B-146285, B-164031(1), APR 19, 1972

B-146285,B-164031(1): Apr 19, 1972

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WELFARE IS REQUIRED TO SEEK REPAYMENT OF A GRANT INADVERTENTLY AWARDED TO THE INGLEWOOD UNIFIED SCHOOL DISTRICT. IT IS ALSO WELL ESTABLISHED THAT GRANT RECIPIENTS ARE CHARGED WITH KNOWLEDGE OF FEDERAL REGULATIONS GOVERNING SUCH AWARDS. THE SCHOOL DISTRICT'S PARTIAL DESEGREGATION PLAN WAS NOT IN ACCORD WITH HEW REGULATIONS WHICH UNMISTAKABLY REQUIRED COMPLETE DESEGREGATION BY THE OPENING OF THE 1970-71 SCHOOL YEAR. SECRETARY: FURTHER REFERENCE IS MADE TO LETTER OF JULY 14. FROM THE GENERAL COUNSEL REQUESTING OUR DECISION AS TO WHETHER YOUR DEPARTMENT IS IN EVERY CASE REQUIRED TO SEEK THE REPAYMENT OF FUNDS UNDER GRANTS. BEEN DETERMINED TO HAVE BEEN INADVERTENTLY MADE WITHOUT AUTHORITY UNDER APPLICABLE FEDERAL STATUTES AND REGULATIONS GOVERNING THE GRANT PROGRAM.

B-146285, B-164031(1), APR 19, 1972

EMERGENCY SCHOOL ASSISTANCE PROGRAM - INELIGIBLE GRANT RECIPIENT - REPAYMENT OBLIGATION CONCERNING WHETHER THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE IS REQUIRED TO SEEK REPAYMENT OF A GRANT INADVERTENTLY AWARDED TO THE INGLEWOOD UNIFIED SCHOOL DISTRICT, INGLEWOOD, CALIF., OR WHETHER THE DEPARTMENT MAY PAY THE GRANTEE'S OBLIGATIONS INCURRED PRIOR TO NOTICE OF RETRACTION. ALTHOUGH UNUSUAL CIRCUMSTANCES MAY WARRANT AN EXCEPTION TO THE GENERAL RULE THAT GRANT FUNDS ERRONEOUSLY AWARDED TO AN INELIGIBLE GRANTEE MUST BE RECOVERED BY THE AGENCY RESPONSIBLE FOR THE ERROR, IT IS ALSO WELL ESTABLISHED THAT GRANT RECIPIENTS ARE CHARGED WITH KNOWLEDGE OF FEDERAL REGULATIONS GOVERNING SUCH AWARDS. FEDERAL CROP INSURANCE CORP. V MERRILL, 332 U.S. 380, 385 (1947). IN THE INSTANT CASE, THE SCHOOL DISTRICT'S PARTIAL DESEGREGATION PLAN WAS NOT IN ACCORD WITH HEW REGULATIONS WHICH UNMISTAKABLY REQUIRED COMPLETE DESEGREGATION BY THE OPENING OF THE 1970-71 SCHOOL YEAR. ACCORDINGLY, THE SUBJECT AMOUNT SHOULD BE COLLECTED AND THE GRANTEE MAY NOT BE REIMBURSED FOR EXPENDITURES INCURRED AND NONCANCELLABLE OBLIGATIONS ENTERED INTO PRIOR TO RECEIVING NOTICE THAT HEW'S INITIAL DETERMINATION HAD BEEN MADE IN ERROR.

TO MR. SECRETARY:

FURTHER REFERENCE IS MADE TO LETTER OF JULY 14, 1971, FROM THE GENERAL COUNSEL REQUESTING OUR DECISION AS TO WHETHER YOUR DEPARTMENT IS IN EVERY CASE REQUIRED TO SEEK THE REPAYMENT OF FUNDS UNDER GRANTS, WHICH HAD, SUBSEQUENT TO AWARD, BEEN DETERMINED TO HAVE BEEN INADVERTENTLY MADE WITHOUT AUTHORITY UNDER APPLICABLE FEDERAL STATUTES AND REGULATIONS GOVERNING THE GRANT PROGRAM; AND WHETHER YOUR DEPARTMENT MAY PAY FOR EXPENDITURES INCURRED AND NONCANCELLABLE COMMITMENTS MADE BY THE GRANT RECIPIENTS PRIOR TO NOTIFICATION THAT THE GRANT HAS BEEN RETRACTED.

IN OUR INITIAL RESPONSE TO YOU DATED SEPTEMBER 15, 1971, B-146285, 51 COMP. GEN. (1971), WE RENDERED OUR DECISION WITH RESPECT TO TWO OF THE EXAMPLES PRESENTED, BUT REFRAINED FROM RENDERING A DECISION WITH RESPECT TO THE EXAMPLE INVOLVING THE INGLEWOOD UNIFIED SCHOOL DISTRICT, INGLEWOOD, CALIFORNIA, BECAUSE OF A CONGRESSIONAL INQUIRY WE HAD RECEIVED WHICH NECESSITATED A MORE COMPLETE REPORT FROM YOUR OFFICE, WHICH WE REQUESTED. WE HAVE NOW COMPLETED OUR REVIEW OF THE REPORT FURNISHED BY YOUR GENERAL COUNSEL. OUR CONCLUSIONS, WHICH FOLLOW, SHOULD BE READ IN CONJUNCTION WITH OUR DECISION OF SEPTEMBER 15, 1971.

GENERALLY, GRANT FUNDS ERRONEOUSLY AWARDED TO AN INELIGIBLE GRANTEE MUST BE RECOVERED BY THE AGENCY RESPONSIBLE FOR THE ERROR. WHILE WE APPLIED THE GENERAL RULE REQUIRING RECOVERY OF SUCH FUNDS IN TWO SIMILAR EXAMPLES IN OUR DECISION OF SEPTEMBER 15, 1971, WE ALSO STATED THAT WE RECOGNIZED THAT THERE MIGHT BE EXCEPTIONAL OR UNUSUAL INSTANCES IN WHICH RECOVERY MIGHT NOT BE REQUIRED, AND THAT EACH CASE WOULD HAVE TO BE DECIDED ON ITS INDIVIDUAL MERITS. IT IS THE VIEW OF YOUR GENERAL COUNSEL THAT THE INGLEWOOD CASE PRESENTS SUCH CIRCUMSTANCES. WE CANNOT AGREE.

THE RECORD INDICATES THAT THE SCHOOL DISTRICT'S DESEGREGATION PLAN WAS IN FACT IN A TERMINAL PHASE WITH RESPECT TO THE DISTRICT'S ELEMENTARY SCHOOLS. IN THE GENERAL COUNSEL'S VIEW, IT WAS THIS "PARTIAL TERMINALITY" WHICH WAS UNUSUAL AND OCCASIONED THE ERRONEOUS DETERMINATION BY THE OFFICE OF EDUCATION WITH RESPECT TO THE DISTRICT'S ELIGIBILITY AND LED TO THE DISTRICT'S RELIANCE ON THE DETERMINATION MADE BY THE HEW OFFICIALS. THE GENERAL COUNSEL'S WORDS:

" *** IT WAS THIS CIRCUMSTANCE THAT LED THE OFFICE OF EDUCATION TO THE ERRONEOUS CONCLUSION THAT THE DISTRICT WAS ELIGIBLE FOR ESAP ASSISTANCE. ALTHOUGH THE DETERMINATION CONCERNING THE TERMINAL PHASE REQUIREMENT WAS A MATTER OF OBJECTIVE EVALUATION, THE ERROR WAS OCCASIONED BY THIS PARTIAL TERMINALITY. IT IS UNDERSTANDABLE, THEREFORE, THAT THE DISTRICT ASSUMED ITS PLAN ACCEPTABLE AND RELIED ON THE DECISION MADE BY THE OFFICE OF EDUCATION."

IT IS WELL ESTABLISHED THAT THOSE PERSONS SEEKING TO COME WITHIN FEDERAL ASSISTANCE PROGRAMS ARE CHARGED WITH KNOWLEDGE OF FEDERAL RULES AND REGULATIONS GOVERNING THE ADMINISTRATION OF THE PROGRAMS AND THAT THE APPEARANCE OF SUCH RULES AND REGULATIONS IN THE FEDERAL REGISTER GIVES LEGAL NOTICE OF THEIR CONTENTS. FEDERAL CROP INSURANCE CORPORATION V MERRILL, 332 U.S. 380, 385 (1947). 45 CFR 181.3(A), RELATING TO THE ESAP PROGRAM (PUBLISHED IN THE FEDERAL REGISTER AUGUST 22, 1970), CLEARLY PROVIDES THAT ASSISTANCE UNDER THE PROGRAM WILL BE PROVIDED TO A SCHOOL DISTRICT IMPLEMENTING A DESEGREGATION PLAN:

"(2) WHICH (I) IS TO COMMENCE THE TERMINAL PHASE OF SUCH PLAN *** BY THE OPENING OF THE 1970-71 ACADEMIC YEAR OR (II) HAS COMMENCED SUCH TERMINAL PHASE DURING THE 1968-69 OR 1969-70 ACADEMIC YEAR."

45 CFR 181.1 CLEARLY DEFINES "TERMINAL PHASE" AS FOLLOWS:

"(G) THE TERM 'TERMINAL PHASE,' AS IT RELATES TO A DESEGREGATION PLAN, MEANS THAT PHASE OF A PLAN AT WHICH THE LOCAL EDUCATION AGENCY BEGINS OPERATING A UNITARY SCHOOL SYSTEM WITHIN WHICH NO PERSON IS EFFECTIVELY EXCLUDED FROM ANY SCHOOL BECAUSE OF RACE OR COLOR. (ALEXANDER V HOLMES CO., 396 U.S. 19 (1969))."

HAD THE ABOVE REGULATIONS BEEN VAGUE OR INCOMPLETE IN SOME RESPECTS, VIZ., HAD NOT DEFINED WITH SUCH CLARITY THE TERM "TERMINAL PHASE," IT IS CONCEIVABLE THAT THE SCHOOL DISTRICT COULD REASONABLY HAVE CONSIDERED THAT ITS PARTIALLY IMPLEMENTED PROGRAM SATISFIED THE GENERAL ELIGIBILITY REQUIREMENTS OF THE LAW. SUCH A CIRCUMSTANCE, COUPLED WITH THE ERRONEOUS DETERMINATION BY HEW COULD, IN OUR VIEW, HAVE REASONABLY BEEN CONSIDERED AN "EXCEPTIONAL" INSTANCE IN WHICH RECOVERY MAY NOT HAVE BEEN APPROPRIATE. HOWEVER, IN THE PRESENT CASE, THE SCHOOL DISTRICT'S PLAN PROVIDED FOR ONLY PARTIAL DESEGREGATION WHEN APPLICABLE HEW REGULATIONS PERTAINING TO GRANTEE ELIGIBILITY WERE UNMISTAKABLY CLEAR AND REQUIRED COMPLETE DESEGREGATION OF THE SCHOOL SYSTEM "BY THE OPENING OF THE 1970-71 ACADEMIC SCHOOL YEAR." SUCH CANNOT, IN OUR VIEW, BE REASONABLY CONSIDERED AS AN UNUSUAL OR EXCEPTIONAL INSTANCE JUSTIFYING NONREPAYMENT OF THE FUNDS IN QUESTION.

ACCORDINGLY, YOU ARE ADVISED THAT THERE SHOULD BE COLLECTED FROM THE INGLEWOOD UNIFIED SCHOOL DISTRICT ALL MONIES RECEIVED AND EXPENDED UNDER THE GRANT IN QUESTION. IT FOLLOWS THAT THE SCHOOL DISTRICT MAY NOT BE REIMBURSED FOR EXPENDITURES INCURRED AND NONCANCELLABLE OBLIGATIONS ENTERED INTO PRIOR TO RECEIVING NOTICE THAT THE DEPARTMENT'S INITIAL DETERMINATION HAD BEEN MADE IN ERROR.