B-37704, NOVEMBER 11, 1943, 23 COMP. GEN. 365

B-37704: Nov 11, 1943

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WHERE AMOUNTS ADMINISTRATIVELY DEDUCTED OR WITHHELD AS LIQUIDATED DAMAGE PENALTIES FROM A CONTRACTOR'S EARNINGS UNDER A CONTRACT ARE RETAINED IN "NO YEAR" OR "AVAILABLE UNTIL EXPENDED" APPROPRIATIONS. 1943: I HAVE YOUR LETTER OF OCTOBER 7. YOU ADVISE THAT AMONG THE AMOUNTS SO RETAINED THERE ARE 20 DIFFERENT LIQUIDATED DAMAGE PENALTIES. WHICH NOW APPEAR TO HAVE BEEN ACCEPTED BY THE CONTRACTORS AS PROPER. A REASONABLE TIME HAVING ELAPSED SINCE THE DEDUCTIONS WERE MADE. EXCEPT IN ONE INSTANCE WHERE CLAIM WAS FILED AND SUBSEQUENTLY DISALLOWED BY THIS OFFICE. A TABULATION TRANSMITTED WITH YOUR LETTER SHOWS THAT FINAL SETTLEMENTS UNDER THE VARIOUS CONTRACTS INVOLVED WERE ACCOMPLISHED DURING A PERIOD EXTENDING FROM DECEMBER 23.

B-37704, NOVEMBER 11, 1943, 23 COMP. GEN. 365

APPROPRIATIONS - "NO YEAR" OR "AVAILABLE UNTIL EXPENDED"--- DISPOSITION OF LIQUIDATED DAMAGE PENALTIES AS A GENERAL RULE AMOUNTS DEDUCTED AS LIQUIDATED DAMAGE PENALTIES FROM A CONTRACTOR'S EARNINGS UNDER A CONTRACT SHOULD NOT BE COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS, BUT, RATHER, SUCH AMOUNTS SHOULD REMAIN TO THE CREDIT OF THE APPLICABLE APPROPRIATION IN THE EVENT THAT THE CONTRACTOR, AT SOME LATER DATE, SHOULD PRESENT A VALID CLAIM FOR REMISSION OF THE AMOUNTS SO DEDUCTED. WHERE AMOUNTS ADMINISTRATIVELY DEDUCTED OR WITHHELD AS LIQUIDATED DAMAGE PENALTIES FROM A CONTRACTOR'S EARNINGS UNDER A CONTRACT ARE RETAINED IN "NO YEAR" OR "AVAILABLE UNTIL EXPENDED" APPROPRIATIONS, AND NO OBJECTION TO THE DEDUCTION HAS BEEN RAISED BY THE CONTRACTOR WITHIN A PERIOD OF TWO OR MORE YEARS, SUCH AMOUNTS MAY BE TREATED AS UNOBLIGATED BALANCES AVAILABLE FOR EXPENDITURE IN THE SAME MANNER AS OTHER FUNDS IN SUCH APPROPRIATIONS, 9 COMP. GEN. 398, AMPLIFIED.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE INTERIOR, NOVEMBER 11, 1943:

I HAVE YOUR LETTER OF OCTOBER 7, 1943, REQUESTING DECISION AS TO THE FINAL DISPOSITION TO BE MADE OF CERTAIN LIQUIDATED DAMAGE PENALTIES DEDUCTED UNDER CONTRACTS OF THE BONNEVILLE POWER ADMINISTRATION AND RETAINED IN ITS "APPROPRIATION.'

YOU ADVISE THAT AMONG THE AMOUNTS SO RETAINED THERE ARE 20 DIFFERENT LIQUIDATED DAMAGE PENALTIES, TOTALING $11,827, WHICH NOW APPEAR TO HAVE BEEN ACCEPTED BY THE CONTRACTORS AS PROPER, A REASONABLE TIME HAVING ELAPSED SINCE THE DEDUCTIONS WERE MADE, AND THERE HAVING BEEN RECEIVED NO PROTEST WITHIN THAT TIME, EXCEPT IN ONE INSTANCE WHERE CLAIM WAS FILED AND SUBSEQUENTLY DISALLOWED BY THIS OFFICE. A TABULATION TRANSMITTED WITH YOUR LETTER SHOWS THAT FINAL SETTLEMENTS UNDER THE VARIOUS CONTRACTS INVOLVED WERE ACCOMPLISHED DURING A PERIOD EXTENDING FROM DECEMBER 23, 1940, TO MAY 12, 1942, AND, IN THE MAJORITY OF INSTANCES, OVER TWO YEARS AGO.

THE SO-CALLED "APPROPRIATION" MENTIONED IN YOUR LETTER APPARENTLY IS THE ACCOUNT "14X1225 CONSTRUCTION, OPERATION, AND MAINTENANCE, BONNEVILLE POWER TRANSMISSION SYSTEM," UNDER WHICH ARE CARRIED THE GENERAL PURPOSE FUNDS APPROPRIATED FOR THE BONNEVILLE POWER ADMINISTRATION BY THE CONGRESS IN VARIOUS APPROPRIATION ACTS. SUCH APPROPRIATIONS ARE SPECIFICALLY MADE AVAILABLE FOR USE UNTIL EXPENDED SO THAT THE LAWS RELATING TO CARRYING LAPSED ANNUAL APPROPRIATIONS TO THE SURPLUS FUND IN THE TREASURY ARE NOT FOR APPLICATION THERETO AS IS THE CASE GENERALLY WITH RESPECT TO ANNUAL APPROPRIATIONS FOR THE USE OF THE VARIOUS DEPARTMENTS AND AGENCIES OF THE GOVERNMENT. SEE THE PROVISIONS OF THE ACT OF JUNE 20, 1874, AS AMENDED, 31 U.S.C. 713; SECTION 3690, REVISED STATUTES, 31 U.S.C. 712.

AS AUTHORITY FOR RETAINING IN SAID ACCOUNT THE LIQUIDATED DAMAGE PENALTIES COLLECTED OR WITHHELD BY THE ADMINISTRATION, YOU CITE 9 COMP. GEN. 398, WHEREIN IT WAS HELD, IN SUBSTANCE, THAT AMOUNTS REPRESENTING WITHHOLDINGS FROM CONTRACTORS AS LIQUIDATED DAMAGES SHOULD NOT BE DEPOSITED TO THE CREDIT OF THE TREASURER OF THE UNITED STATES AND COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS, BUT SHOULD BE LEFT IN THE APPROPRIATION TO BE AVAILABLE FOR PAYMENT THEREFROM TO THE CONTRACTOR, IN THE EVENT THAT, AT SOME LATER DATE, A VALID CLAIM BE PRESENTED FOR REMISSION THEREOF, AND, ALSO, THAT THE QUESTION AS TO THE FINAL DISPOSITION OF ANY AMOUNT SO WITHHELD WOULD BE FOR DETERMINATION BY THIS OFFICE.

ORDINARILY, QUESTIONS RELATING TO THE FINAL DISPOSITION OF AMOUNTS COLLECTED AS LIQUIDATED DAMAGES WILL NOT BE A CONCERN OF ADMINISTRATIVE AGENCIES, SINCE SUCH AMOUNTS REMAIN ENCUMBERED AS CONTINGENT OBLIGATIONS UNTIL THEY REVERT TO THE SURPLUS FUND IN THE TREASURY IN ACCORDANCE WITH THE PROVISIONS OF LAW GOVERNING THE DISPOSITION OF UNEXPENDED BALANCES OF ANNUAL APPROPRIATIONS CITED ABOVE. HOWEVER, IN CASES OF NO YEAR OR "AVAILABLE UNTIL EXPENDED" APPROPRIATIONS SUCH AS INVOLVED IN THE PRESENT MATTER, THE UNDESIRABILITY OF CARRYING OVER SUCH AMOUNTS INDEFINITELY, FROM YEAR TO YEAR, IS OBVIOUS.

IT IS GENERALLY RECOGNIZED BY THE ACCOUNTING OFFICERS OF THE GOVERNMENT THAT WHERE LIQUIDATED DAMAGES ARE DEDUCTED FROM A CONTRACTOR'S EARNINGS FOR SUPPLIES OR SERVICES FURNISHED UNDER A CONTRACT, THERE IS INVOLVED ONLY AN ADJUSTMENT OF THE CONTRACT PRICE AND THE MAKING OF A CHARGE AGAINST THE CONTRACT APPROPRIATION FOR THE NET AMOUNT PAYABLE TO THE CONTRACTOR. CONSEQUENTLY, IN SUCH CASES, A FINAL DISPOSITION OF THE PENALTIES COLLECTED IS ACCOMPLISHED WHEN THEY REMAIN AS CREDITS UNDER THE APPROPRIATION CHARGED WITH THE PAYMENTS UNDER THE CONTRACT. SEE 18 COMP. DEC. 430.

ACCORDINGLY, YOU ARE ADVISED THAT IF, AS APPEARS FROM THE FACT THAT THEY ARE REFERRED TO AS ,DEDUCTIONS," THE AMOUNTS RESERVED BY THE BONNEVILLE POWER ADMINISTRATION AS LIQUIDATED DAMAGE PENALTIES CONSIST MERELY OF REDUCTIONS OF A CONTRACTOR'S EARNINGS IN CONNECTION WITH THE CONTRACT UNDER WHICH ASSESSED, THEIR DISPOSITION IN THE NO YEAR ACCOUNT, SUPRA, MAY BE REGARDED AS FINAL, SUBJECT ONLY TO THE CONTINGENT LIABILITIES EXISTING IN THE MATTER. THE ALLOTMENT OR ENCUMBRANCE FOR SUCH CONTINGENCIES SHOULD BE CONTINUED AS LONG AS THERE EXISTS ANY PROBABILITY THAT A CLAIM FOR REMISSION OF THE AMOUNT DEDUCTED MAY BE PRESENTED, OR UNTIL IT HAS BEEN DETERMINED BY THIS OFFICE THAT SUCH A CLAIM IS CLEARLY WITHOUT MERIT. SEE GENERAL REGULATIONS NO. 50, 5 COMP. GEN. 1058.

HOWEVER, WHERE NO OBJECTION TO THE DEDUCTION HAS BEEN RAISED BY THE CONTRACTOR WITHIN A PERIOD OF TWO OR MORE YEARS, THE LIKELIHOOD THAT IN THE FUTURE THE CONTRACTOR WILL CONTEST THE ASSESSMENT AND COLLECTION OF LIQUIDATED DAMAGES IS CONSIDERED REMOTE. THEREFORE, AND IN VIEW OF THE FACT THAT IT MAY BE ASSUMED A SUFFICIENT BALANCE WILL BE AVAILABLE IN THE NO YEAR ACCOUNT TO DISCHARGE ANY UNANTICIPATED CLAIMS THAT MAY BECOME PAYABLE, NO LEGAL REASON IS PERCEIVED BY THIS OFFICE WHY, IN SUCH CASES AS REFERRED TO IN YOUR SUBMISSION, THE AMOUNTS SO DEDUCTED SHOULD NOT BE TREATED AS UNOBLIGATED BALANCES AVAILABLE FOR EXPENDITURE IN THE SAME MANNER AS OTHER FUNDS IN SAID ACCOUNT.