B-149441, DECEMBER 6, 1962, 42 COMP. GEN. 289

B-149441: Dec 6, 1962

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THE INTEREST EARNED ON THE GRANT-IN-AID FUNDS ARE RECEIPTS INURING TO THE BENEFIT OF THE UNITED STATES. ARE FOR DEPOSIT TO THE CREDIT OF MISCELLANEOUS RECEIPTS. 1962: REFERENCE IS MADE TO LETTER OF JULY 13. WHICH PROVIDE THAT "THE PRESIDENT IS AUTHORIZED * * * TO PROVIDE. WHICH PROVIDES THAT THE PRESIDENT IS AUTHORIZED TO USE. THE APPROPRIATIONS PROVIDED FOR CARRYING OUT THE PROGRAM OF AID TO AMERICAN-SPONSORED SCHOOLS ABROAD DURING THE CURRENT FISCAL YEAR ARE CONTAINED IN THE DEPARTMENT OF STATE APPROPRIATION ACT. STATES THAT THE DEPARTMENT IS OF THE OPINION THAT THE CONCLUSION REACHED THEREIN SHOULD NOT BE APPLIED TO ITS PROGRAM OF AID TO AMERICAN-SPONSORED SCHOOLS ABROAD. IN THAT DECISION IT WAS HELD TO THE EFFECT THAT INTEREST ON FOREIGN CURRENCIES DEPOSITED IN FOREIGN BANKS WHICH IS EARNED BETWEEN THE TIME THE DEPARTMENT OF AGRICULTURE ADVANCES CASH TO AGRICULTURAL COOPERATIVE GROUPS OR ASSOCIATIONS.

B-149441, DECEMBER 6, 1962, 42 COMP. GEN. 289

INTEREST - ADVANCE PAYMENTS - AS BELONGING TO UNITED STATES V. OTHERS. FUNDS - FEDERAL GRANTS, TC., TO OTHER THAN STATES - ADMINISTRATIVE V. STATUTORY. FUNDS - ENDOWMENT - ESTABLISHMENT THE INTEREST AND OTHER ACCRUALS EARNED ON GRANT-IN-AID FUNDS RECEIVED BY AMERICAN-SPONSORED SCHOOLS AND LIBRARIES ABROAD FROM THE DEPARTMENT OF STATE UNDER THE AUTHORITY IN THE MUTUAL EDUCATIONAL AND CULTURAL EXCHANGE ACT OF 1961, 22 U.S.C. 2452 (A), THE FOREIGN ASSISTANCE ACT OF 1961, 22 U.S.C. 2174 (A), AND THE AGRICULTURAL TRADE DEVELOPMENT ACT OF 1954, 7 U.S.C. 1704 (O) (SUPP. II), ACCRUES TO THE UNITED STATES, REGARDLESS OF WHETHER OR NOT THE GRANT AGREEMENT RESTRICTS THE USE OF THE FUNDS TO SPECIFIC PURPOSES, OR FAILS TO REQUIRE THE RETURN OF UNEXPENDED FUNDS, THE STATUTES AUTHORIZING THE PROGRAMS EVIDENCING NO INTENT TO PROVIDE UNQUALIFIED OR UNCONDITIONAL GRANTS OR GIFTS AND, THEREFORE, THE INTEREST EARNED ON THE GRANT-IN-AID FUNDS ARE RECEIPTS INURING TO THE BENEFIT OF THE UNITED STATES, WHICH UNDER SECTION 3617, REVISED STATUTES, 31 U.S.C. 484, ARE FOR DEPOSIT TO THE CREDIT OF MISCELLANEOUS RECEIPTS. THE ELECTION BY THE DEPARTMENT OF STATE TO PROVIDE THE FINANCIAL ASSISTANCE AUTHORIZED TO BE MADE TO AMERICAN-SPONSORED SCHOOLS OR LIBRARIES ABROAD IN THE FORM OF GRANTS-IN-AID DOES NOT MAKE THE GRANTS UNCONDITIONAL WHERE THE LEGISLATION AUTHORIZING THE PROGRAMS EVIDENCES NO SUCH INTENT, THE GRANT-IN-AID TECHNIQUE ONLY FREEING THE FUNDS FROM THE STATUTORY RESTRICTIONS APPLYING TO APPROPRIATED MONEYS AND NOT AFFECTING THE REVERSIONARY INTEREST OF THE UNITED STATES IN THE UNENCUMBERED BALANCES OF THE GRANTS, INCLUDING IMPROPERLY APPLIED FUNDS AND, ALTHOUGH THE INTEREST OR OTHER ACCRUALS EARNED ON GRANTED FUNDS NEED NOT BE RECOVERED, IN THE FUTURE WHEN NECESSARY TO PROVIDE FUNDS IN AMOUNTS THAT PERMIT DEPOSIT AND THE ACCRUAL OF INTEREST, THE AID AGREEMENTS SHOULD PROVIDE FOR THE PAYMENT TO THE UNITED STATES OF THE INTEREST EARNED ON FUNDS. IN THE ABSENCE OF SPECIFIC AUTHORITY THE FUNDS MADE AVAILABLE THROUGH THE MEDIUM OF THE FINANCIAL ASSISTANCE PROGRAMS PROVIDED FOR AMERICAN-SPONSORED SCHOOLS ABROAD UNDER THE AUTHORITY OF THE MUTUAL EDUCATIONAL AND CULTURAL EXCHANGE ACT OF 1961, 22 U.S.C. 2452 (A), THE FOREIGN ASSISTANCE ACT OF 1961, 22 U.S.C. 2174 (A), AND THE AGRICULTURAL TRADE DEVELOPMENT AND ASSISTANCE ACT OF 1954, 7 U.S.C. 1704 (O) (SUPP. III), MAY NOT BE USED TO ESTABLISH PERMANENT ENDOWMENT FUNDS FOR INVESTMENT, THE INTEREST TO BE USED FOR THE SUPPORT OF THE SCHOOLS, AND THE USE OF THE ENDOWMENT METHOD OF FINANCING CONSTITUTING AN INNOVATION IN THE METHODS GENERALLY AUTHORIZED BY CONGRESS FOR THE FINANCIAL TRANSACTIONS OF THE UNITED STATES, THE ADOPTION OF THE ENDOWMENT FUNDING PROCEDURE REQUIRES SPECIFIC LEGISLATIVE AUTHORITY.

TO THE SECRETARY OF STATE, DECEMBER 6, 1962:

REFERENCE IS MADE TO LETTER OF JULY 13, 1962, FROM THE DEPUTY UNDER SECRETARY FOR ADMINISTRATION, REQUESTING OUR DECISION AS TO THE DISPOSITION OF INTEREST AND OTHER ACCRUALS EARNED ON FUNDS GRANTED BY THE DEPARTMENT OF STATE AS ASSISTANCE TO AMERICAN-SPONSORED SCHOOLS ABROAD UNDER AUTHORITY OF THE FOLLOWING STATUTES.

SECTIONS 102 (A) AND (B) (3) OF THE MUTUAL EDUCATIONAL AND CULTURAL EXCHANGE ACT OF 1961, PUBLIC LAW 87-256, APPROVED SEPTEMBER 21, 1961, 75 STAT. 527, 528, 22 U.S.C. 2452 (A) AND (B) (3), WHICH PROVIDE THAT "THE PRESIDENT IS AUTHORIZED * * * TO PROVIDE, BY GRANT, CONTRACT, OR OTHERWISE, FOR * * * (3) ASSISTANCE IN THE ESTABLISHMENT, EXPANSION, MAINTENANCE, AND OPERATION OF SCHOOLS AND INSTITUTIONS OF LEARNING ABROAD, FOUNDED, OPERATED, OR SPONSORED BY CITIZENS OR NONPROFIT INSTITUTIONS OF THE UNITED STATES, INCLUDING SUCH SCHOOLS AND INSTITUTIONS SERVING AS DEMONSTRATION CENTERS FOR METHODS AND PRACTICES EMPLOYED IN THE UNITED STATES.'

SECTION 214 (A) OF THE FOREIGN ASSISTANCE ACT OF 1961, PUBLIC LAW 87-195, APPROVED SEPTEMBER 4, 1961, 75 STAT. 428, 22 U.S.C. 2174 (A), WHICH PROVIDES THAT

THE PRESIDENT IS AUTHORIZED TO USE, IN ADDITION TO OTHER FUNDS AVAILABLE FOR SUCH PURPOSES, FUNDS MADE AVAILABLE FOR THE PURPOSES OF SECTION 211 FOR ASSISTANCE, ON SUCH TERMS AND CONDITIONS AS HE MAY SPECIFY, TO SCHOOLS AND LIBRARIES OUTSIDE THE UNITED STATES FOUNDED OR SPONSORED BY UNITED STATES CITIZENS AND SERVING AS STUDY AND DEMONSTRATION CENTERS FOR IDEAS AND PRACTICES OF THE UNITED STATES.

SECTION 104 (O) OF THE AGRICULTURAL TRADE DEVELOPMENT AND ASSISTANCE ACT OF 1954, AS AMENDED, 72 STAT. 1791, 7 U.S.C. 1704 (O) (SUPP. III), WHICH PROVIDES, IN PART, THAT

* * * THE PRESIDENT MAY USE OR ENTER INTO AGREEMENTS * * * TO USE THE FOREIGN CURRENCIES * * * WHICH ACCRUE UNDER THIS SUBCHAPTER * * *. FOR PROVIDING ASSISTANCE, IN SUCH AMOUNTS AS MAY BE SPECIFIED FROM TIME TO TIME IN APPROPRIATION ACTS, BY GRANT OR OTHERWISE, IN THE EXPANSION OR OPERATION IN FOREIGN COUNTRIES OF ESTABLISHED SCHOOLS, COLLEGES, OR UNIVERSITIES FOUNDED OR SPONSORED BY CITIZENS OF THE UNITED STATES, FOR THE PURPOSE OF ENABLING SUCH EDUCATIONAL INSTITUTIONS TO CARRY ON PROGRAMS OF VOCATIONAL, PROFESSIONAL, SCIENTIFIC, TECHNOLOGICAL, OR GENERAL EDUCATION.

THE APPROPRIATIONS PROVIDED FOR CARRYING OUT THE PROGRAM OF AID TO AMERICAN-SPONSORED SCHOOLS ABROAD DURING THE CURRENT FISCAL YEAR ARE CONTAINED IN THE DEPARTMENT OF STATE APPROPRIATION ACT, 1963, PUBLIC LAW 87-843, APPROVED OCTOBER 18, 1962, 76 STAT. 1080, 1084, AND TITLE I OF THE FOREIGN AID AND RELATED AGENCIES APPROPRIATION ACT, 1963, PUBLIC LAW 87- 872, APPROVED OCTOBER 23, 1962, 76 STAT. 1163.

THE DEPUTY UNDER SECRETARY REFERS TO OUR DECISION TO THE SECRETARY OF AGRICULTURE OF AUGUST 9, 1960, B-143175, REPORTED AT 40 COMP. GEN. 81, AND STATES THAT THE DEPARTMENT IS OF THE OPINION THAT THE CONCLUSION REACHED THEREIN SHOULD NOT BE APPLIED TO ITS PROGRAM OF AID TO AMERICAN-SPONSORED SCHOOLS ABROAD. IN THAT DECISION IT WAS HELD TO THE EFFECT THAT INTEREST ON FOREIGN CURRENCIES DEPOSITED IN FOREIGN BANKS WHICH IS EARNED BETWEEN THE TIME THE DEPARTMENT OF AGRICULTURE ADVANCES CASH TO AGRICULTURAL COOPERATIVE GROUPS OR ASSOCIATIONS, UNDER THE TERMS OF SECTION 104 OF THE AGRICULTURAL TRADE DEVELOPMENT AND ASSISTANCE ACT OF 1954, AS AMENDED, 7 U.S.C. 1704, AND THE TIME THE COOPERATORS ACTUALLY USE THE ADVANCES MAY NOT BE USED FOR SECTION 104 (A) (7 U.S.C. 1704 (A) ( PURPOSES, NAMELY, TO HELP DEVELOP NEW MARKETS FOR UNITED STATES AGRICULTURAL COMMODITIES, BUT MUST BE REGARDED AS RECEIPTS FOR THE BENEFIT OF THE UNITED STATES, WHICH UNDER SECTION 3617, REVISED STATUTES, 31 U.S.C. 484, ARE REQUIRED TO BE DEPOSITED IN THE TREASURY AS MISCELLANEOUS RECEIPTS.

IN SUPPORT OF THE DEPARTMENT'S POSITION IT IS POINTED OUT THAT THE COOPERATIVE AGREEMENTS CONSIDERED IN 40 COMP. GEN. 81 PROVIDED THAT THE GOVERNMENT FUNDS COULD BE USED BY THE RECIPIENTS ONLY FOR CERTAIN SPECIFIED PURPOSES AND THAT ANY UNEXPENDED BALANCE HAD TO BE RETURNED TO THE GOVERNMENT; ALSO, THAT THE CONCLUSION REACHED APPARENTLY WAS BASED UPON THE PREMISE THAT THE RECIPIENTS WERE HOLDING THE FUNDS IN TRUST FOR THE GOVERNMENT DURING THE PERIOD PRECEDING THEIR EXPENDITURE FOR THE PURPOSES FOR WHICH ADVANCED. THE VIEW IS EXPRESSED THAT THE AUTHORITIES CONTAINED IN THE CITED ENABLING STATUTES ARE BROAD ENOUGH TO PERMIT THE DEPARTMENT TO MAKE AN UNRESTRICTED GRANT OF FUNDS TO SUCH SCHOOLS, AND THAT THESE AUTHORITIES MERELY AUTHORIZE ASSISTANCE TO THE SCHOOLS THEMSELVES WITHOUT SPECIFYING THE PURPOSES FOR WHICH FUNDS MAY BE GRANTED, SUCH AS TEACHERS' SALARIES, SCHOLARSHIPS, BUILDINGS, OR BOOKS AND EQUIPMENT.

TO FURTHER SUPPORT THE VIEW THAT THE DECISION IS INAPPLICABLE TO THE PRESENT SITUATION, IT IS OBSERVED THAT THE SECRETARY OF AGRICULTURE, IN GRANTING FUNDS TO COOPERATIVES TO HELP DEVELOP NEW MARKETS FOR UNITED STATES AGRICULTURAL COMMODITIES, UTILIZED THE SERVICES OF SUCH AGENCIES TO CARRY OUT A PROGRAM WHICH HIS DEPARTMENT COULD HAVE CARRIED OUT DIRECTLY. IN CONTRAST, IT IS EXPLAINED THAT THE SECRETARY OF STATE IS NOT AUTHORIZED UNDER THE CITED ENABLING STATUTES TO BUILD, OPERATE OR MAINTAIN SCHOOLS ABROAD TO PROVIDE EDUCATION FOR FOREIGNERS OR AMERICANS, OR TO DEMONSTRATE AMERICAN EDUCATIONAL IDEAS, METHODS AND PRACTICES ABROAD. THE AUTHORITY OF THE DEPARTMENT OF STATE UNDER THESE STATUTES IS SIMPLY TO RENDER ASSISTANCE TO AMERICAN-SPONSORED SCHOOLS ABROAD TO ENABLE THEM TO CARRY OUT THEIR OWN PROGRAMS. CONSEQUENTLY, IT IS CONTENDED THAT THE ASSISTANCE AUTHORIZED TO BE RENDERED BY THE DEPARTMENT IS A TRUE GRANT AUTHORITY, AND A GRANT UNDER IT SHOULD NOT BE REGARDED FOR ANY PURPOSE AS A CONTRACT TO PROCURE OR UTILIZE THE GRANTEE'S SERVICES OR FACILITIES FOR A GOVERNMENT PROGRAM.

PROCEEDING FURTHER, THE DEPUTY UNDER SECRETARY STATES THAT CONSIDERATION HAS ALSO BEEN GIVEN TO THE POSSIBILITY OF MAKING GRANTS TO AMERICAN- SPONSORED SCHOOLS ABROAD FOR THE PURPOSE OF ESTABLISHING ENDOWMENT FUNDS FOR CERTAIN OF THE SCHOOLS AND THAT THE GRANTS WOULD BE INEFFECTIVE IF THE GRANTEE COULD NOT KEEP THE EARNINGS FROM THE FUND. IT IS SUGGESTED THAT GRANTS OF FOREIGN CURRENCY COULD BE JUSTIFIED FOR THIS PURPOSE IN CERTAIN COUNTRIES AND SITUATIONS.

AS AN ADDITIONAL POINT PRESENTED FOR CONSIDERATION, IT IS NOTED THAT EVEN THE GRANTS HERETOFORE MADE, WHICH HAVE BEEN RESTRICTED TO SPECIFIED USES, HAVE FINANCED LARGE PERMANENT ADDITIONS TO THE CAPITAL ASSETS OF THE GRANTEES, AND THAT SUCH ADDITIONAL ASSETS HAVE RESULTED INCREASED ENROLLMENT AND INCOME. THE VIEW IS EXPRESSED THAT IT HAS NEVER BEEN CONTENDED THAT THE GOVERNMENT HAS ANY RIGHTS OR INTEREST IN THE ASSETS FINANCED BY GOVERNMENT FUNDS, OR IN THE INCOME RESULTING THEREFROM.

ON THE BASIS OF THE FOREGOING FACTS PRESENTED, OUR DECISION IS REQUESTED WHETHER THE DEPARTMENT OF STATE MUST REQUIRE PAYMENT TO THE GOVERNMENT OF INTEREST EARNED ON FUNDS GRANTED AS ASSISTANCE TO AMERICAN-SPONSORED SCHOOLS ABROAD PURSUANT TO THE CITED ENABLING STATUTES (1) IN CASES IN WHICH THE GRANT DOCUMENT SPECIFIES THAT THE FUNDS GRANTED SHALL BE USED TO FINANCE SOME PARTICULAR PROJECT OR ACTIVITY OF THE GRANTEE, SUCH AS BUILDING CONSTRUCTION, TEACHERS' SALARIES, ETC., AND REQUIRES THE RETURN OF ANY FUNDS NOT SO USED, (2) IN CASES IN WHICH THE GRANT DOCUMENT FAILS TO SPECIFY THE USES TO WHICH THE FUNDS GRANTED SHALL BE PUT, OR FAILS TO REQUIRE THE RETURN OF UNEXPENDED FUNDS, AND (3) IN CASES IN WHICH THE GRANT DOCUMENT SPECIFIES THAT THE FUNDS GRANTED SHALL BE INVESTED AND USED AS AN ENDOWMENT.

THE DECISION REPORTED IN 40 COMP. GEN. 81, WHICH IS SUGGESTED TO BE INAPPLICABLE TO THE PROGRAM OF AID TO AMERICAN-SPONSORED SCHOOLS ABROAD DID NOT INVOLVE A STATUTORY GRANT OF FUNDS. HOWEVER, THERE WAS APPLIED TO THE FACTS OF THAT CASE, AND CORRECTLY SO, THE RULE UNIFORMLY FOLLOWED BY THE ACCOUNTING OFFICERS WITH RESPECT TO THE DISPOSITION OF INTEREST EARNED ON PAYMENTS MADE BY THE UNITED STATES TO STATES AND OTHER PUBLIC OR PRIVATE AGENCIES AS GRANTS-IN-AID. THAT IS, THAT INTEREST EARNED ON FUNDS SO GRANTED BY THE UNITED STATES, AS A RESULT OF DEPOSIT IN BANKS AND DELAY IN USING THE FUNDS FOR THE PURPOSES FOR WHICH GRANTED, INURES TO THE BENEFIT OF THE UNITED STATES RATHER THAN TO THE GRANTEE AND UNDER THE TERMS OF SECTION 3617, REVISED STATUTES, 31 U.S.C. 484, SHOULD BE ACCOUNTED FOR AND DEPOSITED IN THE TREASURY AS MISCELLANEOUS RECEIPTS. SEE 24 COMP. DEC. 403; 1 COMP. GEN. 652; 2 ID. 684; 3 ID. 956; 20 ID. 610.

BY THE TERMS OF THE STATUTES QUOTED ABOVE, THE DEPARTMENT OF STATE IS AUTHORIZED, PURSUANT TO AUTHORITY DELEGATED BY THE PRESIDENT AND WITHIN THE LIMITS OF AVAILABLE APPROPRIATIONS, TO PROVIDE FINANCIAL ASSISTANCE IN THE ESTABLISHMENT, EXPANSION, MAINTENANCE AND OPERATION OF SCHOOLS, LIBRARIES AND INSTITUTIONS OF LEARNING ABROAD FOUNDED, OPERATED, OR SPONSORED BY CITIZENS OR NONPROFIT INSTITUTIONS OF THE UNITED STATES. THE STATUTES AUTHORIZE THE DEPARTMENT TO PROVIDE SUCH ASSISTANCE UNDER SUCH TERMS AND CONDITIONS AS IT MAY SPECIFY BY METHODS OF GRANT, CONTRACT OR OTHERWISE. IN THE ADMINISTRATION OF THIS PROGRAM, IT HAS BEEN THE PRACTICE OF THE DEPARTMENT TO ENTER INTO AGREEMENTS WITH THE SCHOOLS THAT MEET THE CRITERIA ESTABLISHED BY THE DEPARTMENT FOR QUALIFYING FOR FINANCIAL ASSISTANCE, UNDER WHICH THERE IS AGREED TO BE MADE IN DOLLARS OR IN FOREIGN CURRENCY A GRANT-IN-AID FOR USE IN ACCORDANCE WITH AND SUBJECT TO THE TERMS AND CONDITIONS CONTAINED THEREIN. AN OUTLINE OF THE CRITERIA APPLIED BY THE DEPARTMENT IN DETERMINING ELIGIBILITY FOR SUCH ASSISTANCE IS SET FORTH ON PAGES 322-324 OF THE HOUSE HEARINGS ON THE MUTUAL EDUCATIONAL AND CULTURAL EXCHANGE ACT OF 1961, AND IN BRIEFER FORM ON PAGE 6 OF HOUSE REPORT NO. 1094, 87TH CONGRESS, ON SAID ACT.

THE TERM "GRANT" AS USED IN THE STATUTES IS SUBJECT TO A VARIETY OF MEANINGS, VIZ, CONTRIBUTION, GRATUITY, GIFT, METHOD OF PAYMENT OR PROCUREMENT. SEE 38 C.J.S. 1066-1068, CRAIG V. MERCY HOSPITAL, 45 SO.2D 809. CONSEQUENTLY, THE MEANING OF THIS TERM AS USED IN THE STATUTES QUOTED ABOVE IS TO BE DETERMINED FROM ITS CONNECTION AND THE MANNER OF ITS USE.

THERE CAN BE NO DOUBT THAT ONLY THE CONGRESS IS LEGALLY EMPOWERED TO GIVE AWAY THE PROPERTY OR MONEY OF THE UNITED STATES, AND THAT WHEN IT MAKES GRANTS OF FUNDS TO THE STATES AND OTHER PUBLIC OR PRIVATE AGENCIES IT HAS A RIGHT TO DESIGNATE THE PURPOSE THEREOF AND TO SURROUND THE GRANT BY SUCH CONDITIONS AS IT CHOOSES TO IMPOSE. STATE OF INDIANA V. EWING, 99 F.SUPP. 734, CAUSE REMANDED 195 F.2D 556. THUS, THE PRIMARY QUESTION FOR DETERMINATION IS WHETHER THE CONGRESS, IN PROVIDING FOR A PROGRAM OF FINANCIAL ASSISTANCE TO AMERICAN SPONSORED SCHOOLS ABROAD, INTENDED THAT GRANTS-IN-AID MADE IN IMPLEMENTATION THEREOF CONSTITUTE UNQUALIFIED OR UNCONDITIONAL GRANTS OR GIFTS AS APPEARS TO BE CONTENDED BY THE DEPARTMENT.

THERE APPEARS NOTHING IN THE LANGUAGE OF THE ENABLING LEGISLATION QUOTED ABOVE, NOR HAS THERE BEEN BROUGHT TO ATTENTION ANYTHING IN THE LEGISLATIVE HISTORIES THEREOF OR ELSEWHERE, WHICH WOULD DENOTE THAT THE CONGRESS MADE OR AUTHORIZED AN UNQUALIFIED OR UNCONDITIONAL GRANT OR GIFT TO AMERICAN- SPONSORED SCHOOLS ABROAD IN SUBSTANCE OR IN FACT. WHEN THE CONGRESS INTENDS TO MAKE SUCH A GRANT OR GIFT, IT HAS NO DIFFICULTY IN USING THE NECESSARY LANGUAGE. SEE, FOR EXAMPLE, THE PROVISIONS OF 16 U.S.C. 500 DIRECTING THAT 25 PERCENT OF THE MONEYS RECEIVED FROM THE NATIONAL FORESTS BE PAID BY THE SECRETARY OF THE TREASURY TO THE STATE IN WHICH THE NATIONAL FOREST IS SITUATED, TO BE EXPENDED AS THE STATE LEGISLATURE MAY PRESCRIBE FOR THE BENEFIT OF THE PUBLIC SCHOOLS AND PUBLIC ROADS OF THE COUNTY OR COUNTIES IN WHICH THE NATIONAL FOREST IS SITUATED. CONSIDERING THIS LAW, THE UNITED STATES SUPREME COURT HELD IN THE CASE OF KING COUNTY V. SEATTLE SCHOOL DIST., 263 U.S. 361, 364, THAT "WHEN TURNED OVER TO THE STATE, THE MONEY BELONGS TO IT ABSOLUTELY. THERE IS NO LIMITATION UPON THE POWER OF THE LEGISLATURE TO PRESCRIBE HOW THE EXPENDITURES SHALL BE MADE FOR THE PURPOSES STATED, THOUGH, BY THE ACT OF CONGRESS, ,THERE IS A SACRED OBLIGATION IMPOSED ON ITS PUBLIC FAITH.' * * * CONGRESS ALONE CAN INQUIRE INTO THE MANNER OF ITS EXECUTION BY THE STATE.'

ON THE OTHER HAND, IT IS CLEAR THAT THE FUNDS MADE AVAILABLE TO CARRY OUT THE PROGRAM OF FINANCIAL ASSISTANCE INVOLVED HERE, NAMELY, THE ESTABLISHMENT, EXPANSION, MAINTENANCE AND OPERATION OF SCHOOLS, LIBRARIES AND INSTITUTIONS OF LEARNING ABROAD, FOUNDED, OPERATED, OR SPONSORED BY CITIZENS OR NONPROFIT INSTITUTIONS ARE FOR USE ONLY FOR THESE SPECIFIED PURPOSES. WHILE THE LAW VESTS IN THE DEPARTMENT BROAD DISCRETION IN THE ADMINISTRATION OF THE PROGRAM, INCLUDING AUTHORITY TO MAKE PAYMENTS TO THE SCHOOLS BY VARIOUS METHODS SUCH AS GRANT, CONTRACT OR OTHERWISE, IT DOES NOT FOLLOW THAT THE ELECTION BY THE DEPARTMENT TO PROVIDE THE FINANCIAL ASSISTANCE IN THE FORM OF GRANTS IN-AID OPERATES TO CHANGE THE RELATIONSHIP BETWEEN THE UNITED STATES AND THE GRANTEE IN RESPECT OF THE PURPOSES AND CONDITIONS OF THE MONEYS GRANTED. THE BENEFIT RESULTING FROM THE USE OF THE GRANT-IN-AID TECHNIQUE MERELY EXTENDS TO MAKING THE FUNDS, WHILE UNDER THE CONTROL OF THE GRANTEE, FREE FROM THE STATUTORY RESTRICTIONS GENERALLY APPLICABLE TO THE EXPENDITURE OF APPROPRIATED MONEYS BY THE DEPARTMENTS AND ESTABLISHMENTS OF THE GOVERNMENT. SEE 17 COMP. GEN. 593; 25 ID. 868; 28 ID. 54; 37 ID. 85. IT IS OUR VIEW THAT THESE GRANTS-IN-AID ARE NOT STATUTORY UNCONDITIONAL GRANTS OR GIFTS AND MAY NOT BE SO MADE BY ADMINISTRATIVE ACTION. THE OFFEREE IS FREE TO ACCEPT OR REJECT THE GRANT. THE ACCEPTANCE OF THE GRANT CREATES A CONTRACT BETWEEN THE UNITED STATES AND THE GRANTEE UNDER WHICH THE MONEYS PAID OVER TO THE GRANTEE, WHILE ASSETS IN THE HANDS OF THE GRANTEE, ARE CHARGED WITH THE OBLIGATION TO BE USED FOR THE PURPOSES AND SUBJECT TO THE CONDITIONS OF THE GRANT. CLEARLY, THE UNITED STATES HAS A REVERSIONARY INTEREST IN THE UNENCUMBERED BALANCES OF SUCH GRANTS, INCLUDING ANY FUNDS IMPROPERLY APPLIED. IT IS THE RESPONSIBILITY OF THE DEPARTMENT FOR SEEING THAT THE GRANT FUNDS ARE APPLIED TO THE PURPOSES AND OBJECTS FOR WHICH MADE, WHETHER THE GRANT IS MADE FOR SPECIFIC OBJECTS OF EXPENDITURE SUCH AS TEACHERS' SALARIES, BOOKS, EQUIPMENT, ETC., OR FOR THE GENERAL SUPPORT OF THE SCHOOL.

IN A DECISION REPORTED AT 1 COMP. GEN. 652, RELATIVE TO PROVIDING FEDERAL AID TO THE STATES FOR THE PROMOTION OF THE WELFARE AND HYGIENE OF MATERNITY AND INFANCY, IT WAS HELD, IN SUBSTANCE, THAT THE STATUTE PROVIDING FOR SUCH AID DOES NOT CONTEMPLATE THAT THE STATES SHALL PROFIT BY THE STATUTE OTHERWISE THAN IN THE MANNER AND TO THE EXTENT SPECIFICALLY PROVIDED FOR BY LAW. FURTHER, THAT THE STATUTE DOES NOT CONTEMPLATE THAT THE MONEYS SHALL BE HELD BY THE STATES AND BEAR INTEREST, BUT SHALL BE PROMPTLY APPLIED TO THE PURPOSE FOR WHICH FURNISHED, AND THE MONEYS SHOULD NOT BE FURNISHED IN AMOUNTS NECESSARILY RESULTING IN LARGE SUMS BEING HELD, AND THUS BEAR INTEREST, BUT WHERE IN THE ORDINARY PROCEDURE OF MONEYS BEING PLACED IN A DEPOSITARY INTEREST IS OBTAINED, ANY INTEREST ACCRUING WHILE THE MONEYS ARE SO HELD BY THE STATES INURES TO THE BENEFIT OF THE UNITED STATES. THIS DECISION, TOGETHER WITH OTHERS, WAS CITED IN THE DECISION 40 COMP. GEN. 81.

THE SITUATION CONSIDERED HEREIN MAY BE SAID TO BE SO SIMILAR TO THAT CONSIDERED IN THE DECISION, 1 COMP. GEN. 652, AS TO WARRANT A SIMILAR CONCLUSION--- THAT IS--- THAT INTEREST EARNED ON FUNDS PROVIDED AS GRANTS- IN-AID TO AMERICAN-SPONSORED SCHOOLS ABROAD UNDER THE ENABLING AND APPROPRIATION STATUTES REFERRED TO ABOVE IS INTEREST ACCRUING TO THE UNITED STATES RATHER THAN TO THE GRANTEE AND, THEREFORE, REGARDLESS OF WHETHER IT IS SPECIFICALLY SO PROVIDED IN THE GRANT AGREEMENT SHOULD BE ACCOUNTED FOR AND DEPOSITED IN THE TREASURY AS MISCELLANEOUS RECEIPTS UNDER SECTION 3617, REVISED STATUTES, 31 U.S.C. 484. ACCORDINGLY, THE FIRST AND SECOND QUESTIONS PRESENTED ARE ANSWERED IN THE AFFIRMATIVE. REGARDING THE SECOND QUESTION, WE BELIEVE IT TO BE CLEAR FROM OUR VIEWS EXPRESSED ABOVE, THAT YOUR DEPARTMENT IS NOT AUTHORIZED UNDER EXISTING LAW TO MAKE AN UNQUALIFIED GRANT OR GIFT OF FUNDS TO AMERICAN-SPONSORED SCHOOLS ABROAD OR TO FAIL TO REQUIRE THE RETURN OF UNEXPENDED GRANT FUNDS.

HOWEVER, IN VIEW OF THE CIRCUMSTANCES INVOLVED HERE, WE WILL NOT REQUIRE RECOVERY OF THE INTEREST OR OTHER ACCRUALS HERETOFORE EARNED ON GRANT-IN- AID FUNDS PROVIDED UNDER AGREEMENTS WHICH EITHER AUTHORIZED SUCH INTEREST TO BE USED BY THE GRANTEE OR FAILED TO PROVIDE FOR PAYMENT THEREOF TO THE UNITED STATES. WE SUGGEST, HOWEVER, THAT THE MATTER OF PROVIDING SUCH FUNDS IN AMOUNTS WHICH PERMIT THE DEPOSIT AND ACCRUAL OF INTEREST BE EXAMINED AND LIMITED TO SPECIAL SITUATIONS, IN WHICH CASE SPECIFIC PROVISION SHOULD BE MADE IN THE AGREEMENT FOR PAYMENT OF THE INTEREST EARNED TO THE UNITED STATES.

THE THIRD QUESTION PRESENTED RELATIVE TO THE DISPOSITION OF INTEREST EARNED ON ENDOWMENT FUNDS PROPOSED TO BE ESTABLISHED THROUGH THE MEDIUM OF GRANTS-IN-AID FOR CERTAIN SCHOOLS IS IN AN ALTOGETHER DIFFERENT CATEGORY. THIS PROPOSITION APPARENTLY IS BASED ON THE BELIEF THAT THE AUTHORITY TO PROVIDE FINANCIAL ASSISTANCE TO THE SCHOOLS BY GRANTS, CONTRACTS, OR OTHERWISE INCLUDES AUTHORITY TO ESTABLISH ENDOWMENT FUNDS BY GRANTS-IN-AID AS A PERMANENT FUND TO BE INVESTED AND THE INTEREST OR OTHER INCOME OF WHICH IS TO BE USED FOR SUPPORT OF THE SCHOOLS. WE FIND NOTHING IN THE LANGUAGE OF THE ENABLING LEGISLATION QUOTED ABOVE OR IN ITS LEGISLATIVE HISTORIES TO SUPPORT THIS PROPOSITION. IN VIEW OF THE FACT THAT IT CONSTITUTES AN INNOVATION IN THE METHODS GENERALLY AUTHORIZED BY THE CONGRESS WITH RESPECT TO THE FINANCIAL TRANSACTIONS OF THE UNITED STATES, WE FEEL THAT THE MATTER SHOULD BE SUBMITTED TO THE CONGRESS FOR SPECIFIC LEGISLATIVE AUTHORITY, IF IT BE PLANNED TO ADOPT THIS FUNDING PROCEDURE.

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