B-201546, JANUARY 29, 1981, 60 COMP.GEN. 208

B-201546: Jan 29, 1981

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PAYMENTS - ADVANCE - AUTHORITY - GRANT FUNDS - URBAN MASS TRANSPORTATION ADMINISTRATION URBAN MASS TRANSPORTATION ADMINISTRATION (UMTA) GRANT AUTHORITY UNDER 49 U.S.C. 1602(H) IS SUFFICIENT TO AVOID THE RESTRICTIONS OF 31 U.S.C. 529 ON ADVANCE PAYMENTS. 41 COMP.GEN. 394(1961). 1981: THE CHIEF COUNSEL OF THE URBAN MASS TRANSPORTATION ADMINISTRATION (UMTA) HAS ASKED IF THE ADMINISTRATION IS AUTHORIZED TO ADVANCE GRANT FUNDS UNDER CIRCUMSTANCES WHERE THE REQUIRED NON-FEDERAL MATCHING SHARE IS CONTRACTUALLY COMMITTED BUT NOT YET DISBURSED BY THE GRANTEE. IS FOR APPROXIMATELY $40 MILLION. $32 MILLION IS TO ACQUIRE THE TANGIBLE ASSETS OF A PRIVATE BUS COMPANY. TRANSPORT OF NEW JERSEY (TNJ) AND $8 MILLION IS THE VALUE OF NEW BUSES TO BE ACQUIRED.

B-201546, JANUARY 29, 1981, 60 COMP.GEN. 208

PAYMENTS - ADVANCE - AUTHORITY - GRANT FUNDS - URBAN MASS TRANSPORTATION ADMINISTRATION URBAN MASS TRANSPORTATION ADMINISTRATION (UMTA) GRANT AUTHORITY UNDER 49 U.S.C. 1602(H) IS SUFFICIENT TO AVOID THE RESTRICTIONS OF 31 U.S.C. 529 ON ADVANCE PAYMENTS. 41 COMP.GEN. 394(1961). ACCORDINGLY, UMTA CAN MAKE ADVANCE PAYMENTS TO GRANTEE UNDER THIS AUTHORITY BEFORE DISBURSEMENT OF REQUIRED NON-FEDERAL MATCHING SHARE OF GRANT COSTS.

MATTER OF: URBAN MASS TRANSPORTATION ADMINISTRATION - ADVANCES OF GRANT FUNDS BEFORE DISBURSEMENT OF LOCAL MATCHING SHARE, JANUARY 29, 1981:

THE CHIEF COUNSEL OF THE URBAN MASS TRANSPORTATION ADMINISTRATION (UMTA) HAS ASKED IF THE ADMINISTRATION IS AUTHORIZED TO ADVANCE GRANT FUNDS UNDER CIRCUMSTANCES WHERE THE REQUIRED NON-FEDERAL MATCHING SHARE IS CONTRACTUALLY COMMITTED BUT NOT YET DISBURSED BY THE GRANTEE. FOR THE REASONS GIVEN BELOW WE CONCLUDE THAT IT HAS SUCH AUTHORITY.

THE CHIEF COUNSEL HAS PROVIDED US WITH THE FOLLOWING SUMMARY OF THE PROPOSED TRANSACTION:

BRIEFLY STATED, THE PROJECT APPLICATION SUBMITTED TO UMTA BY THE NEW JERSEY TRANSIT CORPORATION (NJTC), TO BE FUNDED UNDER TWO COMBINED PROJECTS (NJ-03-0034 AND NJ-05-0004), IS FOR APPROXIMATELY $40 MILLION. OF THIS AMOUNT, $32 MILLION IS TO ACQUIRE THE TANGIBLE ASSETS OF A PRIVATE BUS COMPANY, TRANSPORT OF NEW JERSEY (TNJ) AND $8 MILLION IS THE VALUE OF NEW BUSES TO BE ACQUIRED. UNDER PROJECT NO. NJ-03 0034, THE FEDERAL SHARE IS $19,666,212 AND THE PURCHASE OF UP TO 36 BUSES VALUED AT $4,916,553 USING FUNDS PROVIDED BY THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY (PA) IS THE LOCAL SHARE. FOR PROJECT NO. NJ 05-004, $12,444,788 CONSTITUTES THE FEDERAL SHARE WITH THE PURCHASE OF 22 BUSES VALUED AT $3,111,197 USING PA FUNDS AS THE LOCAL SHARE.

THE ENTIRE LOCAL SHARE WILL BE PROVIDED TO THE NJTC BY THE PA WHICH HAS BEEN AUTHORIZED BY STATE LEGISLATION TO EXPEND $120 MILLION FOR BUSES AND RELATED IMPROVEMENTS IN NEW JERSEY, AS THIS IS THE ONLY TYPE OF EXPENDITURE PERMISSIBLE UNDER ITS BOND COVENANT. PURSUANT TO SECTION 3(H) OF THE URBAN MASS TRANSPORTATION ACT OF 1964, AS AMENDED, UMTA IS AUTHORIZED TO APPROVE PROJECTS WHICH UTILIZE FUNDS AVAILABLE UNDER SECTIONS 3 AND 5 OF THE ACT FOR ANY PURPOSE SO LONG AS THE COMBINED PROJECT INCLUDES BUS RELATED ELEMENTS THE COST OF WHICH IS AT LEAST EQUAL TO THE TOTAL AMOUNT WHICH COULD HAVE BEEN PROVIDED FOR BUS PURPOSES UNDER SECTION 5(A)(4). THE BASIC CONGRESSIONAL INTENT OF SECTION 3(H) * * * WAS THAT UMTA SHOULD BE FLEXIBLE "IN ASSISTING JURISDICTIONS TO MOLD BALANCED CAPITAL IMPROVEMENTS PROGRAMS AROUND LOCAL SHARE FUNDS WHOSE USE IS RESTRICTED TO BUS PURPOSES." (H.REP. NO. 95-1485, 95TH CONG., 2D SESS., P. 56).

NJTC PURCHASED THE ASSETS OF TNJ WITH A LOAN FROM THE STATE WITHOUT PREJUDICE TO FUTURE FEDERAL REIMBURSEMENT NOT TO EXCEED THE ELIGIBLE PROJECT COST OF $32,111,000 WHICH NJTC IS APPLYING FOR UNDER THIS PROJECT APPLICATION. THE COMMITMENT TO PROVIDE THE LOCAL SHARE FOR THE PROJECT IS REPRESENTED BY A SIGNED CONTRACT FOR $8,027,750 WITH THE GRUMAN FLEXIBLE CORPORATION FOR THE MANUFACTURE OF BUSES, AND NJTC'S ASSIGNMENT TO THE PA IN RETURN FOR THE PA'S PROMISE TO PAY FOR THE BUSES UPON DELIVERY.

THE GRANT, AS NOTED IN THE SUMMARY, IS TO BE MADE UNDER SECTION 3(H) OF THE URBAN MASS TRANSPORTATION ACT OF 1964 AS ADDED BY PUB. L. NO. 95 599, 92 STAT. 2735, 49 U.S.C. 1602(H), AND IS SUBJECT TO THE MATCHING NON- FEDERAL SHARE REQUIREMENTS OF THAT ACT. 49 U.S.C. 1603(1976). SPECIFICALLY, THE FEDERAL SHARE OF A SECTION 3 GRANT IS 80 PERCENT OF THE NET PROJECT COST WITH THE REMAINDER TO BE PROVIDED "FROM SOURCES OTHER THAN FEDERAL FUNDS."

THE SINGLE QUESTION PRESENTED BY THE CHIEF COUNSEL IS WHETHER UMTA HAS AUTHORITY TO MAKE AN ADVANCE OF GRANT FUNDS PRIOR TO DISBURSEMENT OF A PROPORTIONATE AMOUNT OF THE REQUIRED LOCAL OR NON-FEDERAL SHARE OF THE PROJECT. IN THIS CASE, THE GRANTEE WOULD RECEIVE THE ENTIRE FEDERAL SHARE AT A TIME WHEN THE NON-FEDERAL SHARE HAS NOT BEEN DISBURSED, BECAUSE THE BUSES TO BE PURCHASED WITH THE NON-FEDERAL SHARE HAVE NOT YET BEEN DELIVERED. THE LOCAL SHARE IS COMMITTED HOWEVER, IN THE SENSE THAT A BINDING CONTRACT REQUIRES PAYMENT FOR THE BUSES UPON DELIVERY. ALTHOUGH AN ADVANCE PAYMENT AS PROPOSED WILL BE AN EXCEPTION TO INTERNAL UMTA GUIDANCE, THE CHIEF COUNSEL OF UMTA IS OF THE OPINION THAT SUCH A TRANSACTION IS WITHIN UMTA'S AUTHORITY. WE AGREE.

SECTION 529 OF TITLE 31, U.S.C. PROVIDES GENERALLY THAT "NO ADVANCE OF PUBLIC MONEY SHALL BE MADE IN ANY CASE UNLESS AUTHORIZED BY THE APPROPRIATION CONCERNED OR OTHER LAW." HOWEVER, THE SYSTEM OF FUNDING PROGRAMS, SUCH AS THOSE SUPPORTED BY UMTA, THROUGH FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS AND OTHER ORGANIZATIONS HAS ALWAYS TO OUR KNOWLEDGE INCLUDED THE AUTHORITY TO MADE ADVANCES OF GRANT FUNDS. SEE 41 COMP.GEN. 394(1961). THE POLICY OF PAYMENT UPON RECEIPT OF GOODS OR SERVICES IS SIMPLY INCONSISTENT WITH ASSISTANCE RELATIONSHIPS WHERE THE GOVERNMENT DOES NOT RECEIVE ANYTHING IN THE USUAL SENSE. ADVANCE PAYMENTS ARE A FUNDAMENTAL PART OF THE PRESENT FEDERAL ASSISTANCE SYSTEM. (SEE TREASURY DEPARTMENT CIRCULAR NO. 1075 WHICH IS BASED ON THE ASSUMPTION OF AUTHORITY TO MAKE ADVANCES TO GRANTEES.)

ACCORDINGLY, UNLESS THE PROGRAM LEGISLATION OR THE APPROPRIATION FROM WHICH THE ADVANCE IS MADE RESTRICTS THIS AUTHORITY, UMTA HAS AUTHORITY TO MAKE ADVANCES BY VIRTUE OF ITS GRANT AUTHORITY. THIS AUTHORITY ALONE IS ENOUGH TO SATISFY 31 U.S.C. 529(1976). 41 COMP.GEN. 394(1961). OTHERWISE UNRESTRICTED AUTHORITY TO ADVANCE GRANT FUNDS WHERE A NON- FEDERAL SHARE IS REQUIRED OF THE GRANTEE. A GRANT AGREEMENT USUALLY INCLUDES AN AGREED-UPON EFFORT ON THE PART OF THE GRANTEE OVER A PERIOD OF TIME. THE NON-FEDERAL SHARE IS SHOWN IN THE AGREEMENT AS PART OF THE TOTAL PROJECT COST AND CAN CONSIST OF A NUMBER OF COST ITEMS THAT MAY NOT BE SPREAD EVENLY OVER THE LIFE OF THE GRANT AND MAY NOT CORRESPOND TO THE TIMES AT WHICH THE FEDERAL FUNDS ARE NEEDED. SEE OMB CIRCULAR A-102, ATTACHMENT F. NON-FEDERAL SHARE REQUIREMENTS ARE MET WHERE THERE ARE SUFFICIENT ALLOWABLE GRANT COSTS FROM NON-FEDERAL SOURCES TO MEET THE PERCENTAGE REQUIRED AT THE END OF THE GRANT.

EXHIBIT 3 TO ATTACHMENT H OF OMB CIRCULAR A-102, CITED BY THE CHIEF COUNSEL AS POSSIBLY TENDING TO SUPPORT THE CONTRARY CONCLUSION, IS A STANDARD FORM FOR GRANTEES TO USE TO REQUEST ADVANCES. WHILE IT INCLUDES A PLACE FOR REPORTING THE NON-FEDERAL SHARE OF COSTS FOR WHICH AN ADVANCE IS REQUESTED, WE FAIL TO SEE HOW THIS MAY BE CONSTRUED AS PLACING A RESTRICTION ON THE COST SHARING POLICY EXPRESSED IN ATTACHMENT F.

UMTA'S GUIDELINES (UMTA CIRCULAR 500.1A) REQUIRE GRANTEES TO DEMONSTRATE THAT THEY HAVE A PROPORTIONATE NON-FEDERAL SHARE AVAILABLE AT THE TIME OF EACH ADVANCE OF FEDERAL FUNDS. ACCORDING TO THE CHIEF COUNSEL, THIS IS A LONG STANDING ADMINISTRATIVE PRACTICE OF UMTA, REFLECTING A JUDGMENT THAT THE MANAGEMENT OF THE LARGE SUMS OF MONEY INVOLVED IN THE PROGRAM REQUIRES TANGIBLE COMMITMENTS FROM GRANTEES. SINCE THIS IS AN INTERNAL ADMINISTRATIVE GUIDELINE, WE SEE NO REASON WHY THE ADMINISTRATOR MAY NOT MAKE EXCEPTIONS TO IT IN HIS DISCRETION WHERE HE IS ABLE TO DETERMINE, AS WOULD APPEAR TO BE THE CASE HERE, THAT THE CONTRACTUAL COMMITMENT OF LOCAL FUNDS TO PAY FOR THE BUSES ON DELIVERY ADEQUATELY PROTECTS THE GOVERNMENT'S INTEREST IN ASSURING THAT THE LOCAL SHARE WILL BE FORTHCOMING.

AS PREVIOUSLY NOTED, THERE IS NO INDICATION IN UMTA'S PROGRAM AND APPROPRIATION LEGISLATION THAT ITS GRANTS MUST BE SUBJECT TO RESTRICTIONS ON THE ADVANCE OF FUNDS NOT COMMONLY APPLIED TO OTHER GRANT PROGRAMS. MOREOVER, AS MEMORANDA FROM THE CHIEF COUNSEL'S OFFICE INDICATE, UMTA LEGISLATION EXPRESSLY AUTHORIZES GRANT ADVANCE (49 U.S.C. 1603(B)). ACCORDINGLY, WE AGREE THAT THE ADMINISTRATOR OF UMTA HAS AUTHORITY TO MAKE AN ADVANCE PAYMENT OF THE FEDERAL SHARE OF PROJECT COST BEFORE THE DISBURSEMENT OF THE NON-FEDERAL MATCHING SHARE.