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B-163922.53 April 30, 1979

B-163922.53 Apr 30, 1979
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McIntyre: This is to bring to your attention a matter concerning the ability of the Government to recover claims arising from the unauthorized expenditure of grant funds. This general question was raised in our recent audit report. "More Effective Action is Needed on Auditors' Findings. In the Matter of: "The Emergency Employment Act of 1971 - Recovery of Grant Funds" was an appendix to that report. The Secretary of Transportation said that Highway Trust Funds were not available for offset because of 23 U.S.C. A copy of the Secretary's letter is enclosed. Offset of a claim of another agency is not an expenditure in the terms of 23 U.S.C. We are unable to distinguish. Sec. 101(d) from the more general prohibition agaimst spending appropriated funds for other than the purposes for which they were appropriated (31 U.S.C.

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B-163922.53 April 30, 1979

The Honorable James McIntyre, Jr. Director, Office of Management and Budget

Dear Mr. McIntyre:

This is to bring to your attention a matter concerning the ability of the Government to recover claims arising from the unauthorized expenditure of grant funds. This general question was raised in our recent audit report, "More Effective Action is Needed on Auditors' Findings--Millions Can Be Collected or Saved," FGMSD-79-3, October 25, 1978 (copy enclosed).

Our decision of January 10, 1978, B-163922, in the Matter of: "The Emergency Employment Act of 1971 - Recovery of Grant Funds" was an appendix to that report. In that decision, we returned a claim for disallowed costs under a grant to the State of Rhode Island to the Department of Labor for it to complete claims collection efforts, including offset against the State. In the course of our efforts to locate funds owing to the State against which offset might be taken, we identified certain highway programs as potential sources for offset. The Federal-Aid Highway Program, 23 U.S>C. Sec. 101 et seq. (1976), unlike most grant programs, makes payments of grant funds on a reimbursement basis rather than in advance, see 23 U.S.C. Sec. 121 (1976). Accordingly, offsetting such grant payments would not necessarily impair this program. See OMB Circular A-102, Attachment J, paragraph 7.

In response to our inquiry, the Secretary of Transportation said that Highway Trust Funds were not available for offset because of 23 U.S.C. Sec. 101(d) which limits the use of these funds to the Federal Highway Administration (FHWA) unless otherwise approved by a specific line item in an appropriation act. The Secretary notes that two highway programs not funded out of the trust fund may be available for offset. A copy of the Secretary's letter is enclosed.

We do not agree with the Secretary's position with respect to the Highway Trust Fund. Offset of a claim of another agency is not an expenditure in the terms of 23 U.S.C. Sec. 101(d). Trust funds offset from amounts due a State would, when taken, be treated as if paid to the State in satisfaction of FHWA obligations, i.e., offset would satisfy the claim of a State for reimbursement. Further, we are unable to distinguish, in this context, the limitation in 23 U.S.C. Sec. 101(d) from the more general prohibition agaimst spending appropriated funds for other than the purposes for which they were appropriated (31 U.S.C. Sec 628 (1976)). The Secretary's argument would have the effect, if logically extended, of ending the Government's long recognized right of offset.

However, we agree with the Secretary that where offset does apply, the agency responsible for the program must make the determination on a case- by-case basis as to whether offset will impair the program objectives.

We are bringing this situation to your attention because of your responsibility for OMB Circular A-102, as well as the interest you have taken in the problems raised in our report of October 25, and the memorandum you sent to departments and agencies on october 5, 1978, calling for immediate corrective action on the problems there identified.

(SIGNED) ELMER B. STAATS Comptroller General of the United States

Enclosure

The Honorable Griffin B. Bell The Attorney General Department of Justice

Dear Mr. Attorney General:

This is to forward a copy of a letter we have received from the Secretary of Transportation in response to our inwquiry concerning the availability of Highway Trust Funds for offset of a claim of the Department of Labor against the State of Rhode Island. This claim is based on disallowed grants cost under an Emergency Employment Act of 1971 grant and has been referred to your Department for collection action.

This claim was previously referred to this Office for collection. We returned it to the Department of Labor for it to complete its own claim collection procedures including offset under Claims Collection Act regulations, 4 C.F.R. Parts 101-105. Subsequently, we were asked by Labor for advice on obtaining offset against the State. In the course of our efforts to locate funds owing the State against which offset might be taken, we noted that the Federal-Aid Highway Program, 23 U.S.C. Sec. 101 et seq. (1976). Accordingly, offsetting such grant payments would not necessarily impair the program. See OMB Circular A-102, Attachment J, paragraph 7.

In response to our inquiry, the Secretary of Transportation said that Highway Trust Funds were not available for offset because of 23 U.S.C. Sec. 101(d) which limits the use of these funds to the Federal Highway Administration (FHWA) unless otherwise approved by a specific line item in an appropriation act. The Secretary notes that two highway programs not funded out of the trust fund may be available for offset.

We do not agree with the Secretary's position with respect to the Highway Trust Fund. Offset of a claim of another agency is not an expenditure in terms of 23 U.S.C. Sec. 101(d). Trust funds offset from amounts due the State would, when taken, be treated as if paid to the State in satisfaction of FHWA obligations; i.e., offset would satisfy the claim of the State for reimbursement. Further, we are unable to distinguish, in this context, the limitation in 23 U.S.C. Sec. 101(d) from the more gneeral prohibition against spending appropriated funds for other than the purposes for which they were appropriated, (31 U.S.C. Sec. 628 (1976)). The Secretary's argument would have the effect, if logically extended, of ending the Government's long recognized right of offset.

We do agree with the Secretary, however, that where offset does apply, the agency responsible for the program must make the determination on a case- by-case basis as to whether offset will impair the program.

Since the claim has been referred to your Department for collection action, you may wish to promptly review the Secretary of Transportation's legal position as the claim may be barred by the statute of limitations in May. We also bring this matter to your attention as co-promulgator with this office of the Claims Collection Act regulations (4 C.F.R. Parts 101- 105). We note that 4 C.F.R. Sec. 102.3 requires agencies to attempt to collect claims by offset where possible and that departments and agencies are "enjoined to cooperate in this endeavor."

The Honorable Brock Adams The Secretary of Transporation

Dear Mr. Secretary:

This is in response to your letter concerning the availability of certain highway program funds for offset of a claim against the State of Rhode Island arising from a Department of Labor grant program.

We have forwarded a copy of your letter to the Department of Labor and recommended that it contact your Department about possible offset from the highway beautification and off-system roads programs which you indicated might be available for offset.

In response to our inwquiry, you also said that Highway Trust Funds were not available for offset because of 23 U.S.C. Sec 101(d) (1976) which limits the use of these funds to the Federal Highway Administration (FHWA) unless otherwise approved by a specific line item in an appropriation act. We do not agree with your position on the unavailability of Highway Trust Funds for offset. The offset of a claim of another agency is not an expenditure in the terms of 23 U.S.C. Sec. 101(d). Trust funds offset from amounts due a State would, when taken, be treated as if paid to the State. Offset would in such a case satisfy the claim of the State for reimbursement of obligations of the FHWA. Further, we are unable to distinguish, in this context, the limitation in 23 U.S.C. Sec. 101(d) from the more general prohibition against spending appropriated funds for other than the purposes for which they were appropriated (31 U.S.C. Sec. 628 (1976)). Your argument would have the effect, if logically extended, of ending the Government's long recognized right of offset.

We do agree that were offset does apply, your Department must make the determination on a case-by-case basis as to whether offset will impair the program objectives.

We have noted our disagreement with your position in our letter to the Secretary of Labor and are also making our views known to the Attorney General, to whom Labor has referred this case for possible litigation, and to the Director of the Office of Management and Budget.

Sincerely yours,

(SIGNED) ELMER B. STAATS Comptroller General of the United States

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