B-64739, MARCH 31, 1947, 26 COMP. GEN. 721

B-64739, MARCH 31, 1947, 26 COMP. GEN. 721

SALES - SURPLUS PROPERTY - EXPENSES PAYABLE FROM PROCEEDS COSTS INCIDENT TO THE "DEMILITARIZATION AND PROCESSING FOR SALE" OF SURPLUS AMMUNITION, COMBAT VEHICLES, TOXIC MUNITIONS, ETC., MAY NOT BE REGARDED AS EXPENSES DIRECTLY PERTAINING TO SALES OF SUCH MATERIALS WITHIN THE MEANING OF THE ACT OF JUNE 8, 1896, SO AS TO AUTHORIZE THE USE OF THE GROSS PROCEEDS OF THE SALES TO COVER SUCH COSTS BY WAY OF REIMBURSEMENT OR OTHERWISE.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF WAR, MARCH 31, 1947:

I HAVE A LETTER OF MARCH 20, 1947, FROM THE UNDER SECRETARY OF WAR, AS FOLLOWS:

THE WAR DEPARTMENT IS PRESENTLY CONFRONTED BY TWO VITAL PROBLEMS. THE FIRST IS THE NECESSITY FOR OBTAINING FULL VALUE, IN THE DISCHARGE OF ITS MILITARY OBLIGATIONS, FROM EVERY DOLLAR MADE AVAILABLE BY THE CONGRESS. THE SECOND IS THE NECESSITY FOR MAKING AVAILABLE LARGE QUANTITIES OF SUPPLIES CONTAINING METALS IN VOLUME, WHICH ARE URGENTLY REQUIRED BY THE CIVIL ECONOMY, AND WHICH MUST BE RENDERED INNOCUOUS THROUGH DEMILITARIZATION BY THE WAR DEPARTMENT PRIOR TO DISPOSAL. BUDGET LIMITATIONS HAVE FORCED THE WAR DEPARTMENT TO RESOLVE THE SECOND PROBLEM (DEMILITARIZATION) IN FAVOR OF THE FIRST ( NATIONAL SECURITY). ACCORDINGLY, FUNDS FOR THE DEMILITARIZATION OF THE BULK OF THE WORK LOAD HAVE NOT BEEN REQUESTED OR PROVIDED FOR IN BUDGET ESTIMATES AFTER FY 1947.

FAILURE TO LIQUIDATE AMMUNITION, COMBAT VEHICLES, TOXIC MUNITIONS, AND OTHER ITEMS WHICH MUST BE DISPOSED OF BY THE WAR DEPARTMENT HAS THE FOLLOWING DELETERIOUS EFFECTS:

LOSS OF REVENUE THROUGH INABILITY TO TAKE ADVANTAGE OF AN EXTREMELY FAVORABLE MARKET OR TO LIQUIDATE PRIOR TO DETERIORATION. LOSS TO THE CIVIL ECONOMY OF A LARGE VOLUME OF URGENTLY NEEDED SCARCE METALS, ALLOYS AND OTHER PRODUCTS. CONTINUED USE OF STORAGE SPACE NEEDED FOR MILITARY USE OR WHICH COULD BE SOLD OR THE LEASES FOR WHICH COULD BE TERMINATED.

IN ORDER THAT THE GOVERNMENT WILL CONTINUE TO GAIN MAXIMUM DOLLAR RETURNS, THAT SCARCE MATERIALS WILL CONTINUE TO FLOW TO THE CIVIL MARKET, AND THAT THE WAR DEPARTMENT CAN DISCHARGE ITS OBLIGATIONS IN THE BEST INTEREST OF ALL CONCERNED, IT IS INTENDED TO ISSUE INSTRUCTIONS TO AUTHORIZE THE COSTS INCIDENT TO DEMILITARIZATION AND PROCESSING FOR SALE BE DEDUCTED BY DISBURSING OFFICERS FROM PROCEEDS OF SALE AND CREDITED TO THE APPROPRIATIONS AGAINST WHICH THE ORIGINAL OUTLAYS WERE INCURRED. IS CONSIDERED THAT THIS ACTION IS AUTHORIZED UNDER THE PROVISIONS OF THE ACT OF JUNE 8, 1896, 29 STATUTE, 268, WHICH PROVIDES:

"THAT FROM THE PROCEEDS OF SALES OF OLD MATERIAL, CONDEMNED STORES, SUPPLIES, OR OTHER PUBLIC PROPERTY OF ANY KIND, BEFORE BEING DEPOSITED INTO THE TREASURY, EITHER AS MISCELLANEOUS RECEIPTS ON ACCOUNT OF "PROCEEDS OF GOVERNMENT PROPERTY" TO BE MADE, THERE MAY BE PAID THE EXPENSES OF SUCH SALES, AS APPROVED BY THE ACCOUNTING OFFICERS OF THE TREASURY, SO AS TO REQUIRE ONLY THE NET PROCEEDS OF SUCH SALES TO BE DEPOSITED INTO THE TREASURY, EITHER AS MISCELLANEOUS RECEIPTS OR TO THE CREDIT OF SUCH APPROPRIATIONS, AS THE CASE MAY BE.'

YOUR DECISION IS REQUESTED AS TO WHETHER YOUR OFFICE WOULD BE REQUIRED TO OBJECT TO THE EXPENDITURES FROM THE PROCEEDS OF SALES FOR THE PURPOSES INDICATED ABOVE, IT BEING UNDERSTOOD THAT NET PROCEEDS OF SALE WILL BE DEPOSITED INTO MISCELLANEOUS RECEIPTS.

IT IS IMPORTANT TO OBSERVE THAT THE AMOUNTS PROPERLY DEDUCTIBLE FROM THE PROCEEDS OF SALES OF PUBLIC PROPERTY UNDER THE ACT OF JUNE 8, 1896, 29 STAT. 268, QUOTED IN YOUR LETTER, ARE THOSE WHICH REPRESENT "EXPENSES OF SUCH SALES.' PURSUANT TO THE SAID PROVISION OF LAW, THE THEN COMPTROLLER OF THE TREASURY, UNDER DATE OF JANUARY 9, 1897, ISSUED REGULATIONS AND INSTRUCTIONS PRESCRIBING A FORM FOR THE RENDERING OF ACCOUNTS FOR SALES OF OLD MATERIALS, ETC., AND IT WAS STATED THEREIN--- 3 COMP. DEC. 746--- THAT " THE EXPENSES OF SALE PAYABLE FROM THE GROSS PROCEEDS ARE SUCH AS PERTAIN DIRECTLY TO THE SALE IN QUESTION, SUCH AS AUCTIONEER'S FEES, CARTAGE TO PLACE OF SALE, COST OF INSPECTION IF AN INSPECTOR BE HIRED FOR THAT PURPOSE, ETC.' ( ITALICS SUPPLIED.)

THE ITEMS OF EXPENSE WHICH PROPERLY ARE CHARGEABLE TO THE PROCEEDS OF SALES AS EXPENSES CONNECTED THEREWITH HAVE BEEN THE SUBJECT OF NUMEROUS DECISIONS OF THE ACCOUNTING OFFICERS OF THE GOVERNMENT. SEE 18 COMP. DEC. 5; 20 ID. 20 (HOLDING THAT THE PROCEEDS OF SALES OF WASTE PAPER COULD NOT BE USED TO PURCHASE MACHINERY OR APPLIANCES FOR THE HANDLING AND PREPARATION THEREOF FOR SALE); 1 COMP. GEN. 185 (HOLDING THAT SUCH EXPENSES AS ARE CHARGEABLE TO THE PROCEEDS OF SALES MUST BE ABSOLUTELY CONFINED TO THE WORK OF THE SALES AND MUST NOT INCLUDE ANY EXPENSES INCIDENT TO ANY OTHER WORK). SEE, ALSO, 25 COMP. DEC. 706; 5 COMP. GEN. 680; 6 ID. 348; 15 ID. 886; AND 16 ID. 876.

SINCE THE COSTS INCURRED IN "DEMILITARIZATION AND PROCESSING FOR SALE" CLEARLY ARE NOT EXPENSES DIRECTLY PERTAINING TO SALES WITHIN THE MEANING OF THE 1896 STATUTE, THE USE OF THE PROCEEDS OF SALES TO COVER SUCH COSTS- -- BY WAY OF REIMBURSEMENT OR OTHERWISE--- IS NOT AUTHORIZED. OF COURSE, EXPENSES INCURRED IN THE GENERAL CONDUCT OF THE SALES AND DIRECTLY CONNECTED THEREWITH MAY BE CONSIDERED PROPERLY CHARGEABLE TO THE GROSS PROCEEDS.