B-146285, JAN. 24, 1969

B-146285, JAN. 24, 1969

TO SAM:

THIS IS IN RESPONSE TO YOUR LETTER DATED DECEMBER 17, 1968, REQUESTING OUR ADVICE CONCERNING THE APPLICATION OF A PROVISION OF SECTION 203 OF THE INTERGOVERNMENTAL COOPERATION ACT OF 1968, PUBLIC LAW 90-577, APPROVED OCTOBER 16, 1968, 82 STAT. 1098. THE QUESTION SUBMITTED AROSE IN CONNECTION WITH THE DRAFTING OF INSTRUCTIONS TO THE AGENCIES ON THE IMPLEMENTATION OF THAT ACT.

SECTION 203 PROVIDES THAT FEDERAL GRANT-IN-AID FUNDS SHALL BE SCHEDULED FOR TRANSFER, CONSISTENT WITH PROGRAM PURPOSES AND APPLICABLE TREASURY REGULATIONS, SO AS TO MINIMIZE THE LAPSE OF TIME BETWEEN THE TRANSFER FROM THE TREASURY AND THE DISBURSEMENT BY THE STATE. IT FURTHER PROVIDES, OF PRIMARY CONCERN HEREIN, THAT "STATES SHALL NOT BE HELD ACCOUNTABLE FOR INTEREST EARNED ON GRANT-IN-AID FUNDS, PENDING THEIR DISBURSEMENT FOR PROGRAM PURPOSES.' IN CONNECTION WITH THE LATTER PROVISION, THAT STATES SHALL NOT BE HELD ACCOUNTABLE FOR INTEREST EARNED ON GRANT-IN-AID FUNDS, YOU INQUIRE AS TO WHETHER THAT PROVISION IS APPLICABLE TO INTEREST EARNED BY A STATE ON GRANT-IN-AID FUNDS PRIOR TO THE ENACTMENT OF THE INTERGOVERNMENTAL COOPERATION ACT.

THE STATUTORY PROVISION UNDER CONSIDERATION IN EFFECT RELIEVES THE STATES OF ANY OBLIGATION TO ACCOUNT FOR INTEREST EARNED ON GRANT-IN-AID FUNDS. SINCE THE RELIEF FROM ACCOUNTABILITY BECAME EFFECTIVE UPON PASSAGE OF THE ACT, AND THE ACCOUNTABILITY IS AS TO "INTEREST EARNED," THE PROVISION MAY REASONABLY BE READ TO ENCOMPASS INTEREST EARNED PRIOR TO AS WELL AS SUBSEQUENT TO PASSAGE OF THE ACT. AND SUCH INTERPRETATION WOULD NOT BE OBJECTIONABLE AS GIVING THE PROVISION RETROACTIVE EFFECT.

THE ADOPTION OF THE FOREGOING RATHER LITERAL CONSTRUCTION IS IN KEEPING WITH THE HISTORY OF THE PROVISION AS REFLECTED IN SENATE REPORT NO. 538, 89TH CONGRESS, 1ST SESSION, ACCOMPANYING S. 561, 89TH CONGRESS, A BILL PRIOR AND SIMILAR TO S. 698, 90TH CONGRESS, WHICH BECAME THE INTERGOVERNMENTAL COOPERATION ACT OF 1968, AND CONTAINING THE IDENTICAL PROVISION UNDER CONSIDERATION. THAT REPORT ON PAGE 29, WITH REFERENCE TO THE PROVISION, STATED:

"PAST DECISIONS BY THE COMPTROLLER GENERAL OF THE UNITED STATES REQUIRED THAT A GRANTEE RETURN TO THE UNITED STATES ANY INTEREST EARNED ON FEDERAL GRANTS PRIOR TO THEIR USE. THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE APPROPRIATION ACT OF 1965, ENACTED SEPTEMBER 19, 1964 (PUBLIC LAW 88-605), CONTAINS A PROVISION, HOWEVER (SEC. 205, 78 STAT. 979) WHICH PRECLUDES THE DEPARTMENT REQUIRING THE PAYMENT OF INTEREST OR OTHER INCOME EARNED BY A STATE ON FUNDS RECEIVED UNDER GRANTS FOR RESEARCH, TRAINING, OR DEMONSTRATION PROJECTS MADE PRIOR TO JULY 1, 1964. IN VIEW OF THE LEGISLATIVE HISTORY OF THIS MATTER, THE COMPTROLLER GENERAL, IN HIS DECISION DATED SEPTEMBER 30, 1964 (B 152505), STATED THAT NO FURTHER ACTION WOULD BE TAKEN TOWARD THE RECOVERY OF INTEREST OR OTHER INCOME EARNED PRIOR TO JULY 1, 1964, ON FEDERAL GRANTS TO COLLEGES AND UNIVERSITIES. THIS SECTION BROADENS THE PRINCIPLE ESTABLISHED BY THAT DECISION. STATES ARE NOT HELD ACCOUNTABLE FOR INTEREST OR OTHER INCOME EARNED ON ANY FEDERAL GRANT IN-AID FUNDS ADVANCED TO STATES PRIOR TO THEIR DISBURSEMENT FOR PROGRAM PURPOSES. * * *.'

IN ANSWER TO YOUR SPECIFIC QUERY, YOU ARE ADVISED THAT WE VIEW THE NONACCOUNTABILITY PROVISION OF SECTION 203 AS APPLICABLE TO INTEREST EARNED BY A STATE ON GRANT-IN-AID FUNDS PRIOR TO THE ENACTMENT OF THE INTERGOVERNMENTAL COOPERATION ACT OF 1968.