B-155708-O.M. April 26, 1965
Highlights
This amount was recorded as an obligation against 1964 fiscal year funds. The foregoing arrangement contemplate mutual actions by the parties which are to be performed in the future before disbursements are made. It is not sufficiently definite or specific to support an obligation against the fiscal year 1964 appropriation within the requirements of section 1311 of the Supplemental Appropriation Act. The record shows that it was not until August 1964 that the conditions were fulfilled and the loan made available to the borrower. In such circumstances an obligation within the provisions of section 1311 was not incurred until fiscal year 1965. While no adjustment is required to be made of the improper charge against the fiscal year 1964 appropriation since both the obligated and unobligated balances of the appropriation were reappropriated for the following fiscal year by the Foreign Assistance and Related Agencies Appropriation Act.
B-155708-O.M. April 26, 1965
Director International Operations Division
Returned. On June 23, 1964, the Government of Brazil and the United States entered into the loan agreement in the amount of fiscal year funds. This amount was recorded as an obligation against 1964 fiscal year funds. However, section 3.01 contained certain conditions precedent to disbursement including the following requiring that the Borrower shall furnish to A.I.D.:
"(c) A statement satisfactory to A.I.D. covering the utilization of the special fund established pursuant to Section 5.05 of this Agreement, indicating among other things the sectors in which such special fund shall be utilized."
Section 5.05 of the agreement provided in pertinent part that the "Special Fund shall be used to finance programs contributing to economic and social development in the fields of low cost housing, agricultural and industrial credit and in such other fields as may, from time to time, be agreed upon in writing by A.I.D. and the Government."
The foregoing arrangement contemplate mutual actions by the parties which are to be performed in the future before disbursements are made, and therefore while the loan agreement constitutes a valid binding contract, it is not sufficiently definite or specific to support an obligation against the fiscal year 1964 appropriation within the requirements of section 1311 of the Supplemental Appropriation Act, 1955, 31 U.S.C. 200. Cf. B-151613-O.M., April 8, 1965. The record shows that it was not until August 1964 that the conditions were fulfilled and the loan made available to the borrower. In such circumstances an obligation within the provisions of section 1311 was not incurred until fiscal year 1965.
While no adjustment is required to be made of the improper charge against the fiscal year 1964 appropriation since both the obligated and unobligated balances of the appropriation were reappropriated for the following fiscal year by the Foreign Assistance and Related Agencies Appropriation Act, 1965, Pub. L. 88-634, approved October 7, 1964, 78 Stat. 1015, as a minimum the Agency for International Development should be informed of the conclusion that the charge was improper.
Joseph Campbell Comptroller General of the United States
The Comptroller General
In connection with out audit at the Agency for International Development (AID), certain questions have arisen as to whether a loan agreement with Brazil constituted a valid obligation of fiscal year 1964 funds, or whether under the particular circumstances involved, the obligation and subsequent disbursement could only have been charged against funds available for fiscal year 1965.
Discussions were started in May 1964 between officials of the United States and the Government of Brazil concerning financial assistance to Brazil to meet an emergency gap in foreign exchange. These discussions were culminated by the signing of a loan agreement on June 23, 1964, whereby AID agreed to lend up to $50 million to Brazil to finance the dollar costs of imports from the United States. Pursuant to these arrangements, AID obligated $50 million from the President's fiscal year 1964 contingency fund, a one-year appropriation, and considered this amount to be a valid obligation as of June 30, 1964.
For reason which are described in the attached classified documents, we are questioning the validity of the obligation of fiscal year 1964 funds. Accordingly, this matter is presented to you for a determination as to whether the agency's obligation and subsequent disbursement of fiscal year 1964 funds should properly have been charged against funds available for fiscal year 1965. In the event of an affirmative ruling, we do not believe that a return of funds to the Treasury Department can be accomplished because under current legislation the agency has virtually unlimited carryover of funds authority and deobligation - reobligation authority. If it is determined that the obligation and subsequent disbursement of funds was improperly charged to fiscal year 1964 funds, instructions are requested as to any action this Division should take.
OYA V. STOVALL Director