONSIDERATIONS ABOUT HOW THE AUDIT IN QUESTION SHOULD PROCEED.

SECTION 313(A) OF THE BUDGET AND ACCOUNTING ACT, 1921, AS AMENDED, 31 U.S.C. 716(A) (FORMERLY 31 U.S.C. 54(A)), AUTHORIZES THE COMPTROLLER GENERAL TO INSPECT AGENCY RECORDS TO GET ANY INFORMATION HE CONSIDERS NECESSARY TO AUDIT THE "DUTIES, POWERS, ACTIVITIES, ORGANIZATION, AND FINANCIAL TRANSACTIONS OF THE AGENCY." /3/ THE SENATE REPORT ACCOMPANYING THE GENERAL ACCOUNTING OFFICE ACT OF 1980, PUB. L. NO. 96-226, 94 STAT. 311, STATES THAT CONGRESS RECOGNIZED THAT GAO WOULD REQUIRE COMPLETE ACCESS TO FEDERAL AGENCY RECORDS. S. REP. AT 5. ACCORDINGLY, SINCE WE HAVE AUTHORITY TO AUDIT JOINT COMMISSION ACTIVITIES, INCLUDING ITS PROCUREMENTS AND CONTRACTS, /4/ IT FOLLOWS THAT WE HAVE A CORRESPONDING RIGHT OF ACCESS TO ANY AND ALL AGENCY BOOKS, DOCUMENTS, PAPERS AND RECORDS NECESSARY TO CONDUCT THAT AUDIT.

B. BID PROTEST AUTHORITY

ALTHOUGH WE HAVE CONCLUDED THAT GAO IS AUTHORIZED TO AUDIT JOINT COMMISSION PROCUREMENTS AND CONTRACTS, WE AGREE WITH TREASURY THAT, WITH A FEW EXCEPTIONS, WE DO NOT HAVE AUTHORITY TO ENTERTAIN BID PROTESTS OF ITS PROCUREMENTS. THUS, WE AFFIRM OUR HOLDING IN MANDEX, INC., SUPRA.

GAO'S BID PROTEST JURISDICTION, UNLIKE ITS AUDIT RESPONSIBILITIES, IS BASED ON ITS AUTHORITY TO SETTLE AND ADJUST ACCOUNTS OF FEDERAL AGENCIES, AND TO CERTIFY BALANCES IN THE ACCOUNTS OF ACCOUNTABLE OFFICERS UNDER SECTIONS 304 AND 305 OF THE BUDGET AND ACCOUNTING ACT, 1921, AS AMENDED, 31 U.S.C. 3526 (FORMERLY 31 U.S.C. 71, 74); 4 C.F.R. 21.1. B-194663, MAY 10, 1979; CUBIC WESTERN DATA, B-198530, MAY 15, 1980, 80-1 CPD 341. OUR SETTLEMENT AUTHORITY EXTENDS BOTH TO ACCOUNTS OF FEDERAL AGENCIES SUPPORTING EXPENDITURES OF APPROPRIATED FUNDS AND TO THE RECEIPT OF FUNDS ALLOCABLE TO ACCOUNTS OF THOSE AGENCIES. PEACE SURPLUS, B-186410, JANUARY 27, 1977, 77-1 CPD 64; SEIDMAN & SEIDMAN, B-186384, MAY 10, 1976, 76-1 CPD 306; THE CLIP JOINT, B-184996, DECEMBER 1, 1975, 75-2 CPD 367.

PURSUANT TO THE TERMS OF THE TECHNICAL COOPERATION AGREEMENT, DISCUSSED SUPRA, SAUDI ARABIA IS OBLIGATED TO COVER ALL JOINT COMMISSION PROJECT COSTS, AND MUST DEPOSIT FUNDS NECESSARY TO MEET THE MAXIMUM UNITED STATES OBLIGATIONS IN A DOLLAR ACCOUNT IN THE TREASURY BEFORE ANY PROCUREMENTS ON SAUDI ARABIA'S BEHALF ARE COMMENCED. IN ADDITION, SAUDI ARABIA MUST AGREE TO HOLD THE UNITED STATES HARMLESS FROM ANY AND ALL CLAIMS THAT MAY ARISE AS A RESULT OF THE TECHNICAL SERVICES FURNISHED UNDER THE AGREEMENT TO THE EXTENT THAT THE AMOUNTS INVOLVED EXCEED THE SAUDI ARABIAN FUNDS IN THE DEPOSIT ACCOUNT. SINCE ALL THE MONIES INVOLVED IN THESE PROCUREMENTS ARE FURNISHED BY SAUDI ARABIA IN ADVANCE AND DO NOT INVOLVE ANY EXPENDITURES OF APPROPRIATED FUNDS (WITH THE EXCEPTION OF THE DEPARTMENT OF ENERGY FUNDS FOR THE SOLERAS PROJECT, DISCUSSED LATER), WE HAVE NO AUTHORITY TO TAKE EXCEPTIONS TO ANY EXPENDITURES MADE WITH THOSE FUNDS. ACCORDINGLY, OUR BID PROTEST JURISDICTION WOULD NOT EXTEND TO PROCUREMENTS SUPPORTED BY SAUDI FUNDS DEPOSITED PURSUANT TO THE TECHNICAL COOPERATION AGREEMENT.

ALTHOUGH WE ASSERTED OUR BID PROTEST JURISDICTION OVER FOREIGN MILITARY SALES PROCUREMENTS IN 58 COMP.GEN. 81 (1978), WHICH, AT FIRST GLANCE, APPEAR QUITE SIMILAR TO THOSE UNDERTAKEN BY FEDERAL AGENCIES FOR JOINT COMMISSION PROJECTS, THERE ARE IMPORTANT DIFFERENCES WHICH MERIT SOME DISCUSSION. (IN ITS REPORT TO US ABOUT THE JOINT COMMISSION PROCUREMENTS, THE DEPARTMENT OF THE TREASURY STATES ITS VIEW THAT OUR DECISION ABOUT FOREIGN MILITARY SALES WAS ERRONEOUS AND SHOULD BE REVERSED.

FOREIGN MILITARY SALES ARE CONDUCTED UNDER AUTHORITY OF THE ARMS EXPORT CONTROL ACT, AS AMENDED, 22 U.S.C. 2751 ET SEQ. THERE ARE THREE PRINCIPAL AUTHORITIES FOR FUNDING THE PROCUREMENTS MADE FOR FOREIGN GOVERNMENTS UNDER THIS ACT.

SECTION 2762(A) (CASH SALES) ALLOWS THE UNITED STATES TO ENTER INTO PROCUREMENTS UPON RECEIPT OF A "DEPENDABLE UNDERTAKING" ON THE PART OF THE FOREIGN GOVERNMENT TO MAKE FUNDS AVAILABLE AS REQUIRED TO MAKE PAYMENTS ON THE CONTRACT, AND TO HOLD THE UNITED STATES HARMLESS FROM ANY DAMAGE OR COSTS RESULTING FROM CANCELLATION OF THE CONTRACT. PROCUREMENTS UNDER THIS SECTION ARE MOST LIKE THE PROCUREMENTS CONDUCTED UNDER THE TECHNICAL COOPERATION AGREEMENT.

SECTION 2762(B) (DELAYED PAYMENT) ALLOWS THE FOREIGN CUSTOMER TO PAY FOR THE DEFENSE ARTICLES OR SERVICES DELIVERED WITHIN 120 DAYS AFTER THE DATE OF BILLING. MEANWHILE, DEPARTMENT OF DEFENSE FUNDS ARE USED TO PAY THE CONTRACTORS AS REQUIRED.

THE THIRD AUTHORITY, SECTION 2763 (CREDIT SALES), ALLOWS THE FOREIGN GOVERNMENT UP TO 12 YEARS TO PAY FOR THE ARTICLES OR SERVICES PROVIDED, WHICH, IN THE MEANTIME, ARE COMPLETELY FINANCED BY DOD APPROPRIATIONS. THE TIME OF OUR 1978 DECISION, DELAYED PAYMENT AND CREDIT SALES WERE THE MOST FREQUENTLY USED METHODS OF CONDUCTING FOREIGN MILITARY SALES.

THERE CAN BE NO QUESTION OF OUR SETTLEMENT AUTHORITY, AND THEREFORE OUR BID PROTEST JURISDICTION, OVER DELAYED PAYMENT AND CREDIT SALES BECAUSE OF THE SUBSTANTIAL AMOUNTS OF UNITED STATES APPROPRIATIONS INVOLVED. SALES UNDER SECTION 2762(A) POSE A CLOSER QUESTION. THERE REMAINS, HOWEVER, A POTENTIAL FOR UNITED STATES FINANCIAL INVOLVEMENT EVEN IN THESE SALES THAT IS NOT PRESENT IN JOINT COMMISSION PROCUREMENTS.

FIRST, THE FOREIGN MILITARY SALES PROCUREMENT CONTRACT IS ENTERED INTO BY DOD ON THE BASIS OF A PROMISE-- I.E., A "DEPENDABLE UNDERTAKING"-- THAT THE NECESSARY FUNDS WILL BE DEPOSITED BEFORE ANY PAYMENT NEED BE MADE. HOWEVER, THERE IS NO PRIVITY BETWEEN THE CONTRACTOR AND THE FOREIGN NATION. IF THE FOREIGN NATION IS UNABLE TO MEET THE PAYMENT REQUIREMENTS, THE UNITED STATES MUST DO SO. IN CONTRAST, UNDER THE TECHNICAL COOPERATION AGREEMENT, NO PROCUREMENT CONTRACT IS EVER SIGNED BY A FEDERAL AGENCY UNTIL THE FULL AMOUNT REQUIRED IS SAFELY DEPOSITED IN A TREASURY DOLLAR ACCOUNT. MOREOVER, ALTHOUGH THE FOREIGN GOVERNMENT IN A FOREIGN MILITARY SALES TRANSACTION AGREES TO HOLD THE UNITED STATES HARMLESS FROM ANY DAMAGES OR COSTS ARISING FROM CANCELLATION OF THE CONTRACT, IT DOES NOT OFFER THE SAME PROTECTION SHOULD ADDITIONAL PAYMENTS BE NECESSARY BECAUSE OF CLAIMS BY THE CONTRACTOR FOR COST OVERRUNS OR FOR OTHER REASONS. THE UNITED STATES IS PROTECTED, WITH RESPECT TO JOINT COMMISSION PROJECTS, BY THE RIGHT TO STOP WORK CLAUSE (SECTION 5(D) AND THE HOLD HARMLESS CLAUSE (SECTION 9(A)) OF THE TECHNICAL COOPERATION AGREEMENT, DISCUSSED EARLIER. THUS, THE UNITED STATES IS NOT RESPONSIBLE FOR ANY AMOUNTS DUE ON THE CONTRACT ABOVE A STATED AMOUNT, AND THIS AMOUNT MUST BE DEPOSITED IN THE TREASURY IN FULL BEFORE A COMMITMENT TO A CONTRACTOR IS SIGNED.

IN VIEW OF THESE DISTINCTIONS, WE AFFIRM OUR DECISION IN MANDEX, SUPRA, AND WILL CONTINUE TO ACCEPT BID PROTESTS IN FOREIGN MILITARY SALES PROCUREMENTS IN APPROPRIATE CASES.

AS EXPLAINED ABOVE, THE PRINCIPAL REASON WE DECLINE TO CONSIDER BID PROTESTS ABOUT TYPICAL JOINT COMMISSION PROJECT PROCUREMENTS IS THAT SAUDI ARABIA PROVIDES ALL THE FUNDING. OUR CONCLUSION DOES NOT APPLY, OF COURSE, TO THE ATYPICAL PROJECT IN WHICH UNITED STATES FUNDS ARE USED. OUR KNOWLEDGE, "SOLERAS" IS THE ONLY PROJECT IN WHICH THIS OCCURS. THE SOLERAS PROJECT AGREEMENT PROVIDES THAT THE DEPARTMENT OF ENERGY PAY 50 PERCENT OF THE COSTS. AS THE MONIES CONTRIBUTED BY THE DEPARTMENT OF ENERGY TO THE SOLERAS PROJECT ARE APPROPRIATED FUNDS, WE WOULD HAVE AUTHORITY TO SETTLE AND ADJUST DOLLAR ACCOUNT EXPENDITURES PERTAINING TO THAT PROJECT, AND THUS TO ENTERTAIN BID PROTESTS FOR SOLERAS PROCUREMENTS. SHOULD FUTURE PROJECT AGREEMENTS SIMILARLY OBLIGATE THE UNITED STATES, IT FOLLOWS THAT THE SAME CONCLUSION WOULD APPLY TO THEM.

IN THE OCTOBER 6, 1981 LETTER MENTIONED PREVIOUSLY, MR. ROSENTHAL ALSO ASKED WHETHER WE HAD CONSIDERED ANY CASES SIMILAR OR RELATED TO MANDEX, INC., SUPRA, IN WHICH THE TREASURY DEPARTMENT QUESTIONED OUR AUDIT AUTHORITY. WE HAVE NOT FOUND ANY SUCH CASES.

WE HOPE WE HAVE BEEN OF ASSISTANCE.

/1/ THE AGREEMENT HAS BEEN EXTENDED FOR AN ADDITIONAL 5 YEARS.

/2/ IN GAO/ID 83-4, AT 7, 14, OCTOBER 21, 1982, WE STATED THAT AS OF JUNE 30, 1982, THERE WERE 290 FEDERAL EMPLOYEES WORKING FULL TIME ON JOINT COMMISSION PROJECTS (226 IN SAUDI ARABIA AND 64 IN THE UNITED STATES). OF DECEMBER 31, 1981 TOTAL EXPENDITURES FOR COMMISSION PROJECTS WERE ABOUT $507 MILLION. (THIS INCLUDES $23 MILLION OF UNITED STATES MONIES ON THE SOLERAS PROJECT DISCUSSED LATER IN THE TEXT.) PAYMENTS TO FEDERAL AGENCIES CONSTITUTE A SMALL PART OF THE $507 MILLION.

/3/ THE LEGISLATIVE HISTORY OF THE ACT REVISING, CODIFYING AND ENACTING TITLE 31 SHOWS THAT THE WORD "RECORDS" WAS SUBSTITUTED FOR "BOOKS, DOCUMENTS, PAPERS, OR RECORDS," THE WORDING IN 31 U.S.C. 54(A), AND THE WORD "RECORD" INCLUDES "ALL TERMS PREVIOUSLY USED FOR RECORDS, DOCUMENTS, ACCOUNTS, REPORTS, FILES, MEMORANDA, PAPERS, THINGS, AND OTHER SIMILAR ITEMS." H.R. REP. NO. 651, 97TH CONG., 2ND SESS. 3, 31 (1982).

/4/ CONSISTENT WITH SECTION 304 OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, 41 U.S.C. 254(C), IT APPEARS THAT JOINT COMMISSION CONTRACTS ENTERED INTO BY THE UNITED STATES HAVE A STANDARD CLAUSE GIVING THE COMPTROLLER GENERAL ACCESS TO A CONTRACTOR'S AND SUBCONTRACTOR'S BOOKS, DOCUMENTS, PAPERS, AND RECORDS INVOLVING TRANSACTIONS RELATED TO THE CONTRACT OR SUBCONTRACT UNTIL 3 YEARS AFTER EXPIRATION OF FINAL PAYMENT.