B-89294, AUG. 6, 1963

B-89294, AUG. 6, 1963

TO THE DIRECTOR, UNITED STATES INFORMATION AGENCY:

WE REFER TO LETTER OF JUNE 21, 1963, THAT YOUR GENERAL COUNSEL SUBMITTED IN RESPONSE TO OUR LETTER DATED MAY 15, 1963, RELATIVE TO THE UNITED STATES INFORMATION AGENCY-UNITED ARTISTS CONTRACTUAL ARRANGEMENT FOR THE PRODUCTION AND DOMESTIC DISTRIBUTION OF A FILM ENTITLED ,JACQUELINE KENNEDY'S ASIAN JOURNEY.' OUR LETTER WAS WRITTEN TO OBTAIN INFORMATION UPON WHICH TO BASE A REPLY TO A CONGRESSIONAL INQUIRY WHICH HAD BEEN PRESENTED TO OUR OFFICE. AMONG THE QUESTIONS REFERRED TO YOUR AGENCY BY OUR LETTER OF MAY 15 WAS THE FOLLOWING:

"DOES THE ARRANGEMENT BETWEEN USIA AND UNITED ARTISTS CONCERNING THE PRODUCTION AND SHOWING OF THIS FILM IN THE OPINION OF THE GENERAL ACCOUNTING OFFICE COMPLY FULLY WITH APPLICABLE FEDERAL LAW AND REGULATIONS CONCERNING THE HANDLING AND DISPOSITION OF GOVERNMENT PROPERTY, DISPOSITION OF MONEYS AND RIGHTS ACCRUING TO THE GOVERNMENT, AND ANY OTHER APPLICABLE LAW AND REGULATIONS?

REPRESENTATIVES OF YOUR AGENCY MET WITH REPRESENTATIVES OF OUR OFFICE IN ORDER TO CLARIFY CERTAIN PROBLEMS THAT HAVE COME TO ATTENTION INCIDENT TO OUR CONSIDERATION OF SUCH QUESTION. THE COOPERATION OF YOUR REPRESENTATIVES IN THIS MATTER IS APPRECIATED.

WE HAVE GIVEN FULL CONSIDERATION TO THE VARIOUS ASPECTS OF THE QUESTION BUT ARE UNABLE TO CONCUR IN THE VIEWS OF YOUR AGENCY UPON ONE MAJOR POINT. THIS POINT CONCERNS THE AUTHORITY OF YOUR AGENCY TO APPLY THE NET PROCEEDS OTHERWISE PAYABLE TO IT UNDER THE CONTRACTUAL ARRANGEMENT WITH UNITED ARTISTS IN LIQUIDATION OF OBLIGATIONS INCURRED BY USIA IN FURTHERANCE OF ITS OVERSEAS PROGRAM. YOUR AGENCY SAYS THAT IT HAS AUTHORITY TO DIRECT THE CONTRACTOR TO LIQUIDATE OTHER OBLIGATIONS INCURRED BY USIA WHENEVER USIA DIRECTS THAT SUCH NET PROCEEDS BY APPLIED FOR SUCH PURPOSE. WITH RESPECT TO PROCEEDS THAT ACTUALLY HAVE BEEN OR MAY BE TURNED OVER TO USIA BY THE CONTRACTOR, YOUR AGENCY'S VIEW IS THAT IN ITS SOLE DISCRETION IT MAY EXPEND SUCH NET PROCEEDS IN FURTHERANCE OF ITS OVERSEAS PROGRAM OR COVER THEM INTO THE TREASURY AS MISCELLANEOUS RECEIPTS.

IN SUPPORT OF SUCH POSITION YOUR GENERAL COUNSEL'S LETTER CITES AS AUTHORITY SECTION 1005 OF PUB.L. 402, 80TH CONG., 66 STAT. 14, 22 U.S.C. 1437. THAT SECTION REQUIRES USIA TO "UTILIZE TO THE MAXIMUM EXTENT PRACTICABLE, THE SERVICES AND FACILITIES OF PRIVATE AGENCIES INCLUDING AMERICAN * * * MOTION PICTURE AGENCIES * * * THROUGH CONTRACTUAL ARRANGEMENTS OR OTHERWISE.'

WE FIND NOTHING IN THAT SECTION OR ITS LEGISLATIVE HISTORY WHICH AUTHORIZES USIA TO AVOID THE REQUIREMENT--- THAT ALL MONEYS RECEIVED FROM WHATEVER SOURCE FOR THE USE OF THE UNITED STATES SHALL BE COVERED INTO THE TREASURY--- APPEARING IN 3617 R.S., 31 U.S.C. 484, BY AN ARRANGEMENT ENTERED INTO UNDER THE AUTHORITY OF THAT SECTION. MOREOVER, UNDER SECTION 901 OF PUB.L. 402, 22 U.S.C. 1478, WHEN REIMBURSEMENT OF ALL OR ANY PART OF THE EXPENSE OF A PROGRAM UNDERTAKEN IS REQUESTED AND ACCEPTED THE AMOUNTS SO RECEIVED ARE REQUIRED TO BE COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS. WE CAN SEE NO REASONABLE BASIS FOR APPLYING A DIFFERENT RULE WHEN FUNDS ARE GENERATED THROUGH A CONTRACTUAL ARRANGEMENT UNDER SECTION 1005 OF THE ACT.

YOUR GENERAL COUNSEL'S LETTER ALSO CONSIDERS THAT THE NET PROCEEDS PAYABLE TO OR AT THE DIRECTION OF USIA UNDER THE CONTRACTUAL ARRANGEMENT CONSTITUTES A "GIFT OF MONEY" WITHIN THE MEANING OF PUB.L. 537, JULY 27, 1954, 68 STAT. 566, WHICH MAY BE ACCEPTED BY THE SECRETARY OF THE TREASURY FOR A "PARTICULAR DEFENSE PURPOSE" AND THEREAFTER TRANSFERRED TO USIA TO EXPEND FOR THE PURPOSES FOR WHICH DONATED. HOWEVER, THE PROCEDURE CONTEMPLATED BY THAT STATUTE HAS NOT BEEN UTILIZED AND NO FURTHER CONSIDERATION NEED BE GIVEN THAT STATUTE AT THIS TIME. WE MIGHT ADD, HOWEVER, THAT FOR THE REASONS HEREINAFTER STATED THE NET PROCEEDS TO WHICH USIA WOULD BE ENTITLED UNDER THE CONTRACTUAL ARRANGEMENT MAY NOT REASONABLY BE CONSTRUED AS A "GIFT OF MONEY.'

SIMILARLY, YOUR GENERAL COUNSEL'S LETTER EXPRESSES THE VIEW THAT SUCH NET PROCEEDS CONSTITUTE A "CONTRIBUTION" AS THAT TERM IS USED IN SECTION 105 (F) OF THE MUTUAL EDUCATIONAL AND CULTURAL EXCHANGE ACT OF 1961, PUB.L. 87 -256, 75 STAT. 527 AND, THEREFORE, MAY BE USED BY USIA IN FURTHERANCE OF ITS OVERSEAS ACTIVITIES.

IT IS NOT NECESSARY AT THIS TIME TO DECIDE WHETHER THE AUTHORITY TO ACCEPT CONTRIBUTIONS CONTAINED IN SECTION 105 (F) OF PUB.L. 87-256, DELEGATED TO USIA, COULD PROPERLY BE SAID TO RELATE TO THE PRODUCTION AND DISTRIBUTION OF THE FILM, SINCE WE FIND NO PROPER BASIS UPON WHICH THE NET PROCEEDS PAYABLE TO OR AT THE DIRECTION OF USIA UNDER THE CONTRACTUAL ARRANGEMENT MAY BE REGARDED AS A "CONTRIBUTION.'

THE REPRESENTATIVES OF YOUR AGENCY POINTED OUT INFORMALLY THAT THE CONTRACTUAL ARRANGEMENT WITH UNITED ARTISTS DID NOT EMBODY ALL FORMAL REQUIREMENTS OF THE GOVERNMENT CONTRACT AND WAS NOT SIGNED BY A DULY DESIGNATED CONTRACTING OFFICER AND THAT, THEREFORE, THE NET PROCEEDS WERE NOT PAYABLE AS A CONTRACTUAL OBLIGATION. WE DO NOT SUBSCRIBE TO THAT VIEW. WE UNDERSTAND THAT THE CONTRACTUAL ARRANGEMENT WITH UNITED ARTISTS WAS MADE WITH YOUR FULL KNOWLEDGE AND APPROVAL AS THE HEAD OF THE UNITED STATES INFORMATION AGENCY. MOREOVER, THERE IS NO INDICATION THAT UNITED ARTISTS DOES NOT REGARD THE AGREEMENT AS BINDING AND VALID. THEREFORE, AND UPON THE ASSUMPTION THAT USIA POSSESSES AUTHORITY TO ENTER INTO SUCH AGREEMENT IN THE FIRST INSTANCE WE SEE NO BASIS UPON WHICH IT NOW MAY QUESTION THE CONCLUSION THAT THE AGREEMENT IS BINDING AND VALID. NOR DO WE SEE ANY BASIS OR JUSTIFICATION FOR HAVING SUCH CONTRACTUAL ARRANGEMENTS SIGNED BY OTHER THAN APPROPRIATE CONTRACTING OFFICERS.

IN ANY EVENT THE QUESTION WHETHER THE NET PROCEEDS CONSTITUTES A CONTRIBUTION IS NOT NECESSARILY DEPENDENT UPON ALL FORMAL CONTRACTING REQUIREMENTS HAVING BEEN COMPLIED WITH. THE PLAIN FACT IS THE RIGHTS OF THE RESPECTIVE PARTIES WERE DETERMINED ONLY AFTER BARGAINING AT ARMS LENGTH. UNDER THE AGREEMENT USIA WAS GIVEN EXCLUSIVE RIGHTS TO DISTRIBUTE THE FILM WITHIN THE UNITED STATES AND CANADA FOR A PERIOD OF 2 YEARS FROM THE DATE OF THE FIRST THEATRICAL RELEASE OF THE FILM WITHIN THE UNITED STATES. IN RETURN FOR THE GRANT OF THIS EXCLUSIVE RIGHT OF DISTRIBUTION, USIA BECAME ENTITLED TO CERTAIN NET PROCEEDS AND UNITED ARTISTS BECAME OBLIGATED TO PAY SUCH PROCEEDS TO OR AT THE DIRECTION OFUSIA.

IN THE ABSENCE OF A CLEAR INDICATION OF A LEGISLATIVE INTENT THAT THE TERM "CONTRIBUTION" AS USED IN SECTION 105 (F) WAS INTENDED TO ENCOMPASS AMOUNTS PAID PURSUANT TO SUCH CONTRACTUAL ARRANGEMENT--- AND WE HAVE FOUND NO EVIDENCE OF ANY SUCH INTENT--- WE WOULD NOT BE WARRANTED IN CONCLUDING THAT THE NET PROCEEDS PAYABLE TO USIA UNDER THE CONTRACTUAL ARRANGEMENT CONSTITUTES A ,CONTRIBUTION" WITHIN THE MEANING OF SECTION 105 (F). CF. 25 COMP. GEN. 637, 639 AND UNPUBLISHED DECISION OF APRIL 16, 1948, B- 61938. ACCORDINGLY, ANY NET PROCEEDS PAID OR PAYABLE TO USIA, OR AT ITS DIRECTION UNDER THE TERMS OF THE CONTRACTUAL ARRANGEMENT, CONSTITUTE RECEIPTS FOR USE OF THE UNITED STATES AND AS SUCH ARE REQUIRED TO BE COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS.

IN THE EVENT UNITED ARTISTS HAS PAID OR HEREAFTER PAYS ANY PART OF SUCH NET PROCEEDS AT THE DIRECTION OF USIA, APPROPRIATIONS FOR USIA MUST BE CHARGED WITH THE AMOUNT OF NET PROCEEDS SO PAID AND A LIKE AMOUNT CREDITED AS MISCELLANEOUS RECEIPTS. CF. 28 COMP. GEN. 476, 479.