B-203901 L/M, JUL 9, 1982

B-203901 L/M, JUL 9, 1982

PRECIS-UNAVAILABLE

WILLIAM C. WAMPLER, HOUSE OF REPRESENTATIVES:

THIS IS IN RESPONSE TO YOUR SEPTEMBER 28, 1981 LETTER TO THIS OFFICE REQUESTING US TO PROVIDE YOU WITH A REPORT CONCERNING THE AUTHORITY OF THIS OFFICE TO SETTLE AND ADJUST THE ACCOUNTS OF THE LEGAL SERVICES CORPORATION (LSC). YOU WISH TO KNOW WHETHER AMENDMENTS CONTAINED IN H.R. 3480, A BILL TO AMEND THE LEGAL SERVICES CORPORATION ACT, WILL AUTHORIZE THIS OFFICE TO ENFORCE ITS DECISIONS BY TAKING EXCEPTIONS FOR IMPROPER EXPENDITURES IN LSC ACCOUNTS. H.R. 3480 WAS PASSED BY THE HOUSE AND IS CURRENTLY BEING CONSIDERED BY THE SENATE.

SECTION 17 OF THE BILL AMENDS SECTION 1009 OF THE LEGAL SERVICES CORPORATION ACT (42 U.S.C. SEC. 2996H) AS FOLLOWS:

"(D) THE COMPTROLLER GENERAL AND THE GENERAL ACCOUNTING OFFICE SHALL HAVE THE SAME AUTHORITIES WITH RESPECT TO CONDUCTING AUDITS OF THE CORPORATION AS THE COMPTROLLER GENERAL AND THE GENERAL ACCOUNTING OFFICE HAVE WITH RESPECT TO CONDUCTING AUDITS OF ALL DEPARTMENTS AND AGENCIES OF THE UNITED STATES, INCLUDING THE AUTHORITY TO SETTLE AND ADJUST THE ACCOUNTS OF THE CORPORATION."

ALTHOUGH THE ABOVE-QUOTED PROVISION AUTHORIZES THIS OFFICE TO SETTLE, AND ADJUST THE ACCOUNTS OF THE CORPORATION, AS WELL AS AUDIT THEM, WE STILL MAY NOT BE ABLE TO ENFORCE OUR DECISIONS BECAUSE OF THE CORPORATION'S NON- GOVERNMENT STATUS. CHAPTER 2 OF TITLE 31 OF THE U.S.C. CONTEMPLATES THAT PAYMENTS MADE BY NON-DEFENSE AGENCIES AND DEPARTMENTS WILL BE CERTIFIED AS LEGAL AND CORRECT BY DULY APPOINTED CERTIFYING OFFICERS. THESE CERTIFYING OFFICERS ARE HELD ACCOUNTABLE FOR AND REQUIRED TO MAKE GOOD TO THE UNITED STATES THE AMOUNT OF ANY ILLEGAL, IMPROPER, OR INCORRECT PAYMENT RESULTING FROM ANY FALSE, INACCURATE, OR MISLEADING CERTIFICATE MADE BY THEM AS WELL AS ANY PAYMENT PROHIBITED BY LAW OR WHICH DID NOT REPRESENT A LEGAL OBLIGATION UNDER THE APPROPRIATION OR FUND INVOLVED. (SEE 31 U.S.C. SEC. 82C). THE DECISIONS OF THE COMPTROLLER GENERAL REGARDING THE LEGALITY OF PAYMENTS ARE BINDING AND CONCLUSIVE ON SUCH CERTIFYING OFFICERS AND THEIR PAY MAY BE WITHHELD TO SATISFY AN INDEBTEDNESS TO THE GOVERNMENT.

LSC, ON THE OTHER HAND, IS A PRIVATE, NONPROFIT CORPORATION ESTABLISHED IN THE DISTRICT OF COLUMBIA. IT IS NOT AN INSTRUMENTALITY OF THE FEDERAL GOVERNMENT, AND ITS OFFICERS AND EMPLOYEES ARE NOT OFFICERS AND EMPLOYEES OF THE FEDERAL GOVERNMENT. THE CORPORATION UTILIZES A NON-FEDERAL COMMERCIAL TYPE ACCOUNTING SYSTEM AND HAS NO CERTIFYING OFFICER. EVEN IF THE CORPORATION WOULD VOLUNTARILY ADOPT THE CERTIFYING OFFICER SYSTEM, WE COULD NOT ENFORCE LIABILITY FOR ILLEGAL, IMPROPER OR INCORRECT PAYMENTS AGAINST A CERTIFYING OFFICER WHO IS NOT A FEDERAL EMPLOYEE.

AS A RESULT, UNDER THE PROVISIONS OF THE AMENDMENT IN H.R. 3480, WE WOULD BE AUTHORIZED TO SETTLE AND ADJUST THE ACCOUNTS OF THE CORPORATION, AND COULD TAKE AN EXCEPTION TO THE ACCOUNTS OF THE CORPORATION FOR AN ILLEGAL, IMPROPER OR INCORRECT PAYMENT. HOWEVER, WE COULD NOT ENFORCE OUR DETERMINATION BY REQUIRING THAT THE AMOUNT OF THE IMPROPER PAYMENT BE RECOVERED FROM THE RESPONSIBLE OFFICER OR EMPLOYEE OF THE CORPORATION, AS WE COULD IF THE PAYMENT WAS MADE BY A CERTIFYING OFFICER IN A FEDERAL DEPARTMENT OR AGENCY.

SHORTLY AFTER THE HOUSE PASSED H.R. 3480, WE ASKED MR. DAN BRADLEY, THEN PRESIDENT OF THE CORPORATION, HOW THE CORPORATION CONSTRUED THE AMENDMENT AUTHORIZING GAO TO SETTLE AND ADJUST LSC'S ACCOUNTS. HE RESPONDED IN A LETTER DATED NOVEMBER 16, 1981 AS FOLLOWS:

"ALTHOUGH I ANTICIPATE THAT H.R. 3480, SHOULD IT BECOME LAW, MAY EXPAND THE AUTHORITY OF GAO TO OVERSEE THE CORPORATION'S FINANCIAL OPERATIONS THROUGH THE SETTLEMENT AUTHORITY, THE EXERCISE OF SUCH AUTHORITY MUST BE CONSISTENT WITH THE CORPORATION'S STATUS AS A PRIVATE NON-PROFIT CORPORATION AND AS AN ENTITY INDEPENDENT OF GOVERNMENT CONTROL, AS CLEARLY EVIDENCED BY PROVISIONS OF THE ACT NOT AFFECTED BY THE CHANGES ENVISIONED BY H.R. 3480. (SEE, E.G., SECS. 1001(5), 1004(B), 1004(C), 1004(E), 1005(B)(2), 1005(E)(1), 1006(A) OF THE ACT, SEC. 626 OF THE ECONOMIC OPPORTUNITY ACT OF 1964.)

"UNDER THE ACT, THE CORPORATION IS CHARGED WITH FINAL AUTHORITY TO ENFORCE AND INTERPRET THE PROVISIONS OF THE ACT (SEE, E.G., SECS. 1006(B)(1), 1006(B)(2), 1006(B)(5), 1007(D)). ANY AUTHORITY THAT THE COMPTROLLER GENERAL MAY EXERCISE REGARDING THE EXPENDITURE OF CORPORATION FUNDS MUST BE SUBJECT TO THE CORPORATION'S PRIMARY ROLE WITH RESPECT TO THE ACT."

FROM THE FOREGOING, IT IS CLEAR THAT THE CORPORATION DOES NOT BELIEVE THAT THE COMPTROLLER GENERAL'S AUTHORITY TO AUDIT, SETTLE AND ADJUST THE CORPORATION'S ACCOUNTS WOULD OVERCOME THE AUTHORITY PROVIDED TO THE CORPORATION BY SECTION 1006(A) OF THE ACT (42 U.S.C. SEC. 2996E) TO EXERCISE ALL THE POWER CONFERRED ON OTHER NON-PROFIT CORPORATIONS UNDER DISTRICT OF COLUMBIA LAW. IN ADDITION TO THE OTHER POWERS CONFERRED BY THE LSC ACT, THIS WOULD INCLUDE AUTONOMY IN MAKING FINANCIAL DECISIONS, ALTHOUGH SUCH DECISIONS WOULD, OF COURSE, HAVE TO CONFORM TO THE REQUIREMENTS OF LAW.

WE THINK THAT LSC'S POSITION HAS SOME VALIDITY. IT COULD BE ARGUED THAT SINCE THE NEW AUTHORITIES WHICH H.R. 3480 CONFERS ON THIS OFFICE ARE TO BE THE SAME AS THE AUTHORITIES IT NOW HAS WITH RESPECT TO ALL DEPARTMENTS AND AGENCIES OF THE UNITED STATES, IT FOLLOWS THAT DECISIONS RESULTING FROM THE EXERCISE OF THOSE AUTHORITIES ARE FINAL AND BINDING ON LSC TO THE SAME EXTENT THAT THEY BIND THE EXECUTIVE BRANCH OF GOVERNMENT. SEE 31 U.S.C. SEC. 74. HOWEVER, THE EXISTENCE OF INCONSISTENT LANGUAGE IN THE LEGAL SERVICES CORPORATION ACT WHICH H.R. 3480 LEAVES UNCHANGED CASTS SOME DOUBT ON THAT CONSTRUCTION. TO RESOLVE ANY FURTHER UNCERTAINTY ABOUT THE EFFECT OF OUR DECISIONS ON LSC, WE RECOMMEND AN ADDITIONAL AMENDMENT TO SECTION 1009 OF THE ACT AS FOLLOWS:

INSERT (1) AFTER (D) UNDER SECTION 17 OF H.R. 3480 AND ADD A NEW PARAGRAPH AS FOLLOWS:

"(2) NOTWITHSTANDING ANY OTHER PROVISIONS OF LAW, DECISIONS OF THE COMPTROLLER GENERAL ON QUESTIONS INVOLVING OBLIGATIONS OR EXPENDITURES OF APPROPRIATED FUNDS OR THE BALANCES OF THE CORPORATION'S ACCOUNTS SHALL BE FINAL AND BINDING ON THE CORPORATION TO THE SAME EXTENT AS THEY WOULD BE IF THE CORPORATION WAS A DEPARTMENT OR AGENCY OF THE UNITED STATES."

EVEN IF IT WERE ESTABLISHED BY MEANS OF THE AMENDMENT SUGGESTED ABOVE THAT OUR DECISIONS WITH RESPECT TO LSC EXPENDITURES ARE FINAL AND CONCLUSIVE, UNDER PRESENT LAW, NO CORPORATION OFFICIAL CAN BE HELD PECUNIARILY LIABLE FOR ILLEGAL PAYMENTS. THEREFORE WE HAVE NO MECHANISM THAT WOULD ENABLE US TO ENSURE COMPLIANCE WITH OUR DECISIONS IF LSC FAILED TO VOLUNTARILY COMPLY. IN HIS NOVEMBER 16, 1981 LETTER, MR. BRADLEY CONFIRMED THE FACT THAT AT PRESENT NO OFFICIAL OR EMPLOYEE OF THE CORPORATION MAY BE HELD PECUNIARILY LIABLE FOR ILLEGAL PAYMENTS WHEN HE STATED:

"FINALLY, YOU ASKED WHICH OFFICIAL IN THE CORPORATION WOULD CERTIFY VOUCHERS AND BE PECUNIARILY LIABLE FOR IMPROPER PAYMENTS. AT THE PRESENT TIME THE DIRECTORS OF THE CORPORATION'S VARIOUS DIVISIONS ACT IN LIEU OF CERTIFYING OFFICERS IN THAT THEY OR THEIR DESIGNEES ARE REQUIRED TO APPROVE ALL EXPENDITURES MADE BY THEIR RESPECTIVE DIVISIONS. THE CORPORATION'S COMPTROLLER IS RESPONSIBLE FOR ENSURING THAT CHECKS ARE ISSUED IN THE PROPER AMOUNT AND THAT PAYMENTS ARE FULLY DOCUMENTED. ANY CHANGES IN THAT PROCEDURE THAT MIGHT BE NECESSITATED BY H.R. 3480 WOULD HAVE TO BE MADE BY THE PRESIDENT OF THE CORPORATION, IN CONSULTATION WITH THE BOARD OF DIRECTORS. CANNOT SPECULATE AT THIS TIME WHAT CHANGES, IF ANY, WOULD BE MADE BY THE INDIVIDUALS WHO MIGHT BE HOLDING THOSE POSITIONS AT SOME FUTURE TIME IF H.R. 3480 BECOMES LAW."

YOU ASKED US WHETHER ADDITIONAL LEGISLATION WOULD BE NEEDED, BESIDES THE AMENDMENTS IN H.R. 3840, TO PLACE LSC ON A PAR WITH FEDERAL CORPORATIONS WITH RESPECT TO GAO'S ENFORCEMENT AUTHORITY. IT WOULD, OF COURSE, BE THEORETICALLY POSSIBLE TO DRAFT A NEW AMENDMENT THAT WOULD REQUIRE LSC TO DESIGNATE AN ACCOUNTABLE OFFICER, AND TO MAKE THE PROVISIONS OF 31 U.S.C. 82A-2 THROUGH 82D APPLICABLE TO SUCH AN ACCOUNTABLE OFFICER. HOWEVER, SUCH AN AMENDMENT WOULD BE INCONSISTENT WITH THE CONGRESS' EVIDENT DESIRE TO PRESERVE THE NON-FEDERAL STATUS OF THE CORPORATION. WE WILL CONTINUE TO NOTIFY INTERESTED CONGRESSIONAL COMMITTEES WHENEVER WE CONCLUDE THAT THE CORPORATION HAS MADE ILLEGAL OR IMPROPER EXPENDITURES AND HAS FAILED TO TAKE APPROPRIATE CORRECTIVE ACTION, LEAVING REMEDIAL ACTION TO THE CONGRESS THROUGH THE BUDGETARY PROCESS OR OTHERWISE.

FINALLY, YOU ASKED US FOR COPIES OF OUR DECISION 60 COMP.GEN. 423 (1981) WHICH WE RENDERED TO CONGRESSMAN SENSEBRENNER, AND OTHER CORRESPONDENCE REGARDING LSC ACTIVITIES. U COPIES OF THESE DOCUMENTS SHORTLY AFTER WE RECEIVED YOUR LETTER.

PLEASE CALL ON US IF WE CAN BE OF FURTHER ASSISTANCE.