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TO THE SECRETARY OF THE NAVY: THIS IS IN RESPONSE TO LETTER OF APRIL 5. A MEMORANDUM OF LAW ATTACHED TO THE ASSISTANT SECRETARY'S LETTER CONCLUDES THAT SINCE THE DAIRY FARM PROPERTY WAS ACQUIRED BY THE USE OF REIMBURSABLE APPROPRIATED FUNDS OR NONAPPROPRIATED FUNDS. EXCEPT AS PROVIDED IN SUBSECTIONS (B/-/E) OF THIS SECTION. "/C) WHERE THE PROPERTY TRANSFERRED OR DISPOSED OF WAS ACQUIRED BY THE USE OF FUNDS EITHER NOT APPROPRIATED FROM THE GENERAL FUND OF THE TREASURY OR APPROPRIATED THEREFROM BUT BY LAW REIMBURSABLE FROM ASSESSMENT. THEN THE NET PROCEEDS OF THE DISPOSITION OR TRANSFER SHALL BE CREDITED TO THE REIMBURSABLE FUND OR APPROPRIATION OR PAID TO THE FEDERAL AGENCY WHICH DETERMINED SUCH PROPERTY TO BE EXCESS * * THE DAIRY WAS ORIGINALLY ESTABLISHED AT THE NAVAL ACADEMY IN 1911 THROUGH AN ADVANCE OF $40.

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B-156167, JUL. 18, 1967

NAVAL ACADEMY - DAIRY FARM SALE PROCEEDS DECISION TO NAVY ADVISING THAT PROCEEDS OF SALE OF DAIRY FARM MAY BE CREDITED TO MIDSHIPMEN'S STORE FUND, A REIMBURSABLE NONAPPROPRIATED FUND.

TO THE SECRETARY OF THE NAVY:

THIS IS IN RESPONSE TO LETTER OF APRIL 5, 1967, FROM THE ASSISTANT SECRETARY OF THE NAVY (INSTALLATIONS AND LOGISTICS) CONCERNING WHETHER THE PROCEEDS FROM A CONTEMPLATED SALE OF THE NAVAL ACADEMY DAIRY FARM MAY BE CREDITED TO THE MIDSHIPMEN'S STORE FUND.

A MEMORANDUM OF LAW ATTACHED TO THE ASSISTANT SECRETARY'S LETTER CONCLUDES THAT SINCE THE DAIRY FARM PROPERTY WAS ACQUIRED BY THE USE OF REIMBURSABLE APPROPRIATED FUNDS OR NONAPPROPRIATED FUNDS, THE PROCEEDS OF SALE SHOULD BE CREDITED TO THE MIDSHIPMEN'S STORE FUND. THE RATIONALE FOLLOWED IN REACHING THIS CONCLUSION MAY BE SUMMARIZED AS FOLLOWS:

SHOULD THE NAVAL ACADEMY DAIRY FARM BE DETERMINED SURPLUS, IT COULD BE DISPOSED OF UNDER THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED. SUBSECTION 204 (C) OF THE PROPERTY ACT, AS AMENDED, 10 U.S.C. 485 (C), PROVIDES, QUOTING FROM THE CODE, THAT:

"ALL PROCEEDS UNDER THIS SUBCHAPTER FROM ANY TRANSFER OF EXCESS PROPERTY TO A FEDERAL AGENCY FOR ITS USE, OR FROM ANY SALE, LEASE, OR OTHER DISPOSITION OF SURPLUS PROPERTY, SHALL BE COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS, EXCEPT AS PROVIDED IN SUBSECTIONS (B/-/E) OF THIS SECTION.

"/C) WHERE THE PROPERTY TRANSFERRED OR DISPOSED OF WAS ACQUIRED BY THE USE OF FUNDS EITHER NOT APPROPRIATED FROM THE GENERAL FUND OF THE TREASURY OR APPROPRIATED THEREFROM BUT BY LAW REIMBURSABLE FROM ASSESSMENT, TAX, OR OTHER REVENUE OR RECEIPTS, THEN THE NET PROCEEDS OF THE DISPOSITION OR TRANSFER SHALL BE CREDITED TO THE REIMBURSABLE FUND OR APPROPRIATION OR PAID TO THE FEDERAL AGENCY WHICH DETERMINED SUCH PROPERTY TO BE EXCESS * *

THE DAIRY WAS ORIGINALLY ESTABLISHED AT THE NAVAL ACADEMY IN 1911 THROUGH AN ADVANCE OF $40,000 FROM THE MIDSHIPMEN'S STORE FUND. THE CONGRESS APPROPRIATED ADVANCES TO THE MIDSHIPMEN'S STORE FUND TOTALING $255,000 FOR THE RELOCATION TO AND ESTABLISHMENT OF THE DAIRY AT ITS PRESENT SITE--- $100,000 BY ACT OF MARCH 4, 1913, 37 STAT. 904; $100,000 BY THE ACT OF AUGUST 29, 1916, 39 STAT. 603; AND $55,000 BY THE ACT OF MARCH 28, 1918, 40 STAT. 488.

EACH OF THESE ACTS PROVIDED THAT THE FUNDS APPROPRIATED WERE TO BE "* * * TREATED AS AN ADVANCE TO THE MIDSHIPMEN'S STORE FUND AT THE NAVAL ACADEMY, TO BE ULTIMATELY RETURNED TO THE UNITED STATES * * *;, IN 1925, $100,000 OF THE SUMS ADVANCED WAS REPAID TO THE UNITED STATES AND IN THAT SAME YEAR, THE CONGRESS REPEALED THE STATUTORY REQUIREMENTS FOR REPAYMENT TO THE UNITED STATES OF THE REMAINING BALANCE OF $155,000. SECTION 26 OF THE ACT OF MARCH 4, 1925, 43 STAT. 1278.

IN LIGHT OF THE ABOVE AND SINCE THE MIDSHIPMEN'S STORE IS A NONAPPROPRIATED FUND ACTIVITY--- SEE SUBSECTION 6971 (A) OF TITLE 10, UNITED STATES CODE--- THE REFERRED-TO MEMORANDUM OF LAW CONCLUDES AS FOLLOWS:

"1. AS NOTED EARLIER, THE EXCEPTION FROM THE REQUIREMENT THAT PROCEEDS FROM THE DISPOSAL OF SURPLUS PROPERTY MUST BE DEPOSITED INTO THE TREASURY IS APPLICABLE TO PROPERTY THAT -WAS ACQUIRED BY THE USE OF FUNDS EITHER NOT APPROPRIATED FROM THE GENERAL FUND OF THE TREASURY OR APPROPRIATED THEREFROM BUT BY LAW REIMBURSABLE FROM ASSESSMENT, TAX, OR OTHER REVENUE OR RECEIPTS.- IT IS BELIEVED THAT THE DISPOSITION OF THE PROCEEDS FROM THE DISPOSAL OF THE DAIRY FARM CLEARLY COMES WITHIN THIS EXCEPTION. TO THE EXTENT THE DAIRY WAS ACQUIRED BY THE USE OF FUNDS APPROPRIATED FROM THE GENERAL FUND OF THE TREASURY, THE EXCEPTION WOULD APPLY SINCE THE ACTS PURSUANT TO WHICH THE APPROPRIATIONS WERE MADE EXPRESSLY PROVIDED THAT THE FUNDS WERE TO BE TREATED AS AN ADVANCE TO THE MIDSHIPMEN'S STORE FUND AT THE NAVAL ACADEMY, TO BE ULTIMATELY RETURNED TO THE UNITED STATES.- THUS, WHILE THE FUNDS MAY BE SAID TO HAVE BEEN APPROPRIATED, -BY LAW- THEY WERE REIMBURSABLE.- TO THE EXTENT THAT THE DAIRY WAS ACQUIRED THROUGH THE USE OF THE MIDSHIPMEN'S STORE FUND, THE EXCEPTION WOULD APPLY SINCE THESE WERE NOT FUNDS -APPROPRIATED FROM THE GENERAL FUND OF THE TREASURY.-

"2. ACCORDINGLY, IT IS CONCLUDED THAT THE PROCEEDS FROM THE DISPOSITION OF THE DAIRY FARM, ITS STOCK AND EQUIPMENT ARE NOT REQUIRED TO BE DEPOSITED INTO * * * THE TREASURY, BUT -SHALL BE CREDITED TO THE REIMBURSABLE FUND,- WHICH, IN THIS CASE, IS THE MIDSHIPMEN'S STORE FUND;,

WE ARE IN AGREEMENT WITH THE CONCLUSION REACHED IN THE MEMORANDUM OF LAW ATTACHED TO THE ASSISTANT SECRETARY'S LETTER. ACCORDINGLY, ANY PROCEEDS FROM THE DISPOSITION OF THE NAVAL ACADEMY DAIRY FARM OR ITS STOCK AND EQUIPMENT ORIGINALLY ACQUIRED BY THE MIDSHIPMEN'S STORE FUND, WHICH IS BY LAW A REIMBURSABLE NONAPPROPRIATED FUND, MAY BE CREDITED TO SUCH FUND.

FINALLY, WE WOULD POINT OUT THAT WE ARE NOT DECIDING THE QUESTION WHETHER THE DISPOSAL ACTION CONTEMPLATED MUST BE TAKEN UNDER THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT, AS AMENDED. WE HAVE ASSUMED APPLICABILITY OF THAT ACT PRIMARILY BECAUSE OF THE ASSUMPTIONS WITH REGARD THERETO MADE IN THE ASSISTANT SECRETARY'S LETTER. IT DOES NOT APPEAR THAT ANY USEFUL PURPOSE WOULD BE SERVED TO EXPLORE THE QUESTION AT THIS TIME.

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