B-236940 December 19, 1989

B-236940 December 19, 1989

The Honorable Richard B. Cheney The Secretary of Defense

Dear Mr. Secretary:

By letter of September 6, 1989, the Honorable John P. Murtha, Chairman, Subcommittee on Defense, Committee on Appropriations of the House of Representatives, asked for our opinion on the legality of Air Force transfers from the "M" accounts to the Air Force Stock Fund in payment for previously unrecorded obligations. In B-236940, Oct. 17, 1989 (copy enclosed), we held that the obligations charged to the "M" accounts were not supported by documentary evidence as required by 31 U.S.C. Sec. 1501 and, therefore, the Air Force could not restore amounts from the merged surplus accounts to the "M" accounts to pay the Stock Fund for these obligations. Accordingly, we concluded that the Air Force should reverse the adjustments (approximately $238 million) made to its "M" accounts for fiscal years 1981 through 1986.

We also concluded that, except for obligations owed the Stock Fund for the period from April 1988 through March 1989 which were-validated by the Air Force Audit Agency audit, the Stock Fund should write off all other claimed accounts receivable for fuels for the period from the beginning of fiscal year 1981 through March 1988. Thus, of the additional $214 million that the Air Force transferred to the Stock Fund from expired appropriations accounts (and the Air Force Industrial Fund) to satisfy claimed accounts receivable for fiscal years 1987 and 1988, the Air Force should reverse all transfers except for amounts representing payment for the validated obligations owed the Stock Fund for the period from April 1, 1988 to September 30, 1988.

In the conference report on the DOD Appropriations Act, 1990, H.R. Rep. No. 345, 101st Cong., 1st Sess. 20 (1989), the conferees agreed with our opinion and directed the Air Force to reimburse the "M" accounts for the $233 million improperly transferred to the Stock Fund. The conferees agreed that the Air Force should effectuate the reimbursement by adjusting Stock Fund charges for fiscal years 1991, 1992, and 1993, completing reimbursement to the "M" accounts no later than the end of fiscal year 1993. The conference report, however, did not specifically address moneys improperly transferred from expired appropriations accounts to the Stock Fund to cover claimed obligations for fiscal years 1987 and 1988.

Please inform us as to the actions taken by the Air Force to effectuate compliance with our legal opinion. Include an explanation of Air Force plans for implementing the conferees' directives and how it intends to reimburse the expired appropriations accounts (and the Industrial Fund) for moneys improperly transferred to the Stock Fund for fiscal years 1987 and 1988.

Sincerely yours,

Gary L. Kepplinger Associate General Counsel

Enclosure