B-159999-O.M., March 16, 1997

B-159999-O.M., March 16, 1997

Director, Civil Division

Returned. Section 1311 of the Supplemental Appropriation Act, 1955, as amended, 31 U.S.C. 200, provides in pertinent part that no amount shall be recorded as an obligation unless it is supported by documentary evidence of "a valid loan agreement, showing the amount of the loan to be made and the terms of payment thereof."

A common intention and meeting of the minds on all terms are essential to an "agreement." Broadview Oil Co. v. Livengood, et al., 134 P. 2d 378, 380. To have an "agreement" there must be a proposal by one party and an acceptance by another, and when the parties are not together, the acceptance must be manifested by some appropriate act. White v. Allen Kingston Motor Car Co., 126 N.Y.S. 150, 152. Applying the foregoing to question No. 1, approval of the loan application should be communicated to the applicant and the record should contain documentary evidence that such approval has been communicated. See in this connection 35 Comp.Gen. 319, 321, and 40 id. 147.

In reply to question No. 2, inthe absence of communication of approval in fiscal year 1964, an obligation within the requirements of section 1311 did not exist.

In regard to question No. 3 as to the action to be taken, the administrative office should be advised that our Office deems communication of approval within the fiscal year sought to be charged as essential to support an obligation within the requirements of section 1311, and that all future loan approvals should meet the foregoing notification requirement before being reported as obligations.

FRANK H. WEITZEL Assistant Comptroller General of the United States

Attachment

Submission on legal question concerning the Farmers Home Administration, Department of Agriculture - B-159999-O.M.

Reference is made to the Comptroller General's decision of December 14, 1986 (B-159999-O.M.), in which it was held, among other things, that the Farmers Home Administration (FHA), Department of Agriculture, loan agreement cited in the decision did not meet the requirements of section 1311 of the Supplemental Appropriation Act, 1953, as amended (31 U.S.C. 200) for documentary evidence of a valid loan agreement. The decision stated that the recording of the loan amount as an obligation for the fiscal year in question would therefore be improper.

In a subsequent discussion of this decision with Mr. H. Lock, Attorney, Office of the General Counsel, we were advised that the decision was made on the basis that the documents accompanying out submission did not show that an authorized official of the agency had signed the loan obligating document. The FHA case file, however, contains additional evidence not included with the original submission, which shows that the official who signed the loan obligation was, in fact, authorized to do so.

Using the same FHA case cite in the decision of December 14, 1966, and in
view of the fact that an authorized official of the agency had signed the
obligating document, the following questions are submitted for your
further considered.

1. Is written notification of loan approval to the loan applicant
required before a legan loan agreement is considered to exist for the
purpose of obligation of loan funds pursuant to section 1311?

2. Was there a legal obligation of the funds in fiscal year 1964, when,
as in the case in question, written notification of loan approval to the
applicant did not occur until fiscal your 1965?

3. If written notification is determined to be a legal requirement before
a loan agreement comes into existence, what action, if any, should we
required the agency to take with respect to obligations of prior fiscal
years which did not meet this requirement? Also, since our Office
apparently has not previously decided the issue as it relates to the
obligation of loan funds, is it required that, if written notification is
necessary, we report this matter to the Congress?

cc: Decision Examiner