B-133059, JAN. 28, 1965

B-133059, JAN. 28, 1965

TO THE HONORABLE SECRETARY OF AGRICULTURE:

WE MAKE FURTHER REFERENCE TO LETTER DATED DECEMBER 11, 1964, FROM MR. GEORGE L. MEHREN, ASSISTANT SECRETARY, AND ENCLOSURE, REQUESTING OUR VIEWS ON THE PROPOSED CONCURRENCE BY YOUR DEPARTMENT OF A REDETERMINATION BY THE MISSOURI STATE DEPARTMENT OF PUBLIC HEALTH AND WELFARE THAT NO CLAIM SHOULD BE MADE AGAINST ST. LOUIS COUNTY FOR AN ALLEGED INVENTORY SHORTAGE OF FOOD DISTRIBUTED TO NEEDY FAMILIES IN THAT COUNTY. IT IS ASSERTED THAT THE FOOD WAS DONATED UNDER TWO BASIC FEDERAL STATUTES, SECTION 416 OF THE AGRICULTURAL ACT OF 1949, AS AMENDED, 7 U.S.C. 1431, AND SECTION 32 OF THE ACT OF AUGUST 24, 1935, AS AMENDED, 7 U.S.C. 612 (C), BOTH OF WHICH PERMIT THE DONATION OF AGRICULTURAL COMMODITIES BY YOUR DEPARTMENT TO NEEDY FAMILIES THROUGH STATE DISTRIBUTING AGENCIES AND COUNTY OR LOCAL SUBDISTRIBUTING AGENCIES TO ELIGIBLE RECIPIENTS.

THE FACTS AS SET FORTH IN THE LETTER OF DECEMBER 11, 1964, SHOW THAT AN AUDIT MADE BY YOUR DEPARTMENT DISCLOSED THAT ST. LOUIS COUNTY DID NOT HAVE SIGNED RECEIPTS FROM NEEDY FAMILIES TO SUPPORT REPORTED ISSUES OF FOODS VALUED AT ABOUT $5,000. THE FOODS HAD BEEN ALLOCATED TO THE COUNTY BY THE MISSOURI STATE DEPARTMENT OF PUBLIC HEALTH AND WELFARE UNDER THE PROCEDURE SET FORTH IN 6 CFR 503. IT IS FURTHER ASSERTED THAT A CLAIM FOR $5,042.20 (LATER CHANGED TO $4,925.78) WAS ESTABLISHED BY THE STATE AGENCY AGAINST THE COUNTY WITH YOUR CONCURRENCE. LATER THE STATE AGENCY DETERMINED THAT NO CLAIM SHOULD BE MADE FOR THE INVENTORY SHORTAGES FOR THE REASONS THAT (1) THE LACK OF SIGNED RECEIPTS RESULTED FROM POOR RECORD KEEPING (2) THERE IS NO FRAUD AND (3) THERE IS NO CONCLUSIVE PROOF THAT THE FOODS SHORT WERE NOT ISSUED. THE STATE AGENCY REQUESTED YOUR CONCURRENCE IN ITS REDETERMINATION.

THE MATTER REFERRED TO ABOVE CONCERNING FOODS UNACCOUNTED FOR AND ALLOCATED TO ST. LOUIS COUNTY WAS THE SUBJECT OF AN INQUIRY AND AUDIT BY THIS OFFICE, A REPORT OF WHICH, ALONG WITH OTHER MATTERS, WAS TRANSMITTED TO THE CONGRESS ON SEPTEMBER 3, 1964, ENTITLED "WEAKNESSES IN THE ADMINISTRATION OF THE PROGRAM FOR DIRECT DISTRIBUTION OF FEDERAL SURPLUS COMMODITIES IN ST. LOUIS COUNTY, MISSOURI.' OUR REPORT GENERALLY SUBSTANTIATED THE FINDING OF THE OFFICE OF INSPECTOR GENERAL, DEPARTMENT OF AGRICULTURE, THAT DISTRIBUTION OF COMMODITIES VALUED AT APPROXIMATELY $5,000 WERE NOT ACCOUNTED FOR BY RECEIPTS SIGNED BY THE RECIPIENTS. OUR REPORT CONTAINED THE STATEMENT ALSO THAT "WE CANNOT STATE CONCLUSIVELY THAT COMMODITIES WERE NOT ACTUALLY DISTRIBUTED TO ELIGIBLE RECIPIENTS OR THAT THE SHORTAGE OF COMMODITIES, IF ANY, AMOUNTED TO ABOUT $5,000.'

THE LETTER OF DECEMBER 11, 1964, STATES THAT UPON FURTHER REVIEW OF THE MATTER, YOUR DEPARTMENT PROPOSES TO APPROVE THE STATE AGENCY'S REDETERMINATION THAT NO CLAIM SHOULD BE MADE FOR THE INVENTORY SHORTAGE, UNLESS THIS OFFICE OBJECTS THERETO. OUR VIEWS ARE REQUESTED AS TO THE PROPOSED CONCURRENCE IN THE REDETERMINATION.

AN OPINION OF THE DEPUTY GENERAL COUNSEL OF YOUR DEPARTMENT IS ATTACHED IN SUPPORT OF THE PROPOSAL. IN REPORTING THE FACTS OF THIS CASE THAT OFFICER RELIED UPON THE REPORT OF THE AUDITORS OF YOUR DEPARTMENT AND THE CORROBORATION THEREOF IN OUR AUDIT REPORT. THESE REPORTS INDICATE THE PROCEDURES IN EFFECT BY ST. LOUIS COUNTY IN ACCOUNTING FOR THE QUANTITIES OF COMMODITIES DISTRIBUTED PERMITTED THE USE OF SIGNED TICKETS WHICH WERE LATER DESTROYED INSTEAD OF THE PERMANENT DISTRIBUTION CARDS. UNDER THE PROCEDURE IN EFFECT IN ST. LOUIS COUNTY THESE DISTRIBUTION CARDS WERE SIGNED PRIOR TO THE DISTRIBUTION BUT WERE NOT RELIED UPON FOR ACCOUNTING AND INVENTORY PURPOSES BECAUSE OF THE INABILITY TO OBTAIN SIGNATURES IN ALL CASES OR BECAUSE SOME OF THESE CARDS WERE MISSING. NO EVIDENCE WAS FOUND IN EITHER AUDIT REPORT THAT THERE WAS ANY MISUSE OR DIVERSION OF THE COMMODITIES. THE DEPUTY GENERAL COUNSEL CONCLUDED THAT IN THE ABSENCE OF EVIDENCE OF WRONGDOING, I.E., INSTANCES IN WHICH COMMODITIES WERE ACTUALLY DIVERTED OR MISUSED, THE MERE ABSENCE OF RECORDS FULLY SUPPORTING THE DISTRIBUTION WOULD NOT IN ITSELF BE ADEQUATE SUCCESSFULLY TO PROSECUTE A CLAIM.

THE CASE AT HAND MUST BE CONSIDERED IN THE LIGHT OF A CONTRACTUAL RELATIONSHIP BETWEEN YOUR DEPARTMENT AND THE MISSOURI DEPARTMENT OF PUBLIC HEALTH AND WELFARE AND ITS SUBDISTRIBUTING AGENCY AND AGENT, THE COUNTY OF ST. LOUIS. AS THE LETTER OF DECEMBER 11, 1964 INDICATES, THE PROGRAM FOR THE DONATION OF FOOD COMMODITIES TO NEEDY PERSONS IS AUTHORIZED UNDER THE AFOREMENTIONED 1935 AND 1949 ACTS AND IS REGULATED UNDER THE PROVISIONS IN 6 CFR 503. THE PROVISIONS OF SUBSECTION (D) OF 6 CFR 503.5 REQUIRE THAT PRIOR TO THE INAUGURATION OF A DISTRIBUTION PROGRAM, ELIGIBLE AGENCIES SHALL ENTER INTO WRITTEN AGREEMENTS WITH YOUR DEPARTMENT WHICH SHALL INCORPORATE BY REFERENCE OR OTHERWISE THE TERMS AND CONDITIONS SET FORTH IN THESE REGULATIONS. THUS EVERY REQUIREMENT CONTAINED IN PART 503, TITLE 6, OF THE CODE OF FEDERAL REGULATIONS IS MADE A PART OF THE CONTRACTUAL AGREEMENT BETWEEN YOUR DEPARTMENT AND THE STATE AND LOCAL DISTRIBUTING AGENCIES. 6 CFR 503.6 SETS FORTH THE OBLIGATIONS OF THE DISTRIBUTING AGENCIES. SUBSECTION (1) (6 CFR 503.6 (1) ( STATES THAT IF A DISTRIBUTING AGENCY IMPROPERLY DISTRIBUTES OR USES ANY COMMODITY, REPLACEMENT OF THE COMMODITY SHALL BE MADE IN KIND OR WHERE REPLACEMENT IS IMPRACTICAL, THE VALUE OF THE COMMODITY SHOULD BE PAID TO THE DEPARTMENT. WHERE A SIMILAR IMPROPER ACT OCCURS BY THE SUBDISTRIBUTING AGENCY THE DISTRIBUTING AGENCY SHALL TAKE ALL ACTION NECESSARY TO OBTAIN RESTITUTION. SUBSECTION (8) (6 CFR 503.6 (8) ( REQUIRES ACCURATE AND COMPLETE RECORDS TO BE MAINTAINED BY THE DISTRIBUTING AGENCIES AND SUBDISTRIBUTING AGENCIES WITH RESPECT TO THE RECEIPT, DISPOSAL AND INVENTORY OF COMMODITIES. SUBSECTION (A) OF SECTION 503.10 OF THE AFOREMENTIONED REGULATION (6 CFR 503.10 (A) ( PROVIDES THAT ANY DISTRIBUTING AGENCY WHICH HAS FAILED TO COMPLY WITH THE PROVISIONS OF THIS REGULATION OR ANY AGREEMENT ENTERED INTO PURSUANT THERETO, MAY, AT THE DISCRETION OF THE DEPARTMENT OF AGRICULTURE, BE DISQUALIFIED FROM FURTHER PARTICIPATION IN ANY DISTRIBUTION PROGRAM. SUMMARIZING THEN THE CONTRACTUAL UNDERTAKINGS AS SET FORTH IN THE VARIOUS PARTS OF THE REGULATIONS MENTIONED (1) PROVIDE AN OBLIGATION FOR DISTRIBUTING AGENCIES AND SUBDISTRIBUTING AGENCIES TO MAINTAIN ACCURATE AND COMPLETE RECORDS WITH RESPECT TO THE RECEIPT, DISPOSAL AND INVENTORY OF COMMODITIES, (2) PROVIDE A PENALTY OF REIMBURSEMENT IN KIND OR DOLLAR VALUE FOR COMMODITIES IMPROPERLY DISTRIBUTED, USED, LOST OR DAMAGED, AND (3) PROVIDE SANCTIONS WHERE THERE HAS BEEN A FAILURE TO COMPLY WITH THE PROVISIONS OF THE REGULATION OR CONTRACT IN THE FORM OF DISQUALIFICATIONS FROM FURTHER PARTICIPATION IN THE PROGRAM AT THE DISCRETION OF YOUR

DEPARTMENT.

THE CLAIM ASSERTED AGAINST ST. LOUIS COUNTY WAS BASED UPON A FAILURE OF THE RECORDS TO SHOW OR ACCOUNT FOR THE TOTAL DISTRIBUTION MADE BY THE COUNTY DURING THE PERIOD INVOLVED, HOWEVER, NEITHER THE AUDIT MADE BY YOUR DEPARTMENT OR THE REVIEW CONDUCTED BY THIS OFFICE WAS ABLE TO ESTABLISH THAT THERE WAS ANY DIVERSION OR MISUSE OF THE COMMODITIES DISTRIBUTED. THE ABSENCE OF RELIABLE EVIDENCE OF DIVERSION OR MISUSE OF THE COMMODITIES, THE REGULATIONS OF THE DEPARTMENT OF AGRICULTURE AND THE CONTRACT INCORPORATING BY REFERENCE THESE REGULATORY PROVISIONS,BOTH OF WHICH FIX CONTRACTUALLY THE REMEDIES AVAILABLE TO THE GOVERNMENT, DO NOT REQUIRE THE ASSERTION OF A CLAIM AGAINST THE SUBDISTRIBUTING AGENCY BY THE MISSOURI DEPARTMENT OF PUBLIC HEALTH AND WELFARE. ACCORDINGLY, THIS OFFICE WOULD HAVE NO OBJECTION TO THE PROPOSED CONCURRENCE BY YOUR DEPARTMENT OF THE REDETERMINATION OF THE STATE AGENCY THAT NO CLAIM SHOULD BE MADE FOR THE INVENTORY SHORTAGES RESULTING FROM THE POOR RECORD KEEPING.