B-146285, SEP 15, 1971, 51 COMP GEN 162

B-146285, SEP 15, 1971, 51 COMP GEN 162

STATES - FEDERAL AID, GRANTS, ETC. - FEDERAL STATUTORY RESTRICTIONS - STATE FUND CONTRIBUTIONS THE REQUIREMENT IN THE ADULT EDUCATION ACT OF 1966 (20 U.S.C. 1201 1213), AND THE IMPLEMENTING STATUTORY REGULATION, THAT A STATE'S CONTRIBUTION FROM NON-FEDERAL SOURCES FOR ANY FISCAL YEAR "WILL BE NOT LESS THAN THE AMOUNT EXPENDED FOR SUCH PURPOSE FROM SUCH SOURCES DURING THE PRECEDING FISCAL YEAR" MAY NOT BE WAIVED SINCE THE STATUTE AND REGULATION ARE CONSTRUCTIVE, IF NOT ACTUAL, NOTICE OF THE REQUIREMENT, AND THE GRANT FUNDS ARE TO BE RECOVERED IF A STATE FAILS TO MEET ITS FINANCIAL CONTRIBUTION. IF THE FAILURE IS DUE TO CIRCUMSTANCES BEYOND THE STATE'S CONTROL, POSSIBLE WAIVER IS FOR CONSIDERATION ON AN INDIVIDUAL BASIS. THE FACT THAT INITIALLY THE GRANT WAS ERRONEOUSLY MADE DOES NOT JUSTIFY WAIVER AS THE GOVERNMENT IS ONLY BOUND BY ACTS OF ITS AGENTS WITHIN THE SCOPE OF DELEGATED AUTHORITY, WHICH DOES NOT PERMIT GIVING AWAY THE MONEY OR PROPERTY OF THE UNITED STATES, EITHER DIRECTLY OR BY THE RELEASE OF VESTED RIGHTS. STATES - FEDERAL AID, GRANTS, ETC. - RECOVERY BY FEDERAL GOVERNMENT - WAIVER THE RECOVERY OF ERRONEOUS PAYMENTS OF FEDERAL GRANTS MAY NOT BE WAIVED ON THE BASIS OF THE QUANTUM MERUIT DOCTRINE WHICH HAS BEEN APPLIED WHERE GOODS OR SERVICES ARE RECEIVED BY THE GOVERNMENT IN THE ABSENCE OF AN EXPRESS CONTRACTUAL PROVISION IN VIEW OF THE FACT IT WOULD BE UNFAIR FOR THE GOVERNMENT TO HAVE TANGIBLE BENEFITS WITHOUT RECOMPENSE, SINCE THE GOVERNMENT ACCRUES NO TANGIBLE BENEFITS, AS TRADITIONALLY UNDERSTOOD IN THE CONTEXT OF THE QUANTUM MERUIT AND QUANTUM VALEBAT CASES, FROM A GRANT OF FUNDS, NOR DOES THE ACTIVITY CARRIED OUT BY THE GRANTEE CONSTITUTE EFFORTS OR LABOR PERFORMED FOR THE DIRECT BENEFIT OF THE UNITED STATES. FUNDS - FEDERAL GRANTS, ETC., TO OTHER THAN STATES - EDUCATIONAL GRANTS - MORE THAN ONE - PROHIBITION THE RECIPIENT OF A SOCIAL AND REHABILITATION SERVICE (SRS) RESEARCH FELLOWSHIP GRANT UPON RECEIVING AN AWARD OF A SPECIAL NURSE FELLOWSHIP GRANT BECAME INELIGIBLE FOR THE SRS FELLOWSHIP UNDER SRS REGULATIONS, WHICH PROHIBIT THE RECEIPT OF ANY OTHER FEDERAL EDUCATIONAL BENEFITS DURING THE PERIOD OF THE SRS FELLOWSHIP, AND THE REGULATION ISSUED UNDER THE AUTHORITY IN 29 U.S.C. 37(B) IS A STATUTORY REGULATION THAT HAS THE FORCE AND EFFECT OF LAW, AND THE REGULATION HAVING BEEN PUBLISHED IN THE FEDERAL REGISTER, AS WELL AS THE CODE OF FEDERAL REGULATIONS (45 CFR 405.31), THE RECIPIENT IS CHARGED WITH KNOWLEDGE OF THE PROHIBITION AGAINST RECEIVING TWO FEDERAL EDUCATIONAL BENEFITS AND THERE IS NO BASIS FOR WAIVING RECOVERY OF THE SRS GRANT.

TO THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE, SEPTEMBER 15, 1971:

REFERENCE IS MADE TO LETTER DATED JULY 14, 1971, FROM THE GENERAL COUNSEL REQUESTING OUR DECISION AS TO WHETHER YOUR DEPARTMENT IS IN EVERY CASE LEGALLY REQUIRED TO SEEK THE REPAYMENT OF FUNDS PAID UNDER GRANTS WHICH HAVE, SUBSEQUENT TO AWARD, BEEN DETERMINED TO HAVE BEEN INADVERTENTLY MADE WITHOUT AUTHORITY UNDER THE STATUTE AND/OR THE REGULATIONS GOVERNING THE GRANT PROGRAM; AND WHETHER YOUR DEPARTMENT MAY PAY FOR EXPENDITURES INCURRED AND NONCANCELLABLE COMMITMENTS MADE BY THE GRANT RECIPIENTS PRIOR TO NOTIFICATION THAT THE GRANT HAS BEEN RETRACTED.

THE GENERAL COUNSEL REFERS TO THE FOLLOWING AS EXAMPLES OF THE KINDS OF SITUATIONS PROMPTING THE REQUEST FOR OUR DECISION:

(1) THE OFFICE OF EDUCATION, IN FISCAL YEAR 1968, MADE A GRANT UNDER THE ADULT EDUCATION ACT OF 1966 (20 U.S.C. SECS 1201-1213) TO THE STATE OF SOUTH CAROLINA. THE STATE WAS NOT ELIGIBLE SINCE IT DID NOT MEET THE REQUIREMENT (20 U.S.C. SEC 1206(B) AND 45 CFR SEC 166.28) THAT ITS FINANCIAL CONTRIBUTION TO THE PROGRAM BE NOT LESS THAN THAT OF THE PREVIOUS YEAR.

(2) A SIMILAR PROBLEM HAS ARISEN IN THE EMERGENCY SCHOOL ASSISTANCE PROGRAM ADMINISTERED BY THE COMMISSIONER OF EDUCATION UNDER DELEGATION FROM THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE. PROVISION FOR THIS PROGRAM IS MADE IN THE EMERGENCY SCHOOL ASSISTANCE APPROPRIATION CONTAINED IN THE OFFICE OF EDUCATION APPROPRIATION ACT, 1971, PUB. L. 91-380, 84 STAT. 800, WHICH APPROPRIATES $75 MILLION FOR ASSISTANCE TO "DESEGREGATING LOCAL EDUCATIONAL AGENCIES."

IN A FEW CASES IN WHICH ESAP GRANTS WERE MADE TO LOCAL EDUCATIONAL AGENCIES, IT HAS BEEN DETERMINED, AFTER THE AWARD OF THE GRANT, THAT THE GRANTEE WAS IN FACT INELIGIBLE FOR ESAP ASSISTANCE UNDER THE REGULATION BECAUSE THE DISTRICT WAS NOT OPERATING UNDER A COURT ORDER OR PLAN REQUIRING THE COMMENCEMENT OF THE TERMINAL PHASE OF DESEGREGATION WITHIN THE PERIOD SPECIFIED. IN SEVERAL OF SUCH CASES REEXAMINATION OF THE PLANS WHICH HAD BEEN SUBMITTED AS THE BASIS FOR ELIGIBILITY REVEALED THAT THE TERMINAL PHASE WAS NOT TO COMMENCE UNTIL AFTER THE OPENING OF THE 1970-71 ACADEMIC YEAR. THE FACTS REVELANT TO THOSE CASES SHOULD HAVE BEEN KNOWN TO THE OFFICE OF EDUCATION OFFICIALS AND TAKEN INTO ACCOUNT IN THE GRANT AWARD PROCESS BUT WERE APPARENTLY OVERLOOKED.

(3) THE SOCIAL AND REHABILITATION SERVICE (SRS) OF THIS DEPARTMENT AWARDED A RESEARCH FELLOWSHIP EFFECTIVE SEPTEMBER 1, 1970. EFFECTIVE SEPTEMBER 28, 1970, THE RECIPIENT WAS AWARDED A SPECIAL NURSE FELLOWSHIP BY THE NATIONAL INSTITUTES OF HEALTH. THE INSTITUTE HAD BEEN ADVISED OF THE SRS FELLOWSHIP BUT TOLD THE RECIPIENT THAT SHE COULD HOLD BOTH FELLOWSHIPS. IN FACT, HER RECEIPT OF THE NIH FELLOWSHIP MADE HER INELIGIBLE FOR THE SRS FELLOWSHIP UNDER SRS REGULATIONS.

THE GENERAL COUNSEL STATES THAT IN THE FIRST OF THESE CASES THE OFFICE OF EDUCATION, ON THE ADVICE OF THE OFFICE OF THE GENERAL COUNSEL DECLINED TO SEEK RECOVERY OF THE GRANT FUNDS ON THE GROUND THAT DESPITE THE GRANTEE'S "TECHNICAL INELIGIBILITY" THE GOVERNMENT COULD BE DEEMED TO HAVE RECEIVED THE VALUE OF THE GRANT FUNDS, SINCE THEY WERE PROPERLY EXPENDED FOR A PROGRAM PURPOSE. HE POINTS OUT THAT THIS OFFICE HAS RULED THAT A GOVERNMENT CONTRACTOR, UNDER THE DOCTRINE OF QUANTUM MERUIT, MAY RECOVER THE REASONABLE VALUE OF SERVICES WHERE A CONTRACT HAS BEEN CANCELED AS DEFECTIVE (40 COMP. GEN. 447 (1961); 37 COMP. GEN. 330 (1957)), AND THAT CONTRACT PRINCIPLES MAY APPLY TO GRANTS (41 COMP. GEN. 134 (1961)). RENDERING OUR DECISION ON THE QUESTION PRESENTED, WE ARE ASKED TO CONSIDER THE APPLICABILITY OF SUCH PRINCIPLES TO THE ABOVE-DESCRIBED GRANT SITUATIONS.

THE GENERAL COUNSEL FURTHER STATES:

*** IT WOULD SERVE THE INTEREST OF THIS DEPARTMENT NOT TO REQUIRE REPAYMENT OF GRANT FUNDS WHERE THE GRANTEE RELIES IN GOOD FAITH ON PROGRAM OFFICER'S DETERMINATIONS OF ELIGIBILITY AND WHERE EXCEPT FOR SOME TECHNICAL ELEMENT OF ELIGIBILITY, THE EXPENDITURE BY THE GRANTEE IS FULLY CONGRUENT WITH CONGRESSIONAL AND PROGRAM PURPOSES.

CONCERNING THE EXAMPLES GIVEN IN THE GENERAL COUNSEL'S SUBMISSION, COMMENT HERE WOULD BE INAPPROPRIATE WITH RESPECT TO EXAMPLE NO. (2), SINCE THAT SITUATION IS THE SUBJECT OF A CONGRESSIONAL INQUIRY RECEIVED BY THIS OFFICE AND ONE ON WHICH WE HAVE REQUESTED, BY LETTER DATED AUGUST 12, 1971, A FULL REPORT FROM YOUR DEPARTMENT.

AS TO THE GENERAL COUNSEL'S FIRST EXAMPLE, 20 U.S.C. 1206(B) PROVIDES THAT:

(B) NO PAYMENT SHALL BE MADE TO ANY STATE FROM ITS ALLOTMENT FOR ANY FISCAL YEAR UNLESS THE COMMISSIONER FINDS THAT THE AMOUNT AVAILABLE FOR EXPENDITURE BY SUCH STATE FOR ADULT EDUCATION FROM NON-FEDERAL SOURCES FOR SUCH YEAR WILL BE NOT LESS THAN THE AMOUNT EXPENDED FOR SUCH PURPOSES FROM SUCH SOURCES DURING THE PRECEDING FISCAL YEAR.

THE IMPLEMENTING STATUTORY REGULATIONS (45 CFR 166.28) PROVIDES AS FOLLOWS:

BEFORE A STATE MAY RECEIVE A PAYMENT FROM ITS ALLOTMENT UNDER SECTION 304(B) OF THE ACT, THE COMMISSIONER MUST FIND, PURSUANT TO SECTION 307(B) OF THE ACT, THAT THERE WILL BE AVAILABLE FOR EXPENDITURE BY THE STATE INCLUDING ITS POLITICAL SUBDIVISIONS, FOR BASIC EDUCATION FOR ADULTS, FROM NON-FEDERAL SOURCES DURING THE FISCAL YEAR FOR WHICH THE ALLOTMENT IS MADE, AN AMOUNT EQUAL TO NOT LESS THAN THE TOTAL AMOUNT EXPENDED FOR SUCH PURPOSES FROM SUCH SOURCES DURING THE PRECEDING FISCAL YEAR. THE INFORMATION RECEIVED UNDER SEC 166.47 (A) AND (B) SHALL SERVE AS THE BASIS OF THE COMMISSIONER'S FINDING.

THE STATUTE INVOLVED IN CLEAR AND UNEQUIVOCAL TERMS PROHIBITS THE MAKING OF A GRANT PAYMENT TO ANY STATE FOR ANY FISCAL YEAR UNLESS THE COMMISSIONER OF EDUCATION FINDS THAT THE AMOUNT AVAILABLE FOR EXPENDITURE BY SUCH STATE FOR PROJECT PURPOSES FROM NON-FEDERAL SOURCES WILL NOT BE LESS THAN THE AMOUNT EXPENDED FOR SUCH PURPOSES FROM SUCH SOURCES DURING THE PRECEDING FISCAL YEAR. IT IS CLEAR THAT THE CONGRESS INTENDED THAT EACH STATE'S FINANCIAL CONTRIBUTION TO THE PROGRAM BE NOT LESS THAN THAT OF THE PREVIOUS YEAR. IN OTHER WORDS, THE CONGRESS DID NOT INTEND GRANT FUNDS TO BE AVAILABLE TO A STATE FOR GRANT (PROGRAM) PURPOSES, UNLESS THE STATE AGREED TO MEET ALL THE REQUIREMENTS FOR ENTITLEMENT TO SUCH GRANT AS SET FORTH IN THE STATUTE AND IMPLEMENTING STATUTORY REGULATIONS.

SINCE THE STATE INVOLVED MUST BE CONSIDERED TO HAVE CONSTRUCTIVE, IF NOT ACTUAL, NOTICE OF BOTH THE STATUTE AND REGULATION INVOLVED, WE DO NOT THINK THERE IS A VALID BASIS, AS A GENERAL PROPOSITION, FOR WAIVING THE RECOVERY OF THE GRANT FUNDS WHERE THAT STATE FAILS TO MEET THE FINANCIAL CONTRIBUTION REQUIREMENT OF NOT LESS THAN THE PRIOR YEAR STATE EXPENDITURES ON THE PROGRAM. IT IS RECOGNIZED HOWEVER THAT THERE MIGHT BE SOME EXCEPTIONAL CASES WHERE THE TOTAL AMOUNT OF THE GRANT WOULD NOT HAVE TO BE RECOVERED SUCH AS WHERE THE STATE DUE SOLELY TO CIRCUMSTANCES BEYOND ITS CONTROL WAS UNABLE TO EXPEND ALL OF ITS ANTICIPATED CONTRIBUTION. THESE EXCEPTIONAL CASES WILL HAVE TO BE CONSIDERED ON AN INDIVIDUAL BASIS.

WE RECOGNIZE THAT THE REQUIREMENT THAT IMPROPERLY USED GRANT FUNDS BE IN ALL CASES REPAID MAY IN SOME INSTANCES IMPOSE HARDSHIPS ON GRANTEES WHO HAVE IN GOOD FAITH RELIED ON, AND ACTED UPON, A FEDERAL AGENCY'S PRIOR DETERMINATION OF ELIGIBILITY. HOWEVER, THE ERRONEOUS INITIAL DETERMINATION MADE BY HEW, WHILE UNFORTUNATE FOR THE GRANTEES, MAY NOT BE USED BY YOUR DEPARTMENT AS THE JUSTIFICATION FOR NOT REQUIRING REPAYMENT OF THE MONIES IN QUESTION. IT IS WELL ESTABLISHED THAT THE GOVERNMENT IS BOUND ONLY BY ACTS OF ITS AGENTS WHICH ARE WITHIN THE SCOPE OF THEIR DELEGATED AUTHORITY. SEE: LLOYD'S ACCEPTANCES, 7 WALL. 666; FEDERAL CROP INSURANCE CORPORATION V. MERRILL, 332 U.S. 380, 384 (1947). MOREOVER, THE RULE IS EQUALLY WELL ESTABLISHED THAT OFFICERS AND AGENTS OF THE GOVERNMENT HAVE NO AUTHORITY TO GIVE AWAY THE MONEY OR PROPERTY OF THE UNITED STATES, EITHER DIRECTLY OR BY THE RELEASE OF VESTED RIGHTS. BAUSCH & LOMB OPTICAL CO. V. UNITED STATES, 78 CT. CL. 584 (1934); 20 COMP. GEN. 448 (1941); 40 COMP. GEN. 309, 311 (1960). IN OUR VIEW, NOT TO REQUIRE REPAYMENT OF FUNDS IN THE HANDS OF AN INELIGIBLE GRANTEE COULD HAVE THE EFFECT OF BINDING THE UNITED STATES TO THE IMPROPER AND ERRONEOUS INITIAL AWARD DETERMINATION AND WOULD, IN EFFECT, CONSTITUTE THE GIVING AWAY OF UNITED STATES FUNDS WITHOUT AUTHORITY OF LAW.

WITH RESPECT TO THE APPLICABILITY OF THE QUANTUM MERUIT DOCTRINE, THIS DOCTRINE WOULD NOT APPEAR TO BE FOR APPLICATION IN THE KINDS OF CIRCUMSTANCES PRESENTLY IN QUESTION. THE QUANTUM MERUIT DOCTRINE HAS BEEN APPLIED IN NUMEROUS CASES INVOLVING GOODS OR SERVICES RECEIVED BY THE GOVERNMENT IN THE ABSENCE OF AN EXPRESS CONTRACTUAL PROVISION THEREFOR. THE RIGHT TO PAYMENT ON SUCH A BASIS IS PREDICATED ON THE THEORY THAT IT WOULD BE UNFAIR FOR ONE PARTY TO HAVE THE TANGIBLE BENEFITS OF THE LABOR OF ANOTHER WITHOUT RECOMPENSE, AND THAT PAYMENTS SO JUSTIFIED ARE AUTHORIZED ON THE BASIS OF THE VALUE RECEIVED BY THE GOVERNMENT AGENCY. 40 COMP. GEN. 447, 451 (1961). THE INSTANT SITUATION DIFFERS IN A MATERIAL SENSE, IN OUR VIEW. IT CANNOT BE SAID THAT ANY MEASURABLE TANGIBLE BENEFIT, AS TRADITIONALLY UNDERSTOOD IN THE CONTEXT OF THE QUANTUM MERUIT AND QUANTUM VALEBAT CONTRACT CASES, HAS ACCRUED TO THE GOVERNMENT OR THAT THE ACTIVITIES CARRIED OUT BY THE GRANTEE CONSTITUTE EFFORTS OR LABOR PERFORMED SOLELY FOR THE DIRECT BENEFIT OF THE UNITED STATES.

AS TO THE APPLICABILITY OF CONTRACT PRINCIPLES TO THE SUBJECT MATTER OF FEDERAL GRANTS, THIS OFFICE HAS NEVER INDICATED, NOR HAS ANY COURT, AS FAR AS WE CAN ASCERTAIN, THAT ALL CONTRACT PRINCIPLES, BOTH EQUITABLE AND LEGAL, APPLY TO THE SUBJECT MATTER OF GRANTS. IN 41 COMP. GEN. 134, 137 (1961), AND IN OTHER CASES, WE HAVE STATED THE GENERALLY ACCEPTED PRINCIPLE THAT ONCE A GRANT HAS BEEN OFFERED AND ACCEPTED, A CONTRACTIONAL RELATIONSHIP EXISTS BETWEEN THE GOVERNMENT AND THE GRANTEE. HOWEVER, FOR THE REASONS STATED ABOVE, WE DO NOT BELIEVE THE QUANTUM MERUIT DOCTRINE WOULD BE APPLICABLE IN CASES INVOLVING GRANTS, AT LEAST IN THE KINDS OF CIRCUMSTANCES PRESENTLY IN QUESTION.

CONCERNING EXAMPLE NO. (3), WE HAVE BEEN INFORMALLY ADVISED BY A REPRESENTATIVE OF YOUR DEPARTMENT THAT 45 CFR 405.31 IS APPLICABLE TO RESEARCH FELLOWSHIPS AWARDED BY THE SOCIAL AND REHABILITATION SERVICE. THIS REGULATION PROVIDES, IN PERTINENT PART, AS FOLLOWS:

RESEARCH FELLOWSHIPS ARE AVAILABLE TO ANY PERSON WHO HAS DEMONSTRATED ABILITY AND SPECIAL APTITUDE FOR ADVANCED TRAINING OR PRODUCTIVE SCHOLARSHIP IN THE PROFESSIONAL FIELDS WHICH CONTRIBUTE TO THE VOCATIONAL REHABILITATION OF HANDICAPPED PERSONS. PREDOCTORAL, POSTDOCTORAL, AND SPECIAL RESEARCH AWARDS ARE MADE. A CANDIDATE FOR A FELLOWSHIP SHALL MEET THE QUALIFICATIONS ESTABLISHED BY THE ADMINISTRATOR FOR CARRYING OUT THE PURPOSE OF RESEARCH FELLOWSHIPS, INCLUDING:

(C) HE SHALL NOT BE RECEIVING OTHER FEDERAL EDUCATIONAL BENEFITS DURING THE PERIOD OF THE SOCIAL AND REHABILITATION SERVICE FELLOWSHIP.

THE QUOTED REGULATION WAS APPARENTLY ISSUED PURSUANT TO THE AUTHORITY CONTAINED IN 29 U.S.C. 37(B) AND THUS IS A STATUTORY REGULATION. IT IS WELL ESTABLISHED THAT VALID STATUTORY REGULATIONS HAVE THE FORCE AND EFFECT OF LAW. SEE PUBLIC UTILITIES COMMISSION OF CALIFORNIA V. UNITED STATES, 355 U.S. 534, 542 (1958); 31 COMP. GEN. 193 (1951); 38 ID. 248 (1958); 40 ID. 473 (1961); ID. 691 (1961); AND 43 ID. 516 (1964).

THE CITED REGULATION WAS PUBLISHED IN THE FEDERAL REGISTER (AS WELL AS THE CODE OF FEDERAL REGULATIONS) AND, HENCE, EVERYONE IS CHARGED WITH KNOWLEDGE OF THE REGULATION. SEE FEDERAL CROP INS. CORP. V. MERRELL, SUPRA. THUS, WE ARE NOT AWARE OF ANY BASIS FOR WAIVING RECOVERY OF THE GRANT IN CONNECTION WITH EXAMPLE NO. (3).

CONSIDERING THE FOREGOING, YOU ARE ADVISED THAT WHILE THERE MAY BE SOME INSTANCES WHERE YOUR DEPARTMENT WOULD NOT BE REQUIRED TO SEEK REPAYMENT OF GRANT FUNDS FROM A "TECHNICALLY INELIGIBLE GRANTEE," EACH CASE MUST BE DECIDED ON ITS MERITS. THUS, THIS OFFICE CANNOT LAY DOWN ANY GENERAL GUIDELINES PERTAINING TO THE RECOVERY OR NONRECOVERY OF GRANT FUNDS FROM GRANTEES SUBSEQUENTLY DETERMINED TO BE INELIGIBLE FOR A GRANT UNDER THE LAW INVOLVED AND/OR APPLICABLE REGULATIONS.