In this sense, the Treasury adjustment of the accounting records does no more than place the funds back into the account where they otherwise belong. As the Supreme Court observed in a related situation, it "would be unrealistic . . . to require congressional authorization before a data processor who misplaces a decimal can ‘undo' an inaccurate transfer of Treasury funds." Republic National Bank of Miami v. United States, 113 S. Ct. 554, 561 (1992).

U.S.

We wish to emphasize, however, that Treasury's authority to correct the accounts relates only to obvious clerical errors such as misplaced decimals, transposed digits, or transcribing errors that result in inadvertent cancellations of budget authority, and is not meant to serve as a palliative for deficiencies in DOD's accounting systems. The current record does not provide any indication of the type of mistake at issue here. Only if the Army is able to provide Treasury with convincing evidence that the mistake here falls within the coverage of the above decisions may Treasury adjust Army's accounting records to restore budget authority needed to correct the mistake. One of the very reasons for the new account closing procedures was the inadequacy of DOD's past accounting of "M" account obligations. See, e.g., H.R. Rep. No. 665, 101st Cong., 2d Sess. 2962 ("not all claims against the M accounts are valid"). We have recently reported on a number of accounting problems in the Army and Air Force which indicate that DOD's accounting for current appropriations is also inadequate. For example, in a report examining the Army's financial statement for fiscal years 1992 and 1991, we were unable to express an opinion on the reliability of the financial statements for those fiscal years because of the Army's accounting systems inadequacies and failure to adhere to DOD and Army financial policies. In another report, we found that five Air Force Air Logistics Centers had inaccurate account balances totalling $512 million due to, among other things, paying a contractor too much, charging the wrong appropriation account, or processing information on obligation, payment, or collection transactions inaccurately or incompletely.5

In our view, the type of clerical errors that Treasury can correct should typically manifest themselves soon after an account is closed. The passage of time only magnifies the difficulty inherent in reconstructing the facts needed to establish the error. Therefore, we recommend that Treasury establish reasonable time limits within which agencies must submit requests for correction of reporting errors resulting from obvious clerical mistakes. 6

Turning to the second question, Treasury may adjust canceled appropriation account balances to record disbursements made before cancellation of expired accounts. The restriction in section 1552(a) of title 31, United States Code, codify

4 GAO Report to the Congress, "FINANCIAL AUDIT—Examination of the Army's Financial Statements for Fiscal Years 1992 and 1991," GAO/AIMD-93-1 (June 1993).

5 GAO Report to the Chairman, Subcommittee on Defense, Committee on Appropriations, House of Representatives, "FINANCIAL MANAGEMENT-Air Force Records Contain $512 Million in Negative Unliquidated Obligations," GAO/AFMD-89-78 (June 1989).

6 Pursuant to section 4230.60 of the Treasury Financial Manual (TFM), Treasury requires the submission of yearend closing reports by deadlines specified in TFM Bulletins.

ing section 1405(a)(1) of the Act, does not apply because recording the disbursement results in neither a new obligation of, nor an expenditure from, the canceled appropriation account. The liquidation of the obligation eliminates the underlying budget authority, leaving nothing to be canceled. It completes the transaction and discharges the government's liability. The recording of the disbursement made prior to cancellation of the expired account is simply an accounting entry to reflect the completion of the transaction before cancellation of the expired account. We see no reason why DOD and Treasury should not record these disbursements for canceled "M" account or expired account bal

ances.7

Accordingly, if DOD is able to establish to the satisfaction of the Treasury that a validly recorded obligation in a canceled appropriation account was liquidated before cancellation, then Treasury may adjust the canceled appropriation account balance to reflect the disbursement. If a disbursement that was made before cancellation of an appropriation account cannot be matched with a recorded obligation of a canceled account, but DOD can establish to the satisfaction of Treasury that the disbursement represents payment of a valid unrecorded obligation otherwise properly chargeable against the canceled appropriation account, then Treasury may adjust the canceled account balance to reflect the disbursement. Of course, if there is insufficient budget authority available in the canceled account to cover the disbursement, DOD should determine whether there was a reportable violation of the Antideficiency Act, 31 U.S.C. § 1341. We recommend that if the Secretary of Defense cannot match disbursements with obligations of canceled appropriation accounts within time limits established by Treasury, the Secretary determine the reason for DOD's inability to do so, and take appropriate action to correct the problem.

8

B-254396, September 29, 1993

Miscellaneous Topics

Finance Industry

Government corporations Small business set-asides | Funding levels

Amount determination

The Export-Import Bank (Bank) should calculate the amount authorized for the small business setaside mandated by 12 U.S.C. § 635(b)(1)(E)(v) by using its subsidy appropriation as the basis for its

7 The alternative of using current appropriations, provided by sections 1405(a)(1) and 1405(b)(7) of the Act, 31 U.S.C. §§ 1551 note, 1553(b)(1), would not be appropriate here because under those sections current appropriations are only available for obligations and adjustments to obligations that would have been chargeable to canceled balances. Obligations that were liquidated by disbursements made prior to cancellation are no longer obligations of the canceled account. The use of current appropriations to liquidate paid obligations would result in a double charge to budget authority.

8 With available technology, DOD should have no difficulty reconciling its year-end expenditures with obligations in time for inclusion in year-end closing reports required by Treasury.

projection, plus such other reasonable factors that reflect aggregate Bank program activity. Since the set-aside is available exclusively for small business, the Bank may not use unspent amounts in the set-aside for other purposes.

Matter of: Export-Import Bank-Funding Reserved for Small Business Concerns

The General Counsel of the Export-Import Bank (Bank) asked for our opinion on the Bank's method of calculating the 10 percent authorized program activity level that it must reserve for small business pursuant to 12 U.S.C. § 635(b)(1)(E)(v). The question arose because of recent changes in how Congress provides for the Bank's financing precipitated by the Federal Credit Reform Act of 1990. The General Counsel also asked whether unspent amounts in the reserve can be used for other purposes. For the reasons indicated below, we conclude that the Bank should calculate its authorized activity level, 10 percent of which is reserved for small business, by using its subsidy appropriation as the starting point for its projection and that unspent amounts in this set-aside cannot be used for other purposes.

Calculation of Amount Reserved

The Export-Import Bank Act Amendments of 1983 added section 2(b)(1)(E)(v) to the Export-Import Bank Act of 1945 (the Act), 12 U.S.C. § 635(b)(1)(E)(v) (Supp. IV 1992), which requires the Bank to "make available, from the aggregate loan, guarantee, and insurance authority available to it, an amount to finance exports directly by small business concerns which shall not be less than 10 percent of such authority for each fiscal year." Pub. L. No. 98-181, § 618, 97 Stat. 1254, 1258-1259 (1983). Historically, Congress has specified in annual appropriations acts the total principal amount of loans and guarantees that the Bank may provide. The Bank then makes available for financing small business exports an amount equal to 10 percent of this amount, regardless of the actual budget authority utilized by the Bank by the end of the fiscal year.1

Under the Federal Credit Reform Act of 1990, codified at 2 U.S.C. §§ 661–661f (Supp. IV 1992), new direct loan obligations may be incurred and new loan guarantee commitments may be made only to the extent that appropriations of budget authority to cover their costs are made in advance. 2 U.S.C. § 661c(b). This subsidy cost is defined in 2 U.S.C. § 661a(5) as the estimated long-term cost to the government of direct loans or loan guarantees, calculated on a net present value basis.

For fiscal year 1993, in addition to establishing a subsidy appropriation of $757 million, Congress imposed a limitation of $15.5 billion on "gross obligations for the principal amount of direct loans, and tied-aid grants, and total loan princi

1 See April 3, 1992, letter from Hart Fessenden, General Counsel, Export-Import Bank, to Rachel DeMarcus, Assistant General Counsel, GAO, reprinted in GAO, The U.S. Export-Import Bank: The Bank Provides Direct and Indirect Assistance to Small Businesses (GAO/GGD-92-115, B-247638, Aug. 21, 1992) at 14-16.

pal, any part of which is to be guaranteed, including insurance" that the Bank could authorize during the fiscal year. 1993 Foreign Operations, Export Financing, and Related Programs Appropriations Act, Pub. L. No. 102-391, 106 Stat. 1633, 1655-1656 (1992). Accordingly, for fiscal year 1993, the Bank interpreted 12 U.S.C. § 635(b)(1)(E)(v) as requiring it to make available $1.55 billion for loans, guarantees, and insurance for small business.

However, the submission indicates that Congress will apparently not specify any limitation on the total principal amount of loans, guarantees, and insurance that the Bank may provide for fiscal year 1994. See H.R. 2295, as introduced in the House, May 27, 1993, and as received in the Senate, June 22, 1993. In submitting its report on the 1994 Foreign Operations, Export Financing, and Related Programs Appropriations Bill, the House Committee on Appropriations indicated that "[t]he Committee removed the program limitation on the Bank and has granted the Bank the flexibility to determine, in response to demand, the appropriate mix of direct loans, guaranteed loans, tied-aid grants, and mixed credits and insurance." H.R. Rep. No. 125, 103d Cong., 1st Sess. 102 (1993).

Assuming that the limitation is not enacted for fiscal year 1994, the Bank must develop some other methodology to calculate its available aggregate loan, guarantee, and insurance authority in order to effectuate the 10 percent small business reservation of 12 U.S.C. § 635(b)(1)(E)(v), which had previously been calculated based on the limitation. The Bank proposes to estimate, at the outset of each fiscal year, total projected authorizations for that year based upon the amount of subsidy appropriated to the Bank for that year, as well as projected demand and past experience. The Bank would then make available 10 percent of that amount for small business exports. To ensure that the amount available for small business approximates as closely as possible 10 percent of actual authorizations, the Bank would make adjustments to the amount made available to small business on a quarterly basis taking into account actual authorizations during the previous quarter as well as revised projections for the balance of the fiscal year.

We agree with the General Counsel that Congress has not changed its support for small business that section_2(b)(1)(E)(v) reflects, and that the Congress still intends to target a specified percentage of the Bank's financing resources at small business. See Export Enhancement Act of 1992, Pub. L. No. 102-429, § 121, 106 Stat. 2198 (1992). We also recognize that in the absence of a congressionally set dollar limitation on the Bank's aggregate loan, guarantee, and insurance authority, the Bank's authorized program activity level is no longer precisely determinable.

Although it is only an extrapolation from cost, the Bank's proposal to estimate the total projected authorizations for the year based upon the amount of subsidy appropriated appears to represent a reasonable starting point. As the General Counsel points out, projections based on the estimated cost of loan, guarantee and insurance commitments under credit reform do not directly yield a figure for the Bank's available aggregate loan, guarantee, and insurance authority.

Furthermore, we have no objection to the Bank, in addition to estimating total authorizations for the ensuing fiscal year starting with the amount of subsidy appropriated, using such other reasonable factors2 as are consistent with the Bank's statutory objectives and authority.

Unutilized Small Business Authority

The General Counsel asks whether the Bank may use any portion of the authorizations intended for small business exports for other purposes, if the Bank concludes near the end of the fiscal year that small business is unlikely to utilize the full 10 percent set aside. Despite various marketing efforts targeted at small business, the Bank cannot directly control the demand for its programs or control the volume of small business activity it may be asked to support. Thus, if the Bank determines that small business is not likely to make full use of the 10 percent set aside, the General Counsel asserts that what remains should be available for use to meet demand from other users to avoid "closing out [the Bank's] books at the end of the fiscal year with uncommitted funds that were not utilized by small business."

In our opinion, congressional intent is clear that not less than 10 percent of the Bank's loan and guarantee limits are reserved for small business. As noted earlier, section 2(b)(1)(E)(v) provides that the Bank "shall make available" 10 percent of its aggregate loan, guarantee, and insurance authority to finance direct small business exports. Clauses (vi) and (vii) of section 2(b)(1)(E) both refer to the "amount set aside pursuant to clause (v)." We agree with the Bank's characterization of the quoted language of clauses (vi) and (vii) as "a short hand reference" to the more detailed provisions of clause (v), but, unlike the Bank, we view the references as definitional, that cannot be read out of the statute. "It is an elementary rule of construction that effect must be given, if possible, to every word, clause and sentence of a statute." 2A Sutherland, Statutory Construction § 46.06 (1991).

Any doubt concerning Congress' intent in this regard is dispelled by the legislative history of the 1983 amendment adding the 10 percent set-aside for small business to the Act. The Bank attempts to characterize the language of 12 U.S.C. § 635(b)(1)(E)(v) as being more in the nature of a preference, not a setaside, for small business. However, the legislative history of the 1983 amendment to the Export-Import Bank Act unambiguously speaks in terms of setasides. The House Banking Committee Report stated that:

This bill . . . . establishes budget set-asides exclusively for small business concerns . . . The bill also requires the Export-Import Bank to submit to the Congress . a report outlining a proposed program on the part of Exim designed to ensure utilization of the full set-aside for small business exports. H.R. Rep. No. 175, 98th Cong., 1st Sess. 19 (1983) (italic added).

2 For example, because some programs may not involve a cost to the government, the Bank may consider what other factors to include in projecting the authorized level for purposes of calculating the set-aside.

3 This was again indicated by Congress when it amended section 2(b)(1)(E)(v) of the Act in section 121 of the Export Enhancement Act of 1992, Pub. L. No. 102-429, 106 Stat. 2198. See also H. Conf. Rep. No. 1010, 102d Cong., 2d Sess. 33-34 (1992).