A-91733, JANUARY 21, 1938, 17 COMP. GEN. 593

A-91733: Jan 21, 1938

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THERE IS FOR ADMINISTRATIVE CONSIDERATION WHETHER. IS AS FOLLOWS: AS A MEANS OF EQUALIZING EXPENDITURES FROM STATE AND LOCAL MATCHING FUNDS AND FROM FUNDS GRANTED TO THE STATES BY THE FEDERAL GOVERNMENT IN ACCORDANCE WITH PARTS 1 AND 2 OF TITLE V OF THE SOCIAL SECURITY ACT (ACT OF AUGUST 14. THE CHILDREN'S BUREAU OF THIS DEPARTMENT ADVISED OFFICIAL STATE AGENCIES THAT THEY ARE ENTITLED AT THE END OF EACH QUARTER TO TRANSFER TO STATE FUNDS FROM THE SO-CALLED "TRUST FUND ACCOUNTS. THERE ARE THREE METHODS OF DISPOSING OF SUCH FUNDS WHICH THE CHILDREN'S BUREAU. THESE METHODS ARE AS FOLLOWS: 1. SEPARATE ACCOUNTS RATHER THAN POOLED ACCOUNTS WERE ESTABLISHED BECAUSE OF THE IMPOSSIBILITY UNDER THE LAWS AND PROCEDURES OF MOST STATES OF DEPOSITING FEDERAL.

A-91733, JANUARY 21, 1938, 17 COMP. GEN. 593

STATES - FEDERAL AID - SOCIAL SECURITY ACT ALLOTMENTS - USE AND DISPOSITION OF FUNDS FEDERAL FUNDS GRANTED TO THE STATES UNDER PARTS 1 AND 2 OF TITLE V OF THE SOCIAL SECURITY ACT, 49 STAT. 620, HELD BY THE STATES IN TRUST FUND ACCOUNTS FOR SEGREGATION PURPOSES AND WHICH BECOME BONA FIDE STATE FUNDS BY REASON OF EXPENDITURES OF STATE FUNDS IN REQUIRED AMOUNTS, MAY BE USED THEREAFTER AS THE STATES MAY DECIDE, IRRESPECTIVE OF WHETHER THEY REMAIN IN SUCH TRUST FUND ACCOUNTS OR OTHERWISE, BUT THERE IS FOR ADMINISTRATIVE CONSIDERATION WHETHER, IN ORDER TO AVOID CONFUSION WITH NEW ALLOTMENTS, THE FUNDS SHOULD NOT BE TRANSFERRED TO SOME OTHER STATE CONTROLLED ACCOUNT.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF LABOR, JANUARY 21, 1938:

YOUR LETTER OF JANUARY 6, 1938, IS AS FOLLOWS:

AS A MEANS OF EQUALIZING EXPENDITURES FROM STATE AND LOCAL MATCHING FUNDS AND FROM FUNDS GRANTED TO THE STATES BY THE FEDERAL GOVERNMENT IN ACCORDANCE WITH PARTS 1 AND 2 OF TITLE V OF THE SOCIAL SECURITY ACT (ACT OF AUGUST 14, 1935, C. 531, 49 STAT. 620, U.S. CODE, TI. 42, SEC. 301 FF.), THE CHILDREN'S BUREAU OF THIS DEPARTMENT ADVISED OFFICIAL STATE AGENCIES THAT THEY ARE ENTITLED AT THE END OF EACH QUARTER TO TRANSFER TO STATE FUNDS FROM THE SO-CALLED "TRUST FUND ACCOUNTS," COMPOSED OF FEDERAL GRANTS-IN-AID TO THE STATES, THE DIFFERENCE BETWEEN "ONE-HALF OF THE TOTAL SUM EXPENDED DURING EACH QUARTER" IN CARRYING OUT THEIR PLANS AND THE AMOUNT ACTUALLY OBLIGATED DURING SUCH QUARTER FROM "TRUST FUND ACCOUNTS.'

IN CONNECTION WITH THE ADMINISTRATION OF THE NEW YORK STATE PLANS FOR MATERNAL AND CHILD-HEALTH SERVICES AND SERVICES FOR CRIPPLED CHILDREN, APPROVED UNDER THE PROVISIONS OF PARTS 1 AND 2 OF TITLE V OF THE ACT, THE DIRECTOR OF THE BUDGET OF THE STATE OF NEW YORK HAS REQUESTED THAT YOUR OPINION BE OBTAINED UPON THE QUESTION OF WHETHER OR NOT THE FUNDS ACCRUED TO THE STATE THROUGH EQUALIZATION ON THE BASIS OF ONE-HALF THE TOTAL COST, MAY BE INCLUDED IN SUBSEQUENT PLANS FOR EXPENDITURE BY THE STATE WITHOUT THE REQUIREMENT OF FURTHER MATCHING OF SUCH FUNDS BY CORRESPONDING EXPENDITURES FROM STATE FUNDS.

FOR THE FISCAL YEARS 1936 AND 1937 THERE HAS ACCRUED TO NEW YORK STATE THROUGH THIS EQUALIZATION PROCEDURE A CREDIT FROM FEDERAL FUNDS AMOUNTING TO $67,022.83 UNDER PLANS FOR MATERNAL AND CHILD-HEALTH SERVICES, AND $75,864.36 UNDER PLANS FOR SERVICES FOR CRIPPLED CHILDREN, OR A TOTAL OF $142,887.19. OF THIS TOTAL, THE STATE HAS TRANSFERRED TO THE GENERAL FUNDS OF THE STATE OF NEW YORK A TOTAL OF $79,149.69 AND TRANSFER OF THE BALANCE, OR $63,737.50, HAS BEEN DEFERRED PENDING DECISION ON THE QUESTION REFERRED TO ABOVE.

THERE ARE THREE METHODS OF DISPOSING OF SUCH FUNDS WHICH THE CHILDREN'S BUREAU, ACTING UPON THE ADVICE OF THE SOLICITOR OF THE DEPARTMENT, HAS PERMITTED THE STATES TO FOLLOW. THESE METHODS ARE AS FOLLOWS:

1. ACTUAL TRANSFER OF SUCH FUNDS TO THE GENERAL FUNDS OF THE STATE.

2. NOT TO TRANSFER SUCH FUNDS TO THE GENERAL FUNDS OF THE STATE BUT TO RETAIN THEM IN THE ,TRUST FUND ACCOUNT" AND TO INCLUDE THEM IN SUBSEQUENT PLANS AS FUNDS TO BE USED FOR MATCHING FURTHER REQUESTS FOR FEDERAL GRANTS -IN-AID.

3. NOT TO TRANSFER SUCH FUNDS TO THE GENERAL FUNDS OF THE STATE BUT TO INCLUDE THEM IN SUBSEQUENT PLANS WITHOUT REGARD TO FURTHER MATCHING BY PROPOSED EXPENDITURES FROM STATE FUNDS.

THE FIRST METHOD EVOLVED OUT OF THE PRACTICE OF MOST STATES OF DEPOSITING FEDERAL GRANTS-IN-AID FOR MATERNAL AND CHILD HEALTH AND CRIPPLED CHILDREN'S SERVICES IN SPECIAL ACCOUNTS SEPARATE FROM STATE OR LOCAL FUNDS BROUGHT WITHIN THE STATE PLANS AND TO DISBURSE THESE FUNDS SEPARATELY. SEPARATE ACCOUNTS RATHER THAN POOLED ACCOUNTS WERE ESTABLISHED BECAUSE OF THE IMPOSSIBILITY UNDER THE LAWS AND PROCEDURES OF MOST STATES OF DEPOSITING FEDERAL, STATE, COUNTY, AND OTHER LOCAL OR PRIVATELY CONTRIBUTED FUNDS IN POOLED ACCOUNTS AND MAKING DISBURSEMENTS THEREFROM. IMPOSSIBILITY OF MAINTAINING UNIFORMITY IN THE DEVELOPMENT OF THE VARIOUS PHASES OF PLANNED PROGRAMS RESULTED, IN SOME STATES, IN LARGER EXPENDITURES BEING MADE FROM STATE OR LOCAL FUNDS THAN FROM THE "TRUST FUND ACCOUNTS" COMPOSED OF FUNDS GRANTED TO THE STATES BY THE FEDERAL GOVERNMENT. IN OTHER STATES THE RATE OF EXPENDITURES FROM THE "TRUST FUND ACCOUNTS" WAS GREATER THAN THAT FROM STATE AND LOCAL FUNDS. IN ORDER TO BRING THESE EXPENDITURES INTO BALANCE THE STATES AT FIRST WERE PERMITTED TO TRANSFER FUNDS FROM ONE ACCOUNT TO THE OTHER AT THE END OF EACH QUARTER.

IT WAS SOON FOUND THAT THE FIRST PROCEDURE INDICATED ABOVE WAS NOT ENTIRELY ADAPTABLE TO THE FISCAL PROCEDURES OF A NUMBER OF STATES. SOME STATES IT WAS FOUND THAT SUCH TRANSFERS COULD NOT BE MADE IN THE ABSENCE OF SPECIAL STATUTORY AUTHORITY, IN OTHERS IT WAS FOUND THAT TRANSFERS FROM THE "TRUST FUND ACCOUNTS" COULD ONLY BE MADE INTO THE STATES' GENERAL FUNDS, AND THAT THEY COULD NOT THEREAFTER BE DEVOTED TO THE PURPOSES OF MATERNAL AND CHILD HEALTH AND CRIPPLED CHILDREN'S PROGRAMS WITHOUT REAPPROPRIATION. TO MEET THIS SITUATION THE SECOND AND THIRD METHODS REFERRED TO ABOVE WERE SUGGESTED TO THE STATES.

THE IMPORTANT FEATURE COMMON TO EACH OF THE THREE METHODS OF PROCEDURE WITH WHICH WE ARE HERE CONCERNED IS THAT THEY EFFECT AN ULTIMATE EQUALIZATION OF EXPENDITURES OF FUNDS PROVIDED BY THE STATES AND BY THE FEDERAL GOVERNMENT AND THAT EACH METHOD PROVIDES ASSURANCE AGAINST THE USE OF MORE FEDERAL FUNDS THAN OF STATE AND LOCAL FUNDS. THUS, THESE METHODS OF EQUALIZATION APPEAR TO BE CONSONANT WITH THE FUNDAMENTAL REQUIREMENT OF SECTIONS 504 (A) AND (B) AND 514 (A) AND (B) OF THE SOCIAL SECURITY ACT THAT FEDERAL GRANTS-IN-AID SHALL BE USED TO PAY NOT MORE THAN ONE-HALF THE COST OF CARRYING OUT STATE PLANS.

YOUR OPINION IS RESPECTFULLY REQUESTED UPON THE QUESTION OF WHETHER OR NOT THE STATE OF NEW YORK MAY PROPERLY FOLLOW ANY OF THE THREE METHODS OF DISPOSING OF THE FUNDS WHICH HAVE ACCRUED TO IT IN THE MANNER INDICATED ABOVE, PROVIDED, OF COURSE, THAT SUCH PROCEDURE IS IN ACCORDANCE WITH THE LAW OF THAT STATE.

IF YOU DESIRE ANY ADDITIONAL INFORMATION WITH REGARD TO THESE PROCEDURES, I SHALL BE GLAD TO FURNISH IT, OR TO ARRANGE FOR A REPRESENTATIVE OF THIS DEPARTMENT TO CONFER WITH YOU.

SECTIONS 502 AND 504 OF THE SOCIAL SECURITY ACT, 49 STAT. 629 AND 630, PROVIDE:

SEC. 502. (A) OUT OF THE SUMS APPROPRIATED PURSUANT TO SECTION 501 FOR EACH FISCAL YEAR THE SECRETARY OF LABOR SHALL ALLOT TO EACH STATE $20,000, AND SUCH PART OF $1,800,000 AS HE FINDS THAT THE NUMBER OF LIVE BIRTHS IN SUCH STATE BORE TO THE TOTAL NUMBER OF LIVE BIRTHS IN THE UNITED STATES, IN THE LATEST CALENDAR YEAR FOR WHICH THE BUREAU OF THE CENSUS HAS AVAILABLE STATISTICS.

(B) OUT OF THE SUMS APPROPRIATED PURSUANT TO SECTION 501 FOR EACH FISCAL YEAR THE SECRETARY OF LABOR SHALL ALLOT TO THE STATES $980,000 (IN ADDITION TO THE ALLOTMENTS MADE UNDER SUBSECTION (A) (, ACCORDING TO THE FINANCIAL NEED OF EACH STATE FOR ASSISTANCE IN CARRYING OUT ITS STATE PLAN, AS DETERMINED BY HIM AFTER TAKING INTO CONSIDERATION THE NUMBER OF LIVE BIRTHS IN SUCH STATE.

(C) THE AMOUNT OF ANY ALLOTMENT TO A STATE UNDER SUBSECTION (A) FOR ANY FISCAL YEAR REMAINING UNPAID TO SUCH STATE AT THE END OF SUCH FISCAL YEAR SHALL BE AVAILABLE FOR PAYMENT TO SUCH STATE UNDER SECTION 504 UNTIL THE END OF THE SECOND SUCCEEDING FISCAL YEAR. NO PAYMENT TO A STATE UNDER SECTION 504 SHALL BE MADE OUT OF ITS ALLOTMENT FOR ANY FISCAL YEAR UNTIL ITS ALLOTMENT FOR THE PRECEDING FISCAL YEAR HAS BEEN EXHAUSTED OR HAS CEASED TO BE AVAILABLE.

SEC. 504. (A) FROM THE SUMS APPROPRIATED THEREFOR AND THE ALLOTMENTS AVAILABLE UNDER SECTION 502 (A), THE SECRETARY OF THE TREASURY SHALL PAY TO EACH STATE WHICH HAS AN APPROVED PLAN FOR MATERNAL AND CHILD-HEALTH SERVICES, FOR EACH QUARTER, BEGINNING WITH THE QUARTER COMMENCING JULY 1, 1935, AN AMOUNT, WHICH SHALL BE USED EXCLUSIVELY FOR CARRYING OUT THE STATE PLAN, EQUAL TO ONE-HALF OF THE TOTAL SUM EXPENDED DURING SUCH QUARTER FOR CARRYING OUT SUCH PLAN.

(B) THE METHOD OF COMPUTING AND PAYING SUCH AMOUNTS SHALL BE AS FOLLOWS:

(1) THE SECRETARY OF LABOR SHALL, PRIOR TO THE BEGINNING OF EACH QUARTER, ESTIMATE THE AMOUNT TO BE PAID TO THE STATE FOR SUCH QUARTER UNDER THE PROVISIONS OF SUBSECTION (A), SUCH ESTIMATE TO BE BASED ON (A) A REPORT FILED BY THE STATE CONTAINING ITS ESTIMATE OF THE TOTAL SUM TO BE EXPENDED IN SUCH QUARTER IN ACCORDANCE WITH THE PROVISIONS OF SUCH SUBSECTION AND STATING THE AMOUNT APPROPRIATED OR MADE AVAILABLE BY THE STATE AND ITS POLITICAL SUBDIVISIONS FOR SUCH EXPENDITURES IN SUCH QUARTER, AND IF SUCH AMOUNT IS LESS THAN ONE-HALF OF THE TOTAL SUM OF SUCH ESTIMATED EXPENDITURES, THE SOURCE OR SOURCES FROM WHICH THE DIFFERENCE IS EXPECTED TO BE DERIVED, AND (B) SUCH INVESTIGATION AS HE MAY FIND NECESSARY.

(2) THE SECRETARY OF LABOR SHALL THEN CERTIFY THE AMOUNT SO ESTIMATED BY HIM TO THE SECRETARY OF THE TREASURY, REDUCED OR INCREASED, AS THE CASE MAY BE, BY ANY SUM BY WHICH THE SECRETARY OF LABOR FINDS THAT HIS ESTIMATE FOR ANY PRIOR QUARTER WAS GREATER OR LESS THAN THE AMOUNT WHICH SHOULD HAVE BEEN PAID TO THE STATE FOR SUCH QUARTER, EXCEPT TO THE EXTENT THAT SUCH SUM HAS BEEN APPLIED TO MAKE THE AMOUNT CERTIFIED FOR ANY PRIOR QUARTER GREATER OR LESS THAN THE AMOUNT ESTIMATED BY THE SECRETARY OF LABOR FOR SUCH PRIOR QUARTER.

(3) THE SECRETARY OF THE TREASURY SHALL THEREUPON, THROUGH THE DIVISION OF DISBURSEMENT OF THE TREASURY DEPARTMENT AND PRIOR TO AUDIT OR SETTLEMENT BY THE GENERAL ACCOUNTING OFFICE, PAY TO THE STATE, AT THE TIME OR TIMES FIXED BY THE SECRETARY OF LABOR, THE AMOUNT SO CERTIFIED.

(C) THE SECRETARY OF LABOR SHALL FROM TIME TO TIME CERTIFY TO THE SECRETARY OF THE TREASURY THE AMOUNTS TO BE PAID TO THE STATES FROM THE ALLOTMENTS AVAILABLE UNDER SECTION 502 (B), AND THE SECRETARY OF THE TREASURY SHALL, THROUGH THE DIVISION OF DISBURSEMENT OF THE TREASURY DEPARTMENT AND PRIOR TO AUDIT OR SETTLEMENT BY THE GENERAL ACCOUNTING OFFICE, MAKE PAYMENTS OF SUCH AMOUNTS FROM SUCH ALLOTMENTS AT THE TIME OR TIMES SPECIFIED BY THE SECRETARY OF LABOR.

IT IS ASSUMED FROM YOUR SUBMISSION THAT THE SO-CALLED "TRUST FUND ACCOUNTS" ARE ACCOUNTS OR DEPOSITS MADE IN THE NAME OF AND SUBJECT TO THE CONTROL OF THE PROPER STATE OFFICIALS FOR THE PURPOSE OF SEGREGATING THE FEDERAL FUNDS FROM OTHER STATE FUNDS. WHEN THE STATE HAS SO ESTABLISHED ITS RIGHT TO SUCH FUNDS BY SHOWING AN EXPENDITURE OF TWICE THE AMOUNT OF SUCH ALLOTMENTS THEY BECOME TO ALL INTENTS AND PURPOSES STATE FUNDS AND MAY BE USED IN ANY MANNER AUTHORIZED BY THE STATE LAWS WHETHER SUCH USE IS FOR MATCHING OTHER GRANTS TO THE STATE OR FOR OTHER STATE EXPENDITURES AND IRRESPECTIVE OF WHETHER THEY REMAIN IN SUCH TRUST FUND ACCOUNT OR OTHERWISE. IT WOULD APPEAR PREFERABLE, WHEN SUCH A CONDITION HAS BEEN ESTABLISHED AND IN ORDER TO AVOID CONFUSION WITH NEW ALLOTMENTS, THAT SUCH FUNDS BE TRANSFERRED FROM THE TRUST FUND ACCOUNT EITHER TO THE GENERAL FUNDS OF THE STATE OR TO SOME OTHER ACCOUNT SUBJECT TO STATE EXPENDITURE, BUT THIS IS PRIMARILY A MATTER BETWEEN THE STATE AND YOUR DEPARTMENT.