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clerk. On April 28, 1934, E. B. Pettit was appointed by the Secretary of the Interior, as stenographer, Order No. 3343, grade no. 4, at a designated salary of $1,440 per year, less the economy deduction, which at that time was 10 percent. This was an original Government appointment at a salary set by the Secretary. On May 17, 1934, Mr. M. L. Wilson wrote Mr. E. L. Crain, president of Houston Gardens as follows: ** * * In view of the fact that she (E. B. Pettit) has already been employed and is now on the pay roll, if there is any change in the salary as stated in the appointment and that which she has been receiving, the new salary will take effect on the day that she signs the oath of office.' (Date of oath May 21, 1934)."
Section 7 of the act of March 3, 1933 (47 Stat. 1515), provided in part as follows:
"No administrative promotions in the civil branch of the United States Government or the government of the District of Columbia shall be made during the fiscal year ending June 30, 1934: Provided, That the filling of a vacancy, when authorized by the President, by the appointment of an employee of a lower grade shall not be construed as an administrative promotion, but no such appointment shall increase the compensation of such employee to a rate in excess of the minimum rate of the grade to which such employee is appointed, unless such minimum rate would require an actual reduction in compensation: *
Section 24 of the act of March 28, 1934, 48 Stat. 523, amended the abovequoted provision by adding the following:
66** * * Provided further, That administrative promotions may be made during the fiscal year 1935 to the extent that funds are available therefor, on an annual basis, from savings made in the amounts apportioned for personal services from the applicable appropriations for the fiscal year 1935."
The Houston Gardens, Inc., and the Houston Gardens Project No. 21 are understood to be one and the same subsistence homestead project authorized under section 208 of the National Recovery Act of June 16, 1933 (48 Stat. 305), and Executive Order No. 6209, dated June 21, 1933, in which the President delegated his authority under the statute to the Secretary of the Interior. Both forms of organizations created by the Secretary of the Interior were and are Federal agencies in the "civil branch of the United States Government" and the personnel of both are subject to the statutory prohibitions against administrative promotions. There is no merit in the contention that the first form of organization was not a Federal agency or in the "civil branch of the United States Government" or that the appointment of E. B. Pettit, effective May 21, 1934, date of taking oath of office, was an original appointment in the Federal service. Accordingly, the audit action disallowing credit for the increased payments of compensation must be and is sustained.
(Signed) J. R. MCCARL, Comptroller General of the United States.
COMPTROLLER GENERAL OF THE UNITED STATES,
Mr. W. L. CONOVER,
Washington, January 20, 1936.
SIR: There was received your letter of July 20, 1935, as follows: "Acknowledgment is made to your letter of July 9 covering review of the audit action of your office disallowing credit for increased compensation payments to E. B. Pettit, stenographer-clerk, Houston Gardens, Inc.
"At the time E. B. Pettit was employed by the board of directors of Houston Gardens, Inc., this corporation was acting as a private corporation under a loan agreement with Federal Subsistence Homesteads Corporation, whereby $250,000 was to be advanced for the building of a subsistence homesteads project near Houston. It was not until after the 28th of February the board of directors of Houston Gardens, Inc., authorized the issuance of the authorized capital stock to the Subsistence Homesteads Corporation, which I understand caused the decision that this was a Federal project.
"Further, no employee of Houston Gardens, Inc., had taken the oath of office until during the month of April 1934, at which time we were notified this project was subject to Federal procedure.
"Under date of April 28, 1934, E. B. Pettit received notice of appointment by the Secretary of the Interior, subject to taking the oath of office. The salary named is $1,440 effective date of entrance on duty.
"This appointment is signed by Guy W. Numbers, Acting Chief, Division of Appointments, Mails, and Files.
"I will indeed appreciate your consideration of the foregoing."
In response to office letter of October 4, 1935, requesting a report as to the history of the organization of the Houston Gardens, Inc., the following has been presented by the Administrator of the Resettlement Administration:
"Houston Gardens, Inc., is a Delaware corporation, incorporated on December 20, 1933. The incorporators were evidently three Government employees employed in the Subsistence Homesteads Division of the Department of the Interior, one being the general counsel. According to the articles of incorporation, some of the purposes of the corporation were to build subsistence homesteads in the Houston homesteads community and 'to cooperate with any governmental agency in construction, maintenance, supervision, etc.' of these subsistence homesteads.
"On January 2, 1934, for the purpose of claiming an exemption from the Delaware franchise tax, an affidavit was filed by Frank Fritts, general counsel of the Division of Subsistence Homesteads, in which he stated that he was authorized to execute the affidavit as an attorney in fact for Houston Gardens, Inc. The affidavit stated that Houston Gardens, Inc., was an instrumentality of the United States of America; that its stock was subscribed for by the Federal Subsistence Homesteads Corporation, and held by the Secretary of the Interior, in trust. It was stated that Houston Gardens, Inc., was created for the purpose of serving as an agency of the President and the Secretary of the Interior.
"On January 20, 1934, an application for a permit, allowing the corporation to do business in Texas, was signed and executed by the officers of this corporation. The application stated the following to be the purpose of the corporation: 'Houston Gardens, Inc., will act as an agency of the United States of America under section 208 of title II of the National Industrial Recovery Act, in establishing, maintaining, and supervising a subsistence homesteads community near the city of Houston, in the county of Harris, in the State of Texas.' However, the application was rejected and a certificate never filed, as a result of the opinion of the assistant attorney general of Texas that such permit was not necessary, the corporation being a governmental instrumentality.
"On January 2, 1934, the first meeting of the incorporators was held at the office of the Division of Subsistence Homesteads, Department of the Interior, in Washington, D. C., and five directors were elected. Of these, one or two were Government employees and the remainder were prominent businessmen of Houston.
"On January 8, 1934, the first meeting of the board of directors was held at Houston, Tex. The minutes of this meeting were in a printed form and were passed, as such, by the board of directors with a few insertions. From a reading of the correspondence, it is indicated that the minutes were prepared in Washington and were followed and adopted as a matter of form by prearrangement with the board. Among the resolutions adopted was one to accept an offer of $100 per share, for the full 10 shares, by the Federal Subsistence Homesteads Corporation, and another to cooperate with the Comptroller of the Federal Subsistence Homesteads Division for installing a system of accounts.
"On January 29, 1934, at a second meeting of the board of directors, a resolution was adopted to transfer the shares of stock of the corporation to the Federal Subsistence Homesteads Corporation. There was no cash consideration. The stock was transferred in consideration of the past management, supervision, and other services received from the Federal Subsistence Homesteads Corporation in the way of preparing corporation papers, drafting of necessary resolutions for the first meeting of the board of directors, performing all of the planning and research work necessary, selecting the land to be purchased, and various other considerations. "In the minutes of the third meeting of the board of directors (Apr. 12, 1934), it is indicated that the corporation was operating under instructions and directions from Washington.
"The directors employed such men as a landscape architect, a chief of accounts, and a construction superintendent.
"The corporation apparently had no assets whatsoever. Under a loan agreement made between it and the Federal Subsistence Homesteads Corporation on January 8, 1934, money was advanced to the corporation from time to time as needed. Correspondence indicates that all steps and plans were submitted to Washington for advice and approval. All abstract titles and construction budgets were likewise submitted. Bills were submitted for check and approval before
"The certificate of stock issued to the Federal Subsistence Homesteads Corporation bears no date."
It is believed you will agree that this fails to show that the Houston Gardens, Inc., was other than a Federal agency throughout its existence.
Accordingly, the decision of July 9, 1935, A-61968, must be and is affirmed. Respectfully,
J. W. POPE,
(Signed) J. R. McCARL, Comptroller General of the United States.
COMPTROLLER GENERAL OF THE UNITED STATES,
Former Treasurer, Richton Homesteads No. 30,
SIR: There is before this office your request on form no. 2085, dated September 16, 1935, as accountable officer, Richton Homesteads, administratively verified by O. Z. Smith, project manager, that credit be allowed for a disallowance of $15.51 made in your account for the period June 1 to 19, 1934, on voucher no. 135. Voucher 135 is a pay roll covering the period from May 16 to 31, 1934, and shows the rate of compensation of O. Z. Smith, as manager, from May 15 to 21 (intended as from May 16 to 21), 6 days, at $200 per month, net, and from May 21 (22) to May 31, 9 days, at $266.67 per month, less 10 percent compensation reduction; and the rate of compensation of H. W. Beacham, assistant manager, for the same periods at $183.33 per month, net, and $216.67 per month, less 10 percent compensation reduction. As the pay roll for the previous pay period, May 1 to 15, 1934, voucher no. 121 of your May 1934 account showed the salaries of said employees as manager and assistant manager, respectively, at $200 per month and $183.33 per month, net, it was considered in the audit that the increase in compensation was an administrative promotion in violation of section 7 of the act of March 3, 1933 (47 Stat. 1515), reading in part as follows: "Section 7. No administrative promotions in the civil branch of the United States Government or the government of the District of Columbia shall be made during the fiscal year ending June 30, 1934 * * * "" Your attention was called to decision of May 9, 1934 (13 Comp. Gen. 338).
The replies to the various notices of exception are to the effect that until May 20, 1934, the salaries received by the employees were those fixed by the board of directors of the Richton Homesteads, Inc., and that beginning May 21, 1934, the salaries paid were those fixed by the Washington office when "the homesteads were transferred into a Government project", your view apparently being that the compensation received while under the first appointment was not as a Government employee and that, therefore, the second appointment was the original Government appointment and effected a change of duties and did not involve an administrative promotion.
As stated in decision of July 9, 1935, A-61968, with reference to the same question in the audit of pay rolls of the Houston Gardens Project No. 21, and again in decision of July 12, 1935, A-61949, with reference to the Meridian Homesteads of Mississippi, there is no merit in the contention that the first form of organization was not a Federal agency or in the "civil branch of the United States Government." An appointment effective May 21, 1934, incident to the change of the form of the organization was not an original appointment in the Federal service, and the audit action disallowing credit for the payment of the increase in compensation must be and is sustained. (In this connection see 13 Comp. Gen. 243; id. 272; 14 id. 611.)
(Signed) J. R. McCARL, Comptroller General of the United States.
COMPTROLLER General of THE UNITED STATES,
The ADMINISTRATOR, RESETTLEMENT ADMINISTRATION.
SIR: There was received your letter of September 21, 1935, as follows: "In the administration of section 208 of the National Industrial Recovery Act (48 Stat. 200, approved June 16, 1933) the Secretary of the Interior caused to be created the Federal Subsistence Homesteads Corporation, a corporation organized under the laws of the State of Delaware. That corporation, acting as an agency of the Secretary of the Interior, organized several subsidiary corporations to administer individual subsistence homesteads projects.
"In the performance of their functions each of those corporations hired the necessary employees and placed them on the corporate pay rolls. In most instances such persons were hired late in 1933 and early in 1934. Due to changes in administrative organization, such of those employees as were still necessary were transferred to Federal pay rolls in the early summer months of 1934. At the time of their transfer the salary rates were adjusted so as to agree with Executive order grades. (See Executive Orders Nos. 6440 of Nov. 18, 1933; 6554 of Jan. 10, 1934; 6622 of Mar. 1, 1934; and 6746 of June 21, 1934.)
"Your office took exception to the resulting increases in salary on the ground that they contravened section 7 of the act of March 3, 1933 (47 Stat. 1515), as amended by section 24 of the act of March 28, 1934 (48 Stat. 523).
"On April 29, 1935, C. E. Pynchon, general manager of the Federal Subsistence Homesteads Corporation, asked for a review of some of those exceptions on the ground that the transfer to the Federal pay rolls constituted an initial appointment and, hence, that any increase in salary involved would not constitute a promotion. By opinion A-61949 of July 12, 1935, you overruled that contention, holding that such corporations were in the 'civil branch of the United States Government' and that the statutory prohibition, hence, applied.
"Accepting your decision, this Administration has attempted to enter into arrangements with such of those employees as are still on its pay rolls so as to effect reimbursement to the United States over a period of time. Many of these employees have protested the resulting deductions from their current pay checks and have advanced various arguments in support of their position. It is believed that one of those arguments merits your consideration and it is accordingly submitted to you for your opinion.
"Those employees maintain that on the basis of your last cited opinion they were 'employees in emergency agencies not subject to the Classification Act' from the time of their initial employment by the subsidiary corporation and were hence entitled to be paid in accordance with Executive order grades from the time of such appointment, or at least from January 10, 1934. Adjustments to meet the schedules contained in the Executive orders would result in increases in the salaries of many such employees and consequently in payments from the United States to them in place of the present claimed obligations from them to the United States. They claim such increases.
"Your opinion is hence requested on the following questions:
"1. Should the salaries of employees appointed by subsidiary corporations of the Federal Subsistence Homesteads Corporation prior to January 10, 1934, be retroactively adjusted to conform to Executive order grades?
"2. If such salaries should be so adjusted, to what date should the adjustment be made?
"3. Should the salaries of employees appointed by subsidiary corporations of the Federal Subsistence Homesteads Corporation after January 10, 1934, be retroactively adjusted to the date of their initial appointment to conform to Executive order grades?
"In order to avoid the administrative confusion that would result, no attempts will be made to secure further payments from the affected employees until such time as your opinion is received."
The Executive Order No. 6440, dated November 18, 1933, provided in part as follows:
"By virtue of the authority vested in me as President of the United States, and under authority of section 1753 of the Revised Statutes, and in order to secure greater uniformity in the rates of compensation of employees engaged upon the same or similar classes of work, it is hereby ordered that the respective heads of
which are authorized by law to employ personal services and to fix rates of compensation therefor without regard to the Classification Act of 1923, as amended, shall, unless otherwise specifically authorized by me, fix such rates for officers and
H. Repts., 75-1, vol. 2-31
employees now in the service, as well as for those hereafter appointed, at the amounts prescribed in the following salary-standardization schedule, in accordance with the duties and responsibilities of the positions occupied by them."
The Federal Subsistence Homesteads Corporation and its subsidiaries were not included under the terms of this order, but were included by Executive Order No. 6554, dated January 10, 1934, providing as follows:
"The provisions of Executive Order No. 6440, dated November 18, 1933, prescribing rates of compensation of Government employees in emergency agencies not subject to the Classification Act and acts amendatory thereof, are hereby extended to include, in addition to the agencies named in that order, all other existing emergency agencies and those hereafter created, the rates of compensation of the officers and employees of which are fixed without regard to the Classification Act of 1923, as amended."
Executive Order No. 6746, dated June 21, 1934, superseding the quoted orders, contained a schedule of maximum rates-not a schedule of fixed rates as in the carlier orders.
It appears to be the contention of the employees concerned that as they were "employees in emergency agencies not subject to the Classification Act" from the time of their initial employment, they were entitled to be paid in accordance with Executive order grades from the time of such appointment, or at least from January 10, 1934, and your questions are apparently based upon such contention. While the classification of positions and the fixing of salary rates for personnel in the emergency agencies of the Government were required to be effected pursuant to the terms of Executive Order No. 6440, supra, the Executive order does not even purport to authorize administrative promotions; that is, increases in compensation in contravention of the terms of section 7 of the act of March 3, 1935 (47 Stat. 1515), as extended through the fiscal year of 1935, by section 24 of the act of March 28, 1934 (48 Stat. 522).
The decisions of this office are to the effect that in applying the provisions of Executive Order No. 6440 of officers and employees when it became effective, there must not result a promotion within the meaning of the provisions of section 7 of the act of March 3, 1933, supra (13 Comp. Gen. 243; 14 id. 15; and id. 578). The principle of these decisions is applicable to the former employees of the Federal Subsistence Homesteads Corporation, and in the making of adjustments in the salary rates of such employees to conform to the rates mentioned in the Executive orders there was not authorized any increase in compensation amounting to as much as or more than one salary step in the corresponding grade under the Classification Act as amended.
Insofar as your questions 1 and 3 relate to retroactive increases, they are answered in the negative, which makes consideration of your question 2 unnecessary. However, if the payments made to any such employees for service after January 10, 1934, were in excess of the rate for the applicable grade as prescribed in the Executive orders or exceeded the rate previously paid by as much as or more than one salary step, the payment of such excess was unauthorized and credit therefor necessarily is for disallowance in the accounts.
(Signed) J. R. MCCARL, Comptroller General of the United States.