§8475 Acceptance of Guarantees with Gifts for Major Projects

Summary

The Secretary of the Navy may accept a “qualified guarantee” from one or more donors to help finish a major project for the Naval Academy. If accepted, the guarantee counts as authority to enter contracts and obligate money under federal budget and contracting rules. The Navy can spend project funds even if the other money on hand (not counting the guarantee) would not be enough to finish the job. The Navy must wait 30 days after sending a report about the guarantee to Congress before accepting it, or 14 days if a copy of the report is sent electronically under section 480. The Navy may not use a guarantee and government appropriated funds together in the same contract or transaction. A “major project” costs $1,000,000 or more and covers buying, building, renovating, or repairing real or personal property. A “qualified guarantee” is a written donor promise tied to a donor’s cash or securities gift that is meant to cover a large part of the project and to step in if other donors don’t provide enough. It must be backed either by an irrevocable standby letter of credit for the guarantee amount from a major U.S. commercial bank or by a “qualified account control agreement.” That agreement must make sure enough money is available, create a top-priority security interest for the Naval Academy, require the donor to keep at least 130% of the guaranteed amount in the account, and require noncash assets to be sold and the proceeds put into Treasury bills under 31 U.S.C. 3104 if the account falls below the required value. A “major U.S. commercial bank” must be an FDIC-insured, U.S.-headquartered bank with net assets the Secretary considers large enough. A “major U.S. investment management firm” is a U.S.-headquartered broker, dealer, investment adviser, major bank, or similar firm that holds enough client assets as the Secretary considers large enough.