B-146522, AUGUST 23, 1961, 41 COMP. GEN. 134

B-146522: Aug 23, 1961

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ETC. - PROPRIETY - APPROPRIATIONS - FISCAL YEAR - AVAILABILITY BEYOND - CONTRACTS - AMENDMENTS WHERE SPECIFIC STATUTORY AUTHORITY EXISTS FOR THE PAYMENT OF FEDERAL FUNDS TO STATES WITHOUT CONSIDERATION SUCH AS IS CONTAINED IN THE FEDERAL WATER POLLUTION CONTROL ACT. UNDER WHICH CONTRIBUTIONS ARE MADE TO THE STATES FOR THE CONSTRUCTION OF SEWAGE TREATMENT WORKS. THE PRINCIPLES PRECLUDING THE WAIVER OF VESTED RIGHTS AND THE MODIFICATION OF CONTRACTS BY SUPPLEMENTAL OR SUBSTITUTE AGREEMENTS ARE NOT FOR APPLICATION. DO NOT HAVE ANY LEGAL RIGHT TO COMPEL THE EXECUTION OF AN AMENDMENT TO OBTAIN AN INCREASE IN THE AMOUNT OF THE GRANT. RELATION BACK" UNDER WHICH AN APPROPRIATION INITIALLY OBLIGATED FOR A CONTRACT MUST BE CHARGED WITH ALL NECESSARY COSTS OF THE CONTRACT IS MISSING AND THE LONG ESTABLISHED APPROPRIATION RULE IS NOT FOR APPLICATION.

B-146522, AUGUST 23, 1961, 41 COMP. GEN. 134

STATES - FEDERAL AID, GRANTS, ETC. - AMENDMENT, ETC. - PROPRIETY - APPROPRIATIONS - FISCAL YEAR - AVAILABILITY BEYOND - CONTRACTS - AMENDMENTS WHERE SPECIFIC STATUTORY AUTHORITY EXISTS FOR THE PAYMENT OF FEDERAL FUNDS TO STATES WITHOUT CONSIDERATION SUCH AS IS CONTAINED IN THE FEDERAL WATER POLLUTION CONTROL ACT, 33 U.S.C. 466E (B), UNDER WHICH CONTRIBUTIONS ARE MADE TO THE STATES FOR THE CONSTRUCTION OF SEWAGE TREATMENT WORKS, WITHIN CERTAIN MAXIMUM LIMITATIONS, AND SUBJECT TO PAYMENT OF REMAINING COSTS BY THE GRANTEE, THE PRINCIPLES PRECLUDING THE WAIVER OF VESTED RIGHTS AND THE MODIFICATION OF CONTRACTS BY SUPPLEMENTAL OR SUBSTITUTE AGREEMENTS ARE NOT FOR APPLICATION, THEREFORE, THE SURGEON GENERAL MAY AMEND THE GRANTS, WITHIN THE MONETARY LIMITS, WHEN ADDITIONAL FUNDS BECOME AVAILABLE, NOTWITHSTANDING THAT A GRANT FOR A LESSER SUM HAS BEEN OFFERED AND ACCEPTED AND THE GRANTEE OBLIGATED TO PROVIDE ALL FUNDS REQUIRED OVER THE GRANT TO COMPLETE THE PROJECT. IN VIEW OF THE FACT THAT STATES RECEIVING FEDERAL CONTRIBUTIONS FOR CONSTRUCTION OF SEWAGE TREATMENT WORKS UNDER SECTION 6 OF THE FEDERAL WATER POLLUTION CONTROL ACT, 33 U.S.C. 466E, DO NOT HAVE ANY LEGAL RIGHT TO COMPEL THE EXECUTION OF AN AMENDMENT TO OBTAIN AN INCREASE IN THE AMOUNT OF THE GRANT, AN ESSENTIAL ELEMENT--- ANTECEDENT LAWFUL RIGHT--- FOR APPLICATION OF THE DOCTRINE OF ,RELATION BACK" UNDER WHICH AN APPROPRIATION INITIALLY OBLIGATED FOR A CONTRACT MUST BE CHARGED WITH ALL NECESSARY COSTS OF THE CONTRACT IS MISSING AND THE LONG ESTABLISHED APPROPRIATION RULE IS NOT FOR APPLICATION; THEREFORE, A SUCCEEDING YEAR'S APPROPRIATION AVAILABLE FOR SEWAGE TREATMENT PROJECTS MAY BE CHARGED FOR A GRANT INCREASE EFFECTED BY AN AMENDMENT TO THE ORIGINAL GRANT.

TO THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE, AUGUST 23, 1961:

THIS IS IN RESPONSE TO YOUR LETTER OF JULY 24, 1961, CONCERNING A QUESTION WHICH HAS ARISEN IN YOUR DEPARTMENT WITH RESPECT TO GRANTS FOR CONSTRUCTION UNDER SECTION 6 OF THE FEDERAL WATER POLLUTION CONTROL ACT, 70 STAT. 498, 502, 33 U.S.C. 466E.

UNDER SECTION 6 OF THE ACT THE SURGEON GENERAL IS AUTHORIZED TO MAKE GRANTS TO STATES AND MUNICIPALITIES FOR THE CONSTRUCTION OF NECESSARY TREATMENT WORKS TO PREVENT THE DISCHARGE OF INADEQUATELY TREATED SEWAGE INTO ANY WATERS. SUMS APPROPRIATED UNDER THE STATUTE FOR EACH FISCAL YEAR ARE FROM TIME TO TIME ALLOTTED, ON THE BASIS OF POPULATION AND INCOME STATISTICS, BY THE SURGEON GENERAL TO THE STATES TO BE AVAILABLE FOR APPROVED TREATMENT WORKS PROJECTS. SEVERAL LIMITATIONS ARE IMPOSED BY SUBSECTION 6 (B) OF THE ACT, 33 U.S.C. 466E (B) ONE PERTINENT TO THE QUESTION RAISED BEING AS FOLLOWS:

* * * (2) NO GRANT SHALL BE MADE FOR ANY PROJECT IN AN AMOUNT EXCEEDING 30 PERCENTUM OF THE ESTIMATED REASONABLE COST THEREOF AS DETERMINED BY THE SURGEON GENERAL OR IN AN AMOUNT EXCEEDING $250,000, WHICHEVER IS THE SMALLER; PROVIDED, THAT THE GRANTEE AGREES TO PAY THE REMAINING COST; * *

YOU STATE THAT BECAUSE FUNDS ALLOTTED TO THE STATES ARE FREQUENTLY INADEQUATE TO MEET THE DEMAND FOR GRANTS AT ANY GIVEN TIME, A PROBLEM ARISES CONCERNING UTILIZATION IN ANY YEAR OF THE REMAINING OR "RESIDUAL" FUNDS WHICH MAY BE CONSIDERABLY LESS THAN THE 30 PERCENT FIGURE A PARTICULAR PROJECT WOULD OTHERWISE RECEIVE. YOU POINT OUT, BY WAY OF EXAMPLE, THAT WHERE THE RESIDUAL FUNDS AMOUNT TO ONLY 5 PERCENT OF THE ESTIMATED COST OF CONSTRUCTION OF THE PROJECT HAVING HIGHEST PRIORITY, THE SPONSOR OF SUCH PROJECT, RATHER THAN ACCEPT A 5 PERCENT CONTRIBUTION, MIGHT WELL PREFER TO WAIT UNTIL THE FOLLOWING YEAR AND THEN APPLY FOR A GRANT OF 30 PERCENT, THE OVERALL EFFECT OF SUCH ACTION BEING A SUBSTANTIAL DELAY IN THE CONSTRUCTION OF NEEDED FACILITIES EVEN THOUGH A LIMITED AMOUNT OF UNUSED FUNDS IS AVAILABLE. IN ORDER TO AVOID SUCH DELAY IN CONSTRUCTION, IT HAS BEEN THE PRACTICE OF THE PUBLIC HEALTH SERVICE TO OFFER ELIGIBLE APPLICANTS THE FUNDS REMAINING IN THE ALLOTMENT FOR A PARTICULAR YEAR WITH THE UNDERSTANDING THAT IF A STATE IN A SUBSEQUENT YEAR AND PRIOR TO THE CLOSING OUT OF A PROJECT REQUESTS THAT ADDITIONAL FUNDS BE ALLOCATED TO THE PROJECT FROM THE SUBSEQUENT FISCAL YEAR'S ALLOTMENT, THE AMOUNT OF THE GRANT TO THE APPLICANT WOULD BE INCREASED UP TO 30 PERCENT OF THE REASONABLE COST OF THE PROJECT.

AS A SPECIFIC ILLUSTRATION OF THE PUBLIC HEALTH SERVICE POLICY, YOU REFER TO A GRANT MADE TO THE EVERGREEN SANITATION DISTRICT, EVERGREEN, COLORADO. THE ESSENTIAL FACTS, QUOTING FROM YOUR LETTER, ARE AS FOLLOWS:

ON MARCH 16, 1959, EVERGREEN RECEIVED STATE CERTIFICATION OF PRIORITY AND APPROVAL FOR A GRANT OF THE RESIDUAL FUNDS IN COLORADO'S 1959 GRANT ALLOTMENT--- APPROXIMATELY $11,000. ALTHOUGH THE DISTRICT HAD PREVIOUSLY REQUESTED $55,200 (30 PERCENT OF THE ESTIMATED COST OF THE PROJECT) IT ACCEPTED (ON APRIL 14, 1959) THE OFFER FOR THE SMALLER AMOUNT AND AGREED TO PAY THE REMAINING PROJECT COSTS. APPROXIMATELY TWO MONTHS LATER ( JUNE 11, 1959) THE DISTRICT, CITING FINANCIAL NEED, ASKED IF IT COULD RECEIVE A GRANT INCREASE WHEN THE NEW ALLOTMENT BECAME AVAILABLE. ON SERVICE ASSURANCE OF THE PROPRIETY OF AN INCREASE IN SUCH CIRCUMSTANCES (SUBJECT TO STATE APPROVAL AND RECOMMENDATION), THE COLORADO STATE AGENCY, ON JUNE 30, 1959, INFORMED THE DISTRICT THAT IT WOULD ACT FAVORABLY ON THE INCREASE REQUEST BUT NOT UNTIL THOSE PROJECTS APPROVED BY THE STATE AFTER EVERGREEN'S INITIAL APPLICATION BUT BEFORE ITS REQUEST FOR INCREASE HAD RECEIVED THEIR GRANTS. IN ACCORDANCE WITH THIS UNDERSTANDING, ON JULY 25, 1960--- AFTER EVERGREEN'S PROJECT HAD BEEN COMPLETED BUT BEFORE IT HAD BEEN CLOSED OUT (I.E., BEFORE FINAL INSPECTION AND PAYMENT TO THE APPLICANT/--- THE STATE REQUESTED THE SERVICE TO INCREASE THE DISTRICT'S GRANT FROM $11,226.58 TO $55,200. THE SERVICE INCREASED ITS OFFER ACCORDINGLY ON JULY 28, 1960.

THE SPECIFIC QUESTIONS PRESENTED FOR OUR CONSIDERATION ARE WHETHER WE WOULD BE REQUIRED TO OBJECT TO THE PUBLIC HEALTH SERVICE PRACTICE OF AMENDING A GRANT OFFER IN A SUBSEQUENT ALLOTMENT YEAR, PRIOR TO CLOSING OUT THE PROJECT, TO INCREASE THE GRANT UP TO 30 PERCENT WHERE THE ONLY REASON FOR NOT INCLUDING SUCH AMOUNT IN THE ORIGINAL OFFER WAS THE EXHAUSTION OF THE STATE ALLOTMENT BY OTHER PROJECTS OF HIGHER PRIORITY; AND IF SO, WOULD WE DEEM IT NECESSARY THAT STEPS BE TAKEN TO RECOVER FROM RECIPIENTS OF SUCH INCREASES (AT LEAST EIGHT IN NUMBER AGGREGATING $244,000) THE AMOUNTS WHICH HAVE BEEN GRANTED UNDER THIS POLICY.

SECTION 665 OF TITLE 31, U.S.C. PROVIDES, IN PERTINENT PART, THAT:

(A) NO OFFICER OR EMPLOYEE OF THE UNITED STATES SHALL MAKE OR AUTHORIZE AN EXPENDITURE FROM OR CREATE OR AUTHORIZE AN OBLIGATION UNDER ANY APPROPRIATION OR FUND IN EXCESS OF THE AMOUNT AVAILABLE THEREIN; NOR SHALL ANY SUCH OFFICER OR EMPLOYEE INVOLVE THE GOVERNMENT IN ANY CONTRACT OR OTHER OBLIGATION, FOR THE PAYMENT OF MONEY FOR ANY PURPOSE, IN ADVANCE OF APPROPRIATIONS MADE FOR SUCH PURPOSE, UNLESS SUCH CONTRACT OR OBLIGATION IS AUTHORIZED BY LAW. AND THE PORTION OF SUBSECTION 6 (B) OF THE FEDERAL WATER POLLUTION CONTROL ACT QUOTED ABOVE PRECLUDES THE SURGEON GENERAL FROM APPROVING ANY GRANT FOR A PROJECT UNLESS THE GRANTEE AGREES TO PAY THE COST OF THE PROJECT REMAINING AFTER APPLICATION OF THE GRANT FUNDS. IT IS CLEAR, UNDER THESE PROVISIONS OF LAW, THAT NO APPROVAL MAY BE GIVEN IN ANY FISCAL YEAR FOR FEDERAL AID BEYOND THE FUNDS AVAILABLE IN A STATE'S ALLOTMENT- - NOR MIGHT ANY OFFICER INVOLVE THE GOVERNMENT IN AN OBLIGATION TO PAY ANY ADDITIONAL SUM IN THE FUTURE--- AND THAT SUCH FEDERAL AID AS IS GRANTED MUST BE ON THE BASIS THAT THE RECIPIENT THEREOF WILL PROVIDE ADDITIONAL FUNDS REQUIRED TO COMPLETE THE PROJECT FOR WHICH THE GRANT IS APPROVED.

THE BASIC QUESTION FOR DETERMINATION, THEREFORE, IS WHETHER THE SURGEON GENERAL MAY PROPERLY INCREASE A GRANT, WITHIN THE MONETARY LIMITS SET FORTH IN THE STATUTE, WHEN ADDITIONAL FUNDS BECOME AVAILABLE, NOTWITHSTANDING THAT A GRANT FOR A LESSER SUM HAS BEEN OFFERED AND ACCEPTED AND THE RECIPIENT OBLIGATED THEREUNDER TO PROVIDE ALL FUNDS REQUIRED, OVER AND ABOVE THE GRANT, TO COMPLETE THE PROJECT INVOLVED.

ALTHOUGH FEDERAL CONTRIBUTIONS PURSUANT TO THE FEDERAL WATER POLLUTION CONTROL ACT ARE DESIGNATED AS GRANTS, IT IS CLEAR, ONCE SUCH A GRANT HAS BEEN OFFERED AND ACCEPTED, THAT A CONTRACTUAL RELATIONSHIP EXISTS BETWEEN THE GOVERNMENT AND THE GRANTEE. THAT IS TO SAY THAT HAVING ACCEPTED A GRANT, THE RECIPIENT IS LEGALLY OBLIGATED TO LIVE UP TO THE TERMS THEREOF AND THE GOVERNMENT HAS CERTAIN RIGHTS DERIVING FROM THE GRANT TERMS. SEE 38 C.J.S. 1066-1069; ALSO CRAIG V. MERCY HOSPITAL, 45 SO.2D 809, WHERE VARIOUS MEANINGS OF THE TERM "GRANT" ARE CONSIDERED. AND UNDER THE TERMS OF THE INITIAL GRANTS HERE INVOLVED, THE PURPOSE FOR WHICH SUCH GRANTS WERE MADE--- TO PROMOTE THE CONSTRUCTION OF SEWAGE TREATMENT WORKS--- HAS BEEN PROVIDED FOR IN THAT THE GRANTEES ARE OBLIGATED TO THE GOVERNMENT TO CONSTRUCT THE GRANT PROJECTS WITHOUT ANY ADDITIONAL FEDERAL CONTRIBUTIONS. AS TO WHETHER THE RIGHT OF THE UNITED STATES TO EXPECT COMPLETION OF THESE PROJECTS WITHOUT FURTHER CONTRIBUTION MAY BE WAIVED, IT IS TRUE, OF COURSE, THAT NO OFFICER OF THE GOVERNMENT HAS AUTHORITY TO GIVE AWAY OR SURRENDER A VESTED RIGHT OR TO MODIFY THE TERMS OF A CONTRACT BY A SUPPLEMENTAL OR SUBSTITUTE AGREEMENT, IF SUCH ACTION IS PREJUDICIAL TO THE INTEREST OF THE UNITED STATES. 22 COMP. GEN. 260; 19 ID. 48. HOWEVER, THIS PRINCIPLE WOULD NOT APPEAR TO BE FOR APPLICATION WHERE, AS HERE, STATUTORY AUTHORITY EXISTS FOR THE PAYMENT OF FUNDS WITHOUT CONSIDERATION OTHER THAN THE BENEFITS TO ACCRUE TO THE PUBLIC AND THE UNITED STATES THROUGH USE OF THOSE FUNDS TO CONSTRUCT LOCALLY OWNED AND MAINTAINED SEWAGE TREATMENT WORKS. SEE B-81135, DECEMBER 15, 1948, WHERE WE HELD, IN VIEW OF APPLICABLE STATUTORY AUTHORITY TO DONATE LAND, THAT CERTAIN UNITED STATES OWNED PROPERTY COULD BE CONVEYED TO THE CITY OF NEW YORK WITHOUT MONETARY CONSIDERATION AFTER THE CITY HAD ENTERED INTO A CONTRACT TO PURCHASE THE PROPERTY FROM THE GOVERNMENT. SEE ALSO 40 COMP. GEN. 455.

ALSO, THERE IS FOR CONSIDERATION THE QUESTION WHETHER A SUCCEEDING YEAR'S APPROPRIATION MAY BE CHARGED WITH AN AMENDMENT TO A GRANT, RATHER THAN TO CHARGE THE APPROPRIATION INITIALLY OBLIGATED AS IS GENERALLY REQUIRED UNDER THE LONG-ESTABLISHED RULE THAT CONSUMMATION OF A GOVERNMENT CONTRACT OBLIGATES THE APPROPRIATION INITIALLY CHARGED TO THE EXTENT NECESSARY TO SATISFY ALL CHARGES CONTEMPLATED BY THE CONTRACT. THE COURTS HAVE HELD THAT THIS SO-CALLED DOCTRINE OF "RELATION BACK" MUST BE BASED ON SOME ANTECEDENT LAWFUL RIGHT. THERE BEING NO LEGAL RIGHT IN THE GRANTEES HERE INVOLVED TO COMPEL EXECUTION OF THE AMENDMENTS PROPOSED, AN ESSENTIAL ELEMENT OF THE DOCTRINE IS LACKING AND, THEREFORE, IT IS NOT FOR APPLICATION. SEE 37 COMP. GEN. 861, 863, AND CASES CITED THEREIN.

ACCORDINGLY, WE WOULD NOT OBJECT, UNDER THE CIRCUMSTANCES HEREIN CONSIDERED, TO AMENDING THE GRANTS REFERRED TO, PROVIDED THE SURGEON GENERAL MAKES THE REQUIRED ADMINISTRATIVE DETERMINATIONS IN EACH CASE.