B-9600, MAY 17, 1940, 19 COMP. GEN. 937

B-9600, MAY 17, 1940, 19 COMP. GEN. 937

STOCK PURCHASES AND MEMBERSHIP FEES - LAW LIBRARY ASSOCIATIONS THE INHIBITION IN SECTION 8 OF THE ACT OF JUNE 26, 1912, 37 STAT. 184, AGAINST PAYMENT OF MEMBERSHIP FEES FROM APPROPRIATED FUNDS, DOES NOT PROHIBIT THE USE OF THE SECURITIES AND EXCHANGE COMMISSION'S EXPENSE APPROPRIATION FOR PAYMENT TO A LAW LIBRARY ASSOCIATION OF SUCH CHARGES AS ARE NECESSARY TO SECURE ACCESS TO ITS LIBRARY FACILITIES FOR THE OFFICIAL USE OF THE COMMISSION'S ATTORNEYS EVEN THOUGH SUCH CHARGES TAKE THE FORM OF STOCK PURCHASES AND MEMBERSHIP ASSESSMENTS.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE CHAIRMAN, SECURITIES AND EXCHANGE COMMISSION, MAY 17, 1940:

I HAVE YOUR LETTER OF APRIL 10, 1940, AS FOLLOWS:

THE SECURITIES AND EXCHANGE COMMISSION IS ATTEMPTING TO NEGOTIATE AN AGREEMENT WITH THE CLEVELAND LAW LIBRARY ASSOCIATION OF CLEVELAND, OHIO, WHEREBY THE FACILITIES OF THE LIBRARY WILL BE AVAILABLE TO TEN MEMBERS OF THE STAFF OF THE CLEVELAND OFFICE OF THE COMMISSION.

IT IS IMPORTANT THAT THE ATTORNEYS OF THE COMMISSION WHO HANDLE CASES UNDER CHAPTER X OF THE NATIONAL BANKRUPTCY ACT, AS AMENDED, HAVE ACCESS TO A GREAT VARIETY OF LEGAL AND OTHER PUBLICATIONS. THE COMMISSION IS NOW FACED WITH THE PROBLEM OF EITHER PURCHASING A LARGE SUPPLY OF BOOKS FOR THE CLEVELAND OFFICE AND SUBSEQUENTLY MAINTAINING THE NECESSARY LIBRARY SERVICE INCIDENT THERETO, OR PROVIDING LIBRARY FACILITIES UNDER A SERVICE CONTRACT. THE FORMER METHOD WOULD BE EXPENSIVE AND WOULD INVOLVE AN EXPENDITURE OF THOUSANDS OF DOLLARS, WHEREAS UNDER THE LATTER ARRANGEMENT AN EXPENDITURE OF A FEW HUNDRED DOLLARS PER YEAR WOULD BE INVOLVED.

THE CLEVELAND LAW LIBRARY ASSOCIATION MAINTAINS THE ONLY LIBRARY IN CLEVELAND WITH ADEQUATE FACILITIES TO MEET OUR REQUIREMENTS. THE BYLAWS OF THIS ASSOCIATION PROVIDE, IN PART, THAT (A) ITS FACILITIES SHALL BE AVAILABLE ONLY TO PERSONS WHO ARE STOCKHOLDERS IN THE ASSOCIATION (WITH THE PURCHASE OF ONE SHARE OF STOCK AT A NOMINAL COST WOULD BE SUFFICIENT TO MEET THIS REQUIREMENT), AND (B) AN ASSESSMENT OF $15 PER YEAR SHALL BE LEVIED AGAINST EACH STOCKHOLDER. THE TRUSTEES OF THE ASSOCIATION HAVE INFORMED REPRESENTATIVES OF THE COMMISSION THAT THEY CANNOT WAIVE THESE REQUIREMENTS. HOWEVER, THEY HAVE INDICATED THAT THE STOCK IS ASSIGNABLE AND IF AN EMPLOYEE IN WHOSE NAME THE STOCK IS LISTED IS TRANSFERRED OR SEPARATED FROM THE SERVICE, THE STOCK COULD BE ASSIGNED TO HIS SUCCESSOR.

BECAUSE OF THE ECONOMY INVOLVED AND THE IMMEDIATE NECESSITY OF FURNISHING OUR ATTORNEYS IN CLEVELAND WITH THE NECESSARY FACILITIES TO PERFORM THEIR OFFICIAL DUTIES PROPERLY, WE ARE MOST DESIROUS OF REACHING AN AGREEMENT WITH THE CLEVELAND LAW LIBRARY ASSOCIATION FOR THE USE OF ITS LAW LIBRARY.

IT WILL BE APPRECIATED, THEREFORE, IF YOU WILL ADVISE WHETHER THE APPROPRIATION OF THE COMMISSION IS AVAILABLE TO PAY THE ANNUAL ASSESSMENTS AND THE COST OF TEN SHARES OF ASSIGNABLE STOCK IN THE CLEVELAND LAW LIBRARY ASSOCIATION, ONE SHARE TO BE LISTED IN THE NAME OF EACH OF TEN EMPLOYEES, IT BEING UNDERSTOOD THAT UPON THE TRANSFER OR SEPARATION FROM THE SERVICE OF ANY EMPLOYEE IN WHOSE NAME THE STOCK IS LISTED, SUCH STOCK WILL BE TRANSFERRED TO THE SUCCESSOR EMPLOYEE.

IF YOU DECIDE AGAINST THE ABOVE ARRANGEMENTS, WOULD IT BE PROPER FOR THE COMMISSION TO ENTER INTO AN AGREEMENT WITH THE LIBRARY ASSOCIATION TO PAY A SERVICE CHARGE OF $150.00 PER YEAR FOR THE USE OF THE LIBRARY BY TEN EMPLOYEES OF THE CLEVELAND OFFICE, PROVIDED THE EMPLOYEES PERSONALLY PAY FOR THE STOCK? SINCE THE PURCHASE OF NECESSARY PUBLICATIONS FOR USE OF SECURITIES AND EXCHANGE COMMISSION'S ATTORNEYS IN CLEVELAND WOULD INVOLVE "AN EXPENDITURE OF THOUSANDS OF DOLLARS," WHEREAS ACCESS TO SUCH PUBLICATIONS MAY BE PROCURED FROM THE CLEVELAND LAW LIBRARY ASSOCIATION AT A COST OF APPROXIMATELY $150 PER YEAR, IT IS CLEARLY TO THE FINANCIAL ADVANTAGE OF THE UNITED STATES TO UTILIZE THE FACILITIES OF THIS ASSOCIATION. THEREFORE, UNLESS FUNDS OF THE COMMISSION MAY NOT, UNDER EXISTING LAW, BE USED TO MAKE PAYMENT FOR THE STOCK AND THE ASSESSMENT COSTS WHICH ARE NECESSARY TO RENDER YOUR COMMISSION'S ATTORNEYS ELIGIBLE TO USE THE PUBLICATIONS OF THE ASSOCIATION, IT WOULD APPEAR THAT THIS LATTER METHOD OF PROCUREMENT SHOULD BE EMPLOYED.

IN DETERMINING WHETHER THE PURCHASE OF THE REQUIRED STOCK IN THIS ASSOCIATION AND THE PAYMENT OF THE ASSESSMENT FEES CONSTITUTE AN "AUTHORIZED EXPENDITURE" AND, THEREFORE, MAY BE PAID FROM FUNDS MADE AVAILABLE TO YOUR COMMISSION BY THE ACT OF MARCH 16, 1939, 53 STAT. 539, THERE IS FOR CONSIDERATION THE QUESTION AS TO WHETHER SUCH EXPENDITURES WOULD BE IN CONTRAVENTION OF SECTION 8 OF THE ACT OF JUNE 26, 1912, 37 STAT. 184, WHICH PROVIDES:

NO MONEY APPROPRIATED BY THIS OR ANY OTHER ACT SHALL BE EXPENDED FOR MEMBERSHIP FEES OR DUES OF ANY OFFICER OR EMPLOYEE OF THE UNITED STATES OR OF THE DISTRICT OF COLUMBIA IN ANY SOCIETY OR ASSOCIATION OR FOR EXPENSES OF ATTENDANCE OF ANY PERSON AT ANY MEETING OR CONVENTION OF MEMBERS OF ANY SOCIETY OR ASSOCIATION, UNLESS SUCH FEES, DUES, OR EXPENSES ARE AUTHORIZED TO BE PAID BY SPECIFIC APPROPRIATIONS FOR SUCH PURPOSES OR ARE PROVIDED FOR IN EXPRESS TERMS IN SOME GENERAL APPROPRIATION.

THIS PROVISION APPEARS TO HAVE BEEN INCORPORATED INTO THE ACT OF JUNE 26, 1912, AS A RESULT OF THE FOLLOWING QUESTIONS PROPOUNDED BY CONGRESSMEN COX AND TAYLOR AND THE ANSWERS OF MR. RUDOLPH AND MAJOR JUDSON, COMMISSIONERS OF THE DISTRICT OF COLUMBIA, AT THE TIME HEARINGS WERE BEING CONDUCTED ON THIS LEGISLATION BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS OF THE HOUSE OF REPRESENTATIVES:

MR. COX. I WOULD LIKE TO ASK A QUESTION IN CONNECTION WITH YOUR CONTINGENT EXPENSE. I NOTICE IN THE STATEMENT HERE WHICH WAS SUBMITTED TO CONGRESS AND WHICH IS A HOUSE DOCUMENT THE AUDITOR PAID OUT $10 TO PAY HIS DUES IN THE NATIONAL ASSOCIATION OF COMPTROLLERS AND ACCOUNTANTS. IS NOT THAT SOMEWHAT OF A DEPARTURE FROM THE PRACTICE IN OTHER CITIES? APPARENTLY HE IS A MEMBER OF THAT ASSOCIATION.

MR. RUDOLPH. YES SIR; HE WAS THE PRESIDENT OF IT, AND IT IS CUSTOMARY IN OTHER CITIES TO PAY DUES OF THIS CHARACTER.

MR. COX. AND HE TOOK PUBLIC MONEYS AND PAID HIS DUES IN THAT ORGANIZATION?

MR. RUDOLPH. YES SIR. OF COURSE THERE IS NO DOUBT ABOUT THE BENEFIT THIS CITY DERIVES FROM HIS BEING ASSOCIATED WITH MEN WHO COMPOSE AN ASSOCIATION LIKE A NATIONAL ASSOCIATION OF AUDITORS.

MAJ. JUDSON. I DO NOT THINK THAT IS RIGHT, HOWEVER, BECAUSE WE MIGHT AS WELL HAVE ALL THE PEOPLE WHO BELONG TO ASSOCIATIONS OF THAT KIND HAVE THEIR DUES PAID BY THE DISTRICT. I THINK WE HAD BETTER CALL HIS ATTENTION TO THAT AND HAVE IT REFUNDED.

MR. COX. IT IS A SMALL AMOUNT.

MAJ. JUDSON. BUT THE SAME THING WOULD APPLY TO THE HEALTH OFFICER, WHO BELONGS TO A SIMILAR ORGANIZATION.

MR. TAYLOR. MAJOR, DO YOU NOT BELONG TO THE AMERICAN SOCIETY OF CIVIL ENGINEERS?

MAJ. JUDSON. YES, SIR.

MR. TAYLOR. WHILE THERE IS NO DOUBT THAT SOME BENEFIT ACCRUES TO YOU BY REASON OF YOUR MEMBERSHIP IN THAT ASSOCIATION, AT THE SAME TIME YOU ARE ADDING TO YOUR OWN PERSONAL EQUIPMENT, WHICH WILL BE HELPFUL TO YOU, DOUBTLESS, IN THE FUTURE.

MAJ. JUDSON. I NEVER THOUGHT OF ASKING THE GOVERNMENT TO PAY MY DUES. THINK THE AUDITOR WILL BE VERY GLAD TO HAVE THE MONEY REFUNDED WHEN HE IS TOLD WE THINK IT IS AN IMPROPRIETY ( HEARINGS ON DISTRICT OF COLUMBIA APPROPRIATION BILL FOR 1913, PAGES 65, 66).

THIS TESTIMONY TOOK PLACE ON DECEMBER 11, 1911, AND WHEN THE BILL WAS REPORTED FROM THE COMMITTEE ON JANUARY 11, 1912, IT CONTAINED THE PROHIBITION IN QUESTION RELATIVE TO USE OF PUBLIC MONEYS FOR MEMBERSHIP DUES, ETC., IN SUBSTANTIALLY THE FORM AS SUBSEQUENTLY ENACTED INTO LAW.

THE PRESENT CASE IS NOT ONE WHERE THE BENEFIT TO THE GOVERNMENT FROM MEMBERSHIP IN AN ASSOCIATION IS ONLY INCIDENTAL OR INDIRECT. ON THE CONTRARY IT IS A CASE WHERE THE PROPER CONDUCT OF PUBLIC BUSINESS REQUIRES THAT ITS EMPLOYEES HAVE ACCESS TO CERTAIN PUBLICATIONS, AND PAYMENT OF THE MEMBERSHIP FEES, ETC., IS FOR THE PRIMARY PURPOSE OF ACCOMPLISHING THAT RESULT IN THE MOST FEASIBLE MANNER AND AT THE LEAST POSSIBLE COST TO THE UNITED STATES. WHILE THE CHARGES MADE BY THE CLEVELAND LAW LIBRARY ASSOCIATION TAKE THE FORM OF STOCK PURCHASES AND STOCKHOLDERS ASSESSMENTS, THE FACT REMAINS THAT SO FAR AS THE UNITED STATES IS CONCERNED THEY REALLY REPRESENT SERVICE CHARGES FOR THE USE OF PUBLICATIONS. IN OTHER WORDS, REGARDLESS OF HOW THE EXPENDITURE IS LABELED OR DESCRIBED, FROM THE STANDPOINT OF THE UNITED STATES IT MORE CLOSELY RESEMBLES AN EXPENDITURE FOR MEMBERSHIP IN AN ELECTRIC COOPERATIVE (DECISION OF JANUARY 5, 1939, B- 21, TO THE SECRETARY OF WAR) OR IN A WATER USERS ASSOCIATION (DECISION OF DECEMBER 5, 1938, A 99421, TO THE SECRETARY OF AGRICULTURE) THAN A PAYMENT OF DUES OR FEES OF THE CHARACTER WHICH THE CONGRESS BY THE ENACTMENT OF SECTION 8 OF THE ACT OF JUNE 26, 1912, APPEARS TO HAVE INTENDED TO PREVENT.

YOU ARE ADVISED, THEREFORE, THAT UNDER THE FACTS AND CIRCUMSTANCES OF THIS PARTICULAR CASE, NO OBJECTION WILL BE RAISED BY THIS OFFICE TO THE USE OF FUNDS APPROPRIATED TO COVER THE EXPENSES OF YOUR COMMISSION FOR THE PAYMENT OF SUCH CHARGES TO THE CLEVELAND LAW LIBRARY ASSOCIATION AS ARE NECESSARY TO SECURE ACCESS TO THE FACILITIES OF ITS LIBRARY FOR THE OFFICIAL USE OF THE ATTORNEYS OF YOUR COMMISSION, EVEN THOUGH IT MAY INVOLVE THE PURCHASE OF STOCK AND PAYMENT OF MEMBERSHIP ASSESSMENTS. THIS RESULT CAN BE ACHIEVED BY ENTERING INTO A CONTRACT WITH THE ASSOCIATION AS SUGGESTED IN THE LAST PARAGRAPH OF YOUR LETTER, SUCH WOULD APPEAR TO BE THE PREFERABLE PROCEDURE.