Correspondence between Comptroller General Warren and the Administrator of the Federal Economic Administration
This document explains some of the finer points of the Lend Lease Act.
67854Lend-Lease Acts — Correspondence between Comptroller General Warren and the Administrator of the Federal Economic AdministrationUS Comptroller General
B-49205, MAY 25, 1945, 24 COMP. GEN. 847
LEND-LEASE MATERIAL - PROCEEDS OF SALES; INSURANCE AND SALVAGE RECEIPTS; PURCHASE PRICE REFUNDS BY CONTRACTORS - DISPOSITION PROCEEDS OF THE SALE OF DEFENSE ARTICLES PROCURED UNDER THE LEND LEASE ACT, AS AMENDED, FOR A FOREIGN GOVERNMENT BUT DIVERTED TO DOMESTIC USE PRIOR TO TRANSFER TO SUCH GOVERNMENT MAY BE CREDITED TO THE DEFENSE AID ALLOCATIONS ACCOUNT FOR USE IN FINANCING OTHER TRANSACTIONS, RATHER THAN COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS UNDER SECTION 3617, REVISED STATUTES, AS MONEYS RECEIVED FOR THE USE OF THE UNITED STATES. WHERE DEFENSE ARTICLES PROCURED UNDER THE LEND-LEASE ACT, AS AMENDED, HAVE BEEN LOST OR DAMAGED IN TRANSIT OR IN STORAGE PRIOR TO TRANSFER TO A FOREIGN GOVERNMENT, THE INSURANCE OR SALVAGE PROCEEDS RECEIVED ON ACCOUNT OF SUCH LOSS OR DAMAGE MAY BE CREDITED TO THE DEFENSE AID ALLOCATIONS ACCOUNT FOR USE IN FINANCING OTHER TRANSACTIONS, RATHER THAN COVERED IN THE TREASURY AS MISCELLANEOUS RECEIPTS UNDER SECTION 3617, REVISED STATUTES, AS MONEY RECEIVED FOR THE USE OF THE UNITED STATES. VOLUNTARY REFUNDS MADE BY CONTRACTORS, PRIOR TO RENEGOTIATION, OF PART OF THE PURCHASE PRICE PAID UNDER CONTRACTS FOR LEND-LEASE MATERIAL MAY NOT BE CREDITED TO THE APPROPRIATION ORIGINALLY CHARGED BUT MUST BE COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS PURSUANT TO SECTION 3617, REVISED STATUTES.
COMPTROLLER GENERAL WARREN TO THE ADMINISTRATOR, FOREIGN ECONOMIC ADMINISTRATION, MAY 25, 1945:
THERE HAS BEEN CONSIDERED YOUR LETTER OF APRIL 18, 1945, AS FOLLOWS:
WE RESPECTFULLY REQUEST YOUR OPINION AS TO THE PROPER APPLICATION OF THE PROCEEDS RECEIVED IN THE DISPOSITION OF LEND-LEASE ARTICLES OTHERWISE THAN BY DISPOSITION TO FOREIGN GOVERNMENTS. PRIOR TO FEBRUARY, 1944, THE PROCEEDS FROM SUCH TRANSACTIONS HAD BEEN DEPOSITED BY THE TREASURY IN THE ORIGINAL ALLOCATIONS ACCOUNT PURSUANT TO AN INFORMAL UNDERSTANDING WITH YOUR OFFICE. SINCE THAT TIME, THE PROCEEDS HAVE BEEN HELD BY THE TREASURY IN A SPECIAL ACCOUNT PENDING CONFIRMATION BY YOUR OFFICE OF THE PROPER DISPOSITION TO BE MADE OF THE PROCEEDS.
WE ARE NOT HERE CONCERNED WITH THE APPLICATION, UNDER SECTION 6 (B) OF THE LEND-LEASE ACT, OF THE PROCEEDS RECEIVED IN PAYMENT FOR ARTICLES TRANSFERRED TO FOREIGN GOVERNMENTS OR IN THE DISPOSITION OF ARTICLES FURNISHED BY FOREIGN GOVERNMENTS UNDER REVERSE LEND-LEASE. NOR ARE WE CONCERNED WITH THE DISPOSITION OF PROCEEDS RECEIVED FROM THE DISPOSAL OF SURPLUS PROPERTY UNDER THE SURPLUS PROPERTY ACT OF 1944.
FOR THE PURPOSE OF SIMPLIFICATION, WE HAVE GROUPED UNDER TWO GENERAL HEADINGS THE TRANSACTIONS IN WHICH PROCEEDS HAVE BEEN RECEIVED FROM THE DISPOSITION OF LEND-LEASE ARTICLES OTHERWISE THAN BY DISPOSITION TO FOREIGN GOVERNMENTS.
THE FIRST TYPE OF SITUATION IS ONE IN WHICH DEFENSE ARTICLES PROCURED UNDER THE LEND-LEASE ACT PURSUANT TO A REQUEST BY A FOREIGN GOVERNMENT HAVE, PRIOR TO TRANSFER OF THE ARTICLES TO SUCH GOVERNMENT, BEEN DIVERTED TO THE USE OF ANOTHER GOVERNMENT DEPARTMENT OR AGENCY ON A REIMBURSABLE BASIS OR SOLD FOR DOMESTIC CIVILIAN USE PURSUANT TO AUTHORIZATION BY THE WAR PRODUCTION BOARD, WHERE SUCH USE WOULD BEST SERVE THE INTERESTS OF THE UNITED STATES. SUCH DIVERSIONS OF DEFENSE ARTICLES ARE MADE WHEN THE NEED OF ANOTHER GOVERNMENT AGENCY OR OF DOMESTIC WAR INDUSTRY HAS BECOME MORE URGENT THAN THE NEED OF THE REQUISITIONING FOREIGN GOVERNMENT FOR THE PARTICULAR DEFENSE ARTICLES.
DISPOSITION IN THIS MANNER OF DEFENSE ARTICLES ORIGINALLY PROCURED FOR LEND-LEASE COUNTRIES IS CARRIED OUT UNDER SECTION 102 OF THE DEFENSE AID APPROPRIATION ACT, 1945 ( PUBLIC LAW 382, 78TH CONGRESS, SECOND SESSION), WHICH PROVIDES THAT: " ANY DEFENSE ARTICLE, INFORMATION, OR SERVICE PROCURED FROM FUNDS APPROPRIATED BY THIS TITLE OR PRIOR ACTS APPROPRIATING FUNDS TO THE PRESIDENT FOR THE PURPOSE OF CARRYING OUT THE PROVISIONS OF SAID ACT OF MARCH 11, 1941, AS AMENDED, SHALL BE RETAINED BY OR TRANSFERRED TO AND FOR THE USE OF SUCH DEPARTMENT OR AGENCY OF THE UNITED STATES AS THE PRESIDENT MAY DETERMINE, IN LIEU OF BEING DISPOSED OF TO A FOREIGN GOVERNMENT, WHENEVER IN THE JUDGMENT OF THE PRESIDENT THE DEFENSE OF THE UNITED STATES WILL BE BEST SERVED THEREBY.' SIMILAR PROVISIONS WERE CONTAINED IN THE PRECEDING DEFENSE AID APPROPRIATION ACTS. ALTHOUGH SALES OF DEFENSE ARTICLES FOR USE IN WAR PRODUCTION MIGHT BE ACHIEVED UNDER THIS PROVISION BY DIVERSION TO AN AGENCY OF THE GOVERNMENT SUCH AS DEFENSE SUPPLIES CORPORATION WHICH MAY SELL DIRECTLY TO A WAR CONTRACTOR, THIS ADDITIONAL STEP HAS BEEN ELIMINATED THROUGH THE DISPOSITION OF DEFENSE ARTICLES DIRECTLY TO DOMESTIC WAR PRODUCTION UNDER AUTHORIZATION BY THE WAR PRODUCTION BOARD, WHICH HAS AUTHORITY UNDER PARAGRAPH 2B OF EXECUTIVE ORDER 9024, TO APPROVE AND DIRECT THE TRANSFER OF DEFENSE ARTICLES DIRECTLY TO DOMESTIC WAR PRODUCTION UNDER AUTHORIZATION BY THE WAR PRODUCTION BOARD, WHICH HAS AUTHORITY UNDER PARAGRAPH 2B OF EXECUTIVE ORDER 9024, TO APPROVE AND DIRECT THE TRANSFER OF DEFENSE ARTICLES FROM FOREIGN DISPOSITION TO DOMESTIC WAR PRODUCTION.
IT IS OUR OPINION THAT IN ALL SUCH CASES WHERE DEFENSE ARTICLES ORIGINALLY PROCURED OUT OF DEFENSE AID APPROPRIATIONS FOR USE BY LEND LEASE GOVERNMENTS ARE OTHERWISE DISPOSED OF AS ABOVE SET FORTH TO MEET OUR OWN MORE URGENT NEEDS, THE FUNDS RECOVERED SHOULD REVERT TO THE DEFENSE AID ALLOCATIONS ACCOUNT SO AS TO BE AVAILABLE FOR THE FINANCING OF COMPLETED LEND-LEASE TRANSACTIONS FOR WHICH CONGRESS MADE THE DEFENSE AID APPROPRIATIONS. THE PURPOSE OF THE ABOVE-MENTIONED PROVISION OF THE APPROPRIATION ACTS WAS EXPLAINED BY THE HOUSE APPROPRIATIONS COMMITTEE IN ITS REPORT ON THE FIRST DEFENSE AID APPROPRIATION BILL AS FOLLOWS: "OBVIOUSLY, IF OUR OWN NEED AT ANY POINT IN THE PROGRAM SHOULD PRECIPITOUSLY BECOME MORE IMPORTANT THAN THE FURNISHING OF AID TO A COUNTRY WHOSE DEFENSE THE PRESIDENT HAD DEEMED VITAL TO THE DEFENSE OF THE UNITED STATES, THE RIGHT SHOULD EXIST TO RETAIN AND USE FOR OUR OWN IMMEDIATE NECESSITIES SUCH DEFENSE ARTICLES AS THE PRESIDENT SHOULD CONSIDER WOULD BEST SERVE OUR OWN INTERESTS.' THE RESERVE POWER THUS CONFERRED ON THE PRESIDENT TO SAFEGUARD OUR NATIONAL INTERESTS WAS OBVIOUSLY NOT INTENDED TO PRECLUDE THE FURTHER PROCUREMENT OF SUCH REPLACEMENT, SUBSTITUTE OR OTHER DEFENSE ARTICLES FOR LEND-LEASE GOVERNMENTS AS MIGHT BE NECESSARY TO PROMOTE THE DEFENSE OF THE UNITED STATES. FURTHERMORE, IT IS ESSENTIAL THAT THE FUNDS RECOVERED IN THE DIVERSION OF LEND LEASE ARTICLES TO OUR OWN MORE URGENT NEEDS SHOULD BE MADE AVAILABLE FOR THE FINANCING OF COMPLETED LEND-LEASE TRANSACTIONS IN ORDER TO PREVENT THE UNINTENDED DEPLETION OF THE DEFENSE AID APPROPRIATIONS AND THE BUDGETED PROGRAMS OF AID TO FOREIGN GOVERNMENTS FOR WHICH SUCH APPROPRIATIONS WERE MADE.
THE SECOND SITUATION IN WHICH PROCEEDS HAVE BEEN RECEIVED FROM THE DISPOSITION OF DEFENSE ARTICLES OTHERWISE THAN BY TRANSFER TO FOREIGN GOVERNMENTS IS WHERE SUCH ARTICLES, PRIOR TO TRANSFER TO THE REQUISITIONING GOVERNMENT, HAVE BEEN LOST OR DAMAGED IN TRANSIT OR IN STORAGE AND PROCEEDS FROM INSURANCE AND SALVAGE PROCEEDS THUS RECEIVED SHOULD BE AVAILABLE FOR REPLACEMENT PURPOSES TO CARRY OUT COMPLETED LEND- LEASE TRANSACTIONS IN ACCORDANCE WITH THE PURPOSE OF THE DEFENSE AID APPROPRIATIONS.
WE ALSO REQUEST YOUR OPINION CONCERNING THE PROPER DISPOSITION OF VOLUNTARY REFUNDS MADE PRIOR TO RENEGOTIATION BY CONTRACTORS UNDER LEND- LEASE CONTRACTS. SUCH REFUNDS SUBSEQUENT TO ACTUAL PROCUREMENT MAYBE CONSIDERED AS EQUIVALENT TO A VOLUNTARY REDUCTION IN THE PURCHASE PRICE DURING PROCUREMENT AND THEREFORE MAY BE TREATED AS BEING IN THE NATURE OF OVERPAYMENTS AND PLACED ACCORDINGLY IN THE ORIGINAL ALLOCATIONS ACCOUNT SO AS TO BE AVAILABLE FOR FURTHER LEND-LEASE EXPENDITURE. WHERE A PARTICULAR REFUND IS APPLICABLE TO A NUMBER OF DIFFERENT CONTRACTS FINANCED OUT OF A SINGLE APPROPRIATION CATEGORY, THE REFUND WOULD BE AVAILABLE FOR REALLOCATION AND EXPENDITURE WITHIN THE PARTICULAR CATEGORY.
CONSIDERATION OF THE QUESTION AS TO THE PROPRIETY OF APPLYING THE FUNDS REFERRED TO IN THE MANNER PROPOSED IN YOUR LETTER NECESSARILY INVOLVES SECTION 3617, REVISED STATUTES, 31 U.S.C. 484, WHICH REQUIRES THAT THE GROSS AMOUNT OF ALL MONEYS RECEIVED FROM WHATEVER SOURCE FOR THE USE OF THE UNITED STATES (WITH CERTAIN EXCEPTIONS NOT RELEVANT HERE) SHALL BE DEPOSITED AND COVERED IN TO THE TREASURY AS MISCELLANEOUS RECEIPTS. GENERALLY HAS BEEN HELD, UNDER THIS PROVISION OF LAW, THAT MONEYS COLLECTED TO REIMBURSE THE GOVERNMENT FOR EXPENDITURES PREVIOUSLY MADE MAY NOT BE USED TO REIMBURSE THE APPROPRIATIONS FROM WHICH THE EXPENDITURES WERE MADE BUT SHOULD BE COVERED INTO THE GENERAL FUND OF THE TREASURY AS MISCELLANEOUS RECEIPTS. 23 COMP. GEN. 986; 16 ID. 195; 15 ID. 390; 14 ID. 923. HOWEVER, IT WOULD SEEM EVIDENT THAT THE TERMS OF THE CITED STATUTE ARE GENERAL IN SCOPE AND MUST RECEIVE A SENSIBLE CONSTRUCTION WITH RESPECT TO ANY PARTICULAR FORM OF INCOME OR RECEIPT. THE QUESTION FOR DETERMINATION HERE WOULD APPEAR TO BE WHETHER BY REASON OF THE PURPOSE OR PROVISIONS OF THE ACT TO PROMOTE THE DEFENSE OF THE UNITED STATES, 55 STAT. 31, AS AMENDED, POPULARLY KNOWN AS THE LEND-LEASE ACT, THE NATURE OF THE FUNDS IN QUESTION, OR OTHER FACTORS HAVING A MATERIAL BEARING ON THE MATTER, IT REASONABLY MAY BE CONCLUDED THAT THE PROCEEDS OF THE SALE OF DEFENSE ARTICLES PROCURED FOR FOREIGN GOVERNMENTS BUT DISPOSED OF DOMESTICALLY MIGHT BE USED FOR THE SUBSTITUTION OR REPLACEMENT OF SUCH ARTICLES.
SECTION 6 (B) OF THE LEND-LEASE ACT, AS AMENDED (22 U.S.C. 415), PROVIDES, IN PERTINENT PART, AS FOLLOWS:
(B) ALL MONEY AND ALL PROPERTY WHICH IS CONVERTED INTO MONEY RECEIVED UNDER SECTION 412 FROM ANY GOVERNMENT SHALL, WITH THE APPROVAL OF THE DIRECTOR OF THE BUDGET REVERT TO THE RESPECTIVE APPROPRIATION OR APPROPRIATIONS OUT OF WHICH FUNDS WERE EXPENDED WITH RESPECT TO THE DEFENSE ARTICLE OR DEFENSE INFORMATION FOR WHICH SUCH CONSIDERATION IS RECEIVED, AND SHALL BE AVAILABLE FOR EXPENDITURE FOR THE PURPOSE FOR WHICH SUCH EXPENDED FUNDS WERE APPROPRIATED BY LAW, DURING THE FISCAL YEAR IN WHICH SUCH FUNDS ARE RECEIVED AND THE ENSUING FISCAL YEAR * * *.
THE FACT THAT THE PROCEEDS RECEIVED FROM DEFENSE ARTICLES DISPOSED OF TO FOREIGN GOVERNMENTS ARE EXEMPTED FROM THE INHIBITION OF SECTION 3617, REVISED STATUTES, SUPRA, AND THUS ARE RENDERED AVAILABLE FOR FURTHER EXPENDITURE UNDER THE ABOVE-QUOTED PROVISION OF LAW, SEEMS A CLEAR INDICATION ON THE PART OF THE CONGRESS CONTEMPLATED THAT THE SAID PROGRAM SHOULD BE, TO SOME DEGREE, SELF-SUPPORTING OR SELF-SUSTAINING. WHILE, OBVIOUSLY, THE FUNDS HERE INVOLVED DO NOT FALL WITHIN THE PURVIEW OF THE PROCEDURE CONTEMPLATED BY SECTION 6 (B), SUPRA, YET, THERE IS ROOM FOR THE VIEW THAT THE PROPOSED USE OF SAID FUNDS WOULD BE CONSISTENT WITH SUCH EXPRESSION OF INTENT.
BUT, ASIDE FROM THE FOREGOING, IT IS TO BE OBSERVED THAT THE PRIMARY PURPOSE OF THE LEND-LEASE ACT WAS TO MAKE AVAILABLE WEAPONS, MATERIALS, AND INFORMATION, USEFUL IN RESISTING THE COMMON ENEMY, TO THE GOVERNMENT OF ANY FOREIGN COUNTRY WHOSE DEFENSE THE PRESIDENT DEEMED VITAL TO THE DEFENSE OF THE UNITED STATES; AND, OF COURSE, THE MONEYS MADE AVAILABLE BY THE VARIOUS DEFENSE AID APPROPRIATION ACTS WERE APPROPRIATED TO CARRY OUT THE PURPOSE. WHILE, AS POINTED OUT IN YOUR SUBMISSION, THE CONGRESS HAS AUTHORIZED IN SAID ACTS THE DIVERSION TO DOMESTIC USE, UNDER CERTAIN CIRCUMSTANCES, OF LEND-LEASE ARTICLES DESIGNED AND PROCURED FOR FOREIGN GOVERNMENTS, IT NOWHERE IS INDICATED THAT THE APPROPRIATIONS WERE MADE, AND THE AMOUNTS THEREOF FIXED, IN CONTEMPLATION OF SUCH USE. ON THE CONTRARY, IT CLEARLY APPEARS THAT THE AMOUNTS OF SUCH APPROPRIATIONS ARE BASED SOLELY UPON THE ESTIMATED REQUIREMENTS OF FOREIGN GOVERNMENTS FOR LEND-LEASE AID. SEE, IN THAT CONNECTION, STATEMENT WITH REFERENCE TO LEND -LEASE PROCEDURE AT PAGE 50 OF THE HEARINGS BEFORE THE SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, HOUSE OF REPRESENTATIVES, ON THE FOREIGN ECONOMIC ADMINISTRATION APPROPRIATION BILL FOR 1945, 58 STAT. 630. VIEW THEREOF, I FIND SUBSTANTIAL GROUND FOR CONCLUDING THAT UNLESS THE PROCEEDS OF THE SALE OF LEND-LEASE ARTICLES DISPOSED OF IN THIS COUNTRY BE CREDITED TO THE APPROPRIATIONS CHARGED, THE APPROPRIATIONS AVAILABLE FOR THE PROCUREMENT OF SUCH ARTICLES FOR FOREIGN GOVERNMENTS WILL HAVE BEEN DEPLETED TO THAT EXTENT AND THE PURPOSE FOR WHICH THE APPROPRIATION WAS MADE PARTIALLY WOULD BE DEFEATED. CF. 23 COMP. GEN. 652; B-40556, MARCH 16, 1944. OBVIOUSLY, THE CREDITING OF SUCH MONEYS TO THE APPROPRIATION WILL NOT OPERATE TO AUGMENT THE ORIGINAL AMOUNT APPROPRIATED BY THE CONGRESS FOR THE PURPOSE FOR WHICH THE APPROPRIATION WAS MADE. ACCORDINGLY, I HAVE TO ADVISE THAT SUCH FUNDS PROPERLY ARE FOR DEPOSITING TO THE CREDIT OF THE DEFENSE AID ALLOCATION ACCOUNTS FOR USE IN FINANCING LEND-LEASE TRANSACTIONS; AND, FOR THE SAME REASONS, IT MAY BE HELD THAT THE INSURANCE AND SALVAGE PROCEEDS REFERRED TO IN YOUR LETTER LIKEWISE MAY REVERT TO SAID ACCOUNTS. CF. 22 COMP. GEN. 1133.
WITH RESPECT TO THE MONEYS REFERRED TO UNDER THE SECOND GENERAL HEADING OF YOUR LETTER--- VOLUNTARY REFUNDS MADE BY CONTRACTORS SUBSEQUENT TO PROCUREMENT AND PRIOR TO RENEGOTIATION--- MANIFESTLY, THE REASONS SET FORTH IN SUPPORT OF THE CONCLUSION HEREINABOVE REACHED ARE NOT FOR APPLICATION HERE. THAT IS TO SAY, THERE IS NOT PRESENT IN SUCH A SITUATION A DEPLETION OF LEND-LEASE APPROPRIATIONS OR A DIVERSION OF FUNDS CONTRARY TO THE PURPOSE FOR WHICH THE APPROPRIATIONS WERE MADE AVAILABLE. IT IS ASSUMED THAT IN SUCH CASES THE PAYMENT TO THE CONTRACTOR WAS MADE PURSUANT TO AN AGREEMENT REACHED BETWEEN THE UNITED STATES AND THE CONTRACTOR AS TO THE PURCHASE PRICE TO BE PAID; AND IF THEREAFTER THE CONTRACTOR ELECTS TO RETURN A PART OF THE PURCHASE PRICE THERE WOULD SEEM TO BE NO JUSTIFICATION FOR REGARDING THE AMOUNT RETURNED AS AN OVERPAYMENT AS SUGGESTED BY YOU. CERTAINLY, THE AMOUNT RETURNED DOES NOT REPRESENT A REFUND OR OVERPAYMENT OF MONEYS DISBURSED ERRONEOUSLY OR IN EXCESS OF WHAT WAS ACTUALLY DUE, WHICH, GENERALLY, HAVE BEEN HELD TO BE PROPERLY FOR CREDITING TO THE APPROPRIATION ORIGINALLY CHARGED. SEE 5 COMP. GEN. 734, AND THE CASES CITED THEREIN. SUCH BEING THE CASE, THE PROCEEDS IN QUESTION WOULD SEEM TO FALL SQUARELY WITHIN THE PURVIEW OF SECTION 3617, REVISED STATUTES, SUPRA, AND SHOULD BE COVERED INTO THE GENERAL FUND OF THE TREASURY AS MISCELLANEOUS RECEIPTS.
