A-97878, JUNE 27, 1939, 18 COMP. GEN. 986

A-97878, JUNE 27, 1939, 18 COMP. GEN. 986

EMERGENCY RELIEF APPROPRIATION ACT OF 1938 - LOANS TO RURAL REHABILITATION COOPERATIVE ASSOCIATIONS FOR ENGAGING IN INDUSTRIAL ENTERPRISES PAYMENTS UNDER THE LOAN AGREEMENTS, CONSIDERED IN 18 COMP. GEN. 508, WITH COOPERATIVE ASSOCIATIONS FOR THE ESTABLISHMENT OF HOSIERY MILLS AT RURAL REHABILITATION PROJECTS NEED NOT BE FURTHER QUESTIONED ON THE GROUND OF THE NONAVAILABILITY FOR THAT PURPOSE OF THE EMERGENCY RELIEF FUNDS INVOLVED, THERE HAVING BEEN FURNISHED INFORMATION NOT PREVIOUSLY OF RECORD IN SUPPORT OF THE AGREEMENTS AS MADE; THE ADMINISTRATIVE PRACTICE UNDER WHICH THE AGREEMENTS WERE MADE HAVING BEEN APPROVED AS TO SIMILAR AGREEMENTS INVOLVING PRIOR APPROPRIATED FUNDS THE AUTHORITY UNDER WHICH WAS NO GREATER IN THIS RESPECT THAN UNDER THE APPROPRIATION HERE INVOLVED; AND THE PUBLIC RESOLUTION OF FEBRUARY 4, 1939, 53 STAT. 507, PROHIBITING THE USE OF FUNDS TO ESTABLISH MILLS OR FACTORIES WHICH WOULD MANUFACTURE FOR SALE ARTICLES OR MATERIALS IN COMPETITION WITH EXISTING INDUSTRIES, BEING OPERATIVE PROSPECTIVELY ONLY.

COMPTROLLER GENERAL BROWN TO THE SECRETARY OF AGRICULTURE, JUNE 27, 1939:

YOUR LETTER OF MAY 15, 1939, REQUESTING THE REMOVAL OF EXCEPTIONS TO DISBURSEMENTS RAISED BY THE AUDIT DIVISION OF THIS OFFICE PURSUANT TO DECISION OF DECEMBER 6, 1938, 18 COMP. GEN. 508, HOLDING THAT ON THE RECORD THEN PRESENTED LOANS TO THE RED HOUSE ASSOCIATION AND FOUR OTHER COOPERATIVE ASSOCIATIONS FOR THE ESTABLISHMENT OF HOSIERY MILLS AT RURAL REHABILITATION PROJECTS WERE NOT AUTHORIZED UNDER THE PROVISIONS OF THE EMERGENCY RELIEF APPROPRIATION ACT OF 1938, 52 STAT. 809, SETS FORTH AT LENGTH THE FACTS AND CIRCUMSTANCES JUSTIFYING THE NECESSITY FOR SUCH LOANS IN THE ADMINISTRATION OF SUCH PROJECTS, AND TRANSMITS FOR MY CONSIDERATION IN THAT CONNECTION A COPY OF THE ATTORNEY GENERAL'S OPINION OF MARCH 4, 1939, TO THE EFFECT, QUOTING THE SYLLABUS, THAT---

LOAN AGREEMENTS ENTERED INTO BY THE DEPARTMENT OF AGRICULTURE WITH COOPERATIVE ASSOCIATIONS AT RURAL REHABILITATION PROJECTS FOR THE PURPOSE OF ESTABLISHING HOSIERY MILLS AT SUCH PROJECTS WERE AUTHORIZED BY STATUTES THEN EXISTING. AND THAT---

PUBLIC RESOLUTION NO. 1 OF FEBRUARY 4, 1939, FORBIDDING THE USE OF PUBLIC FUNDS FOR SUCH PURPOSES, DOES NOT APPLY TO CONTRACTS PREVIOUSLY MADE.

THE SAID PUBLIC RESOLUTION OF FEBRUARY 4, 1939, 53 STAT. 507, CONTAINED THE PROVISION THAT---

* * * NO FUNDS APPROPRIATED IN THE EMERGENCY RELIEF APPROPRIATION ACT OF 1938 OR HEREIN APPROPRIATED SHALL BE USED BY ANY FEDERAL AGENCY, TO ESTABLISH MILLS OR FACTORIES WHICH WOULD MANUFACTURE FOR SALE ARTICLES OR MATERIALS IN COMPETITION WITH EXISTING INDUSTRIES.

I THINK THERE CAN BE NO DISAGREEMENT WITH THE CONCLUSION OF THE ATTORNEY GENERAL THAT THIS PROVISION "UNQUESTIONABLY PROHIBITS THE MAKING OF SIMILAR AGREEMENTS (TO THOSE HERE INVOLVED) IN THE FUTURE" UNDER THE CITED ACTS. NOR DOES THERE APPEAR ANY BASIS FOR DISAGREEMENT WITH THE CONCLUSION OF THE ATTORNEY GENERAL THAT THE PROVISION IS NOT RETROACTIVE. THE PROVISION STATES THAT NO FUNDS, ETC., "SHALL BE USED," DENOTING FUTURITY, AND NO INTENT IS EXPRESSED THAT THE PROHIBITION SHOULD BE OTHER THAN PROSPECTIVE. THE LOAN AGREEMENTS WERE CONSUMMATED AND THE DISBURSEMENTS THEREUNDER, HERE IN QUESTION, WERE MADE IN SEPTEMBER 1938, OR MORE THAN 4 MONTHS BEFORE THE ENACTMENT OF THE PROHIBITORY LEGISLATION, AND MORE THAN 2 MONTHS BEFORE THE DECISION OF DECEMBER 6, 1938, HOLDING THAT THE RECORD THEN PRESENTED DID NOT ESTABLISH THAT THE LOANS WERE AUTHORIZED UNDER THE EMERGENCY RELIEF APPROPRIATION ACT OF 1938. IT THUS APPEARS THAT PRIOR TO ANY LEGISLATIVE INTERDICTION OR OF ANY QUESTIONING OF THE TRANSACTIONS BY THIS OFFICE THE LOAN AGREEMENTS WERE MADE AND THE FUNDS WERE ADVANCED TO THE BORROWERS, AND FROM YOUR LETTER AND THE ATTORNEY GENERAL'S OPINION IT FURTHER APPEARS THAT THE BORROWERS HAVE LARGELY EXPENDED OR OBLIGATED SUCH FUNDS, BEYOND RECALL, FOR THE PURPOSES STIPULATED IN THE AGREEMENTS, AND THAT THE GOVERNMENT MAY LOOK NOW ONLY TO THE FRUITION OF SUCH PURPOSES FOR REPAYMENT OF THE LOANS TO RECOVER THE FUNDS ADVANCED TOGETHER WITH OTHER AMOUNTS PREVIOUSLY INVESTED IN THE PROJECTS. THIS LEAVES THE BARE QUESTION OF WHETHER ON THE ADDITIONAL FACTS NOW SUBMITTED THE LOAN AGREEMENTS WHEN MADE WERE SO CLEARLY BEYOND THE AUTHORITY OF THE APPROPRIATION ACT INVOLVED THAT THIS OFFICE IS REQUIRED TO DENY CREDIT TO THE ACCOUNTABLE OFFICERS FOR DISBURSEMENTS, UNDER THE APPROPRIATION MADE, TO THE BORROWERS PURSUANT TO SUCH LOAN AGREEMENTS.

THE LOANS TO THE FIVE COOPERATIVE ASSOCIATIONS FOR THE PURPOSE OF ESTABLISHING AND OPERATING HOSIERY MILLS AT FIVE DIFFERENT RESETTLEMENT OR RURAL REHABILITATION HOMESTEAD PROJECTS (AMONG THOSE WHICH HAD BEEN FOUNDED BY THE RESETTLEMENT ADMINISTRATION UNDER PRIOR RELIEF APPROPRIATION ACTS AND THE ADMINISTRATION OF WHICH HAD BEEN TRANSFERRED TO THE DEPARTMENT OF AGRICULTURE) WERE MADE UNDER THE PROVISION IN SECTION 1 (3) OF THE EMERGENCY RELIEF APPROPRIATION ACT OF 1938, 52 STAT. 809, 810, APPROPRIATING TO THE SECRETARY OF AGRICULTURE THE AMOUNT OF $175,000,000, TOGETHER WITH THE UNOBLIGATED BALANCES OF ALLOCATIONS MADE TO THE FARM SECURITY ADMINISTRATION UNDER CITED PRIOR ACTS, AND STATING THAT "SUCH SUMS SHALL BE AVAILABLE FOR ADMINISTRATION, LOANS, RELIEF, AND RURAL REHABILITATION FOR NEEDY PERSONS.' THE FIRST PARAGRAPH OF THE SAID SECTION 1 STATED GENERALLY THE PURPOSES OF THE APPROPRIATIONS MADE THEREUNDER TO VARIOUS ADMINISTRATIVE AGENCIES TO BE "TO CONTINUE TO PROVIDE WORK RELIEF ON USEFUL PUBLIC PROJECTS, AND RELIEF, IN THE UNITED STATES AND ITS TERRITORIES AND POSSESSION" AND THE LANGUAGE USED THEREUNDER IN MAKING THE SAID APPROPRIATION TO THE SECRETARY OF AGRICULTURE FOR "ADMINISTRATION, LOANS, RELIEF, AND RURAL REHABILITATION FOR NEEDY PERSONS" APPEARS IN SUBSTANCE NO MORE RESTRICTIVE THAN THE LANGUAGE USED IN THE PRIOR EMERGENCY RELIEF APPROPRIATION ACTS APPROPRIATING MONEY TO BE USED IN THE DISCRETION AND UNDER THE DIRECTION OF THE PRESIDENT, AMONG OTHER PURPOSES FOR "LOANS, RELIEF, AND RURAL REHABILITATION FOR NEEDY PERSONS * * * INCLUDING SUCH COST OF ADMINISTRATION AS THE PRESIDENT MAY DIRECT" (EMERGENCY RELIEF APPROPRIATION ACT OF 1937, 50 STAT. 352, 353),"RURAL REHABILITATION, LOANS AND RELIEF TO FARMERS AND LIVESTOCK GROWERS" (EMERGENCY RELIEF APPROPRIATION ACT OF 1936, 49 STAT. 1608), AND "RURAL REHABILITATION AND RELIEF IN STRICKEN AGRICULTURAL AREAS" (EMERGENCY RELIEF APPROPRIATION ACT OF 1935, 49 STAT. 115).

UNDER THE LATTER (1935) APPROPRIATION ACT THE PRESIDENT BY SECTIONS 1 (B) AND 2 OF EXECUTIVE ORDER NO. 7143, AUGUST 19, 1935, AUTHORIZED LOANS TO BE MADE BY THE RESETTLEMENT ADMINISTRATION ,EITHER TO INDIVIDUALS OR TO SUCH BONA FIDE AGENCIES OR COOPERATIVE ASSOCIATIONS AS THE ADMINISTRATION SHALL APPROVE" FOR SUCH PURPOSES "AS MAY BE NECESSARY IN THE ADMINISTRATION OF APPROVED PROJECTS INVOLVING RURAL REHABILITATION OR RELIEF IN STRICKEN AGRICULTURAL AREAS.'

BY DECISION OF MAY 19, 1936 (A-73755), ADDRESSED TO THE ADMINISTRATOR, RESETTLEMENT ADMINISTRATION, IT WAS DECIDED BY THE FORMER COMPTROLLER GENERAL THAT A LOAN OF $100,000 TO A COOPERATIVE ASSOCIATION, THE FOREST PRODUCTS ASSOCIATION, INC., FOR THE PURPOSE OF COOPERATIVE HANDLING AND MARKETING OF PULPWOOD BY THE ASSOCIATION MEMBERS IN A STRICKEN AGRICULTURAL AREA IN NEW ENGLAND WAS AUTHORIZED BY THE STATED PROVISIONS OF EXECUTIVE ORDER NO. 7143, UNDER THE EMERGENCY RELIEF APPROPRIATION ACT OF 1935.

BY EXECUTIVE ORDER NO. 7396, JUNE 22, 1936, THE PROVISIONS OF SAID EXECUTIVE ORDER NO. 7143, WERE EXTENDED AND MADE APPLICABLE TO FUNDS APPROPRIATED IN THE EMERGENCY RELIEF APPROPRIATION ACT OF 1936. EXECUTIVE ORDER NO. 7530, DECEMBER 31, 1936, AS AMENDED BY EXECUTIVE ORDER NO. 7557, FEBRUARY 19, 1937, THE POWERS, FUNCTIONS, AND DUTIES THERETOFORE VESTED IN THE RESETTLEMENT ADMINISTRATION WERE TRANSFERRED TO THE SECRETARY OF AGRICULTURE TO BE EXERCISED AND PERFORMED BY HIM.

BY DECISION OF MAY 26, 1937, 16 COMP. GEN. 1043, ADDRESSED TO YOU AS SUCH SUCCESSOR TO THE FUNCTIONS OF THE RESETTLEMENT ADMINISTRATION, IT WAS HELD BY THE THEN ACTING COMPTROLLER GENERAL ON A FULL STATEMENT OF THE FACTS AND CIRCUMSTANCES ESTABLISHING THE NECESSITY FOR PROVIDING SUPPLEMENTAL EMPLOYMENT FOR PERSONS SETTLED ON THE WESTMORELAND HOMESTEADS PROJECT IN PENNSYLVANIA, THAT A LOAN WAS AUTHORIZED UNDER THE EMERGENCY RELIEF APPROPRIATION ACTS OF 1935 AND 1936, TO A COOPERATIVE ASSOCIATION FOR THE PURPOSE OF ESTABLISHING AND OPERATING A PANTS FACTORY AT SUCH PROJECT. WAS SAID IN THE DECISION:

IN VIEW OF THE CIRCUMSTANCES STATED IN YOUR LETTER IT APPEARS THAT THE WESTMORELAND HOMESTEADS PROJECT IS AN APPROVED PROJECT INVOLVING RURAL REHABILITATION OR RELIEF IN A STRICKEN AGRICULTURAL AREA, AND THAT THE PROPOSED LOAN, IF OTHERWISE PROPER, MAY BE CONSIDERED WITHIN THE PURVIEW OF THE PROVISIONS OF SAID EXECUTIVE ORDER NO. 7143, EXPRESSLY AUTHORIZING SUCH LOANS TO BONA FIDE AGENCIES OR COOPERATIVE ASSOCIATIONS "FOR SUCH OTHER PURPOSES AS MAY BE NECESSARY IN THE ADMINISTRATION OF APPROVED PROJECTS INVOLVING RURAL REHABILITATION OR RELIEF IN STRICKEN AGRICULTURAL AREAS.' ACCORDINGLY, YOU ARE ADVISED THAT THIS OFFICE WILL NOT BE REQUIRED TO OBJECT TO THE MAKING OF SUCH A LOAN FROM FUNDS ALLOCATED BY THE PRESIDENT FOR SAID PROJECT UNDER THE EMERGENCY RELIEF APPROPRIATION ACT OF 1935 OR THE EMERGENCY RELIEF APPROPRIATION ACT OF 1936, PROVIDED THAT SUFFICIENT EVIDENCE IS SUBMITTED IN SUPPORT OF ANY SUCH EXPENDITURE TO ESTABLISH COMPLIANCE WITH THE CONDITIONS STIPULATED IN SECTION 2 OF SAID EXECUTIVE ORDER NO. 7143 AS TO MEMBERSHIP IN, AND SUPERVISION OF, THE ASSOCIATION, AND THAT THE LOAN AGREEMENT COMPLIES WITH ALL THE REQUIREMENTS AS TO INTEREST RATES, MATURITY, AND REPAYMENTS STIPULATED IN SECTION 3, 4, AND 5 OF THE SAID EXECUTIVE ORDER.

THE INSTANT CASE IS DISTINGUISHED FROM THAT CONSIDERED IN DECISION OF SEPTEMBER 11, 1935, A-64822, TO THE ADMINISTRATOR, RESETTLEMENT ADMINISTRATION, HOLDING THAT THE APPROPRIATION MADE BY SECTION 208 OF THE NATIONAL INDUSTRIAL RECOVERY ACT OF JUNE 16, 1933, 48 STAT. 205, BEING SPECIFICALLY AVAILABLE ONLY FOR "MAKING LOANS FOR AND OTHERWISE AIDING IN THE PURCHASE OF SUBSISTENCE HOMESTEADS," WAS NOT AVAILABLE FOR ERECTING A FACTORY BUILDING IN CONNECTION WITH A SUBSISTENCE HOMESTEAD PROJECT AT REEDSVILLE (ARTHURDALE), W. VA., IN THAT THE PRESENT PROPOSAL IS NOT FOR THE GOVERNMENT TO ERECT AND OPERATE A FACTORY BY VIRTUE OF ANY SUPPOSED AUTHORITY IN SECTION 208 OF THE NATIONAL INDUSTRIAL RECOVERY ACT, BUT TO MAKE A LOAN TO A COOPERATIVE ASSOCIATION FOR RURAL REHABILITATION UNDER THE BROAD POWERS CONFERRED ON THE PRESIDENT BY THE LATER EMERGENCY RELIEF APPROPRIATION ACTS OF 1935 AND 1936, SUPRA, AND THE EXECUTIVE ORDERS PROMULGATED THEREUNDER.

AS STATED ABOVE, THE LANGUAGE IN THE EMERGENCY RELIEF APPROPRIATION ACT OF 1938 APPEARS NO MORE RESTRICTIVE IN THIS RESPECT THAN THE LANGUAGE IN THE PRIOR ACTS UNDER WHICH IT WAS HELD THAT SUCH LOANS TO COOPERATIVE ASSOCIATIONS WERE AUTHORIZED. YOUR PRESENT LETTER SETS FORTH AT LENGTH THE FACTS AND CONDITIONS ESTABLISHING THE NECESSITY WHICH EXISTED FOR MAKING SUCH LOANS IN THE ADMINISTRATION OF THE FIVE RURAL REHABILITATION PROJECTS HERE INVOLVED, THE SAME AS AT WESTMORELAND HOMESTEADS, TO PROVIDE ESSENTIAL SUPPLEMENTAL EMPLOYMENT FOR PERSONS RESETTLED THERE IF SUCH PROJECTS WERE TO SURVIVE, WHICH INFORMATION WAS NOT BEFORE THIS OFFICE WHEN THE MATTER WAS QUESTIONED BY THE DECISION OF DECEMBER 6, 1938. THE CONGRESS HAS NOT DIRECTED THE ABANDONMENT OF SUCH RESETTLEMENT AND RURAL REHABILITATION PROJECTS, BUT HAS PROVIDED FUNDS FOR THEIR CONTINUED ADMINISTRATION.

ON THE RECORD THUS NOW PRESENTED, I DO NOT FIND THE CONCLUSION JUSTIFIED, IN VIEW OF THE CITED PRIOR DECISIONS AND THE ADMINISTRATIVE PRACTICE APPROVED THEREBY, THAT THIS OFFICE IS REQUIRED TO DISALLOW CREDIT FOR DISBURSEMENTS OTHERWISE CORRECT AND PROPER MADE PURSUANT TO THE FIVE LOAN AGREEMENTS. ACCORDINGLY, THE EXCEPTIONS RAISED BY THE AUDIT DIVISION OF THIS OFFICE WILL BE REMOVED AND CREDIT WILL BE ALLOWED IN THE ACCOUNTS OF THE DISBURSING OFFICERS FOR PAYMENTS OTHERWISE CORRECT AND PROPER UNDER THE SAID AGREEMENTS.