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FUNDS FOR WORK AT GOVERNMENT-OWNED ESTABLISH

MENTS

May 17, 1937.-Committed to the Committee of the Whole House on the stato

of the Union and ordered to be printed

Mr. MAGNUSON, from the Committee on Naval Affairs, submitted the

following

REPORT

(To accompany H. R. 6866]

The Committee on Naval Affairs, to whom was referred the bill (H. R. 6866) authorizing the obligation of funds for work at Government-owned establishments, having considered the same, report it to the House with the recommendation that it do pass.

The purpose of this bill is to reaffirm the authority granted by the provision in the Naval Appropriation Act, approved July 1, 1922, namely:

That all orders or contracts for work or material, under authorization of law heretofore or hereafter placed with Government-owned establishments, shall be considered as obligations in the same manner as provided for similar orders or contracts placed with private contractors, and appropriations for such work or material shall remain available for payment therefor as in the case of orders or contracts placed with private contractors.

The need for this legislation is set forth in the letter of the Secretary of the Navy to the Speaker of the House of Representatives which is hereby made a part of this report:

NAVY DEPARTMENT,

Washington, May 4, 1937. The SPEAKER OF THE HOUSE OF REPRESENTATIVES,

Washington, D. C. MY DEAR MR. SPEAKER: There is transmitted herewith a draft of a proposed bill “Authorizing the obligation of funds for work at Government-owned establishments."

The purpose of the proposed legislation is to reinstate the authority granted by the following provision in the Naval Appropriation Act approved July 1, 1922 (42 Stat. 812), viz:

“That all orders or contracts for work or material, under authorization of law heretofore or hereafter placed with Government-owned establishments, shall be considered as obligations in the same manner as provided for similar orders or contracts placed with private contractors, and appropriations for such work or material shall remain available for payment therefor as in the case of orders or contracts placed with private contractors.”

Under the authority granted by the above-quoted act, the bureaus of the Vary Department have regularly issued project orders for approved work and mat rials under annual appropriations prior to the expiration of the fiscal year for which the appropriations are made. Under the authority of the obligations created by thiese duly issued project orders, expenditures have been and are currently being incurred at navy yards and naval stations under annual appropriations which would not otherwise be available for expenditure. These expenditures include not only manufacture but ship repair, other work, services, and materials which cannot logically be considered as embraced within the term “manufacture.” A continuance of this procedure is vital to the orderly administration of appropriated funds and if interfered with or discontinued, would seriously affect not only the current appropriations but also the appropriations for the next fiscal year.

The right of the Navy Department to continue such procedure has been seriously jeopardized by recent rulings of the Comptroller General. In his decision of December 11, 1936, A-80526 to the Secretary of the Navy (copy herewith) he held that in view of the limitation imposed by section 8 of the First Deficiency Appropriation Act, fiscal year 1936, approved June 22, 1936 (49 Stat. 1648), providing that “After June 30, 1936, advance payments rnder the provisions of title VI, part II, of the Legislative Appropriation Act for the fiscal year 1933, shall have no longer period of availability than the appropriation from which such advance payments are made”, the “issuing of project orders by the Navy Department to navy yards or other Government agency under the Navy Department may not be considered as constituting such obligations as are contemplated by section 8 of the act of 1936."

In said decision the Comptroller General referred to the authority for treating orders placed with Government-owned establishments for work and materials as obligations as having been granted by three acts, namely: Title VI, part II, of the Legislative Appropriation Act for 1933 (47 Stat. 417); act of June 5, 1920 (41 Stat. 975), and act of July 1, 1922 (42 Stat. 812), and did not say specifically therein that the last two-cited acts were superseded or repealed by the firstmentioned one.

However, in a later decision of February 9, 1937 (A-83505), to the Secretary of War (copy herewith), the Comptroller General expressly held that the act of July 1, 1922, was superseded by section 601 (c) of the act of June 30, 1932 (417 Stat. 418) reading: "Orders placed as provided in subsection (a) shall be con sidered as obligations upon appropriations in the same manner as orders or contracts placed with private contractors. Advance payments credited to a special working fund shall remain available until expended”, and that said last quoted section was repealed by section 8 of the First Deficiency Appropriation Act, fiscal year 1936.

In considering the effect of said section 8 of the act of June 22, 1936, on the act of June 5, 1920 (41 Stat. 975) providing:

“That all orders or contracts for the manufacture of material pertaining to approved projects heretofore or hereafter placed with Government-owned establishments shall be considered as obligations in the same manner as provided for similar orders placed with commercial manufacturers, and the appropriations shall remain available for the payment of the obligations so created as in the cas of contracts or orders with commercial manufacturers."

The Comptroller General after saying that, “There appears to be nothing in the terms of section 8 of the act of June 22 or in its legislative history, to indicate an intent to restore or preserve the procedure originally authorized under the act of June 5, 1920”, nevertheless concluded that "in the case of advances made to the War Department or the Navy Department for the procurement of material to be manufactured, the placing of orders for approved projects with Government-owned manufacturing establishments such as arsenals, navy yards, etc., pursuant to the provisions of the act of June 5, 1920, may be considered obligations for payment of which the advanced funds may be used in accordance with the provisions of the said act of June 5, 1920, notwithstanding the provisions of section 8 of the act of June 22, 1936, supra.'

The act of June 5, 1920, was an annual appropriation act for the Army. The act of July 1, 1922, was an annual appropriation act for the Navy. The provisions regarding the status of obligation of appropriations found in both acts as quoted above are in substance the same. Yet the Comptroller General in his opinion of February 9, 1937, treats the Navy provision as superseded, but gives current effect to the Army provision notwithstanding his statement that the history of the legislation negatives such construction.

The act of June 5, 1920, relates only to the manufacture of material. As stated above the project orders issued by the Navy include not only manufacturing work but ship repair and other work, services, and materials not embraced by the term "manufacture.” For this reason the Navy Department has made little use of the authority granted by that act but issues its project orders under the 1922 act which is much broader and better adapted to meet the needs of the Navy's problems. It is a matter of urgent necessity, therefore, that this authority, which has been rendered inoperative by the Comptroller General's rulings, be reenacted.

A draft of the proposed legislation was submitted to the Acting Comptroller General of the United States who reports that his office has no objection thereto.

It is desired to stress the necessity of securing the enactment of this legislation before the close of the current fiscal year. Unless authority is granted to obligate during the current fiscal year appropriations that would not otherwise be available for expenditure after June 30 next for essential items of navy yard work, it is possible that the completion of important projects may be endangered and other work for which appropriations were provided, curtailed or abandoned.

The Navy Department, therefore, urgently recommends that the proposed legislation be enacted at the earliest practicable date. The proposed legislation is in accord with the program of the President. Sincerely yours,

CLAUDE A. SWANSON. The Comptroller General's decisions referred to above are contained in letters to the Secretary of the Navy and the Secretary of War which are hereby made a part of this report:

GENERAL ACCOUNTING OFFICE,

Washington, December 11, 1936. The SECRETARY OF THE NAVI.

SIR: There has been considered your letter of September 8, 1936, as follows: "Section 8 of the First Deficiency Act, fiscal year 1936, approved June 22, 1936 (Public, No. 739, 74th Cong.), provides that, 'After June 30, 1936, advance payments under the provisions of title VI, part II, of the Legislative Appropriation Act for the fiscal year 1933, shall have no longer period of availability for obligation than the appropriation from which such advance payments are made.'

“In construcing the above-quoted provision in decision, A-76495, of June 24, 1936, to the Administrator, Works Progress Administration, you held that

" Said provision is directed to the matter of the availability--for obligatingof funds advanced pursuant to title VI, part II, of the Legislative Appropriation Act for the fiscal year 1933, and it is to the effect that after June 30, 1936, the funds involved in such advance payments shall be available for obligating only for the period “the appropriation from which such advance payments are made" may be available for obligating. The intent of the law appears clearly to be that at the close of business on June 30, 1936, all funds advanced pursuant to title VI, part II, of the act of June 30, 1932 (47 Stat. 417), cease to be available for obligating unless the appropriation from which the funds were taken is, by its terms, made available for obligating after said date, in which event the funds so advanced will continue available for obligating for the same period for which the appropriation from which taken continues available for obligating.'

“It would seem that advances made subsequently to June 30, 1936, will also come within the purview of the above cited act.

"Section 601 of the Legislative Appropriation Act for the fiscal year 1933, approved June 30, 1932 (47 Stat. 417; 31 Ú. S. C., sec. 686) provides that advance payments may be made pursuant to orders placed by an executive department or independent establishment or any bureau or office thereof with any other department, establishment, bureau, or office.

“The act of June 5, 1920 (41 Stat. 975; 41 U. S. C., sec. 23), reads:

“All orders or contracts for the manufacture of material pertaining to approved projects placed before June 5, 1920, or thereafter with Government-owned establishments shall be considered as obligations in the same manner as provided for similar orders placed with commercial manufacturers, and the appropriations shall remain available for the payment of the obligations so created as in the case of contracts or orders with commercial manufacturers'.

“The Naval Appropriation Act of July 1, 1922 (42 Stat. 812), contains the following provision to like effect:

" "That all orders or contracts for work or material, under authorization of law heretofore or hereafter placed with Government-owned establishments, shall be considered as obligations in the same manner as provided for similar orders or contracts placed with private contractors, and appropriations for such work or material shall remain available for payment therefor as in the case of orders or contracts placed with private contractors.'

"It would seem, therefore, that prior to the enactment of the First Deficiency Appropriation Act, fiscal year 1936, when an order was placed with the Navy by another department of the Government, the necessary funds to cover the order that were represented by the advance payment, were thereby obligated and in accordance with the provisions of section 601 of the Legislative Appropriation Act, fiscal year 1933 remained available to meet such obligation until expended. However, section 8 of the First Deficiency Appropriation Act, fiscal year 1936, would appear to prohibit the subsequent obligation of advance payments by the receiving department, establishment, bureau, or office, unless the appropriation from which the advance payment is made is simultaneously available for obligation.

"If such is the interpretation given to the last-mentioned legislation, then it becomes necessary to obligate all advance payments while the appropriation involved remains available for obligation if the advance payment is to accomplish the purpose for which it was made. In the case of contracts with commercial concerns, definite obligations can thus be set up assuming that sufficient time is available in which to execute the necessary contracts.

"However, many of these advance payments cover work to be done in navy yards, and will be used in paying for the necessary labor and for material to be drawn from store. The question, therefore, arises as to whether or not in the case of an advance payment made under the provisions of section 601 of the act of June 30, 1932, which involves yard work, an obligation within the meaning of section 8 of the act of June 22, 1936, can be set up by the issuance of an order to the yards concerned to perform the work under the authority of the act of July 1, 1922, supra, which also provides that such orders shall be considered as obligations.

An extremely important case in point is the advance of funds received from the Coast Guard to cover the construction of certain vessels. These funds were advanced under the appropriation ‘National Industrial Recovery, 1933–37' and this appropriation, unless extended by future legislation, will not be available for obligation after June 30, 1937. The vessels are being constructed at navy yards and the necessary expenditures for their construction may possibly not be concluded by June 30, 1937. If the Navy Department may issue project orders under the authority contained in the act of July 1, 1922, which will permit expenditures for yard work after June 30, 1937, the situation can be easily met by issuing appropriate project orders. if, however, it should be held by the accounting officers that such project orders would not be obligations within the meaning of section 8 of the act of June 22, 1936, then it will be necessary to submit the matter for the consideration of the Congress at as early a date at the next session as practicable.

“In order that the Navy Department may be in a position to determine the appropriate action to be taken in this case and in other cases that are likely to arise in the future, your decision is requested as to whether or not in the case of an advance payment made under section 601 of the Legislative Appropriation Act, fiscal year 1933, which involves yard work, an obligation within the meaning of section 8 of the First Deficiency Appropriation Act, fiscal year 1936, can be set up by the issuance of project orders to the yards concerned to perform the work under the authority granted by the Naval Appropriation Act of July 1, 1922."

By the provisions of title VI, part II, of the Legislative Appropriation Act for 1933 (47 Stat. 417), orders placed with Government-owned establishments for work or material were to be considered as obligations, as was also provided by the acts of June 5, 1920 (41 Stat. 975), and July 1, 1922 (42 Stat. 812), and where advance payments were made and credited to special working funds, such advances were to remain available until expended.

However, under the terms of section 8 of the act of June 22, 1936 (49 Stat. 1648), there is placed a limitation on the time in which an advance of funds may be obligated, in that advance payments under the provisions of title VI, part II, of the Legislative Appropriation Act for the fiscal year 1933 shall have no longer period of availability for obligation than the appropriation under which such advance payments are made. The act of June 22, 1936, must necessarily, therefore, be considered as modifying prior legislation in that the advancing of funds acts merely to earmark such funds for the purpose for which transferred, so that funds credited to working funds may be charged only with obligations legally incurred during the period of the availability of the appropriation from which the funds were taken.

As stated in the decision of June 24, 1936, A-76495, section 8 of said act of June 22, 1936, goes to the matter of the availability—for obligating purposes of the funds advanced pursuant to title VI, part II, of the 1932 act, supra, the effect thereof being that after June 30, 1936, funds involved in such advance payments shall be available for obligating only for the period "the appropriation from which such advance payments are made" may be available for obligating. Accordingly, I have to advise that the issuing of project orders by the Navy Department to navy yards or other Government agency under the Navy Department may not be considered as constituting such obligations as are contemplated by section 8 of the act of 1936. Respectfully,

R. N. ELLIOTT, Acting Comptroller General of the United States.

GENERAL ACCOUNTING OFFICE,

Washington, February 9, 1937. The SECRETARY OF WAR.

SIR: There has been received your letter of January 26, 1937, as follows:

In accordance with understanding reached during the conference on the 18th instant with representatives of this Department in your office, there are submitted herewith two questions pertaining to the application of existing laws to the utilization of arsenal orders for the accomplishment of work for other departments for which funds are advanced by them.

As a preliminary to the presentation of these questions, it is desired to make the following statements with a view to possibly clarifying the situation as to the administrative problems which, it is believed, pertain in very much greater degree, if not exclusively, to the activities of the War and Navy Departments than to those of other departments:

(a) There two classes of legislatively authorized procedure providing special means of accomplishing work of this character as follows:

(1) Advancement of funds by one depariment or agency to another depert ment or agency coordinate therewith, or not under the jurisdiction thereof. This procedure was initially specifically authorized by sections of the Fortification Appropriation Act of May 21, 1920 (41 Stat. 613); which provision was amended by section 601 of the act of June 30, 1932; and further amended by section 8 of the Deficiency Act of June 22, 1936.

(2) Specific treatment of orders for manufacture placed by supervisory agencies with establishments subordinate thereto and the placing of said orders within the period of availability of the appropriation chargeable having the effect of authorizing the incurring by the subordinate agency of obligations to effectuate the purposes of the order for 2 fiscal years after the period of availability of the original appropriation. This procedure was initially authorized by section 6 of the Fortification Appropriation Act of May 21, 1920 (41 Stat. 613), applying exclusively to orders placed with ordnance establishments, and subsequently by a provision contained in the Army Appropriation Act of June 5, 1920 (41 Stat. 975), which is more general in its terms; both enactments providing that the orders for manufacturing ‘shall be considered as obligations in the same manner as provided for similar orders placed with commercial manufacturers.'

"(6) In the administration of the manufacturing activities of the War Department, it has been considered that the two classe of legislation cited in subparagraph (a) above, were separate and distinct and that the limitation in the act of June 22, 1936, on the availability of funds advanced from one agency to another, did not in any way modify the legislative definition of an 'obligation' referred to under subparagraph (a) (2) above.

"(c) With reference to subparagraph (a) (2). While the applicability of section 6 of the act of May 21, 1920, is restricted to 'armament of fortifications appropriations', the corresponding provision in the act of June 5, 1920, contains no such restriction but applies in terms to any funds utilized for the manufacture of material pertaining to approved projects, and it has been the understanding of this Department that this provision of law still applies to manufacturing orders placed by the War Department with its subordinate agencies irrespective of whether the cost of the work is chargeable to funds originally appropriated for the War Department or to funds advanced by other departments.

"(d) The work of the Ordnance Department of the Army has always involved large amounts of manufacturing, done at Government establishments, and is of such character that it cannot economically and efficiently be accomplished under appropriations with a fiscal-year limitation without some such special authorization as those cited in subparagraph (a) (2) above. Prior to 1920 the bulk of funds provided for activities of the Army Ordnance Department were provided in Fortifications Appropriation Acts, which were then available until expended. The enactment in 1919 making future fortifications appropriations subject to a

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