Compromise Settlements and Judgments in Three SBA Suits

The Department of Justice asked GAO to clarify the compromise settlements and judgments for payment in three suits to which the Small Business Administration (SBA) was a party. One case involved a compromise settlement under the Tort Claims Act, another involved a judgment for costs in an action under the Civil Rights Act, and in the third case SBA had been joined as a third party defendant under a deferred participation agreement with a bank in a suit against the bank for the wrongful sale of loan collateral. SBA practice has been to pay judgments and settlements arising from SBA activities from SBA funds. It is unclear why in the past the Justice Department sent these cases to GAO for payment. However, GAO certified the judgments for settlement and payment from their appropriations for settlement to avoid delay. SBA receives two distinct kinds of appropriations; salaries and expenses, and authorization to make expenditures from various revolving funds under its jurisdiction. The SBA salaries and expenses appropriation is not available to pay judgments since there is no provision therefor. Court judgments or compromise settlements are paid out of a permanent indefinite appropriation. Final judgments, awards, and compromise settlements are payable from the permanent indefinite appropriation only if such payments are not otherwise provided for. The practice of charging judgments against SBA funds from SBA loan or insurance programs is long-standing. This practice needs no change so long as judgments arising from administrative practices are paid from the judgment fund. GAO sends requests for certification of judgments to the Justice Department for payment from SBA funds. In the third case, its category can not be determined and GAO will not seek reimbursement of the judgment fund for that settlement. The two other cases are payable from the SBA permanent indefinite appropriation.