U.S. Department of Agriculture—Use of Commodity Credit Corporation Funds for Various Programs

Decision

Matter of: U.S. Department of Agriculture—Use of Commodity Credit Corporation Funds for Various Programs

File: B-334146.1

Date: September 20, 2023

The U.S. Department of Agriculture (USDA) transferred Commodity Credit Corporation (CCC) funds to USDA agencies to carry out new financial assistance programs that were not specifically identified in USDA’s fiscal year (FY) 2021 budget submission. While section 5 of the Commodity Credit Corporation Charter Act (CCC Charter Act), 15 U.S.C. § 714c, authorizes CCC, a USDA wholly owned government corporation, to use its funds to carry out a budget submitted to and approved by Congress pursuant to the Government Corporation Control Act (GCCA), GCCA does not require corporations to delineate specific programs in their budget submissions prior to carrying them out. Therefore, USDA was not required to include these programs in its FY 2021 budget submission and did not violate section 5 of the CCC Charter Act or the Antideficiency Act when it transferred funds for the programs where such programs otherwise carried out the purposes of CCC’s funds.

Additionally, USDA announced the Partnerships for Climate-Smart Commodities (PCSC), which is a grant-based program that supports the marketing and production of “climate-smart agricultural commodities.” The Food Security Act authorizes USDA to carry out various activities under the Environmental Quality Incentives Program (EQIP), including a grant program to carry out certain projects for pollution reduction and practices for the storage of carbon in soil. Because the principal purpose of PCSC is to expand the market for climate-smart agricultural commodities, PCSC is not a part of the grant program authorized by EQIP and, accordingly, not subject to EQIP’s restrictions. Rather, PCSC is authorized under section 5(e) of the CCC Charter Act, which authorizes USDA to use CCC funds to expand domestic markets for agricultural commodities.

This responds to a request for a decision regarding whether the Commodity Credit Corporation (CCC) was authorized to use its funds for certain financial assistance programs prior to including them in a budget program submitted to and approved by Congress in accordance with the Commodity Credit Corporation Charter Act (CCC Charter Act), 15 U.S.C. §§ 714–714p, and whether this use of funds violated the Antideficiency Act.[1] The request also separately asks whether the Partnerships for Climate-Smart Commodities (PCSC) is a grant program authorized by the Environmental Quality Incentives Program (EQIP) and therefore subject to funding restrictions applicable to that program.[2] We conclude that the U.S. Department of Agriculture (USDA) did not violate the CCC Charter Act or the Antideficiency Act when it used CCC funds for programs that were not specifically included in its budget submission to Congress. In addition, we conclude that PCSC is not part of the grant program authorized under EQIP and not subject to that program’s restrictions. Rather, PCSC is authorized under section 5(e) of the CCC Charter Act, which authorizes USDA to use CCC funds to expand domestic markets for agricultural commodities.

In accordance with our regular practice, we contacted USDA to seek factual information and its legal views on this matter.[3] USDA responded with its explanation of the pertinent facts and legal analysis.[4]

BACKGROUND

Overview of the Commodity Credit Corporation

CCC is a wholly owned government corporation within USDA that was established by the CCC Charter Act.[5] It is managed by a board of directors under “the general supervision and direction” of the Secretary of Agriculture.[6] Under section 5 of the CCC Charter Act, CCC “is authorized to use its general powers only to” carry out activities that fall within seven enumerated areas or “such other operations as the Congress may specifically authorize or provide for.”[7]

CCC operations are funded by capital stock of $100 million,[8] borrowing authority,[9] and appropriations.[10] USDA explains that certain programs, such as CCC’s disaster, foreign assistance, and credit reform programs, are financed by appropriations;[11] most programs, though, are financed through CCC’s borrowing authority, which is capped at $30 billion.[12]

To ensure CCC has sufficient funds to operate, Congress provides CCC in annual appropriations acts with an indefinite appropriation to reimburse CCC’s net realized losses, as specified in CCC’s annual audited financial statement.[13] Occasionally, CCC has needed to fund activities that would “strain” the $30 billion borrowing cap prior to the annual appropriation;[14] in those situations, Congress has provided CCC an appropriation to reimburse CCC’s net realized losses prior to the enactment of its annual appropriation.[15]

Although CCC receives funds for its operations, it has no employees and carries out its programs through other agencies’ employees and facilities.[16] CCC does not directly use its funds; it instead exercises its borrowing authority and transfers the borrowed funds to other USDA offices and agencies that carry out its programs.[17] CCC recognizes a net realized loss in the FY during which funds were borrowed and transferred regardless of when the performing agency may actually spend the funds.[18]

Specific USDA programs at issue

$3 billion investment programs

USDA announced a series of programs in Press Release No. 0209.21 on September 29, 2021, that were to be funded by CCC’s borrowing authority.[19] Labeling the programs a “[c]omprehensive [i]nvestment [p]ackage,” USDA publicized “$3 billion in investments that will support drought resilience and response, animal disease prevention, market disruption relief, and purchase of food for school nutrition programs.”[20] USDA transferred funds for the programs on September 27, 2021, and September 29, 2021, to “USDA offices and agencies in anticipation of carrying out programs in accordance with the purposes announced in Press Release No. 0209.21.”[21] According to USDA, the agencies began funding these programs in FY 2022.[22]

Partnerships for Climate-Smart Commodities program

USDA also used Press Release No. 0209.21 to publicize a request for information on PCSC.[23] USDA described PCSC as a grant-based program that supports the marketing and production of “climate-smart commodities”[24] through a set of pilot projects that provide financial assistance to producers and landowners.[25] On February 7, 2022, USDA announced that it would begin using CCC funds to finance projects through PCSC.[26]

DISCUSSION

At issue here is whether USDA was required by section 5 of the CCC Charter Act to include the $3 billion investment programs in its budget submission to Congress in advance of transferring CCC funds to other agencies to conduct those activities. Additionally at issue is whether PCSC is part of a grant program authorized by EQIP and therefore subject to that program’s restrictions.

Budget submission requirements of section 5 of the CCC Charter Act

Section 5 of the CCC Charter Act authorizes CCC to use its general powers, including its available funds, “[i]n the fulfillment of its purposes and in carrying out its annual budget programs submitted to and approved by the Congress pursuant to chapter 91 of title 31.”[27] The phrase “chapter 91 of title 31” refers to the Government Corporation Control Act (GCCA), provisions of which govern wholly owned government corporations’ annual budget submissions.[28]

While GCCA requires Congress to “consider” wholly owned government corporations’ annual budget programs and make “necessary appropriations,” it permits wholly owned government corporations to carry out activities authorized by another law.[29] Further, GCCA authorizes the President to “submit changes in a budget program of a corporation at any time.”[30]

GCCA requires corporations to annually prepare a “business-type budget” for the budget program, to be submitted to the President for transmittal to Congress as part of the President’s Budget.[31] This budget must contain specified information, including estimates of the financial condition and operations of the current and following FYs; information to make known the financial condition and operations of the corporation, including estimates of operations by major activities; and provisions for emergencies and contingencies.[32] Notably, GCCA does not require the annual budget program to delineate every specific program and activity a corporation intends to carry out in the upcoming FY.[33]

For FY 2021—the year in which CCC transferred funds to carry out the $3 billion investment programs—USDA submitted a budget program for CCC to the President, which was transmitted to Congress in the FY 2021 President’s Budget Appendix.[34] Although the budget did not specifically refer to the $3 billion investment programs, USDA’s FY 2021 budget submission for CCC contained the information required by GCCA. Because USDA’s budget submission complied with GCCA, USDA also complied with section 5 of the CCC Charter Act when it transferred CCC funds to other USDA agencies for the $3 billion investment programs where such programs otherwise carried out the purposes of CCC’s appropriations.[35] Additionally, CCC did not violate the Antideficiency Act.[36]

Our conclusion that section 5 of the CCC Charter Act does not require USDA to delineate the specific programs that CCC plans to fund is consistent with the broad discretion Congress has afforded government corporations generally and CCC specifically.[37] For example, Congress gives government corporations “a high degree of autonomy and flexibility in the carrying on of programs involving activities of a business nature.”[38]

CCC’s autonomy and flexibility are evidenced by its authority to “determine the character of and the necessity for its obligations and expenditures and the manner in which they shall be incurred, allowed, and paid.”[39] This “character and necessity” provision is a hallmark of broad corporate discretion.[40] In addition, CCC has “such powers as may be necessary or appropriate for the exercise of the powers specifically vested in the Corporation, and all such incidental powers as are customary in corporations generally.”[41]

While CCC has broad corporate discretion, there are at least three processes through which Congress oversees CCC’s activities: the appropriations process, CCC reports and audits, and legislative authorization. It is through the appropriations process that the requirement in section 5 of the CCC Charter Act that CCC’s budget be approved by Congress is met. For example, Congress exercises its approval of CCC’s annual budget when it enacts the annual appropriation for CCC’s net realized losses.[42] Congress can also enact restrictions or conditions on CCC’s funds in the annual appropriations act.[43]

CCC is also subject to regular reporting requirements and audits. For example, CCC is required to submit an annual management report on its financial condition and operations to Congress, with copies to the President, OMB, and the Comptroller General.[44] Additionally, CCC is required to send Congress quarterly itemized reports of “all expenditures over $10,000” made under two provisions of the CCC Charter Act, including section 5.[45] And GCCA requires the USDA OIG to audit CCC’s financial statements and requires the audit report to be submitted to Congress.[46]

Further, as USDA recognizes, “CCC funds are used to implement specific programs established by Congress as well as to carry out activities under the broad authorities of the CCC Charter Act.”[47] Congress’s legislative powers allow it to direct CCC’s spending, including by responding to corporate action that Congress determines exceeds a corporation’s powers, disregards the will of the Congress, or is simply unnecessary.[48]

Our conclusion here is generally consistent with USDA’s legal views and historical practice.[49] USDA interprets section 5 of the CCC Charter Act as “describ[ing] two types of actions under the Charter Act for which Congress has limited CCC’s use of its general powers: when the CCC is fulfilling its purposes, and when it is carrying out a budget program.”[50] In either instance, USDA acknowledges that CCC’s programs must fall within one of the specific purposes listed in section 5.[51] USDA’s interpretation of section 5 comports with “the decades-long practices of Congress and the CCC in fulfilling CCC’s purposes.”[52] Accordingly, USDA does not always amend its budgets to include CCC programs that are authorized by congressional mandate[53] or section 5.[54]

Partnerships for Climate-Smart Commodities program

We next consider the legal authority for PCSC. Specifically, we consider whether PCSC is authorized by the Food Security Act and, thus, subject to the restrictions applicable to EQIP.[55]

The Food Security Act authorizes various activities under EQIP.[56] The general purposes of EQIP include promoting agricultural production, forest management, and environmental quality as compatible goals and optimizing environmental benefits.[57] EQIP’s conservation innovation grant program authorizes grants, in part, for projects that ensure effective transfer of innovative technologies, such as market systems for pollution reduction.[58]

PCSC and EQIP have overlapping, yet distinct, objectives. Through PCSC, USDA financially assists producers in implementing practices that reduce greenhouse gas emissions or sequester carbon to create a market for commodities produced using greenhouse gas reduction or carbon sequestration technologies.[59] EQIP assists producers in developing techniques that promote environmental enhancement and protection, as well as agricultural production and forest resource management.[60] Although both programs provide grants to producers using measures to improve environmental quality, EQIP’s statutory charge does not prioritize the creation and expansion of markets for specified “climate-smart” commodities.[61] EQIP may even be used to more appropriately utilize forest resources or to promote agricultural production for commodities that are not produced using climate-smart technologies.[62] Therefore, PCSC could not be authorized as part of the Food Security Act’s EQIP and is not subject to the restrictions applicable to EQIP.

When we review whether an appropriation is available for a particular expenditure, we ask whether the expenditure falls within the agency’s legitimate range of discretion.[63] Here, we similarly consider whether carrying out PCSC pursuant to section 5 of the CCC Charter Act falls within USDA’s legitimate range of discretion. USDA explains that PCSC is authorized by section 5(e), which authorizes USDA to use CCC funds to “[i]ncrease the domestic consumption of agricultural commodities.”[64] USDA explains that PCSC is authorized by this section because it is an agricultural commodity production program that incentivizes producers to implement large-scale pilot projects with the goal of creating market opportunities for commodities produced using climate-smart practices.[65] Congress vested in USDA the authority to administer CCC’s authorities and to determine whether a particular program helps “increase the domestic consumption of agricultural commodities.” Because the principal focus of PCSC is on the expansion of markets for climate-smart commodities, we agree that it is authorized by section 5(e) of the CCC Charter Act.

CONCLUSION

USDA did not violate the CCC Charter Act or the Antideficiency Act when it did not include several new financial assistance programs in its budget submission prior to transferring funds for those programs, where those programs otherwise carried out the purposes of CCC’s appropriation. In addition, PCSC is authorized under section 5(e) of the CCC Charter Act and not the Food Security Act.

Edda Emmanuelli Perez

General Counsel

 

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