BNUMBER:  B-276550 
DATE:  December 15, 1997
TITLE: [Letter], B-276550, December 15, 1997
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B-276550

December 15, 1997

Mr. William R. Barton
Inspector General
General Services Administration

Dear Mr. Barton:

This responds to your request for our opinion on whether the 
Administrator, General Services (GSA), has the authority to compromise 
debt arising from the disposal of surplus property under section 
204(g) of the Federal Property and Administrative Services Act of 1949 
(Property Act), 40 U.S.C.  sec.  485(g) (1994).  Section 204(g) provides 
that where the Administrator has extended credit in connection with 
the disposal of surplus property, he "may enforce, adjust, and settle 
any right of the Government with respect to [that credit] in such 
manner and upon such terms as he deems in the best interest of the 
Government."  As explained below, section 204(g) does not provide the 
Administrator with compromise authority.  

While you have asked for our views on this issue, we note that our 
statutory role in this area was limited in 1996, when the Congress 
transferred the Comptroller General's authority under 31 U.S.C.  sec.  
3702(a) to settle and adjust claims of or against the United States to 
the Office of Management and Budget (OMB).  OMB in turn delegated 
parts of this authority to other executive departments and agencies.  
Pub. L. No. 104-316, Tit. II,  sec.  202(n)(1), 110 Stat. 3843-44 (1996); 
see also Pub. L. No. 104-53,  sec.  211, 109 Stat. 535 (1995).  

Background

Your question arose in connection with the GSA sale of the United 
States Custom House in Boston to the City of Boston.  In March 1986, 
GSA declared that the Custom House was surplus property, and, in 
October 1987, sold it to Boston, receiving from the city a 10-year 
promissory note.  In April 1991, Boston defaulted on the note.  At the 
time, Boston's total outstanding debt (principal and accumulated 
interest) exceeded $13 million.  In January 1996, after a 
restructuring of the debt and almost 5 years of negotiations, the city 
discharged its debt for approximately $6.1 million.  

Your office has concluded that the Administrator's restructuring of 
Boston's loan agreement and eventual agreement to Boston's discharge 
of the debt resulted in compromises of Boston's debt in violation of 
the FCCA.  In January 1996, when GSA discharged Boston's debt, the 
FCCA limited agencies' compromise authority to claims that did not 
exceed $20,000.  Pub. L. No. 89-508,  sec.  3, 80 Stat. 308, 309 (1966).[1]

GSA disagrees that its actions constituted a compromise, but argues, 
nevertheless, that section 204(g) of the Property Act, in authorizing 
the Administrator to restructure credit offerings, permits GSA to 
compromise debt, and that section 204(g), enacted prior to the FCCA, 
supersedes any restrictions imposed by the FCCA.[2]

In your view, the Property Act did not grant the Administrator the 
authority to compromise debts.  As requested by your office, our 
opinion does not address GSA's sale of the Custom House and GSA's 
contention that its actions do not constitute a compromise of debt.  
Rather, we address only the question whether section 204(g) permits 
the Administrator to compromise debt.

Discussion
I.
The Constitution lodges the power to release or otherwise dispose of 
the rights and property of the United States in the Congress.  U.S. 
Const., Art. IV,  sec.  3, Cl. 2; Royal Indemnity Co. v. United States, 313 
U.S. 289, 294 (1941).  For this reason, absent statutory authority, 
the officers and agents of the government have no authority to waive 
contractual rights which have accrued to the United States or to 
modify existing contracts to the detriment of the United States 
without adequate legal consideration or a compensating benefit.  67 
Comp. Gen. 271, 273 (1988).  In this regard, the FCCA provides the 
officers and agents of the government with the authority to compromise 
debts of less than $100,000 without Justice Department approval and in 
excess of $100,000 with Justice Department approval.  31 U.S.C.  sec.  
3711(a)(2) (West Supp. 1997).  While the FCCA or its implementing 
regulations do not define the word "compromise", it is commonly 
understood to mean the discharge of a debt for less than the 
outstanding balance without any compensating benefit.  See, e.g., 62 
Comp. Gen. 489, 492 (1983) ("the discretion . . . to allow the 
borrower to discharge the debt by paying less than the outstanding 
balance").  See also S. Rep. No. 89-1331, at 2, reprinted in 1966 
U.S.C.C.A.N., at 2532-33 (FCCA legislative history).  

In the absence of express statutory language, as a general rule, the 
authority to adjust and settle claims does not confer the authority to 
compromise claims.       62 Comp. Gen. 489, 490 (1983); B-200112, May 
5, 1983.  This rule draws support from a 1916 Supreme Court decision, 
Illinois Surety Co. v. United States ex rel. Peeler, 240 U.S. 214 
(1916).  After reviewing the statutes establishing the administrative 
practice for claims and account settlement, the Court pointed out that 
"[t]he words 'settled and adjusted' [as used in the predecessor 
statute to       31 U.S.C.  sec.  3702 (1994)] were taken to mean the 
determination in the Treasury Department for administrative purposes 
of the state of the account and the amount due."  Accordingly, the 
Court concluded that "[t]he word 'settlement' in connection with 
public contracts and accounts . . . has a well defined meaning as 
denoting the appropriate administrative determination with respect to 
the amount due."  Id. at 221.  In this context, the Supreme Court's 
limited definition is applicable.  See, e.g., B-276561, Sept. 30, 
1997.

Where the Congress has authorized agencies to waive contractual rights 
and compromise debt, it has done so by providing specific authority.  
For example, the Administrator of the Small Business Administration is 
authorized to "sue and be sued" and "pursue to final collection, by 
way of compromise . . . all claims against third parties assigned to 
the Administrator," 15 U.S.C.  sec.  634(b)(l), (4); the Secretary of the 
Department of Veterans Affairs is authorized to "sue and be sued" and 
"pay, compromise, waive or release any right, title, claims, lien or 
demand . . . ," 38 U.S.C.  sec.  3720(a)(1), (3), (4); and, the Secretary 
of Agriculture is authorized to "compromise, adjust, reduce, or 
charge-off debts or claims, and adjust, modify, subordinate, or 
release the terms of security instruments, leases, contracts, and 
agreements entered into or administered by the Farmers Home 
Administration . . . ," 7 U.S.C.  sec.  1981(d).

II.
At issue here is whether section 204(g) of the Property Act provides 
the Administrator with such authority.  Section 204(g) provides as 
follows:   

     "Where credit has been extended in connection with any 
     disposition of
     surplus property . . . or where such disposition has been by 
     lease or permit, the Administrator shall administer and manage 
     such credit, lease, or permit, and any security therefor, and may 
     enforce, adjust, and settle any right of the Government with 
     respect thereto in such manner and upon such terms as he deems in 
     the best interest of the Government."  40 U.S.C.  sec.  485(g).

In its response to your report on the sale of the Custom House, GSA 
states that since 1955, it has interpreted section 204(g) as providing 
the Administrator with compromise authority.  In the 1955 opinion, 
addressing the sale of notes and mortgages acquired in the course of a 
sale of surplus property pursuant to section 204(g), GSA's General 
Counsel stated that 

     "where a debtor is in default in payment under such a note, 
     settlement with the debtor for an amount less than the face value 
     is authorized under the provision in section 204(g) of the Act 
     authorizing the Administrator to 'enforce, adjust and settle any 
     right of the Government with respect thereto in such manner and 
     upon such terms as he deems in the best interest of the 
     Government.'"  

Opinion of the General Counsel No. 99, Mar. 10, 1955.  

OMB, recently, reached the same conclusion.  In a May 19, 1997, 
memorandum to GSA, OMB, referring to the clause in section 204(g), "in 
such manner and upon such terms . . . ", stated,

     "this provision cannot reasonably be construed as having conveyed 
     only the non-discretionary authority to 'determine the amount 
     due.'     . . .  The 'no compromise' theory . . . cannot account 
     for, and in fact is inconsistent with, the discretionary 
     authority that is conveyed by virtue of the 'upon such terms' 
     language of the GSA statute." 

Section 204(g), by its terms, authorizes the Administrator only to 
"adjust, and settle".  Noticeably missing from section 204(g) is the 
word (or words equivalent in effect to) "compromise".  Clearly, the 
clause "in such manner and upon such terms" modifies the phrase 
"adjust, and settle", and, thus, does not overcome the general rule 
and establish authority to compromise.  In our view, section 204(g) 
authorizes the Administrator to fix the amount owed by the purchaser 
("adjust, and settle"), and, because of the clause, permits the 
Administrator discretion in adjusting the terms of any credit offered, 
for example, by extending its repayment period.  
Cf. 67 Comp. Gen. 271 (1988)[3] and cases cited therein.  Because it 
does not clearly and expressly authorize the Administrator to 
compromise, the Administrator may not allow the debtor to pay less 
than the outstanding balance owed or otherwise waive a right of the 
United States without obtaining some consideration or other 
compensating benefit in return.  To do so is tantamount to a 
compromise.  To read section 204(g) as permitting compromise would 
require us to infer compromise authority from its general language.[4]   

As noted above, GSA advised that it has interpreted section 204(g) as 
providing compromise authority since 1955.  However, in a January 8, 
1992 opinion that discusses the Administrator's authority to waive 
debts due to the United States, GSA concluded that a restructuring of 
debts for less than the full amount due, i.e. compromising the debt, 
required Justice Department approval.  Memorandum to James J. Buckley, 
Special Assistant, Office of the Commissioner, Federal Property 
Resources Service, from Gordon S. Creed, Deputy Associate General 
Counsel, Real Property Division, Jan. 8, 1992.  In that opinion, GSA 
stated: 

     "[a] preferred approach to situations where a debtor has fallen 
     in arrears is refinancing of the obligation.  For example, the 
     conditions of a note, including its payment term and interest 
     rate, may be modified allowing the debtor to work out any 
     difficulty encountered with the obligation.  Under the 
     authorities granted to the Administrator, this method may be 
     undertaken without the approval of the Attorney General or the 
     Comptroller General of the United States; however, any such 
     arrangement must ensure that the United States receives the full 
     amount owing to it."

On the other hand in a March 6, 1992 opinion, GSA asserts that section 
204(g) does provide the Administrator compromise authority.  
Memorandum to Earl E. Jones, Commissioner, Federal Property Resources 
Service, from Gordon S. Creed, Deputy Associate General Counsel, Real 
Property Division, Mar. 6, 1992. In that opinion, GSA stated:

     [i]t is our opinion that the Administrator is authorized to 
     compromise or write-off-debts . . . in excess of $100,000 without 
     referring such matters to the Department of Justice . . ."[5]  

In our opinion, GSA may refinance or otherwise review the terms of its 
credit offerings under section 204(g).  However, because section 
204(g) does not provide GSA with compromise authority, GSA may not 
revise the terms of its credit offerings in such a way that would 
result in a reduction of the outstanding balance unless it receives 
adequate consideration from the debtor in return.

III.
If GSA persists in its current interpretation of section 204(g), we 
would suggest that GSA formally request a decision from the Attorney 
General interpreting section 204(g).  Except in a few instances not 
relevant here, the Attorney General, as noted above, has sole 
authority to compromise debts exceeding $100,000, and she, together 
with the Secretary of the Treasury, prescribes the standards (FCCS) 
implementing FCCA, including its provisions governing compromises.  

We trust that you will find this useful.  We would be happy to discuss 
this matter with you further if you have additional questions.  Please 
call Gary Kepplinger or Tom Armstrong of my staff at (202) 512-5644. 

Sincerely yours,

Robert P. Murphy
General Counsel

B-276550

DIGEST

In our opinion, section 204(g) of the Federal Property and 
Administrative Services Act, 40 U.S.C.  sec.  485(g), which authorizes the 
Administrator of the General Services Administration (GSA) to "adjust, 
and settle" amounts owed GSA, "upon such terms as [GSA] deems in the 
best interest of the Government," does not permit the Administrator to 
compromise debts in the absence of adequate legal consideration.  
Where the Congress has authorized agencies to compromise debts, it has 
provided specific statutory authority to do so.  Because of the 
Attorney General's authorities under the Federal Claims Collection 
Act, as amended, 31 U.S.C.  sec.  3711(a)(2), to compromise debts owed the 
United States exceeding $100,000, we suggest that the Administrator 
ask the Attorney General for her interpretation of section 204(g).

1. The FCCA, as amended by the Debt Collection Improvement Act, now 
authorizes heads of agencies, generally, to compromise debts, but only 
in amounts of not more than $100,000.  31 U.S.C.A.  sec.  3711(a)(2) (West 
Supp. 1997).  The Federal Claims Collection Standards require that 
agencies refer to the Department of Justice for approval any proposal 
to compromise debt in excess of $100,000.  4 C.F.R.  sec.  103.1(b) (1997). 

2. Section 4 of the FCCA specifies that the authorities provided 
agencies by the FCCA were not intended to diminish any pre-existing 
authority that an agency had to compromise debt.  Pub. L. No. 89-508,  sec.  
4, 80 Stat. 309 (1966).

3. The Small Business Administration (SBA), unlike GSA, had express 
authority to compromise debts as well as to modify (or adjust) the 
terms of loans.  SBA opined, and we agreed, that its authority to 
modify loans was separate and distinct from its compromise authority.  
SBA would compromise debts after SBA concluded that its debtor was 
unable to pay the debt, but would require adequate legal consideration 
from its debtor before its would agree to modifications that would 
reduce the value of a loan.

4. We are aware of only one instance where compromise authority has 
been inferred when not expressly granted by statute.  In that 
instance, the agency had "sue and be sued" authority.  We accepted 
without objection the Virgin Islands Company's authority to compromise 
damage claims for personal injuries as part of its authority to "sue 
and be sued".  25 Comp. Gen. 685, 687 (1946).  

5. According to the GSA memo, the Department of Justice "accepted" 
GSA's proposal in 1992 to refinance Boston's note.  It is not clear 
whether Justice agreed with GSA's opinion that section 204(g) 
authorizes the Administrator to compromise debts.