A-62047, OCTOBER 5, 1937, 17 COMP. GEN. 301

A-62047, OCTOBER 5, 1937, 17 COMP. GEN. 301

CONTRACTS - DEMURRAGE ON EMPTY CYLINDERS - BASIS FOR PAYMENTS VOUCHERS COVERING DEMURRAGE CHARGES ON GAS CYLINDERS RETAINED BEYOND THE CONTRACT FREE PERIOD MAY BE SUBMITTED ON THE QUANTITY BASIS, THAT IS, ON THE BASIS OF A NUMBER OF CYLINDERS WITHOUT REGARD TO ANY PARTICULAR CYLINDER, WHERE CONTRACTS PROVIDE FOR DEMURRAGE PAYMENTS UPON SUCH QUANTITY BASIS, BUT IN SUCH CASES THERE SHOULD BE SUBMITTED AN EXPLANATION OF THE METHOD OF CALCULATING DEMURRAGE, PROPER CITATION TO THE DISBURSING OFFICER'S VOUCHER COVERING THE PRECEDING DEMURRAGE PAYMENT, AND SUCH OTHER IDENTIFYING DATA AS WILL ENABLE THE GENERAL ACCOUNTING OFFICE TO RENDER A PROPER AUDIT. 15 COMP. GEN. 134, AMPLIFIED.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF AGRICULTURE, OCTOBER 5, 1937:

YOUR LETTER OF AUGUST 25, 1937, IS AS FOLLOWS:

WE WISH TO ACKNOWLEDGE RECEIPT OF YOUR LETTER OF JULY 16, 1937, WITH WHICH YOU TRANSMITTED FOR OUR CONSIDERATION AND SUCH ACTION AS WOULD BE DEEMED APPROPRIATE, A COPY OF LETTER DATED JUNE 21, 1937, FROM THE CYLINDER CONTROL DEPARTMENT OF THE LINDE AIR PRODUCTS COMPANY, TOGETHER WITH COPIES OF RELATED PAPERS, RELATIVE TO THE MATTER OF BILLING FOR EMPTY GAS CYLINDERS NOT RETURNED WITHIN THE FREE PERIOD OF THIRTY DAYS.

IT APPEARS THAT, UNDER DATE OF APRIL 14, 1937, THE AMARILLO, TEXAS, REGIONAL OFFICE OF THE SOIL CONSERVATION SERVICE OF THIS DEPARTMENT, REQUESTED THE LINDE AIR PRODUCTS COMPANY TO FURNISH WITH EACH INVOICE FOR DEMURRAGE A STATEMENT SHOWING THE SERIAL NUMBER FOR EACH INDIVIDUAL CYLINDER SHIPPED AND RETURNED WITH THE RESPECTIVE DATES THEREOF; AND THE COMPANY, UNDER DATE OF JUNE 21, 1937, REFERRED THE MATTER TO YOU WITH THE STATEMENT THAT THE REQUESTED INFORMATION IS NOT AVAILABLE BECAUSE THE COMPANY HAS NOT RECORDED THE OUT AND IN MOVEMENTS OF CYLINDERS BY SERIAL NUMBERS SINCE EARLY IN 1932.

YOU WILL NOTE, IN THE LETTER OF APRIL 14, 1937, TO THE LINDE AIR PRODUCTS COMPANY FROM THE REGIONAL OFFICE OF THE SOIL CONSERVATION SERVICE, THAT SUCH A RECORD AS WAS INDICATED TO BE REQUIRED IN YOUR PREDECESSOR'S LETTER OF AUGUST 14, 1935, A-62047, TO THIS DEPARTMENT, IS BEING MAINTAINED BY THE VARIOUS FIELD OFFICES OF THE AMARILLO, TEXAS, REGION; AND WE UNDERSTAND THAT THE SOIL CONSERVATION SERVICE IS, GENERALLY, MAINTAINING SUCH RECORDS IN OTHER LOCALITIES. HOWEVER, THE DIFFICULTY APPEARS TO BE TO DETERMINE WHETHER THE COMPANY'S BILLINGS FOR DEMURRAGE AGREE WITH THE RECORDS KEPT BY THE FIELD OFFICES. THAT IS, THE PARTICULAR CYLINDER TO WHICH THE BILLING HAS REFERENCE IS NOT ALWAYS READILY ASCERTAINABLE.

THE REQUIREMENTS OF A-62047 (15 C.G. 134) WERE BROUGHT TO THE ATTENTION OF ALL CHIEFS OF BUREAUS AND OFFICES OF THIS DEPARTMENT UNDER DATE OF MARCH 22, 1937. WHILE THE BUREAUS AND OFFICES OF THIS DEPARTMENT ENDEAVOR TO MAINTAIN A RECORD OF THE CYLINDER NUMBERS RECEIVED AND RETURNED FOR THE PURPOSE OF COMPLYING WITH DECISION 15 COMP. GEN. 134IT IS REALIZED THAT SUCH PROCEDURE IS TIME CONSUMING, AND IN ADDITION SETTLEMENT ON THE BASIS OF INDIVIDUAL CYLINDERS IS FINANCIALLY DISADVANTAGEOUS TO THE GOVERNMENT. ALSO, SINCE SEVERAL COMPANIES DO NOT RECORD ISSUANCE AND RETURN BY NUMBERS AND NUMBERS, ESPECIALLY ON METAL, ARE EASILY MISREAD, IT WOULD NOT BE SURPRISING IF ERRONEOUS NUMBERS ARE FREQUENTLY CITED. THE ACTING FORESTER'S LETTER QUOTED IN DECISION 15 COMP. GEN. 134 MENTIONED THAT IN THE NORTHWEST REGION THE AIR REDUCTION COMPANY HAD NOT MAINTAINED A RECORD BY INDIVIDUAL NUMBERS OF CYLINDERS FURNISHED AND RETURNED; THE CORRESPONDENCE OF THE LINDE AIR PRODUCTS COMPANY STATES THAT THAT COMPANY MAINTAINS NO SUCH RECORD; AND IT IS UNDERSTOOD THAT IN SOME LOCALITIES THE OIL COMPANIES HAVE ABANDONED THE PRACTICE OF RECORDING OIL DRUMS BY NUMBER, BECAUSE OF THE EXPENSE AND IMPRACTICABILITY OF FOLLOWING THAT SYSTEM.

ASIDE FROM THE COST TO THE COMPANY OF MAINTAINING AN INDIVIDUAL NUMBER RECORD, THE PROCEDURE OUTLINED IN 15 COMP. GEN. 134 WOULD BE DISTINCTLY ADVANTAGEOUS TO THE CONTRACTOR AND DISADVANTAGEOUS TO THE GOVERNMENT. INDIVIDUAL NUMBER RECORDS SHOW THAT WHERE GAS USE IS LIMITED, LONG PERIODS ELAPSE BEFORE SOME CYLINDERS ARE EMPTIED, AND DEMURRAGE ACCRUES UNDER THE INDIVIDUAL NUMBER SYSTEM. UNDER THE QUANTITY SYSTEM, HOWEVER, RETURN OF OTHER CYLINDERS BEFORE EXPIRATION OF THE FREE PERIOD OFTEN OFFSETS THE CHARGES ACCRUING ON THE DELAYED CYLINDERS. FOR EXAMPLE, WITH A THIRTY-DAY FREE PERIOD, IF TEN CYLINDERS OBTAINED JULY 1 ARE HELD FORTY-FIVE DAYS, AND TEN JULY 15 HELD FIFTEEN DAYS, NO CHARGE ACCRUES BECAUSE THERE WILL HAVE BEEN RETURNED TO THE COMPANY AT THE CLOSE OF JULY TEN CYLINDERS AND ABOUT THE MIDDLE OF AUGUST ANOTHER TEN CYLINDERS; UNDER THE INDIVIDUAL NUMBER PLAN THERE WOULD ACCRUE ON THE TEN CYLINDERS OBTAINED JULY 1 DEMURRAGE CHARGES FOR ONE HUNDRED FIFTY CYLINDER DAYS, ALTHOUGH THE TEN FURNISHED JULY 15 WERE RETAINED ONLY HALF THE ALLOWABLE PERIOD. WHILE THE OWNER UNDER THE CONTRACT MAY HAVE A RIGHT TO REQUIRE DEMURRAGE ON EACH CYLINDER HELD MORE THAN THE FREE PERIOD, IF THE COMPANY IS WILLING TO RELINQUISH THAT RIGHT AND ALLOW THE SHORT PERIODS TO OFFSET THE DELAYS, IT SEEMS IN THE GOVERNMENT'S INTEREST TO TAKE ADVANTAGE OF SUCH ARRANGEMENT. SINCE THE QUANTITY SYSTEM IS DISTINCTLY TO THE ADVANTAGE OF THE GOVERNMENT BOTH AS TO THE AMOUNT OF DEMURRAGE PAYMENT AND FROM THE STANDPOINT OF SIMPLICITY OF RECORD, IT IS STRONGLY URGED THAT THE INDIVIDUAL NUMBER PROCEDURE OUTLINED IN 15 COMP. GEN. 134 BE DISCONTINUED AND SETTLEMENT PERMITTED IN ACCORDANCE WITH THE COMMERCIAL PRACTICE OF THE PARTICULAR COMPANY CONCERNED, WHERE SUCH PRACTICE DOES NOT CONSTITUTE A MODIFICATION OF OR VARIATION FROM THE CONTRACT TO THE DISADVANTAGE OF THE GOVERNMENT.

THE DECISION CITED IN YOUR LETTER, 15 COMP. GEN. 134, INVOLVED CONTRACTS WHICH PROVIDED FOR A DEMURRAGE CHARGE OF A SPECIFIED AMOUNT PER DAY FOR EACH DAY BEYOND A FREE RENTAL PERIOD OF 30 DAYS. OBVIOUSLY DEMURRAGE VOUCHERS RECEIVED IN DISBURSING OFFICER'S ACCOUNTS PREPARED UPON THE BASIS OF THE "QUANTITY SYSTEM" SUCH AS ALLUDED TO IN YOUR LETTER COULD NOT BE AUDITED UNDER THE TERMS OF THE CONTRACT. THE DECISION THEREFORE SET FORTH THE DATA CONSIDERED ESSENTIAL TO A PROPER AUDIT OF EACH DEMURRAGE VOUCHER UNDER THE TERMS OF THE CONTRACTS.

HOWEVER, THERE IS NO OBJECTION TO THE SUBMISSION OF DEMURRAGE VOUCHERS UPON THE QUANTITY BASIS WHERE CONTRACTS MAY PROVIDE FOR DEMURRAGE PAYMENTS UPON SUCH QUANTITY BASIS. BUT IN SUCH CASES THERE SHOULD BE SUBMITTED WITH THE VOUCHERS IDENTIFYING DATA SUCH AS THOSE PROVIDED FOR IN COMMERCIAL FORM USED BY THE LINDE AIR PRODUCTS CO., NO. A/R 1115-A ENTITLED,"EXPLANATION OF METHOD OF CALCULATING LINDE CYLINDER DEMURRAGE," INCLUDING PROPER CITATION TO THE DISBURSING OFFICER'S VOUCHER ON WHICH THE LAST DEMURRAGE PAYMENT MAY HAVE BEEN MADE--- IT BEING THE ADMINISTRATIVE RESPONSIBILITY AT ALL TIMES TO FURNISH WITH FISCAL OFFICER'S ACCOUNT SUCH IDENTIFYING DATA AS WILL ENABLE THIS OFFICE TO RENDER A PROPER AUDIT.