B-166272, JUL. 9, 1969

B-166272, JUL. 9, 1969

TO MR. W. THOMAS RICE, PRESIDENT:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 25, 1969, REGARDING THE PAYMENT OF YOUR COMPANY'S BILLS BY THE DEPARTMENT OF DEFENSE IN CONNECTION WITH TRAFFIC DELIVERED TO SUNNY POINT, NORTH CAROLINA. BECAUSE OF THE SERIOUS EFFECT ON YOUR COMPANY'S CASH FLOW AND THE HIGH COST OF SECURING NECESSARY WORKING FUNDS AND DELAYS IN PAYMENT OF YOUR BILLS, YOU PROPOSED THAT A SPECIAL FUND BE ESTABLISHED BY THE DEPARTMENT OF THE ARMY UPON WHICH YOUR COMPANY COULD DRAW AFTER A BILL OF LADING HAS BEEN COMPLETED BY THE DELIVERY OF THE SHIPMENT AND YOUR BILL PREPARED.

IN CONSIDERATION OF THE CIRCUMSTANCES YOU DESCRIBED, WE MADE AN INVESTIGATION OF THE DOCUMENTATION AND PAYMENT PROCEDURES ASSOCIATED WITH THE TRAFFIC INVOLVED IN YOUR INQUIRY. ON MARCH 17, 1969, WE CHECKED WITH THE TRANSPORTATION DIVISION, FINANCE CENTER, U.S. ARMY, INDIANAPOLIS, INDIANA, WITH REGARD TO THE AVERAGE NUMBER OF DAYS THEN CURRENTLY REQUIRED TO PROCESS CARRIERS' BILLS TO A CONCLUSION GENERALLY, INCLUDING THE ISSUANCE AND MAILING OF CHECKS IN THE AMOUNT DUE.

ON MARCH 21, WHILE ACKNOWLEDGING SOME UNUSUAL DELAYS OCCURRED DURING DECEMBER 1968 AND JANUARY 1969, RESULTING FROM THE FLU EPIDEMIC AND PERSONNEL CEILINGS, THE FINANCE CENTER ADVISED THAT THE PAYMENT CYCLE IN MARCH 1969 WAS 21 DAYS FROM DATE OF RECEIPT TO DATE OF PAYMENT FOR DOCUMENTS AND VOUCHERS FOR SHIPMENTS ON REGULAR GOVERNMENT BILLS OF LADING. TRANSIT BILLINGS ARE SOMEWHAT LONGER IN PROCESSING BECAUSE THEY ARE ROUTED THROUGH THEIR RECORDS FOR INBOUND REFERENCES. ADDITIONALLY, THEY POINT OUT THAT ON SEABOARD COAST LINE BILLINGS THE AVERAGE DATE OF RECEIPT WAS 6-1/2 DAYS FROM THE DATE OF THE BILL, WHICH SEEMS TO INDICATE YOUR COMPANY'S BILLS ARE NOT MAILED ON THE BILLING DATE SHOWN THEREON.

WE ALSO VISITED THE MILITARY OCEAN TERMINAL, SUNNY POINT, SOUTHPORT, NORTH CAROLINA, FOR FIRST-HAND OBSERVATIONS OF THE RECEIPT AND ACCOMPLISHMENT OF THE GOVERNMENT BILLS OF LADING COVERING THE SEABOARD COAST LINE SHIPMENTS IN QUESTION. THE PROCEDURES ESTABLISHED THERE REQUIRE SUCH GOVERNMENT BILLS OF LADING TO BE ACCOMPLISHED ON A DAILY BASIS AND TO BE CLEARED WITHIN SEVEN DAYS AFTER DELIVERY OF THE SHIPMENTS. WE UNDERSTAND THIS PROCEDURE ENTAILS SEABOARD'S OBTAINING THE WAYBILLS ON SUCH SHIPMENTS WHICH ARE MATCHED BY THE TERMINAL WITH THE ORIGINAL GOVERNMENT BILLS OF LADING BEFORE ACCOMPLISHMENT.

THE PROCEDURES FOR PROCESSING AND PAYING BILLS FOR TRANSPORTATION SERVICES ARE FUNCTIONS WHICH ARE PRIMARILY WITHIN THE DISCRETION OF THE ADMINISTRATIVE AGENCIES, PROVIDED THESE PROCEDURES AFFORD ADEQUATE PROTECTION OF PUBLIC FUNDS AND ARE NOT OTHERWISE CONTRARY TO LAW. THEREFORE, ON MARCH 26, 1969, WE REFERRED YOUR LETTER TO THE CHIEF OF FINANCE AND ACCOUNTING, OFFICE OF THE COMPTROLLER OF THE ARMY, FOR CONSIDERATION AND COMMENT.

ON MAY 23, 1969, THAT OFFICIAL ADVISED US THAT THEIR PRESENT SYSTEM, FOR WHICH THE PAYMENT CYCLE AVERAGES APPROXIMATELY 20 DAYS, IS BELIEVED TO BE SATISFACTORY CONSIDERING THE LARGE NUMBER OF CARRIERS PAID AND THE VOLUME OF BILLINGS PROCESSED. HE MENTIONED THE DELAY IN PROCESSING BILLINGS COVERING CERTAIN TRANSIT BILLS OF LADING BECAUSE OF THE NEED TO OBTAIN INBOUND PAYMENT REFERENCES, AND HE INDICATED THAT YOUR PEOPLE HAVE BEEN REQUESTED TO LIMIT TO THREE THE NUMBER OF TRANSIT BILLS OF LADING PER BILLING. HE EXPRESSED A BELIEF THAT THIS WILL FACILITATE INBOUND REFERENCE SEARCHING AND REDUCE THE PAYMENT PROCESSING TIME FOR THIS TYPE OF BILL.

YOUR PROPOSAL TO PROVIDE A FUND ON WHICH YOU COULD DRAW UPON SURRENDER OF THE COMPLETED GOVERNMENT BILL OF LADING, IF IT COULD LEGALLY BE ADOPTED, RAISES QUESTIONS AS TO THE CARRIERS WHICH WOULD BE PERMITTED TO PARTICIPATE THEREIN, THEIR FINANCIAL RESPONSIBILITY, AND WHETHER ESTABLISHMENT OF THE FUND WOULD BE IN THE BEST INTERESTS OF THE UNITED STATES. IN ADDITION, UNLESS PAYMENTS FROM SUCH A FUND WERE TO BE DISBURSED BY AN APPROPRIATE GOVERNMENT DISBURSING OFFICER (WHICH IS WHAT YOUR PROPOSAL APPARENTLY WOULD AVOID), THE ARRANGEMENT WOULD APPEAR TO CONTRAVENE 31 U.S.C. 82, WHICH PROVIDES AS FOLLOWS:

"EXCEPT AS OTHERWISE PROVIDED, THE ADMINISTRATIVE EXAMINATION OF ALL PUBLIC ACCOUNTS, PRELIMINARY TO THEIR AUDIT BY THE GENERAL ACCOUNTING OFFICE, SHALL BE MADE AS CONTEMPLATED BY SECTION 78 OF THIS TITLE, AND ALL VOUCHERS AND PAY ROLLS SHALL BE PREPARED AND EXAMINED BY AND THROUGH THE ADMINISTRATIVE HEADS OF DIVISIONS AND BUREAUS IN THE EXECUTIVE DEPARTMENTS AND NOT BY THE DISBURSING CLERKS OF SAID DEPARTMENTS, EXCEPT THOSE VOUCHERS PREPARED OUTSIDE OF WASHINGTON PRIOR TO AUGUST 23, 1912, MAY CONTINUE TO BE SO PREPARED AND THE DISBURSING OFFICERS SHALL MAKE ONLY SUCH EXAMINATION OF VOUCHERS AS MAY BE NECESSARY TO ASCERTAIN WHETHER THEY REPRESENT LEGAL CLAIMS AGAINST THE UNITED STATES.'

THIS STATUTE SEEMS TO CONTEMPLATE THAT VOUCHERS PRIOR TO PAYMENT WILL BE EXAMINED BY A DISBURSING OFFICER TO ASCERTAIN THAT THEY REPRESENT PROPER CLAIMS AGAINST THE GOVERNMENT. HENCE, THERE IS CONSIDERABLE DOUBT WHETHER ANY PROVISION WHICH WOULD PERMIT YOUR COMPANY TO DRAW AGAINST GOVERNMENT FUNDS, WITHOUT INTERVENTION OF A GOVERNMENT DISBURSING OFFICER EXAMINING THE BILLING TO DETERMINE IT CONSTITUTED A LEGAL CLAIM, COULD BE APPROVED.

THE REGULATIONS OF THE INTERSTATE COMMERCE COMMISSION RELATING TO EXTENSION OF CREDIT TO SHIPPERS BY RAIL CARRIERS, 49 CFR 1320.3, TO WHICH YOU REFER, WERE ISSUED UNDER AUTHORITY OF 49 U.S.C. 3 AND 12. PARAGRAPH (2) OF SECTION 3 PROVIDES IN PERTINENT PART: "* * * THAT THE PROVISIONS OF THIS PARAGRAPH SHALL NOT BE CONSTRUED TO PROHIBIT ANY CARRIER OR EXPRESS COMPANY FROM EXTENDING CREDIT IN CONNECTION WITH RATES AND CHARGES ON FREIGHT OR EXPRESS SHIPMENTS TRANSPORTED FOR THE UNITED STATES, FOR ANY DEPARTMENT, BUREAU, OR AGENCY THEREOF * * *.' THEREFORE, NO CARRIER WOULD BECOME LIABLE TO PROSECUTION UNDER THE ELKINS ACT BECAUSE OF DELAY BY THE UNITED STATES IN SETTLING ITS ACCOUNTS.

ALTHOUGH NO SPECIAL CONCESSIONS ARE THUS POSSIBLE IN CONNECTION WITH THE PAYMENT OF BILLINGS ON THE TRAFFIC CONSIGNED TO SUNNY POINT, NORTH CAROLINA, WE TRUST THE INFORMATION FURNISHED HEREIN IN REFERENCE TO THE IMPROVED PROCESSING OF BILLS BY THE TRANSPORTATION DIVISION, FINANCE CENTER, U.S. ARMY; THE MORE TIMELY ACCOMPLISHMENT OF THE GOVERNMENT BILLS OF LADING AT DESTINATION, AND THE POTENTIAL FOR REDUCING THE TIME IN WHICH THE DISBURSING OFFICE RECEIVES YOUR BILLS, WILL ENABLE REDUCTION IN THE TIME PERIOD REQUIRED FOR PAYMENT OF YOUR COMPANY'S BILLINGS.

IN ADDITION, THE BUREAU OF THE BUDGET, TREASURY, AND OUR OFFICE HAVE INITIATED A JOINT AGENCY STUDY UNDER THE SPONSORSHIP OF THE JOINT FINANCIAL MANAGEMENT IMPROVEMENT PROGRAM WHICH HAS AS ITS OBJECTIVE THE INTEGRATION INSOFAR AS PRACTICABLE OF COMMERCIAL PRACTICES INTO THE GOVERNMENT'S DISBURSEMENTS FOR TRANSPORTATION SERVICES FURNISHED IT AND INCLUDES, AMONG OTHERS, A STUDY OF THE TIMELINESS OF PAYMENTS FOR TRANSPORTATION GENERALLY. WHILE THE STUDY TO DATE HAS LARGELY BEEN CONFINED TO THE TRANSPORTATION PAYMENTS BY THE CIVILIAN AGENCIES RATHER THAN THOSE OF THE MILITARY DEPARTMENTS, WE BELIEVE THAT IN DUE COURSE ALL GOVERNMENT PAYMENT METHODS AND PROCEDURES WILL BE IMPROVED IN A MANNER WHICH WILL RESULT IN SHORTENING THE TIME PERIOD BETWEEN THE CONSUMMATION OF THE TRANSPORTATION AND PAYMENT TO THE CARRIER.

WE WOULD BE PLEASED TO REFER TO SUCH STUDY GROUP FOR ITS CONSIDERATION ANY ADDITIONAL THOUGHTS OR SUGGESTIONS YOU MAY WISH TO EXPRESS TOWARDS CARRYING OUT THE INDICATED OBJECTIVES OF SUCH GROUP.