B-69713, FEBRUARY 26, 1948, 27 COMP. GEN. 477

B-69713, FEBRUARY 26, 1948, 27 COMP. GEN. 477

SALE OF USED VEHICLES, ETC. - APPLICATION OF PROCEEDS TO PURCHASE PRICE ACCOUNTING METHODS AN ADMINISTRATIVE PROCEDURE WHEREBY THE SALES PROCEEDS OF USED VEHICLES WOULD BE COVERED INTO SUBSIDIARY ACCOUNTS UNDER A SPECIAL FUND RECEIPT ACCOUNT ACCORDING TO THE CLASS OF VEHICLE SOLD FOR THE PURPOSE OF APPLYING SUCH PROCEEDS TOWARD THE PURCHASE PRICE OF NEW VEHICLES OF THE SAME CLASS WOULD NOT AFFORD THE IDENTIFICATION OF A PARTICULAR REPLACEMENT PURCHASE WITH THE RELATED SALE OF THE OLD VEHICLES CONTEMPLATED BY SECTION 8 OF THE ADMINISTRATIVE EXPENSE STATUTE OF AUGUST 2, 1946, PERMITTING THE APPLICATION OF THE PROCEEDS FROM THE SALES OF USED VEHICLES, ETC., TOWARD THE PURCHASE OF NEW SIMILAR ITEMS.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE ARMY, FEBRUARY 26, 1948:

REFERENCE IS MADE TO LETTER DATED DECEMBER 16, 1947 ( FINDT 400.703/567335), FROM THE ASSISTANT CHIEF OF FINANCE, DEPARTMENT OF THE ARMY, REQUESTING THE ESTABLISHMENT OF SUBSIDIARY ACCOUNTS UNDER THE SPECIAL FUND RECEIPT ACCOUNT "6690 DEPOSITS, PROCEEDS OF SALES, MOTOR PROPELLED VEHICLES, ETC., DEPARTMENT OF THE ARMY, 1948; AND CORRESPONDING LIMITATION ACCOUNTS UNDER THE SPECIAL FUND APPROPRIATION ACCOUNT "2186690 PAYMENTS FROM PROCEEDS OF SALES, MOTOR-PROPELLED VEHICLES, ETC., DEPARTMENT OF THE ARMY, 1948" FOR USE IN ACCOUNTING FOR TRANSACTIONS INVOLVING THE SALES OF VARIOUS CLASSES OF MOTOR VEHICLES AND PARTS THEREOF AND THE APPLICATION OF THE PROCEEDS OF SUCH SALES TO THE PURCHASE OF NEW SIMILAR EQUIPMENT PURSUANT TO SECTION 8 OF PUBLIC LAW 600, APPROVED AUGUST 2, 1946, 60 STAT. 808.

THE ATTENTION OF YOUR DEPARTMENT IS DIRECTED TO THE PROVISIONS OF SECTION 8 OF THE ACT OF JULY 31, 1894, AS AMENDED, 31 U.S.C. 74, WHICH AUTHORIZES DECISIONS IN A MATTER LIKE THIS ONLY UPON THE REQUEST OF THE HEAD OF A DEPARTMENT OR ESTABLISHMENT OF THE GOVERNMENT, AND, IN CONNECTION THEREWITH, TO CIRCULAR LETTER OF THIS OFFICE DATED DECEMBER 13, 1946, B- 62476, 26 COMP. GEN. 993. HOWEVER, IN THIS PARTICULAR INSTANCE, THE MATTER WILL BE TREATED AS A SUBMISSION FROM YOU.

REQUEST FOR THE ESTABLISHMENT OF SUBSIDIARY ACCOUNTS COVERING SIX CATEGORIES OF VEHICLES AND PARTS AND A GENERAL SUBSIDIARY ACCOUNT FOR ALL OTHER PROCEEDS OF SALES WAS MADE BY THE OFFICE OF THE CHIEF OF FINANCE, WAR DEPARTMENT, UNDER DATE OF AUGUST 19, 1947, AND WAS DENIED BY THE ACCOUNTING AND BOOKKEEPING DIVISION, GENERAL ACCOUNTING OFFICE, IN LETTER DATED OCTOBER 20, 1947, FOR THE REASON THAT, UNDER THE PROPOSED PROCEDURE, THERE WOULD BE NO DIRECT REFERENCE IN PURCHASE VOUCHERS OF NEW EQUIPMENT TO PRIOR SALES OF OLD, SIMILAR EQUIPMENT AND, THEREFORE, THAT AN ADEQUATE AUDIT OF COLLECTIONS AND PURCHASES UNDER THE PROPOSED ACCOUNTS COULD NOT BE MADE WITH THE ASSURANCE THAT THE PROCEEDS OF SALES WERE USED IN CONNECTION WITH PURCHASES OR ORDERS FOR NEW REPLACING EQUIPMENT. THERE WAS CITED OFFICE DECISION OF APRIL 2, 1947, 26 COMP. GEN. 729, WHICH HELD THAT THIS OFFICE WOULD NOT BE REQUIRED TO OBJECT TO THE USE OF THE PROCEEDS OF THE SALE OF USED EQUIPMENT TOWARD THE PURCHASE OF NEW EQUIPMENT EVEN THOUGH THE SALE BE AT A TIME NOT SIMULTANEOUS WITH THE PURCHASE OF THE NEW EQUIPMENT, PROVIDED THE EQUIPMENT SOLD IS SO IDENTIFIED WITH THE EQUIPMENT TOWARDS THE PURCHASE OF WHICH THE PROCEEDS OF THE SALE ARE APPLIED AS TO PERMIT A DETERMINATION THAT THE OLD AND THE NEW EQUIPMENT ARE SUFFICIENTLY SIMILAR TO FALL WITHIN THE PROVISIONS OF SECTION 8 OF PUBLIC LAW 600. ANOTHER REASON ADVANCED FOR DECLINING TO ESTABLISH THE SUBSIDIARY ACCOUNTS WAS THIS OFFICE WOULD NOT BE ABLE FACTUALLY TO DETERMINE THAT ONLY THE PROCEEDS FROM THE SALE OF USED SIMILAR EQUIPMENT WOULD BE APPLIED TOWARD THE PURCHASE OF NEW EQUIPMENT, OR WHETHER THE PROCEEDS WERE DERIVED FROM THE SALE OF EQUIPMENT SURPLUS TO THE NEEDS OF THE DEPARTMENT OF THE ARMY.

THE LETTER OF DECEMBER 16, 1947, FROM YOUR DEPARTMENT, STATES THAT, IN VIEW OF THE LARGE NUMBER OF CONTEMPLATED TRANSACTIONS, IT IS EXTREMELY DIFFICULT TO IDENTIFY INDIVIDUAL PURCHASES AND SALES ORDERS, PARTICULARLY IN THE CASE OF SALES ORDERS,"AS IN PRACTICALLY EVERY CASE THE SALES AGREEMENT IS EXECUTED, THE SALE ACCOMPLISHED, AND THE PROCEEDS THEREFROM DEPOSITED BEFORE A PURCHASE IS DE.' IT IS STATED FURTHER THAT COLLECTION VOUCHERS WILL BE SUPPORTED BY DOCUMENTS POSITIVELY IDENTIFYING THE ITEMS SOLD SO AS TO PERMIT A DETERMINATION THAT THE PROCEEDS OF SALES HAVE BEEN PLACED IN THE PROPER LIMITATIONS ACCOUNT, AND THAT SUBSEQUENT PURCHASE DOCUMENTS WILL PROVIDE LIKE INFORMATION, THEREBY ENABLING A POSITIVE TIE- IN BETWEEN THE SALE OF OLD EQUIPMENT AND THE PURCHASE OF NEW SIMILAR EQUIPMENT.

HOWEVER, WHILE THE DOCUMENTATION PROPOSED TO BE FURNISHED WOULD SHOW THAT FUNDS USED TO MAKE PAYMENT ON ACCOUNT OF THE PURCHASE OF A GENERAL CLASS OF NEW EQUIPMENT--- SUCH, FOR EXAMPLE, AS SEDANS AND BUSSES--- WERE DERIVED FROM THE PROCEEDS OF SALES OF OLD EQUIPMENT OF THE SAME GENERAL CLASS, THE SUPPORTING PAPERS WOULD NOT SHOW THAT THE FUNDS USED TO MAKE PAYMENT ON ACCOUNT OF A PARTICULAR VEHICLE WERE DERIVED FROM THE SALE OF AN OLD VEHICLE WHICH IT IS TO REPLACE. HENCE, IT IS OBVIOUS THAT THE USE OF THE PROPOSED SUBSIDIARY ACCOUNTS DOES NOT CONTEMPLATE THE IDENTIFICATION OF A PARTICULAR PURCHASE WITH A PARTICULAR SALE. RATHER, IDENTIFICATION WOULD BE LIMITED TO A REFERENCE OF A CLASS OF SALES TO A SIMILAR CLASS OF PURCHASES. FURTHERMORE, IT APPEARS THAT THE BULK OF THE SALES WILL BE ACCOMPLISHED PRIOR TO THE PURCHASE OF EQUIPMENT.

SECTION 8 OF PUBLIC LAW 600 PROVIDES AS FOLLOWS:

IN PURCHASING MOTOR-PROPELLED OR ANIMAL-DRAWN VEHICLES OR TRACTORS, OR ROAD, AGRICULTURAL, MANUFACTURING, OR LABORATORY EQUIPMENT, OR BOATS, OR PARTS, ACCESSORIES, TIRES OR EQUIPMENT THEREOF, OR ANY OTHER ARTICLE OR ITEM THE EXCHANGE OF WHICH IS AUTHORIZED BY LAW, THE HEAD OF ANY DEPARTMENT OR HIS DULY AUTHORIZED REPRESENTATIVE MAY EXCHANGE OR SELL SIMILAR ITEMS AND APPLY THE EXCHANGE ALLOWANCES OR PROCEEDS OF SALES IN SUCH CASES IN WHOLE OR IN PART PAYMENT THEREFOR: PROVIDED, THAT ANY TRANSACTION CARRIED OUT UNDER THE AUTHORITY OF THIS SECTION SHALL BE EVIDENCED IN WRITING.

THUS IT IS IN CONNECTION WITH THE PURCHASE OF MOTOR-PROPELLED VEHICLES, ETC., THAT THERE IS PERMITTED THE APPLICATION OF THE PROCEEDS OF SALES OF OLD OR USED VEHICLES, ETC. THAT IS TO SAY, THERE MUST BE SOME ACTION TOWARDS THE PURCHASE, BY THE ISSUANCE OF AN ORDER OR REQUISITION, IF NOT THE ACTUAL CONSUMMATION OF THE PURCHASE BEFORE THE PROCEEDS OF THE SALE MAY BE APPLIED. WHILE, AS STATED IN 26 COMP. GEN. 729, SUPRA, THE SALE DOES NOT HAVE TO BE AT A TIME SIMULTANEOUSLY WITH THE PURCHASE OF THE NEW EQUIPMENT. SUFFICIENT EVIDENCE MUST BE FURNISHED TO PERMIT A DETERMINATION THAT THE OLD AND NEW EQUIPMENT ARE SUFFICIENTLY SIMILAR TO FALL WITHIN THE PROVISIONS OF THE STATUTE. FURTHERMORE, WHILE THE PROCEEDS OF SALE OF TWO OR MORE UNITS MAY BE APPLIED AGAINST THE PURCHASE OF A NEW ONE IN REPLACEMENT THEREOF, IT IS THE PLAIN INTENT OF THE STATUTE TO PERMIT THE PROCEEDS OF THE SALE OF PARTICULAR ITEMS OF OLD OR USED EQUIPMENT TO BE APPLIED ONLY AGAINST THE PURCHASE PRICE OF A PARTICULAR ITEM OF NEW EQUIPMENT WITH WHICH THE OLD IS TO BE REPLACED. IN SUCH CONNECTION IT WAS HELD IN DECISION OF JULY 28, 1947, 27 COMP. GEN. 30, THAT TWO OR MORE OLD UNITS OF EQUIPMENT MAY BE TRADED IN OR SOLD AND THE PROCEEDS OF THE SALE APPLIED TOWARD THE PURCHASE OF A UNIT OF NEW EQUIPMENT IF, IN FACT, THE NEW IS TO BE USED AS A REPLACEMENT FOR THE OLD; HOWEVER, IF THE OLD EQUIPMENT IS SURPLUS, THE EXCHANGE OR SALE THEREOF IN CONNECTION WITH THE PURCHASE OF NEW EQUIPMENT IS NOT AUTHORIZED.

AS INDICATED ABOVE, THE USE OF THE SUBSIDIARY ACCOUNTS AS PROPOSED WOULD NOT PERMIT THE IDENTIFICATION OF PARTICULAR PURCHASES WITH RELATED SALES AND, THEREFORE, THE ACCOUNTING FOR TRANSACTIONS THEREUNDER WOULD NOT COMPLY WITH THE PROVISIONS OF SECTION 8 OF PUBLIC LAW 600. ACCORDINGLY, THE REQUEST FOR THE ESTABLISHMENT OF THE PROPOSED SUBSIDIARY ACCOUNTS MUST BE DENIED.