B-209669 L/M, DEC 17, 1982, OFFICE OF GENERAL COUNSEL

B-209669 L/M: Dec 17, 1982

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SUPREME COURT NO. 81-2125 THIS IS IN REPLY TO YOUR LETTER OF OCTOBER 28. WE UNDERSTAND THAT YOU ARE CONCERNED THAT THIS SECTION MIGHT BE CONSTRUED AS (A) IMPLIEDLY PROHIBITING THE USE OF ADMINISTRATIVE OFFSET AGAINST STATE AND LOCAL GOVERNMENTS. SUBSECTION (A) OF THE NEW SECTION 5 PROVIDES THAT AGENCIES OF THE FEDERAL GOVERNMENT WHO ARE ATTEMPTING TO COLLECT A CLAIM FROM A "PERSON" PURSUANT TO SECTION 3(A) OF THE FCCA MAY NOT DO SO BY MEANS OF ADMINISTRATIVE OFFSET IF THE CLAIM HAS BEEN OUTSTANDING FOR MORE THAN TEN YEARS. THE EXERCISE OF THE AUTHORITY CONTAINED IN (A) IS CONDITIONED UPON AGENCY COMPLIANCE WITH A NUMBER OF DUE PROCESS-STYLED PROCEDURES. IT IS PART OF THIS LAST PROVISION.

B-209669 L/M, DEC 17, 1982, OFFICE OF GENERAL COUNSEL

PRECIS-UNAVAILABLE

J. PAUL MCGRATH, DEPARTMENT OF JUSTICE:

RE: BELL V. NEW JERSEY AND PENNSYLVANIA, SUPREME COURT NO. 81-2125

THIS IS IN REPLY TO YOUR LETTER OF OCTOBER 28, 1982, REQUESTING OUR ADVICE CONCERNING THE MEANING AND IMPLICATIONS OF SECTION 10 OF THE DEBT COLLECTION ACT OF 1982, PUB.L. NO. 97-365, 96 STAT. 1749 (OCTOBER 25, 1982), AS IT RELATES TO THE FEDERAL GOVERNMENT'S RIGHT TO EFFECT ADMINISTRATIVE OFFSET AGAINST STATE AND LOCAL GOVERNMENTS IN ORDER TO COLLECT MISSPENT FEDERAL GRANT FUNDS. IN PARTICULAR, WE UNDERSTAND THAT YOU ARE CONCERNED THAT THIS SECTION MIGHT BE CONSTRUED AS (A) IMPLIEDLY PROHIBITING THE USE OF ADMINISTRATIVE OFFSET AGAINST STATE AND LOCAL GOVERNMENTS, OR (B) ALTERING OR ABROGATING THE GOVERNMENT'S COMMON LAW RIGHT TO USE ADMINISTRATIVE OFFSET AGAINST STATE AND LOCAL GOVERNMENTS. YOUR LETTER INDICATES THAT YOUR DEPARTMENT MUST ADDRESS THESE PROBLEMS IN A BRIEF TO THE SUPREME COURT IN THE ABOVE-CAPTIONED CASE.

AS YOU KNOW, SECTION 10 ADDS A NEW SECTION 5 TO THE FEDERAL CLAIMS COLLECTION ACT OF 1966 (FCCA), 31 U.S.C. SEC. 3711 (PUB.L. NO. 97-258, 96 STAT. 877 (SEPTEMBER 13, 1982)), FORMERLY 31 U.S.C. SEC. 951. SUBSECTION (A) OF THE NEW SECTION 5 PROVIDES THAT AGENCIES OF THE FEDERAL GOVERNMENT WHO ARE ATTEMPTING TO COLLECT A CLAIM FROM A "PERSON" PURSUANT TO SECTION 3(A) OF THE FCCA MAY NOT DO SO BY MEANS OF ADMINISTRATIVE OFFSET IF THE CLAIM HAS BEEN OUTSTANDING FOR MORE THAN TEN YEARS. SUBSECTION (B) PROVIDES THAT AN AGENCY "MAY NOT COLLECT ANY CLAIM BY ADMINISTRATIVE OFFSET AUTHORIZED BY SUBSECTION (A) UNLESS THE AGENCY HAS PRESCRIBED REGULATIONS FOR THE EXERCISE OF SUCH ADMINISTRATIVE OFFSET ***." SUBSECTION (C), THE EXERCISE OF THE AUTHORITY CONTAINED IN (A) IS CONDITIONED UPON AGENCY COMPLIANCE WITH A NUMBER OF DUE PROCESS-STYLED PROCEDURES. SUBSECTION (D) STATES THAT THE PROVISIONS OF THE NEW SECTION 5 "SHALL NOT APPLY IN ANY CASE IN WHICH A STATUTE EITHER EXPLICITLY PROVIDES FOR OR PROHIBITS THE COLLECTION THROUGH ADMINISTRATIVE OFFSET OF THE CLAIM ***." FINALLY, SUBSECTION (E) PROVIDES THAT, FOR THE PURPOSES OF SECTION 5, "THE TERM 'ADMINISTRATIVE OFFSET' MEANS THE WITHHOLDING OF MONEY PAYABLE BY THE UNITED STATES TO OR HELD BY THE UNITED STATES ON BEHALF OF A PERSON TO SATISFY A DEBT OWED THE UNITED STATES BY THAT PERSON; AND THE TERM 'PERSON' DOES NOT INCLUDE ANY AGENCY OF THE UNITED STATES, OR OF ANY STATE OR LOCAL GOVERNMENT."

IT IS PART OF THIS LAST PROVISION, THE DEFINITION OF "PERSON," WHICH CONCERNS YOU. OUR EXAMINATION OF THE LEGISLATIVE HISTORY OF THE DEBT COLLECTION ACT DOES NOT DISCLOSE ANY FURTHER EXPLANATION OF THE MEANING OR PURPOSE OF THIS PROVISION. IT APPEARS THAT THIS DEFINITION WAS INSERTED INTO THE ACT AFTER THE SENATE AND HOUSE BILLS HAD BEEN REPORTED OUT OF COMMITTEE, AND THE FLOOR DEBATES DO NOT SHED ANY ADDITIONAL LIGHT ON THE MATTER. CONSEQUENTLY, WE HAVE ONLY THE PLAIN LANGUAGE OF THE ACT TO GUIDE US.

AS QUOTED ABOVE, SUBSECTION 10(A) OF THE ACT SPECIFICALLY REFERS TO COLLECTING CLAIMS UNDER SECTION 3(A) OF THE FEDERAL CLAIMS COLLECTION ACT OF 1966, WHICH IN TURN AUTHORIZES COLLECTION "PURSUANT TO" THE JOINT STANDARDS PROMULGATED BY THE ATTORNEY GENERAL AND THE COMPTROLLER GENERAL. THOSE REGULATIONS PRESCRIBE A NUMBER OF COLLECTION METHODS, INCLUDING A SPECIFIC DIRECTIVE TO ALL CREDITOR AGENCIES TO USE ADMINISTRATIVE OFFSET WHENEVER FEASIBLE. (4 C.F.R. SEC. 102.3 (1982).) IN OUR VIEW, SECTION 10 SIMPLY ADDS SOME NEW REQUIREMENTS AND RESTRICTIONS TO THE PROCESS OF COLLECTING CLAIMS AGAINST "PERSONS" BY MEANS OF ADMINISTRATIVE OFFSET. HOWEVER, THE DEFINITION OF "PERSONS" IN SUBSECTION (E), DISCUSSED BEFORE, MAKES IT CLEAR THAT THESE NEW RESTRICTIONS AND REQUIREMENTS DO NOT APPLY TO CLAIMS AGAINST FEDERAL, STATE, AND LOCAL AGENCIES WHICH ARE NOT "PERSONS" UNDER THE ACT. IN OTHER WORDS, SECTION 10 DOES NOT AMOUNT TO NEW STATUTORY AUTHORITY TO COLLECT CLAIMS BY ADMINISTRATIVE OFFSET. THAT AUTHORITY WAS ALREADY INCORPORATED BY REFERENCE INTO THE FEDERAL CLAIMS COLLECTION ACT THROUGH THE JOINT REGULATIONS. WE COULD FIND NO EVIDENCE IN THE LEGISLATIVE HISTORY OF THE NEW PROVISION THAT THE CONGRESS INTENDED TO REPLACE THAT EXISTING AUTHORITY OR DO ANYTHING MORE THAN ADD CERTAIN SAFEGUARDS WHEN A FEDERAL AGENCY UNDERTAKES TO USE IT AGAINST A NON PUBLIC ENTITY.

FURTHERMORE, THERE IS NO EVIDENCE OF CONGRESSIONAL INTENT TO PROHIBIT THE USE OF ADMINISTRATIVE OFFSET TO COLLECT CLAIMS OWED BY STATE AND LOCAL GOVERNMENTS PURSUANT TO ANY OTHER AUTHORITY (WHETHER FOUNDED IN STATUTE OR COMMON LAW) WHICH MAY BE AVAILABLE TO THE FEDERAL GOVERNMENT. WE PRESUME THAT HAD THE CONGRESS INTENDED TO IMPOSE A COMPREHENSIVE PROHIBITION WHICH EITHER REPEALED BY IMPLICATION PRE EXISTING STATUTES, OR ABROGATED COMMON LAW PRINCIPLES CONCERNING THE USE OF ADMINISTRATIVE OFFSET AGAINST ALL ENTITIES NOT COVERED BY SECTION 10, IT WOULD HAVE PROVIDED STATUTORY LANGUAGE AND LEGISLATIVE HISTORY WHICH CLEARLY EXPRESS SUCH A PURPOSE OR REASONABLY SUPPORT SUCH A CONSTRUCTION. SEE, E.G., MORTON V. MANCARI, 417 U.S. 535, 550 (1974); IS BRANDTSEN CO. V. JOHNSON, 343 U.S. 779, 783 (1952); UNITED STATES V. BELLARD, 674 F.2D 330, 335 (5TH CIR. 1982). CF., E.G., EDMONDS V. COMPAGNIE GENERALE TRANSATLANTIQUE, 443 U.S. 256, 266-67 (1979).

BASED ON THE PRECEDING DISCUSSION, WE CONCLUDE THAT THE PASSAGE OF THE DEBT COLLECTION ACT OF 1982 DOES NOT ADVERSELY AFFECT YOUR DEPARTMENT'S POSITION IN BELL V. NEW JERSEY AND PENNSYLVANIA, SUPRA. NEVERTHELESS, WE SHOULD POINT OUT THAT GAO DOES NOT NECESSARILY ENDORSE THE POSITION TAKEN BY THE DEPARTMENT OF JUSTICE THAT ADMINISTRATIVE SETOFF SHOULD BE USED AGAINST THE PARTICULAR GRANT FUNDS WHICH ARE AT ISSUE IN BELL. ON PAGE 16 OF THE PETITION FOR CERTIORARI WHICH WAS FILED BY THE UNITED STATES, IT IS ASSERTED THAT "THE DISTINCTION BETWEEN 'ADVANCE' AND 'REIMBURSEMENT' FUNDING IS NOT SIGNIFICANT" WHEN CONSIDERING THE GOVERNMENT'S RIGHT TO USE ADMINISTRATIVE OFFSET AGAINST GRANT FUNDS WHICH ARE PAID TO THE STATES. IN NUMEROUS DECISIONS, THE COMPTROLLER GENERAL HAS FOUND THE DISTINCTION BETWEEN ADVANCE AND REIMBURSED GRANT PAYMENTS TO BE CRUCIAL TO THE DETERMINATION OF WHETHER ADMINISTRATIVE OFFSET IS APPROPRIATE TO RECOUP MISSPENT FUNDS, AS A MATTER OF POLICY.

NORMALLY, ACCORDING TO OUR PREVIOUS DECISIONS, IT IS INAPPROPRIATE FOR THE GOVERNMENT TO EFFECT ADMINISTRATIVE OFFSET AGAINST ADVANCE GRANT PAYMENTS BECAUSE IT MIGHT HAVE THE EFFECT OF DEFEATING OR INTERFERING WITH THE PURPOSES OF THE GRANT. SEE, E.G., B-171019, DECEMBER 14, 1976. FACT, ON PAGE 17, THE PETITION OF THE UNITED STATES CITES TO THE PRECISE LOCATION IN A RECENT GAO REPORT (FEDERAL AGENCIES NEGLIGENT IN COLLECTING DEBTS ARISING FROM AUDITS, AFMD-82-32, JANUARY 22, 1982, AT 26) WHICH CLEARLY EXPLAINS GAO'S POSITION ON THIS MATTER.

IN BELL, THE GOVERNMENT IS SEEKING REVIEW OF THE DECISION OF THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT. THE COURT OF APPEALS DECISION TURNED, IN SIGNIFICANT PART, ON THE DISTINCTION BETWEEN ADVANCE AND REIMBURSEMENT PAYMENTS. THE COURT EXPLAINED AND DISTINGUISHED PRECEDENTIAL CASES USING THAT DISTINCTION, AND CONCLUDED THAT, IN THE PARTICULAR CASE BEFORE IT, ADMINISTRATIVE OFFSET AGAINST THE ADVANCE GRANT PAYMENTS AT ISSUE WOULD "DEFEAT CONGRESSIONAL OBJECTIVES." THEREFORE, THE COURT PROHIBITED THE GOVERNMENT FROM RECOVERING THE MISSPENT FUNDS BY ADMINISTRATIVE OFFSET AGAINST ADVANCE GRANT PAYMENTS. NEW JERSEY DEPARTMENT OF EDUCATION V. HUFSTEDLER, 662 F.2D 208, 217-18 (3RD CIR. 1981). AS EXPLAINED ABOVE, THIS IS PRECISELY THE ANALYSIS WHICH GAO HAS UTILIZED IN DEALING WITH SIMILAR PROBLEMS IN THE PAST.

WE HAVE MADE THIS LATTER POINT IN ORDER TO AVOID MISLEADING YOUR DEPARTMENT CONCERNING OUR POSITION, AND TO ASSURE THAT THE GOVERNMENT WILL NOT BE SURPRISED IN ITS ARGUMENTS TO THE SUPREME COURT, SHOULD GAO'S CONTRARY POSITION (WHICH IS CLEARLY CITED IN THE GOVERNMENT'S PETITION FOR CERTIORARI) BE ARGUED AGAINST THE GOVERNMENT. WE HOPE THAT THIS ADDITIONAL INFORMATION IS USEFUL TO YOU, AND THAT WE HAVE ADEQUATELY ANSWERED YOUR INITIAL QUESTIONS.

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