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B-176994, FEB 19, 1974

B-176994 Feb 19, 1974
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MAY NOT BE REIMBURSED WHEN REGULATORY REQUIREMENTS FOR AN EXECUTED PROGRAM AGREEMENT WITH THE ADMINISTERING AGENCY WERE NOT MET. SINCE GAO HAS NO AUTHORITY TO APPROVE SETTLEMENT OF A CLAIM FOR WHICH THE GOVERNMENT IS NOT LEGALLY LIABLE. WE WILL NOT OBJECT TO SETTLEMENT UNDER THE PARTICULAR FACTS IN THIS CASE SINCE THE NEEDY CHILDREN WERE ACTUALLY FED AND THE GOVERNMENT'S OWN ACTIONS MAY HAVE CREATED THE IMPRESSION THAT THE SERVICES WERE AUTHORIZED. TO SECRETARY OF AGRICULTURE: OUR CONCURRENCE WAS REQUESTED IN THE DEPARTMENT OF AGRICULTURE'S PROPOSAL TO SETTLE A CLAIM AGAINST THE DEPARTMENT FOR EXPENSES INCURRED BY THE CLAIMANT. INC.'S APPLICATION WAS "APPROVED BASED ON THE INFORMATION THAT YOU SUBMITTED" AND THAT ITS PROGRAM WAS "AUTHORIZED AT $70.

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B-176994, FEB 19, 1974

ORDINARILY, EXPENDITURES OF A SERVICE INSTITUTION IN PROVIDING FREE MEALS TO NEEDY CHILDREN UNDER SECTION 13 OF THE NATIONAL SCHOOL LUNCH ACT, 42 U.S.C. 1761, MAY NOT BE REIMBURSED WHEN REGULATORY REQUIREMENTS FOR AN EXECUTED PROGRAM AGREEMENT WITH THE ADMINISTERING AGENCY WERE NOT MET, SINCE GAO HAS NO AUTHORITY TO APPROVE SETTLEMENT OF A CLAIM FOR WHICH THE GOVERNMENT IS NOT LEGALLY LIABLE. HOWEVER, WE WILL NOT OBJECT TO SETTLEMENT UNDER THE PARTICULAR FACTS IN THIS CASE SINCE THE NEEDY CHILDREN WERE ACTUALLY FED AND THE GOVERNMENT'S OWN ACTIONS MAY HAVE CREATED THE IMPRESSION THAT THE SERVICES WERE AUTHORIZED.

TO SECRETARY OF AGRICULTURE:

OUR CONCURRENCE WAS REQUESTED IN THE DEPARTMENT OF AGRICULTURE'S PROPOSAL TO SETTLE A CLAIM AGAINST THE DEPARTMENT FOR EXPENSES INCURRED BY THE CLAIMANT, FELLOWSHIP, INC., OF DALLAS, TEXAS, IN CONDUCTING A SUMMER FEEDING PROGRAM FOR NEEDY CHILDREN DURING THE PERIOD JUNE 13 THROUGH JULY 24, 1972.

FROM MR. LAKE'S LETTER AND FROM THE EXTENSIVE FILES AND DOCUMENTS ENCLOSED, THE ESSENTIAL FACTS APPEAR TO BE AS FOLLOWS:

THE REVEREND SAMMIE DAVIS, DIRECTOR OF FELLOWSHIP, INC., APPLIED ON APRIL 18, 1972, TO THE DEPARTMENT TO PARTICIPATE IN THE SUMMER SPECIAL FOOD SERVICE PROGRAM FOR CHILDREN, AUTHORIZED BY SECTION 13 OF THE NATIONAL SCHOOL LUNCH ACT, AS AMENDED, 42 U.S.C. 1761. THE SOUTHWEST REGIONAL OFFICE OF THE DEPARTMENT'S FOOD AND NUTRITION SERVICE (FNS) WHICH ADMINISTERS THE PROGRAM, WROTE TO THE REVEREND DAVIS ON APRIL 28, 1972, THAT IN "ACCORDANCE WITH SPECIAL FOOD SERVICE PROGRAM REGULATIONS" FELLOWSHIP, INC.'S APPLICATION WAS "APPROVED BASED ON THE INFORMATION THAT YOU SUBMITTED" AND THAT ITS PROGRAM WAS "AUTHORIZED AT $70,195."

DEPARTMENT REGULATIONS (7 CFR 225.7(E)) REQUIRE THAT SERVICE INSTITUTIONS SELECTED FOR PARTICIPATION IN THE PROGRAM ENTER INTO WRITTEN AGREEMENTS WITH THE FNS REGIONAL OFFICE (IN STATES LIKE TEXAS IN WHICH FNS ADMINISTERS THE PROGRAM DIRECTLY), SETTING FORTH CERTAIN PRESCRIBED ASSURANCES AND UNDERTAKINGS, AND FURTHER PROVIDES (7 CFR 225.11) THAT REIMBURSEMENT PAYMENTS SHALL BE MADE ONLY TO SERVICE INSTITUTIONS OPERATING UNDER AN AGREEMENT WITH THE STATE AGENCY OR THE DEPARTMENT, AND SHALL BE MADE ONLY AFTER EXECUTION OF THE AGREEMENT. THIS PROGRAM AGREEMENT WAS NEVER EXECUTED BECAUSE THE FNS REGIONAL OFFICE SUBSEQUENTLY RECEIVED CERTAIN DEROGATORY INFORMATION, LATER CONFIRMED IN A JUNE 9 REPORT BY THE DEPARTMENT'S OFFICE OF INSPECTOR GENERAL (OIG), RELATING TO FELLOWSHIP, INC.'S FINANCIAL CONDITION, INTEGRITY, AND REPUTATION.

ON MAY 26, 1972, WHILE STILL WAITING FOR THE RESULTS OF THE OIG INVESTIGATION, THE REGIONAL OFFICE WROTE TO THE CLAIMANT POINTING OUT CERTAIN DEFICIENCIES IN THE APPLICATION, ASKING FOR ADDITIONAL INFORMATION, AND CONCLUDING WITH THE STATEMENT "IN VIEW OF THE ABOVE, WE DO NOT BELIEVE THAT YOUR APPLICATION CAN BE APPROVED." ACCORDING TO FNS RECORDS, THE REVEREND DAVIS BROUGHT THE REQUESTED INFORMATION TO THE REGIONAL OFFICE ON JUNE 1, 1972, BUT WAS TOLD (ORALLY) BY THE PROGRAM DIRECTOR THAT IT WAS STILL NOT SUFFICIENT TO REMEDY THE DEFICIENCIES IN THE APPLICATION. ON JUNE 14, 1972, THE CLAIMANT WAS ADVISED BY LETTER THAT "THE APPLICATION FOR PARTICIPATION IS DENIED." NEVERTHELESS, IT APPEARS FROM SUBSEQUENT CORRESPONDENCE, DATED JUNE 20, 1972, FROM THE REGIONAL ADMINISTRATOR TO THE DIRECTOR, CHILD NUTRITION DIVISION THAT MEETINGS AND CONVERSATIONS CONCERNING THE POSSIBILITY OF APPROVAL WERE STILL BEING HELD WITH THE APPLICANT. ON JULY 17, 1972, HOWEVER, THE REGIONAL OFFICE SENT THE CLAIMANT ANOTHER LETTER (DATED JULY 14), STATING, "THIS IS OFFICIAL NOTICE OF THE DENIAL OF THE APPLICATION" AND THAT THE ACTION WAS TAKEN "IN THE BEST INTEREST OF THE FEDERAL GOVERNMENT."

ON JULY 21, 1972, FNS HEADQUARTERS RECEIVED A LETTER FROM A CONGRESSIONAL SOURCE INDICATING THAT FELLOWSHIP, INC., WAS ACTUALLY OPERATING A SUMMER FEEDING PROGRAM FOR THE NEEDY CHILDREN OF DALLAS IN SPITE OF THE LACK OF A FORMAL AGREEMENT. A SUBSEQUENT INVESTIGATION AND RELATED DOCUMENTATION SATISFIED THE DEPARTMENT THAT (1) FELLOWSHIP, INC., PROVIDED SATISFACTORY FREE MEALS TO DALLAS NEEDY CHILDREN FROM JUNE 13 THROUGH JULY 24, 1972; (2) SIX VENDORS HAD FURNISHED FOOD, SUPPLIES, AND SERVICES TO FELLOWSHIP, INC., ON THE BASIS OF THE INITIAL FNS REGIONAL AUTHORIZATION LETTER OF APRIL 28, 1972; AND (3) THE BILLINGS TO FELLOWSHIP, INC., FROM THE SIX VENDORS AMOUNTED TO $11,845.75.

THE DEPARTMENT NOW PROPOSES, ACCORDING TO MR. LAKE'S LETTER, TO REIMBURSE FELLOWSHIP, INC. FOR 100 PERCENT OF ITS OPERATING COSTS ($11,845.75) FOR THE FOLLOWING REASONS:

(1) NEITHER FELLOWSHIP, INC., NOR ITS PARENT ORGANIZATION, THE TRUE FELLOWSHIP BAPTIST CHURCH, ARE FINANCIALLY ABLE TO MEET THE INCURRED EXPENSES;

(2) THE TIME OF ACTIONS AND THE LETTERS AND PROCEDURES UTILIZED BY THE FNS REGIONAL OFFICE IN THIS CASE (PRIOR TO THE JULY 17, 1972, NOTIFICATION) CREATED A REASONABLE IMPRESSION ON FELLOWSHIP, INC. OFFICIALS THAT THE APPLICATION HAD BEEN APPROVED AND THAT THE PROGRAM AGREEMENT WOULD EVENTUALLY BE EXECUTED TO COMPLETE THE FORMALITIES; AND

(3) THE VENDORS CONTRACTED IN GOOD FAITH WITH FELLOWSHIP, INC., IN RELIANCE UPON THE APRIL 28, 1972, LETTER OF AUTHORIZATION FROM THE REGIONAL OFFICE.

IN THE INSTANT CASE, IT IS CLEAR THAT SATISFACTORY MEALS WERE IN FACT DELIVERED TO THE POOR CHILDREN OF DALLAS. IT ALSO APPEARS, FROM MR. LAKE'S LETTER, THAT THE REPRESENTATIONS AND ACTIONS OF THE DEPARTMENT'S REGIONAL OFFICE EMPLOYEES MAY HAVE BEEN RESPONSIBLE FOR CREATING THE IMPRESSION ON AN UNSOPHISTICATED APPLICANT THAT HIS APPLICATION WAS APPROVED AND THAT THE FORMAL PROGRAM AGREEMENT WOULD EVENTUALLY BE EXECUTED. IN VIEW OF THE PARTICULAR FACTS AND CIRCUMSTANCES OF THIS CASE, WE WILL NOT OBJECT TO THE SETTLEMENT PROPOSED BY THE DEPARTMENT OF AGRICULTURE.

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