Section 13 of Executive Order 8557, September 30, 1940, issued pursuant to the act of July 8, 1940, 5 U. S. C. 103a, reads as follows:

The head of the department concerned may pay the expenses allowable under these regulations either directly to the persons performing the prescribed services or by reimbursement to any person who has made original payment of such

expenses.

Section 16 of that Executive order provides for use of a Government bill of lading whenever possible where shipment of the remains is made by express.

Paragraph 4, Army Regulation 30-1830, which sets forth the regulations of the War Department under 10 U. S. C. 916 and related. legislation, provides generally that burial services may be obtained directly by Government contract or that arrangements may be made by relatives and others where no military authorities are handling the case. In the latter situation payments to the undertaker or reimbursement to the relatives are provided for, based upon what the Government allows for such services after receipt of the itemized invoice and claim. Upon such determination being made, it is provided therein that the claim will be forwarded to the General Accounting Office for settlement.

It is apparent from the above that under both statutory provisions, services may be procured by Government contract, either formal or informal, and by relatives of the decedent or others not connected with the Government. As to expenses incurred under Government. contract either formal or informal, the rule is well established that in the absence of specific statute to the contrary the amounts due are chargeable to the fiscal year appropriation current at the time the legal obligation arose, that is, the fiscal year in which a valid contract or agreement as to the particular service was entered into. 24 Comp. Gen. 195, 23 id. 370, 18 id. 363, 17 id. 664. In such cases, regardless of the date of death, the date the contract obligation arose is controlling as to the fiscal year appropriation chargeable.

As to cases where the services for which amounts are allowable are secured by relatives of the decedent or others not connected with the Government, it appears that the action of the head of the department or his delegate under 5 U. S. C. 103, and of the Quartermaster General or his designee under 10 U. S. C. 916-916d, is prerequisite to settlement by the Claims Division of the General Accounting Office. Hence, actually it is the action of the department in recommending the amount to be paid, rather than that of the General Accounting Office in certifying the amount for payments which obligates the fund. Accordingly, as to such cases, the fiscal year appropriation current at the time of approval by the War Department may be charged with such ex

penses as are finally allowed regardless of the date of death or of the certificate of settlement of the General Accounting Office.

This procedure, it is believed, should largely obviate the objectionable features of the present practice and the Claims Division hereafter will process claims in accordance with the foregoing.

(B-75530)

INTEREST-ADVANCES TO COLORADO RIVER DAM FUND

In the computation and collection of interest charges on Treasury advances to the Colorado River Dam Fund made pursuant to the Boulder Canyon Project Act, which act requires the capitalization of deferred interest earnings and therefore contemplates financing through an account showing a single outstanding amount, the "United States Rule" of applying repayments first to the liquidation of interest and then to the discharge of the principal would not be applicable, and should not be used in place of the present Treasury method of applying repayments to the reduction of the outstanding balance that includes the capitalized interest.

Comptroller General Warren to the Secretary of the Treasury, May 20, 1948: Reference is made to a letter of April 14, 1948, from the Fiscal Assistant Secretary, concerning the correct method of computing and collecting interest charges on advances made by the Treasury Department to the Colorado River Dam Fund, created by section 2 (a) of the Boulder Canyon Project Act, 45 Stat. 1057.

It is stated in the letter that, pursuant to the authority of said act, advances have been made to the fund beginning with the fiscal year 1933 and that the first repayment to apply on interest due was made during the fiscal year 1938, while the first repayment to be applied on principal was made during the fiscal year 1945. It is stated further therein as follows:

Interest at the rate of 3 per centum per annum has been (1) charged on advances to the fund, (2) charged on the amount outstanding at the end of each operating year (including accrued and unpaid interest), and (3) credited on repayments made to the Treasury during the year.

Since repayments in excess of interest requirements are now being made to the Treasury, your decision is requested as to whether or not the method which was used in computing interest due on the fund should be continued, or would it be more appropriate if (1) payments during the year would first be applied against accrued interest before any deductions would be made from the principal (United States Rule, modified to the extent of computing interest on a compounded basis as required by the aforementioned law); (2) payments which do not equal the accrued interest would leave the principal undiminished until other payments are made which are sufficient to cover all interest accrued during the year; and (3) any excess remaining after the payments exceed the accrued interest would be applied to the principal.

A retroactive application of the United States Rule in this case will result in an additional interest charge of $272,432.23. Accordingly, if it is determined that the application of the United States Rule should be adopted in computing such interest, your decision is requested also as to whether or not adjustments should be made retroactively to the beginning of the account to conform to this rule, or

whether or not this rule should be applied only to current interest computations on the fund.

The Boulder Canyon Project Act, 45 Stat. 1057, 1058, provides, insofar as is here pertinent, that:

SEC. 2. (a) There is hereby established a special fund, to be known as the "Colorado River Dam fund"

*

(b) The Secretary of the Treasury is authorized to advance to the fund, from time to time and within the appropriations therefor, such amounts as the Secretary of the Interior deems necessary for carrying out the provisions of this Act, except that the aggregate amount of such advances shall not exceed the sum of $165,000,000. * * * Interest at the rate of 4 per centum per annum accruing during the year upon the amounts so advanced and remaining unpaid shall be paid annually out of the fund, except as herein otherwise provided.

*

(d) The Secretary of the Treasury shall charge the fund as of June 30 in each year with such amount as may be necessary for the payment of interest on advances made under subdivision (b) at the rate of 4 per centum per annum accrued during the year upon the amounts so advanced and remaining unpaid, except that if the fund is insufficient to meet the payment of interest the Secretary of the Treasury may, in his discretion, defer any part of such payment, and the amount so deferred shall bear interest at the rate of 4 per centum per annum until paid.

Section 6 of the Boulder Canyon Project Adjustment Act, 54 Stat. 777, provides as follows:

Whenever by the terms of the Project Act or this Act payment of interest is provided for, and whenever interest shall enter into any computation thereunder, such interest shall be computed at the rate of 3 per centum per annum compounded annually.

Such provisions require that interest at the rate of 3 per centum per annum be charged on (1) outstanding advances and (2) annually accrued interest the payment of which has been deferred. Hence, there is no question but that, for interest computation purposes, it was intended to capitalize deferred interest earnings in the same manner as original advances.

In other words, viewed as a whole, the legislation contemplates financing the Colorado River Dam Fund through a single account in which the Government's investment, including accrued deferred interest charges, is capitalized and shown as a single outstanding amount.

It appears from Exhibit A, attached to the aforesaid letter that under method used by the Treasury Department beginning with the fiscal year 1938-when the initial repayments were made-amounts repaid during a project year (June 1 to May 31) were credited at the end of said year in their entirety to the reduction of the outstanding balance in the account including accrued and deferred interest. Also, there was allowed as a credit in the account an amount representing interest at 3 percent per annum on the repayments from the dates on which they were received until the end of the project year. Thus,

at the close of the project year ending May 31, 1937, there was an outstanding balance of advances and accrued interest totaling $87,834,205.50. During the ensuing project year additional advances totaling $5,685,000 were made to the fund. Interest accruing on the said additional advances from the dates on which made totaled $88,848.90, and the interest which accrued during the year on the outstanding balance of $87,834,205.50 was $2,635,026.17. Therefore, the new outstanding balance at the end of the said project year was $96,243,080.57. However, during the course of the project year repayments totaling $1,100,000 were made to the Treasury and the entire amount thereof, together with the sum of $30,221.91, as interest on the repayments from the dates on which made to the end of the project year, were allowed as credits, resulting in a net outstanding balance of $95,112,858.66 as of May 31, 1938.

As appears from the above-quoted portion of the letter of April 14, a question has arisen in the Treasury Department as to whether the repayments should have been applied first to liquidate the interest which had accrued on the outstanding balance from the beginning of the operating year to the dates of the repayments, and the balance of the repayments, if any, applied in reduction of the amount of the outstanding balance. This latter method is identified as the "United States Rule," and, thereunder, partial payments on interest bearing accounts are first applied to discharge interest due. If a payment exceeds interest due, the excess of payment goes to discharge principal and interest is computed thereafter on the balance of principal. On the other hand, if the payment is less than the interest due, the excess of interest is not added to principal but interest is computed thereafter on the former principal until the payments taken together exceed the interest due. Where interest is payable in periodic installments which themselves bear interest from maturity, partial payments are first applied to discharge interest accrued on interest, then to discharge interest on principal, and lastly to discharge principal itself. See 47 C. J. S. 66.

However, the said rule does not appear proper for application where, as here, the accrued interest, upon deferral, loses its identity as interest. Thus, in the present matter, since interest upon becoming due either is paid or, if deferred, is capitalized, there is no occasion to credit partial payments to interest or principal separately. Moreover, application of the rule and adjusting the account as each repayment is made within a project year would not appear to be in accordance with the provisions of sections 2 (b) and (d) of the act involved, quoted above, which contemplate a determination of accrued interest at the end of the year.

Accordingly, the method of computing interest and applying partial payments which has been used by the Treasury Department appears to be proper and to be in accordance with statutory direction. and the adoption of a different method is not deemed to be necessary.

(B-76253) BIDS-MISTAKES

Where the invitation to bid warned bidders that the equipment was to be furnished in strict accordance with attached specifications, the error of the successful bidder in underestimating its bid price, allegedly due to the fact that specifications were not attached to the invitation, must be regarded as unilateral-not mutual-due solely to the bidder's own negligence or oversight and in nowise contributed to by the Government, and affords no basis for increasing the price specified in the bid which, having been accepted by the Government, consummated a valid and binding contract.

Acting Comptroller General Fisher to the Chairman, National Advisory Committee for Aeronautics, May 20, 1948:

I have a letter dated May 6, 1948, with enclosures, from your Committee, relative to an error alleged by the Continental Equipment Company, Tomlinson Steam Specialty Company, to have been made in its bid dated December 1, 1947, which was accepted by the Government December 12, 1947, thereby becoming contract No. NA3-494. You request a decision as to whether the contract price may be increased by the amount of $1,088, as requested by the contractor due to the alleged error in its bid.

It appears that on November 20, 1947, your Committee's laboratory at Cleveland, Ohio, advertised for bids, to be opened December 2, 1947, for furnishing butterfly valves, lever operated, heavy duty, suitable for throttling gases at 50 pounds per square inch pressure differential and 1200 degrees Fahrenheit, in strict accordance with Specification No. C-569 dated November 12, 1947, quantities and types as listed on invitation C-569. As the bid of the Continental Equipment Company, Tomlinson Steam Specialty Company, was the only bid received under the invitation involved, award was made to that company.

On January 29, 1948, in an effort to expedite delivery of the valves involved, the field procurement officer wrote to the Janette Manufacturing Company, the contractor's supplier of the speed reducer unit under item No. 4 of the contract, calling attention to that portion of the specification which required that each valve operating motor be supplied with explosion-proof reversing combination starter and fused disconnect switch and requesting information as to what gain in delivery time would result from the substitution of a certain switch in lieu thereof. On February 26, 1948, the contractor wrote to the