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B-200685, APR 27, 1981

B-200685 Apr 27, 1981
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OUR PRELIMINARY VIEWS WERE INFORMALLY DISCUSSED WITH REPRESENTATIVES OF YOUR STAFF IN A BRIEFING ON APRIL 1. YOUR QUESTIONS AND OUR SUMMARY ANSWERS ARE SET OUT IN PART I BELOW. HAVE THE AUTHORITY TO RESERVE CETA. RETRIEVE SUCH TITLE VI FUNDS WHICH HAVE BEEN OBLIGATED LOCALLY PURSUANT TO VALID AUTHORITY?". LIKELY WILL. RESULT IN "RETRIEVING" TITLE VI FUNDS WHICH HAVE BEEN OBLIGATED LOCALLY. SUCH PLANS ALSO ARE DESIGNED TO HOLD HARMLESS GRANTEE PRIME SPONSORS WHOSE COSTS EXCEED THEIR REDUCED FUNDING LEVELS. PROVIDED THAT THE PRIME SPONSORS HAVE TAKEN PRESCRIBED ACTIONS TO CONTROL OVEREXPENDITURES. TO THE EXTENT THAT THESE PLANS SUCCEED IN SATISFYING PRIME SPONSOR OBLIGATIONS - AND DOL OFFICIALS BELIEVE THAT THEY WILL BE LARGELY SUCCESSFUL - WE SEE NO LEGAL PROBLEM.

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B-200685, APR 27, 1981

PRECIS-UNAVAILABLE

CARL D. PERKINS, HOUSE OF REPRESENTATIVES:

THIS RESPONDS TO YOUR MARCH 17, 1981, LETTER IN WHICH YOU ASK SEVERAL QUESTIONS REGARDING THE PRESIDENT'S PROPOSED DEFERRALS AND RESCISSION (PROPOSALS D81-36, 36A, AND P81-92) OF FUNDS APPROPRIATED TO CARRY OUT PUBLIC SERVICE EMPLOYMENT PROGRAMS UNDER TITLES II-D AND VI OF THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT (CETA), AS AMENDED, 29 U.S.C. SECS. 853-859 AND 961-970. OUR PRELIMINARY VIEWS WERE INFORMALLY DISCUSSED WITH REPRESENTATIVES OF YOUR STAFF IN A BRIEFING ON APRIL 1, 1981. AT THAT TIME WE NOTED THAT WE DID NOT CONDUCT A DETAILED AUDIT OF THE MATTERS RAISED IN YOUR LETTER BECAUSE OF THE TIGHT REPORTING DEADLINE. CONSEQUENTLY, WE LIMITED OUR EFFORTS TO A REVIEW OF DEPARTMENTAL MATERIALS AND DISCUSSIONS WITH HEADQUARTERS AGENCY PERSONNEL. YOUR QUESTIONS AND OUR SUMMARY ANSWERS ARE SET OUT IN PART I BELOW, FOLLOWED BY A MORE DETAILED DISCUSSION IN PART II.

1.

1. "DOES THE DEPARTMENT OF LABOR (HEREAFTER REFERRED TO AS D.O.L.) HAVE THE AUTHORITY TO RESERVE CETA, TITLE VI F. Y. 1981 BUDGET AUTHORITY AND OUTLAYS BASED ON A RESCISSION REQUEST NOT ACTED ON BY CONGRESS? CAN D.O.L. RETRIEVE SUCH TITLE VI FUNDS WHICH HAVE BEEN OBLIGATED LOCALLY PURSUANT TO VALID AUTHORITY?"

WITH REFERENCE TO THE FIRST PART OF THIS QUESTION, DOL HAS NOT FORMALLY RESERVED TITLE VI BUDGET AUTHORITY FOR FORMULA GRANTS TO PRIME SPONSORS PENDING CONGRESSIONAL CONSIDERATION OF THE RESCISSION. NEVERTHELESS, WE BELIEVE THAT DOL LEGALLY COULD WITHHOLD SUCH BUDGET AUTHORITY FOR UP TO 45 DAYS OF CONTINUOUS CONGRESSIONAL SESSION DURING CONSIDERATION OF THE RESCISSION PROPOSAL. WITH REFERENCE TO THE SECOND PART OF THE QUESTION, DOL'S CURRENT ACTIONS AND ANNOUNCED PLANS COULD, AND LIKELY WILL, RESULT IN "RETRIEVING" TITLE VI FUNDS WHICH HAVE BEEN OBLIGATED LOCALLY. HOWEVER, SUCH PLANS ALSO ARE DESIGNED TO HOLD HARMLESS GRANTEE PRIME SPONSORS WHOSE COSTS EXCEED THEIR REDUCED FUNDING LEVELS, PROVIDED THAT THE PRIME SPONSORS HAVE TAKEN PRESCRIBED ACTIONS TO CONTROL OVEREXPENDITURES. TO THE EXTENT THAT THESE PLANS SUCCEED IN SATISFYING PRIME SPONSOR OBLIGATIONS - AND DOL OFFICIALS BELIEVE THAT THEY WILL BE LARGELY SUCCESSFUL - WE SEE NO LEGAL PROBLEM. CONCEIVABLY SOME PRIME SPONSORS MAY NOT BE MADE WHOLE UNDER THE DOL PLANS AND WILL, THEREFORE, SUBMIT CLAIMS OR TAKE OTHER LEGAL ACTION AGAINST DOL. WE ARE NOT IN A POSITION TO SPECULATE ON WHAT THE OUTCOME WOULD BE IN THESE CIRCUMSTANCES. HOWEVER, WE DO NOT BELIEVE THAT THIS POSSIBILITY INVALIDATES DOL'S BASIC ACTIONS AND PLANS TO DATE.

2. "ASSUMING D.O.L.'S AUTHORITY TO RESERVE FOR DEFERRAL UNOBLIGATED F. Y. 1981 BUDGET AUTHORITY AND OUTLAYS IN VARIOUS CETA PROGRAMS BASED ON DEFERRAL REQUESTS SUBMITTED TO CONGRESS, DOES THE DEPARTMENT HAVE THE LEGAL AUTHORITY TO DEOBLIGATE ADDITIONAL FUNDS WHICH HAVE ALREADY BEEN CONTRACTUALLY OBLIGATED AT THE LOCAL LEVEL PURSUANT TO VALID OBLIGATIONAL AUTHORITY? CAN D.O.L. LEGALLY AND PROPERLY REQUIRE CETA PRIME SPONSORS AND OTHER GRANTEES TO UNILATERALLY BREACH VALID CONTRACTS AND ASSUME THE RESULTANT LIABILITY?"

AS NOTED IN RESPONSE TO YOUR FIRST QUESTION, DOL'S ACTIONS AND PLANS CONTEMPLATE THAT PRIME SPONSORS WILL NOT HAVE TO ABSORB SUCH LIABILITIES SO LONG AS THEY TAKE ACTIONS PRESCRIBED BY DOL TO CONTROL OVEREXPENDITURES. HERE AGAIN, WE SEE NO LEGAL OBJECTION TO DOL'S ACTIONS AND PLANS SINCE THEY CONTAIN HOLD HARMLESS FEATURES DESIGNED TO AVOID THE POTENTIAL CONSEQUENCES SUGGESTED IN YOUR QUESTION. IF ANY SUCH CONSEQUENCES DO OCCUR, NOTWITHSTANDING DOL'S ANNOUNCED PLANS AND INFORMAL REPRESENTATIONS TO US, THE LEGAL RAMIFICATIONS WILL HAVE TO BE ADDRESSED AT THAT TIME.

3. "ASSUMING D.O.L.'S LEGAL AUTHORITY TO DEOBLIGATE SUCH LEGAL CONTRACTUAL EXPENDITURES UNDER THE AEGIS OF DEFERRAL, I WOULD LIKE THE GENERAL ACCOUNTING OFFICE TO COMMENT ON THE POTENTIALLY DETRIMENTAL POLICY IMPLICATIONS SUCH ACTION WOULD HAVE ON THE FEDERAL GOVERNMENT'S FUTURE ABILITY TO CONTRACT WITH OTHER PARTIES."

IT IS DIFFICULT, AT BEST, TO ESTIMATE WHAT IMPACT LABOR'S ACTIONS WILL HAVE ON THE FEDERAL GOVERNMENT'S FUTURE ABILITY TO CONTRACT WITH OTHER PARTIES. WE BELIEVE, HOWEVER, THAT LABOR'S PLANNED EFFORTS TO MINIMIZE THE IMPACT OF ITS ACTIONS BOTH ON PRIME SPONSORS AND PARTICIPANTS, IF SUCCESSFUL, WILL HELP TO LESSEN ANY DETRIMENTAL POLICY IMPLICATIONS.

II.

THE PRESIDENT HAS PROPOSED A PHASEOUT OF THE PUBLIC SERVICE EMPLOYMENT PROGRAMS AUTHORIZED BY TITLES II-D AND VI OF CETA. IN LATE FEBRUARY 1981 A HIRING FREEZE WAS ANNOUNCED FOR BOTH THE TITLES II-D AND VI PROGRAMS. IN ADDITION, THE PRESIDENT HAS SUBMITTED TO CONGRESS UNDER THE IMPOUNDMENT CONTROL ACT OF 1974, 31 U.S.C. SECS. 1401-1407, A DEFERRAL (D81-36A) OF FUNDS FOR THE TITLE II-D PROGRAM NOW TOTALING $729,187,000, AND A PROPOSAL TO RESCIND (R81-92) BUDGET AUTHORITY FOR THE TITLE VI PROGRAM.

BY FIELD MEMORANDUM NO. 133-81, DATED MARCH 13, 1981, THE EMPLOYMENT AND TRAINING ADMINISTRATION OF DOL ISSUED INSTRUCTIONS IN CONNECTION WITH THE PRESIDENT'S DEFERRAL AND RESCISSION PROPOSALS. PARAGRAPH 4 OF THE FIELD MEMORANDUM ANNOUNCED REVISED TITLES II-D AND VI FUNDING ALLOCATIONS TO GRANTEE PRIME SPONSORS HAD BEEN CALCULATED BASED ON THE DEFERRAL AND RESCISSION MESSAGES. THE ALLOCATIONS REFLECTED, ON A NATIONAL BASIS, A REDUCTION IN AVAILABILITY OF 38.9 PERCENT IN THE TITLE II-D PROGRAM AND 32.2 PERCENT IN THE TITLE VI PROGRAM. THE REVISED TITLE II-D ALLOCATIONS WERE MADE EFFECTIVE IMMEDIATELY. HOWEVER, THE REVISED TITLE VI FIGURES WERE NOT FORMALLY IMPLEMENTED. THE FIELD MEMORANDUM STATES WITH REGARD TO TITLE VI:

"*** THE TITLE VI ALLOCATIONS ARE TO BE RELEASED FOR INFORMATIONAL PURPOSES ONLY AT THIS TIME. REVISED TITLE VI ANNUAL PLAN SUBPARTS WILL BE REQUIRED WHEN CONGRESS HAS ACTED UPON THE TITLE VI RESCISSION. PRIME SPONSORS MAY, IF THEY WISH, VOLUNTARILY IMPLEMENT THE TITLE VI REDUCTION."

PARAGRAPH 9 OF THE FIELD MEMORANDUM ELABORATES UPON THE STATUS OF THE TITLE VI PROGRAM AS FOLLOWS:

"*** REGIONAL OFFICES SHOULD ENCOURAGE PRIME SPONSORS TO PROCEED VOLUNTARILY WITH THE TITLE VI REDUCTIONS AND MODIFICATIONS. WHERE PRIME SPONSORS AGREE TO SUCH A PROCEDURE, APPROPRIATE TITLE VI FUNDS SHOULD BE IMMEDIATELY DEOBLIGATED AND REVISED PLANS SUBMITTED WITHIN 30 DAYS. PRIME SPONSORS WHICH AGREE TO THE VOLUNTARY REDUCTION AND MODIFICATION SHOULD BE INFORMED THAT ALL FUNDS WILL BE RESTORED SHOULD CONGRESS NOT AGREE TO RESCISSION."

PARAGRAPH 5 OF THE FIELD MEMORANDUM RECOGNIZED THAT PRIME SPONSORS COULD BE CAUGHT SHORT BY THE DOWNWARD REVISION IN FUNDING LEVELS, AND ADDRESSES THIS SITUATION AS FOLLOWS:

"DEPARTMENT OF LABOR PLANS TO COVER SHORTFALLS CREATED BY REVISED TITLES II-D AND VI ALLOCATIONS. IT IS ANTICIPATED THAT SOME PRIME SPONSORS WILL FACE SEVERE FUNDING PROBLEMS DUE TO THE REVISED ALLOCATIONS. IT WILL BE NECESSARY TO IMMEDIATELY IDENTIFY PRIME SPONSORS WHOSE REVISED ALLOCATIONS ARE LESS THAN ACCRUED EXPENDITURES TO DATE. IT WILL ALSO BE NECESSARY TO IDENTIFY THOSE PRIME SPONSORS WHICH WILL BE UNABLE TO CLOSE DOWN OPERATIONS BEFORE ACCRUED COSTS EXCEED THE REVISED ALLOCATIONS.

"IT IS THE DEPARTMENT'S INTENT TO PROVIDE ADDITIONAL FUNDS TO THOSE PRIME SPONSORS WHICH WERE OR ARE UNABLE TO CLOSE DOWN OPERATIONS BEFORE ACCRUED COSTS EXCEEDED THEIR REVISED TITLES II-D AND VI ALLOCATIONS. THESE FUNDS WILL BE PROVIDED ONLY TO PRIME SPONSORS WHICH INCURRED COSTS OVER AND ABOVE THEIR REVISED ALLOCATIONS AS A RESULT OF SUCH REQUIREMENTS AS LAYOFF NOTICES. ***

"FUNDS WILL NOT BE PROVIDED TO PRIME SPONSORS WHO FAIL TO ACT PROMPTLY TO CONTROL OVEREXPENDITURES OR FOR THOSE WHICH DELIBERATELY OVEREXTEND."

PARAGRAPH 5 GOES ON TO SPECIFY PROCEDURES AND TIME LIMITS TO BE FOLLOWED BY PRIME SPONSORS FOR LAYOFF NOTICES. IT ALSO IDENTIFIES AVAILABLE SOURCES OF FUNDS WHICH THE DOL INTENDS TO UTILIZE "TO ASSIST THOSE PRIME SPONSORS FACED WITH CONTROLLABLE OVEREXPENDITURES WHERE THE PRIME SPONSORS HAVE ACTED IN GOOD FAITH TO AVOID OR LIMIT SUCH OVEREXPENDITURES."

OTHER PORTIONS OF THE FIELD MEMORANDUM DEAL WITH THE PROCEDURAL PROTECTIONS TO BE AFFORDED PARTICIPANTS IN CONNECTION WITH LAYOFFS (PARAGRAPH 4(D)), AND EFFORTS TO BE MADE TO "TRANSITION" PARTICIPANTS TO OTHER ACTIVITIES (PARAGRAPH 4(G)).

YOUR QUESTIONS DEAL PRIMARILY WITH THE FUNDING ASPECTS OF THE FIELD MEMORANDUM AND THEIR IMPACT ON PRIME SPONSORS. IT IS OUR UNDERSTANDING, BASED ON DISCUSSIONS WITH DOL OFFICIALS, THAT THE FULL AMOUNT OF FORMULA GRANTS UNDER TITLES II-D AND VI OF CETA ARE OBLIGATED AT THE FEDERAL LEVEL (SEE 31 U.S.C. SEC. 200) AT THE TIME EACH GRANT IS MADE. FROM THIS POINT ON, THE GRANTEE CAN DRAW DOWN AGAINST THE FULL AMOUNT OF THE GRANT. HOWEVER, THE CETA PROGRAM REGULATIONS - SPECIFICALLY 20 C.F.R. SEC. 676.16(A) - PERMIT FEDERAL PROGRAM OFFICIALS TO ALTER FUND ALLOCATIONS LEVELS OVER THE COURSE OF THE GRANT PERIOD:

"*** THE RA (REGIONAL ADMINISTRATOR) MAY REQUIRE MODIFICATIONS OF THE CETP (COMPREHENSIVE EMPLOYMENT AND TRAINING PLAN) ONLY ONCE EACH FISCAL QUARTER WITH THE EXCEPTION OF CHANGES IN THE FUNDING ALLOCATION LEVEL OR TO INSURE COMPLIANCE WITH THE ACT AND REGULATIONS ***."

SINCE PRIME SPONSORS ARE REQUIRED TO COMPLY WITH THE CETA REGULATIONS AS A CONDITION TO THEIR GRANTS (SEE 20 C.F.R. SECS. 676.10-2, 676.10-3), DOL REGARDS THE ABOVE-QUOTED REGULATION AS PERMITTING IT TO MAKE UNILATERAL MODIFICATIONS IN THE ALLOCATION LEVELS AS FREQUENTLY AS NECESSARY. IN FACT, WE HAVE BEEN ADVISED BY DOL OFFICIALS THAT THIS PROVISION OF THE REGULATIONS HAS BEEN INVOKED IN THE PAST TO REDUCE FUNDING LEVELS FOR VARIOUS REASONS NOT INVOLVING DEFERRALS OR PROPOSED RESCISSIONS OF BUDGET AUTHORITY. FN1

WE DO NOT QUESTION IN THE ABSTRACT DOL'S AUTHORITY UNDER THE REGULATIONS DISCUSSED ABOVE TO UNILATERALLY REDUCE FUNDING LEVELS. IT IS NECESSARY, HOWEVER, TO CONSIDER THE APPLICATION OF THE REGULATIONS IN RELATION TO PROPOSED DEFERRALS AND RESCISSIONS UNDER THE IMPOUNDMENT CONTROL ACT AND THE CONSEQUENCES ON PRIME SPONSORS WHO ARE CAUGHT IN A "SHORTFALL" SITUATION AS A RESULT OF REDUCED FUNDING.

WE WILL FIRST CONSIDER THE IMPOUNDMENT CONTROL ACT ISSUES. THE IMPOUNDMENT CONTROL ACT GENERALLY AUTHORIZES THE WITHHOLDING OF BUDGET AUTHORITY DURING THE PENDENCY BEFORE CONGRESS OF PROPOSED DEFERRALS AND RESCISSIONS. DEFERRALS, OF COURSE, ARE WITHHOLDINGS OF BUDGET AUTHORITY WHICH ARE IMPLEMENTED BY EXECUTIVE ACTION AND GENERALLY CAN CONTINUE UNTIL THE END OF THE FISCAL YEAR IN WHICH THEY ARE IMPLEMENTED UNLESS EITHER HOUSE OF CONGRESS PASSES AN IMPOUNDMENT RESOLUTION DISAPPROVING THEM. SEE 31 U.S.C. SECS. 1401(1) AND 1403. A RESCISSION PROPOSAL UNDER THE ACT IS, IN EFFECT, A REQUEST BY THE PRESIDENT THAT CONGRESS REPEAL IN WHOLE OR IN PART CERTAIN BUDGET AUTHORITY. SEE GENERALLY 31 U.S.C. SECS. 1401(3) AND 1402. FN2 SECTION 1402(B) OF TITLE 31 PROVIDES WITH RESPECT TO RESCISSIONS PROPOSED BY THE PRESIDENT IN A SPECIAL MESSAGE:

"ANY AMOUNT OF BUDGET AUTHORITY PROPOSED TO BE RESCINDED *** IN SUCH SPECIAL MESSAGE SHALL BE MADE AVAILABLE FOR OBLIGATION UNLESS, WITHIN THE PRESCRIBED 45-DAY PERIOD, THE CONGRESS HAS COMPLETED ACTION ON A RESCISSION BILL RESCINDING ALL OR PART OF THE AMOUNT PROPOSED TO BE RESCINDED ***."

OUR OFFICE TRADITIONALLY HAS CONSTRUED THIS LANGUAGE AS AUTHORIZING THE WITHHOLDING OF BUDGET AUTHORITY PROPOSED FOR RESCISSION DURING THE PRESCRIBED 45 DAYS OF CONTINUOUS SESSION FOLLOWING SUBMISSION TO THE CONGRESS OF THE PRESIDENT'S PROPOOSAL.

GIVEN DOL'S AUTHORITY UNDER ITS PROGRAM REGULATIONS TO UNILATERALLY REDUCE FUNDING LEVELS AND THE AUTHORITY TO WITHHOLD FUNDS UNDER THE IMPOUNDMENT CONTROL ACT PENDING CONGRESSIONAL CONSIDERATION OF DEFERRALS AND RESCISSIONS, WE BELIEVE THAT DOL HAS CONSIDERABLE FLEXIBILITY. THE DEPARTMENT HAS REDUCED PRIME SPONSOR FUNDING LEVELS IN CONNECTION WITH THE DEFERRAL OF TITLE II-D BUDGET AUTHORITY, THEREBY DEOBLIGATING A PORTION OF THE TITLE II-D GRANTS. THIS ACTION DOES NOT VIOLATE THE IMPOUNDMENT CONTROL ACT.

ON THE OTHER HAND, DOL HAS NOT FORMALLY REDUCED PRIME SPONSOR FUNDING LEVELS IN ORDER TO DEOBLIGATE OR OTHERWISE "RETRIEVE" TITLE VI BUDGET AUTHORITY WHICH HAS BEEN PROPOSED FOR RESCISSION. AS NOTED PREVIOUSLY, THE FIELD MEMORANDUM STATES THAT THE REDUCED TITLE VI LEVELS HAVE NOT BEEN IMPLEMENTED, BUT ARE "VOLUNTARY" AT THIS TIME. AS WE UNDERSTAND THE PRESENT SITUATION, THEREFORE, TITLE VI GRANTEES REMAIN FREE TO DRAW DOWN AT THE HIGHER LEVELS NOW IN EFFECT. IN ANY EVENT, WE SEE NO LEGAL REASON WHY LABOR COULD NOT IMPLEMENT THE TITLE VI FUNDING REDUCTIONS AT THIS TIME, THEREBY DEOBLIGATING THE FUNDS PROPOSED FOR RESCISSION IN THE SAME MANNER THAT THE DEFERRED TITLE II-D FUNDS HAVE BEEN DEOBLIGATED. THIS WOULD BE CONSISTENT WITH OUR VIEW THAT THE EXECUTIVE HAS AUTHORITY TO WITHHOLD FUNDS PENDING CONGRESSIONAL CONSIDERATION OF A RESCISSION PROPOSAL. OF COURSE, FUNDS SO WITHHELD MUST BE RELEASED IF A RESCISSION HAS NOT BEEN ENACTED WITHIN 45 DAYS OF CONTINUOUS SESSION FOLLOWING SUBMISSION OF THE PRESIDENT'S SPECIAL MESSAGE. WE NEXT CONSIDER DOL'S ACTIONS AND PLANS IN TERMS OF THEIR IMPACT ON GRANTEES. WE BELIEVE IT IS, AT BEST, DOUBTFUL THAT DOL COULD EXERCISE ITS REGULATORY AUTHORITY TO REDUCE FUNDING LEVELS IN A MANNER THAT WOULD RESULT, BY DESIGN OR NECESSARY EFFECT, IN GRANTEES HAVING TO ABSORB LIABILITIES WHICH THEY HAD PROPERLY INCURRED PURSUANT TO THE GRANT. HOWEVER, WE ARE SATISFIED THAT THIS IS NOT THE CASE WITH RESPECT TO THE DOL ACTIONS AND PLANS HERE INVOLVED.

AS NOTED PREVIOUSLY, FIELD MEMORANDUM NO. 133-81 CLEARLY PROVIDES FOR NOTIFYING GRANTEES OF THE ACTUAL (IN THE CASE OF TITLE II-D) AND POTENTIAL (IN THE CASE OF TITLE VI) REDUCTIONS IN FUNDING LEVELS; OUTLINES ACTIONS WHICH GRANTEES ARE EXPECTED TO TAKE IN ORDER TO CONTROL OVEREXPENDITURES; AND INDICATES AN INTENT TO HOLD HARMLESS GRANTEES WHO HAVE INCURRED, OR MAY INCUR, COSTS BEYOND THEIR REVISED ALLOCATIONS EVEN THOUGH THEY HAVE TAKEN THE PRESCRIBED ACTIONS TO CONTROL OVEREXPENDITURES. IN ADDITION TO REVIEWING THE PROVISIONS OF THE FIELD MEMORANDUM, WE HAVE DISCUSSED IMPLEMENTATION OF THESE PROVISIONS WITH DOL OFFICIALS. THE REVISED TITLE II-D FUNDING LEVELS HAVE BEEN IMPLEMENTED; THUS GRANTEES ARE NOW LEGALLY BOUND BY SUCH REVISED LEVELS. THE DOL OFFICIALS ARE CONFIDENT THAT THEY WILL HAVE ADEQUATE FUNDS TO MEET THE HOLD HARMLESS PROVISIONS OF THE FIELD MEMORANDUM FOR THESE GRANTEES. WE UNDERSTAND THAT THE PRIMARY SOURCE FOR THIS PURPOSE WILL BE TITLE II-D DISCRETIONARY FUNDS. EVEN IF THE DISCRETIONARY FUNDS ARE NOT SUFFICIENT, THE FIELD MEMORANDUM IDENTIFIES OTHER POTENTIAL SOURCES. ULTIMATELY THE TITLE II-D FUNDS BEING DEFERRED FOR CARRYOVER INTO FISCAL YEAR 1982 COULD BE USED FOR THIS PURPOSE.

WHILE THE SITUATION WITH RESPECT TO TITLE VI GRANTEES IS MORE COMPLICATED, THE DOL OFFICIALS LIKEWISE BELIEVE THAT THEY CAN HOLD HARMLESS GRANTEES WHO TAKE PROMPT ACTION TO CONTROL OVEREXPENDITURES. WHILE THE REVISED TITLE VI FUNDING LEVELS HAVE NOT BEEN IMPLEMENTED, THE FIELD MEMORANDUM PROVIDES FOR FORMALLY NOTIFYING GRANTEES OF WHAT THEIR REVISED AMOUNTS WILL BE IF THE TITLE VI RESCISSION IS ENACTED. SUCH NOTICE WOULD SEEM SUFFICIENT TO INFORM TITLE VI GRANTEES THAT THEY ACT AT THEIR OWN RISK SHOULD THEY FAIL TO TAKE ACTION TO CONTROL OVEREXPENDITURES IN ANTICIPATION OF THE REVISED ALLOCATIONS. THE DOL OFFICIALS BELIEVE THAT THEY WILL HAVE SUFFICIENT FUNDS TO HOLD HARMLESS TITLE VI GRANTEES WHO TAKE THE CONTROL ACTIONS SPECIFIED IN THE FIELD MEMORANDUM. HOWEVER, THEY DOUBT THAT FUNDING WOULD BE AVAILABLE TO COVER ANY GRANTEES WHICH FAIL TO TAKE CONTROL ACTIONS AND CONTINUE TO SPEND AT THEIR CURRENT LEVELS. IN ANY EVENT, GIVEN THE NOTICE THAT HAS BEEN AFFORDED TO TITLE VI GRANTEES, IT APPEARS QUESTIONABLE WHETHER DOL WOULD HAVE ANY OBLIGATION TO ATTEMPT TO HOLD HARMLESS GRANTEES CAUGHT SHORT BY VIRTUE OF THEIR OWN ACTIONS IN THIS SITUATION.

FUNDAMENTALLY, THEREFORE, IT IS LABOR'S INTENT TO MAKE WHOLE TITLE II-D AND TITLE VI GRANTEES TO THE EXTENT THAT THEY INCUR LIABILITIES AS A RESULT OF ACTIONS WHICH DOL REQUIRES OF THEM. WHILE DOL CANNOT GUARANTEE THAT SUFFICIENT FUNDS WILL BE AVAILABLE FOR THIS PURPOSE, WE HAVE NO BASIS TO QUESTION THEIR INTENT IN THIS REGARD OR THEIR BELIEF THAT THEY WILL BE ABLE TO COMPLY WITH SUCH INTENT. IF THEY CANNOT HONOR THIS INTENT, IT IS CERTAINLY POSSIBLE THAT GRANTEES COULD HAVE VALID CLAIMS AGAINST DOL. HOWEVER, WE ARE NOT IN A POSITION TO SPECULATE ON WHAT MIGHT HAPPEN IN THIS SITUATION. THE OTHER CONCEIVABLE SOURCE OF CLAIMS WOULD BE TITLE VI GRANTEES WHO CONTINUE TO OPERATE WITHOUT TAKING PRESCRIBED ACTIONS IN ANTICIPATION OF THE REDUCED FUNDING LEVELS. AGAIN, WE ARE NOT IN A POSITION TO SPECULATE ON THE RESULTS SHOULD THIS OCCUR. HOWEVER, AS NOTED PREVIOUSLY, IT IS QUESTIONABLE WHETHER GRANTEES WOULD HAVE LEGALLY VALID CLAIMS IN THESE CIRCUMSTANCES.

WITH REGARD TO YOUR FINAL QUESTION, IT IS DIFFICULT TO FORESEE WHAT IMPACT, IF ANY, DOL'S ACTIONS WOULD HAVE ON THE FEDERAL GOVERNMENT'S FUTURE ABILITY TO CONTRACT WITH OTHER PARTIES. WE BELIEVE THAT DOL'S ACTIONS AND PLANS TO MINIMIZE THE ADVERSE IMPACT OF THE FUNDING LEVELS ON BOTH GRANTEES AND PROGRAM PARTICIPANTS WOULD AT LEAST MITIGATE ANY ADVERSE EFFECTS ON THE GOVERNMENT'S FUTURE PROGRAM ACTIONS. OF COURSE, THE SUCCESS OF THE HOLD HARMLESS MEASURES WILL CERTAINLY BE A FACTOR AS WELL.

WE HAVE DISCUSSED IN DETAIL ABOVE DOL'S ACTIONS WITH REGARD TO GRANTEES. LABOR ALSO HAS ATTEMPTED TO MINIMIZE THE IMPACT OF THE CETA PHASEDOWN ON PROGRAM PARTICIPANTS. SPECIFICALLY, PRIME SPONSORS HAVE BEEN INSTRUCTED TO MAKE EVERY EFFORT TO TRANSITION TITLE II-D AND VI PARTICIPANTS INTO OTHER ACTIVITIES. THIS INCLUDES:

- ACCELERATING THE "TRANSITIONING" OF PARTICIPANTS INTO PERMANENT UNSUBSIDIZED PRIVATE SECTOR EMPLOYMENT;

- TRANSITIONING PARTICIPANTS INTO OTHER CETA-FUNDED ACTIVITIES, SUCH AS TITLES II-B AND C AND VACANT POSITIONS IN THE PRIVATE SECTOR INITIATIVE PROGRAMS, OR FOR ELIGIBLE AID TO FAMILIES WITH DEPENDENT CHILDREN PARTICIPANTS, TO THE WORK INCENTIVE PROGRAM;

- REFERRING APPLICANTS TO THE LOCAL JOB SERVICE OFFICE;

- ENCOURAGING LOCAL GOVERNMENTS AND OTHER EMPLOYING AGENCIES TO ABSORB THE PUBLIC SERVICE EMPLOYEES INTO THEIR REGULAR WORK FORCES; AND

- REFERRING PARTICIPANTS TO OTHER NON-CETA FUNDED SKILLS TRAINING INSTITUTIONS SUCH AS COMMUNITY COLLEGES AND OTHER VOCATIONAL AND TECHNICAL INSTITUTIONS.

ALL PROGRAMS ADMINISTERED BY THE EMPLOYMENT AND TRAINING ADMINISTRATION ARE BEING REQUIRED TO MAKE THE "TRANSITIONING" OF PARTICIPANTS THEIR NUMBER ONE PRIORITY.

IN ADDITION, THE SECRETARY OF LABOR HAS REQUESTED A $245 MILLION REPROGRAMMING OF FISCAL YEAR 1981 TITLE II-D FUNDS TO CETA TITLE III FOR THE PURPOSE OF PROVIDING STATES WITH MONEY TO PAY UNEMPLOYMENT BENEFITS TO ENROLLEES WHO ARE LAID OFF. A SPECIAL ACCOUNT WILL BE ESTABLISHED WITH EACH STATE THROUGH WHICH COSTS WILL BE PAID FOR BENEFITS ATTRIBUTABLE TO WORK PERFORMED AFTER DECEMBER 5, 1980. COSTS ATTRIBUTABLE TO WORK PERFORMED BY PUBLIC SERVICE EMPLOYEES PRIOR TO DECEMBER 5 ARE FINANCED FROM THE FEDERAL UNEMPLOYMENT BENEFITS ACCOUNT (FUBA). THE REPROGRAMMING IS BEING REQUESTED BECAUSE THE OMNIBUS RECONCILIATION ACT OF 1980, PUB. L. 96-499, DECEMBER 5, 1980, PROHIBITED FINANCING OF UNEMPLOYMENT COSTS FROM THE FUBA FOR WORK PERFORMED AFTER DECEMBER 5.

WE ARE UNABLE TO DETERMINE AT THIS POINT THE EXTENT THAT DOL'S ACTIONS WILL MITIGATE HARDSHIP ON CETA PARTICIPANTS.

WE TRUST THE FOREGOING IS RESPONSIVE TO YOUR MARCH 17, 1981, LETTER. PLEASE DO NOT HESITATE TO CALL UPON US IF WE CAN BE OF FURTHER ASSISTANCE.

DIGEST

SECTION 1012 OF IMPOUNDMENT CONTROL ACT, 31 U.S.C. SEC. 1402, GENERALLY AUTHORIZES WITHHOLDING OF BUDGET AUTHORITY FOR UP TO 45 DAYS OF CONTINUOUS SESSION DURING CONGRESSIONAL CONSIDERATION OF RESCISSION PROPOSAL UNDER THAT ACT. ALSO, COMPREHENSIVE EMPLOYMENT AND TRAINING ACT REGULATIONS (20 CFR SEC. 676.16(A)) AUTHORIZE UNILATERAL REDUCTIONS IN PREVIOUSLY OBLIGATED FUNDING LEVELS FOR GRANTEES. BASED ON THESE AUTHORITIES, DEPARTMENT OF LABOR MAY REDUCE GRANTEE FUNDING LEVELS IN CONNECTION WITH RESCISSION PROPOSAL. SINCE DEPARTMENT PLANS TO HOLD HARMLESS GRANTEES WHO INCUR LIABILITIES AS RESULT OF ALLOCATION REDUCTIONS, NOTWITHSTANDING COMPLIANCE WITH LABOR DEPARTMENT-PRESCRIBED ACTIONS TO CONTROL OVEREXPENDITURES, GAO DOES NOT BELIEVE THAT LABOR'S PLANS AND ACTIONS ARE ILLEGAL.

FN1 BEFORE THE ISSUANCE OF FIELD MEMORANDUM NO. 133-81, THE TITLE VI FUNDING LEVELS FOR FISCAL YEAR 1981 HAD TO BE REDUCED TO REFLECT FUNDING ACTS MADE BY THE CONTINUING APPROPRIATIONS LEGISLATION WHICH NOW FUNDS THE PROGRAM, PUB. L. NO. 96-536 (DECEMBER 16, 1980), 94 STAT. 3166, 3171.

FN2 A PROPOSAL BY THE PRESIDENT TO RESERVE FOR THE BALANCE OF A FISCAL YEAR BUDGET AUTHORITY PROVIDED ONLY FOR 1 FISCAL YEAR IS ALSO TREATED AS A RESCISSION. HOWEVER, THIS CONCEPT IS NOT RELEVANT HERE SINCE THE TITLE II -D FUNDS BEING DEFERRED FOR THE BALANCE OF FISCAL YEAR 1981 ARE 2-YEAR APPROPRIATIONS.

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