B-214585, MAR 22, 1985, 64 COMP.GEN. 388

B-214585: Mar 22, 1985

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WAS AUTHORIZED TO RECEIVE $31.3 MILLION IN FISCAL YEAR 1984 IN GRANT MONIES. WAS SUBJECT TO EARMARKS OF $13.8 MILLION AND $2.5 MILLION FOR TWO SPECIFIC SUBGRANTEES. THE EARMARK LANGUAGE OF THE AUTHORIZATION WAS BINDING ON THE ENDOWMENT. BACKGROUND THE NATIONAL ENDOWMENT FOR DEMOCRACY WAS ESTABLISHED ON NOVEMBER 18. IT WAS CREATED. THE EXISTENCE OF THE ENDOWMENT WAS STATUTORILY RECOGNIZED 4 DAYS AFTER ITS CREATION IN THE NATIONAL ENDOWMENT FOR DEMOCRACY ACT. FUNDS SO PROVIDED ARE TO BE USED BY THE ENDOWMENT TO CARRY OUT ITS SPECIFIED PURPOSES. TWO OF THOSE THIRD-PARTY ORGANIZATIONS ARE SPECIFICALLY IDENTIFIED IN THE AUTHORIZING STATUTE. CONTAINED AS A SEPARATE TITLE IN THE SAME PUBLIC LAW THAT INCLUDES THE NATIONAL ENDOWMENT FOR DEMOCRACY ACT IS THE DEPARTMENT OF STATE AUTHORIZATION ACT FOR FISCAL YEARS 1984 AND 1985.

B-214585, MAR 22, 1985, 64 COMP.GEN. 388

GRANTS - FEDERAL - EARMARKED AUTHORIZATION THE NATIONAL ENDOWMENT FOR DEMOCRACY, A PRIVATE NON-PROFIT ORGANIZATION, WAS AUTHORIZED TO RECEIVE $31.3 MILLION IN FISCAL YEAR 1984 IN GRANT MONIES, TO BE PROVIDED BY USIA. FUNDING, HOWEVER, WAS SUBJECT TO EARMARKS OF $13.8 MILLION AND $2.5 MILLION FOR TWO SPECIFIC SUBGRANTEES. SUBSEQUENT TO ENACTMENT OF THE AUTHORIZATION, THE ENDOWMENT RECEIVED $18 MILLION IN ITS FISCAL YEAR 1983 APPROPRIATION. GENERAL ACCOUNTING OFFICE CONCLUDES THAT, CONTRARY TO THE ACTUAL DISPOSITION OF GRANT FUNDS BY THE ENDOWMENT, THE EARMARK LANGUAGE OF THE AUTHORIZATION WAS BINDING ON THE ENDOWMENT, AND THAT THE ENDOWMENT MUST COMPLY WITH EARMARK REQUIREMENTS IN FUTURE GRANT AWARDS.

TO THE HONORABLE HANK BROWN, HOUSE OF REPRESENTATIVES, MARCH 22, 1985:

BY LETTER DATED OCTOBER 12, 1984 (SUPPLEMENTED BY YOUR LETTER OF FEBRUARY 4, 1985), YOU REQUESTED THAT THIS OFFICE PROVIDE YOU WITH A LEGAL RULING AS TO WHETHER THE NATIONAL ENDOWMENT FOR DEMOCRACY, IN PROVIDING GRANT FUNDS TO SUBGRANTEE ORGANIZATIONS DURING FISCAL YEAR 1984, COMPLIED WITH SECTION 503(E) OF THE NATIONAL ENDOWMENT FOR DEMOCRACY ACT, WHICH EARMARKS SPECIFIC FUNDING LEVELS FOR TWO NAMED SUBGRANTEE ORGANIZATIONS. THIS LETTER RESPONDS TO YOUR REQUEST. AS EXPLAINED IN DETAIL BELOW, WE CONCLUDE THAT THE ENDOWMENT'S DISPOSITION OF GRANT FUNDS DID NOT COMPLY WITH THE STATUTORY EARMARK LANGUAGE.

BACKGROUND

THE NATIONAL ENDOWMENT FOR DEMOCRACY WAS ESTABLISHED ON NOVEMBER 18, 1983, AS A PRIVATE NONPROFIT DISTRICT OF COLUMBIA CORPORATION. IT WAS CREATED, AMONG VARIOUS PURPOSES, TO USE PRIVATE SECTOR INITIATIVES TO PROMOTE DEMOCRATIC INSTITUTIONS ABROAD. THE EXISTENCE OF THE ENDOWMENT WAS STATUTORILY RECOGNIZED 4 DAYS AFTER ITS CREATION IN THE NATIONAL ENDOWMENT FOR DEMOCRACY ACT, PUB.L. NO. 98-164, TIT. V, 97 STAT. 1017, 1039-42 (1983) (22 U.S.C.A. SECS. 4411-4413 (WEST SUPP. 1984)). THAT ACT REQUIRES THE DIRECTOR OF USIA TO MAKE AN ANNUAL GRANT TO THE ENDOWMENT, FROM THE USIA'S "SALARIES AND EXPENSES" ACCOUNT, OR FROM FUNDS SPECIFICALLY APPROPRIATED THEREFOR. 22 U.S.C.A. SEC. 4412(A), FUNDS SO PROVIDED ARE TO BE USED BY THE ENDOWMENT TO CARRY OUT ITS SPECIFIED PURPOSES, WHICH INCLUDE THE PROVISION OF ASSISTANCE TO THIRD PARTY ORGANIZATIONS, "ESPECIALLY THE TWO MAJOR AMERICAN POLITICAL PARTIES, LABOR, AND BUSINESS." 22 U.S.C.A. SEC. 4411(B). TWO OF THOSE THIRD-PARTY ORGANIZATIONS ARE SPECIFICALLY IDENTIFIED IN THE AUTHORIZING STATUTE, WHICH ALSO SPECIFIES MINIMUM AMOUNTS TO BE PROVIDED TO THEM BY THE ENDOWMENT, AS FOLLOWS:

OF THE AMOUNTS MADE AVAILABLE TO THE ENDOWMENT FOR EACH OF THE FISCAL YEARS 1984 AND 1985 TO CARRY OUT PROGRAMS IN FURTHERANCE OF THE PURPOSES OF THIS ACT (1) NOT LESS THAN $13,800,000 SHALL BE FOR THE FREE TRADE UNION INSTITUTE; AND (2) NOT LESS THAN $2,500,000 SHALL BE TO SUPPORT PRIVATE ENTERPRISE DEVELOPMENT PROGRAMS OF THE NATIONAL CHAMBER FOUNDATION. 22 U.S.C.A. SEC. 4412(E) (WEST SUPP. 1984).

CONTAINED AS A SEPARATE TITLE IN THE SAME PUBLIC LAW THAT INCLUDES THE NATIONAL ENDOWMENT FOR DEMOCRACY ACT IS THE DEPARTMENT OF STATE AUTHORIZATION ACT FOR FISCAL YEARS 1984 AND 1985. SECTION 205 OF THAT ACT PROVIDES THAT "NOT LESS THAN $31,300,000" OF THE AMOUNTS APPROPRIATED FOR THE USIA FOR FISCAL YEARS 1984 AND 1985 SHALL BE AVAILABLE FOR A GRANT TO THE NATIONAL ENDOWMENT FOR DEMOCRACY. PUB. L. NO. 98-164, TIT. I, SEC. 205, 97 STAT. 1017, 1031 (1983).

ON NOVEMBER 28, 1983, SIX DAYS FOLLOWING ENACTMENT OF THE NATIONAL ENDOWMENT FOR DEMOCRACY ACT (AND THE ACCOMPANYING FUNDING AUTHORIZATION), THE DEPARTMENT OF STATE AND RELATED AGENCIES APPROPRIATION ACT, 1984, WAS ENACTED INTO LAW. THAT ACT CONTAINED THE FISCAL YEAR 1984 APPROPRIATION FOR THE ENDOWMENT, SIGNIFICANTLY LOWER THAN THE AMOUNT AUTHORIZED:

FOR GRANTS MADE BY THE UNITED STATES INFORMATION AGENCY TO THE NATIONAL ENDOWMENT FOR DEMOCRACY AS AUTHORIZED BY THE NATIONAL ENDOWMENT FOR DEMOCRACY ACT, $18,000,000: PROVIDED, THAT THESE FUNDS SHALL BE AVAILABLE FOR OBLIGATION ONLY UPON ENACTMENT INTO LAW OF AUTHORIZING LEGISLATION. PUB.L. NO. 98-166, TIT. III, 97 STAT. 1071, 1098 (1983).

THE ENDOWMENT HELD ITS FIRST ORGANIZATIONAL MEETING ON DECEMBER 16, 1983, AND, AFTER EXTENSIVE NEGOTIATIONS, RECEIVED AN $18 MILLION GRANT FROM USIA UNDER AN AGREEMENT SIGNED ON MARCH 19, 1984. /1/

ON APRIL 9, 1984, THE BOARD OF DIRECTORS APPROVED A FISCAL YEAR 1984 BUDGET, BASED ON THE $18 MILLION GRANT, AS FOLLOWS:

$11 MILLION FOR THE FREE TRADE UNION INSTITUTE;

$1.7 MILLION FOR THE NATIONAL CHAMBER FOUNDATION'S CENTER FOR INTERNATIONAL PRIVATE ENTERPRISE;

$1.5 MILLION EACH FOR THE INTERNATIONAL INSTITUTES OF THE DEMOCRATIC AND REPUBLICAN PARTIES; AND

$2.3 MILLION FOR ENDOWMENT ADMINISTRATION, AND FOR DISCRETIONARY GRANTS TO OTHER ORGANIZATIONS.

ACTUAL GRANT AMOUNTS WERE BASED ON SPECIFIC GRANT PROPOSALS FROM THE THIRD PARTY ORGANIZATIONS, WITH TOTALS CORRESPONDING TO THE ABOVE BUDGETARY FIGURES. CONSEQUENTLY, GRANTS TO THE TWO STATUTORY SUBGRANTEES (THE FREE TRADE UNION INSTITUTE AND THE NATIONAL CHAMBER FOUNDATION) WERE ACTUALLY LESS THAN THE AMOUNTS SPECIFIED IN SECTION 503(E) OF THE AUTHORIZING LEGISLATION, A FACT NOT DISPUTED BY THE ENDOWMENT.

DISCUSSION

THE LEGAL QUESTION PRESENTED HERE IS WHETHER THE EARMARKING LANGUAGE SPECIFIED IN THE ENDOWMENT'S AUTHORIZING LEGISLATION WAS BINDING ON THE ENDOWMENT, NOTWITHSTANDING THE FACT THAT THE ACTUAL APPROPRIATION ACT PROVIDED FUNDING AT A LEVEL SIGNIFICANTLY LESS THAN THE FULL AMOUNT AUTHORIZED.

A REVIEW OF THE AUTHORIZATION AND APPROPRIATION ACTS IN QUESTION HERE REVEALS NO OBVIOUS CONFLICT BETWEEN THE TWO. THE PROGRAM AUTHORIZATION FOR THE ENDOWMENT SPECIFIES THAT "OF AMOUNTS MADE AVAILABLE" TO THE ENDOWMENT, NO LESS THAN $13.8 MILLION IS FOR THE FREE TRADE UNION INSTITUTE, AND $2.5 MILLION IS FOR THE NATIONAL CHAMBER FOUNDATION. THE AMOUNT ACTUALLY PROVIDED TO THE ENDOWMENT TOTALED $18 MILLION, A FIGURE CLEARLY LESS THAN THE TOTAL AMOUNT AUTHORIZED, BUT SUFFICIENT TO MEET THE EARMARK REQUIREMENTS AND STILL LEAVE $1.7 MILLION FOR THE ENDOWMENT'S ADMINISTRATIVE COSTS (AND FOR DISCRETIONARY GRANTS, TO THE EXTENT THAT ANY FUNDS WERE LEFT OVER). USIA, ALTHOUGH AGREEING WITH THE ENDOWMENT'S DISTRIBUTION, CONCLUDES THAT A "LITERAL READING" OF THE EARMARK SEEMS TO REQUIRE THAT IT BE COMPLIED WITH. FURTHERMORE, IN SIMILAR CIRCUMSTANCES WE HAVE CONCLUDED THAT EARMARK LANGUAGE SHOULD BE APPLIED.

IN B-207343, AUGUST 18, 1982, THE FUNDING AUTHORIZATION FOR THE ACTION AGENCY INCLUDED A SPECIFIC EARMARK OF $16 MILLION FOR THE VISTA PROGRAM, OUT OF A TOTAL APPROPRIATION OF $25.8 MILLION. THE EARMARK LANGUAGE IN THE ACTION AUTHORIZATION PROVIDED THAT "OF THE AMOUNTS APPROPRIATED UNDER THIS SECTION, NOT LESS THAN $16,000,000 SHALL BE FIRST AVAILABLE FOR CARRYING OUT (THE VISTA PROGRAM)." THE ACTUAL APPROPRIATION WAS CONTAINED WITHIN A LARGER LUMP-SUM FIGURE INCORPORATED BY REFERENCE IN THE CONTINUING APPROPRIATIONS RESOLUTION FOR THAT YEAR. THAT RESOLUTION, HOWEVER, REDUCED EACH APPROPRIATION ACCOUNT BY 4 PERCENT, WITH A SIMULTANEOUS REQUIREMENT THAT NO PROGRAM OR PROJECT WITHIN EACH ACCOUNT BE REDUCED BY MORE THAN 6 PERCENT.

THE ACTION AGENCY CONCLUDED THAT THE EARMARK LANGUAGE OF THE AUTHORIZATION ACT COULD NOT BE RECONCILED WITH THE REDUCED LEVEL OF FUNDING PROVIDED IN THE APPROPRIATIONS ACT. THE PRINCIPAL BASIS FOR THIS CONCLUSION WAS ACTION'S VIEW THAT COMPLIANCE WITH THE EARMARK LANGUAGE WOULD REQUIRE OFFSETTING REDUCTIONS OF MORE THAN 6 PERCENT IN OTHER PROGRAMS WITHIN THE SAME TITLE OF THE DOMESTIC VOLUNTEER SERVICE ACT OF 1973. OUR DECISION, HOWEVER, DISAGREED WITH ACTION'S CONCLUSION THAT THE TWO STATUTES COULD NOT BE RECONCILED. WE NOTED THAT THE APPROPRIATION "ACCOUNT" IN QUESTION WAS FOR ALL PROGRAMS UNDER THE ACT, AND NOT JUST FOR TITLE I; THEREFORE, ACTION COULD MAKE OFFSETTING REDUCTIONS (UP TO 6 PERCENT) IN A LARGE NUMBER OF PROGRAMS WITHIN THE SAME ACCOUNT, IN ORDER TO RETAIN VISTA FUNDING AT THE EARMARKED LEVEL.

IN THE PRESENT CASE, HOWEVER, THE ENDOWMENT CONTENDS THAT THE EXPRESS LANGUAGE OF THE TWO ENACTMENTS CANNOT BE RECONCILED IN A WAY THAT WOULD PROVIDE A PROGRAM CONSISTENT WITH THE OVERALL REQUIREMENTS OF THE AUTHORIZING LEGISLATION. IN A SUBMISSION PREPARED AT THE REQUEST OF THIS OFFICE, THE ENDOWMENT'S ATTORNEYS STATED THAT ALLOCATION OF THE AMOUNTS EARMARKED WOULD HAVE LEFT AN INSUFFICIENT SUM FOR MEANINGFUL FUNDING OF OTHER PROGRAMS AND ADMINISTRATION, AND THAT THE ENDOWMENT WOULD NOT HAVE BEEN ABLE EFFECTIVELY TO FULFILL ITS STATUTORY MISSION. IN ADDITION, THE ENDOWMENT CONTENDS THAT THE LEGISLATIVE HISTORY OF THE APPROPRIATIONS ACT SUPPORTS THE VIEW THAT CONGRESS DID NOT INTEND THE AUTHORIZATION EARMARKS TO GOVERN DISTRIBUTION OF THE LESSER AMOUNT ACTUALLY PROVIDED. /2/

WITH REGARD TO THE ENDOWMENT'S FIRST ARGUMENT, WE CANNOT AGREE THAT COMPLIANCE WITH THE AUTHORIZATION EARMARK WOULD HAVE PREVENTED THE ENDOWMENT FROM EFFECTIVELY FULFILLING ITS STATUTORY MISSION. ALTHOUGH WE RECOGNIZE THAT A VARIETY OF ORGANIZATION CATEGORIES ARE IDENTIFIED IN THE AUTHORIZATION ACT'S DELINEATION OF THE ENDOWMENT'S PURPOSES, WE CANNOT AGREE WITH THE ENDOWMENT'S CONTENTION THAT THE STATUTE IMPOSES A LEGAL OBLIGATION TO PROVIDE ASSISTANCE TO ALL SUCH GROUPS. THE ENDOWMENT'S INTERPRETATION OF THE PURPOSES CLAUSE, IN EFFECT, TREATS ALL MENTIONED CATEGORIES OF ORGANIZATIONS AS IF EARMARKED FOR FUNDING, WHEN IN FACT ONLY TWO ORGANIZATIONS, THE FREE TRADE UNION INSTITUTE AND THE NATIONAL CHAMBER FOUNDATION, ARE SO TREATED UNDER THE STATUTE.

A REVIEW OF THE LEGISLATIVE HISTORY OF THE AUTHORIZATION SUPPORTS OUR VIEW. THE PRINCIPAL BENEFICIARIES OF THE ENDOWMENT'S FAILURE TO COMPLY WITH THE AUTHORIZATION EARMARKS WERE THE INTERNATIONAL AFFAIRS INSTITUTES OF THE DEMOCRATIC AND REPUBLICAN POLITICAL PARTIES, AND, INDEED, THE TWO POLITICAL PARTIES ARE DESCRIBED AS POTENTIAL BENEFICIARIES IN THE PURPOSES CLAUSE OF THE ACT. SEE 22 U.S.C.A. SEC. 4411(B). AT ONE TIME PRIOR TO ITS ENACTMENT, THE AUTHORIZATION BILL SPECIFICALLY EARMARKED FUNDING FOR THE TWO PARTIES ($5 MILLION EACH), IN THE SAME SECTION NOW EARMARKING FUNDS FOR THE FREE TRADE UNION INSTITUTE AND NATIONAL CHAMBER FOUNDATION. SEE, E.G., H.R. REP. NO. 130, 98TH CONG., 1ST SESS. 90 (1983). THE PARTICIPATION OF THE TWO POLITICAL PARTIES IN THE ENDOWMENT'S PROGRAMS, HOWEVER, WAS AN ISSUE SUBJECT TO MUCH OPPOSITION DURING CONSIDERATION OF THE BILL IN THE HOUSE. SEE, E.G., 129 CONG. REC. H3811-21 (DAILY ED. JUNE 9, 1983). THE HOUSE EVENTUALLY DELETED THE EARMARK LANGUAGE FOR THE POLITICAL PARTIES, AS WELL AS ALL BUT ONE REFERENCE TO THE PARTIES IN THE PURPOSES CLAUSE OF THE BILL. ID. AT H3814-18. NO SIMILAR ATTEMPT WAS MADE DURING CONSIDERATION OF THE BILL IN THE SENATE, WHERE ALL FOUR EARMARKS WERE RETAINED. SEE 129 CONG. REC. S1270321 (DAILY ED. SEPTEMBER 22, 1983). IN CONFERENCE, ALL PREVIOUS REFERENCES TO THE TWO POLITICAL PARTIES WERE RESTORED TO THE PURPOSES CLAUSE, BUT THE DELETION OF EARMARKS FOR THESE ORGANIZATIONS REMAINED UNCHANGED. THE CONFERENCE REPORT NOTED THAT EARMARKS FOR THE PARTY INSTITUTES WERE DROPPED WITHOUT PREJUDICE TO THEIR RECEIPT OF FUNDS FROM THE ENDOWMENT. H. REP. NO. 563, 98TH CONG., 1ST SESS. 77 (1983).

THE FACT THAT EARMARKING FOR THE TWO POLITICAL PARTY INSTITUTES WAS DELETED WHILE SIMILAR EARMARKING FOR LABOR AND BUSINESS WAS RETAINED BY THE CONGRESS DEMONSTRATES THAT CONGRESS INTENDED TO GIVE PRIORITY TO THE LATTER TWO GROUPS OVER THE FORMER. THE RETENTION OF REFERENCES TO THE TWO POLITICAL PARTIES AS EXAMPLES OF ELIGIBLE RECIPIENTS, WITHOUT RETENTION OF MANDATORY EARMARK LANGUAGE CONCERNING SUCH ORGANIZATIONS, INDICATES AN INTENTION THAT SUCH GROUPS BE FUNDED TO THE EXTENT POSSIBLE, BUT NOT TO THE DETRIMENT OF THE TWO ORGANIZATIONS FOR WHICH EARMARKS WERE SPECIFIED.

IN ADDITION TO THE FOREGOING, WE DO NOT AGREE WITH THE ENDOWMENT'S VIEW THAT THE LEGISLATIVE HISTORY OF THE APPROPRIATION ACT SUPPORTS THE ALLOCATIONS ACTUALLY MADE. THE ORIGINAL HOUSE VERSION OF THE FISCAL YEAR 1984 APPROPRIATION BILL CONTAINED AN APPROPRIATION FOR THE ENDOWMENT EQUAL TO THE FULL AMOUNT AUTHORIZED ($31.3 MILLION). SEE H.R. REP. NO. 226, 98TH CONG., 1ST SESS. 60 (1983). THE SENATE VERSION CONTAINED NO SUCH FUNDING, BUT WAS AMENDED ON OCTOBER 21, 1983, TO APPROPRIATE $23 MILLION FOR THE ENDOWMENT. SEE 129 CONG. REC. S14441 (DAILY ED. OCT. 21, 1983). THE HOUSE LATER REDUCED THE AMOUNT FURTHER, TO THE LEVEL EVENTUALLY ENACTED ($18 MILLION). 129 CONG. REC. H9592 (DAILY ED. NOV. 9, 1983). THE ONLY DETAILED EXPLANATION OF ANY OF THESE DECREASES (FROM THE AUTHORIZATION FIGURE) IS CONTAINED IN THE FLOOR DISCUSSION DURING SENATE CONSIDERATION. THIS LANGUAGE HAS BEEN CITED BY THE ENDOWMENT TO SUPPORT ITS VIEW THAT CONGRESS DID NOT INTEND THE TWO LABOR AND BUSINESS ORGANIZATIONS TO RECEIVE ALL FUNDS EARMARKED FOR THEM:

I WOULD HAVE MUCH PREFERRED AN AMENDMENT TO PROVIDE THE FULL $31,300,000 FISCAL YEAR 1984 FUNDING FOR THE NATIONAL ENDOWMENT FOR DEMOCRACY. THEREFORE REGRET THAT THE APPROPRIATIONS COMMITTEE WILL ACCEPT AN AMENDMENT FUNDING ONLY THREE-QUARTERS OF THE AMOUNT AUTHORIZED FOR THE ENDOWMENT. HOWEVER, I UNDERSTAND THAT THERE WILL BE SOME DELAY IN THE ESTABLISHMENT OF THE VARIOUS INSTITUTIONS THAT WILL BE RECEIVING GRANTS, THEREFORE $23 MILLION SHOULD COVER THE COSTS ASSOCIATED WITH THE START-UP OF THIS PROGRAM. 129 CONG. REC. S14442 (DAILY ED. OCT. 21, 1983) (REMARKS OF SENATOR PELL).

IT IS NOT CLEAR, HOWEVER, THAT SENATOR PELL'S REMARKS WERE DIRECTED AT EVERY POTENTIAL RECIPIENT ORGANIZATION. WHILE IT IS TRUE THAT THE TWO POLITICAL PARTY INSTITUTES WERE NOT OPERATIONAL AT THE TIME OF THESE PROCEEDINGS (THE ORGANIZATIONS WERE INCORPORATED IN APRIL OF 1983 BUT WERE NOT FUNDED OR STAFFED UNTIL APRIL OF 1984), THE AFL-CIO HAD BEEN CARRYING OUT SUCH ACTIVITIES FOR THREE DECADES. SEE, 129 CONG. REC. H3813 (DAILY ED. JUNE 9, 1983) (REMARKS OF CONGRESSMAN GILMAN). SIMILARLY, ALTHOUGH THE NATIONAL CHAMBER FOUNDATION DID NOT CREATE ITS CENTER FOR INTERNATIONAL PRIVATE ENTERPRISE UNTIL JUNE 1983, PRIVATELY FUNDED PROGRAMS CARRIED OUT BY THE U.S. CHAMBER OF COMMERCE (WITH WHICH THE NATIONAL CHAMBER FOUNDATION IS AFFILIATED) WERE IN EXISTENCE WELL BEFORE CREATION OF THE ENDOWMENT. SEE REPORT OF THE DEMOCRACY PROGRAM PP. 38-39 (NOVEMBER 30, 1983). IT IS NOT CLEAR, THEREFORE, THAT SENATOR PELL INTENDED HIS REMARKS TO REFER TO THOSE TWO PROGRAMS. FURTHERMORE, THE RELEVANCE OF THESE REMARKS TO THE $18 MILLION APPROPRIATION ULTIMATELY PASSED IS QUESTIONABLE. WHEN SENATOR PELL MADE HIS REMARKS AN ADDITIONAL $5 MILLION WAS UNDER CONSIDERATION WHICH, IF APPROPRIATED, WOULD HAVE PROVIDED FURTHER AMOUNTS FOR GRANTS TO UNEARMARKED ORGANIZATIONS.

ADDITIONALLY, REMARKS BY SENATOR HATCH DURING THE SAME PROCEEDINGS SPECIFICALLY REFER TO THE EARMARK INTENDED FOR LABOR:

MR. PRESIDENT, IT WILL COME AS NO SURPRISE TO MY COLLEAGUES IN THIS BODY THAT I HAVE A PARTICULAR COMMITMENT TO SUPPORT THE SUPERB WORK DONE ON BEHALF OF FREE TRADE UNIONISM ABROAD BY THE AFL-CIO INTERNATIONAL PROGRAMS. THEREFORE, I TAKE SPECIAL PRIDE IN THE FACT THAT THE AFL-CIO ESPECIALLY SHOULD FIND IT POSSIBLE TO UTILIZE THE FUNDS EARMARKED FOR ITS WORK UNDER THE ENDOWMENT IN THE VERY NEAR FUTURE ON BEHALF OF EFFORTS TO STRENGTHEN DEMOCRATIC TRADE UNIONS. I URGE THE SUPPORT OF MY COLLEAGUES IN A VITAL MEANS TO STRENGTHEN DEMOCRATIC PROCESS THROUGHOUT THE WORLD. IT IS MY UNDERSTANDING THAT THIS AMENDMENT (TO PROVIDE FUNDING AT A $23 MILLION LEVEL) IS ACCEPTABLE TO THE MANAGERS OF THE BILL. 129 CONG. REC. AT S14441.

THESE REMARKS CLEARLY DO NOT REFLECT AN INTENTION TO OVERRIDE THE EARMARK PROVISIONS OF THE AUTHORIZATION ACT BY REDUCING OVERALL FUNDING LEVELS.

IN ADDITION TO THOSE ARGUMENTS ADDRESSED ABOVE, THE ENDOWMENT STATES IN ITS SUBMISSION TO US THAT THE TWO LABOR AND BUSINESS ORGANIZATIONS AGREED WITH, AND DID NOT APPLY FOR MORE THAN, THE AMOUNTS ACTUALLY PROVIDED TO THEM. ACCORDING TO THE ENDOWMENT, IT WOULD HAVE BEEN UNLAWFUL TO PROVIDE THESE ORGANIZATIONS WITH MORE THAN THEY HAD REQUESTED. IN LATER CORRESPONDENCE, THE ENDOWMENT CHARACTERIZED THIS ARGUMENT AS ITS "PRIMARY SUBMISSION." WE AGREE THAT IN THE ABSENCE OF AN APPLICATION OR A PROPOSAL TO SPEND THE EARMARKED AMOUNTS, AWARDS SHOULD NOT BE MADE, BUT THE CONSEQUENCE OF THIS IS NOT TO FREE THE UNOBLIGATED EARMARKS FOR OTHER PROJECTS. UNDER THE EARMARK LANGUAGE WE ARE ASKED TO INTERPRET, FUNDS ARE NOT AVAILABLE FOR OTHER THAN THE EARMARKED PURPOSE AND, TO THE EXTENT THEY HAVE BEEN MISDIRECTED, SHOULD BE RETURNED TO USIA. IN ITS SUBSEQUENT SUBMISSION, THE ENDOWMENT CITES TRAIN V. CITY OF NEW YORK, 420 U.S. 35 (1975) IN SUPPORT OF ITS ARGUMENT. THIS CASE INVOLVED THE OBLIGATION OF LESS THAN AVAILABLE AMOUNTS; IT DOES NOT INVOLVE THE USE OF UNUSED APPROPRIATIONS FOR ALTERNATIVE PURPOSES.

MOREOVER, UNLIKE THE ENDOWMENT, WE DO NOT AFFORD A GREAT DEAL OF SIGNIFICANCE TO THE FACT THAT THE TWO STATUTORY SUBGRANTEES ACCEDED IN THE ENDOWMENT'S DISTRIBUTION OF GRANT FUNDS, SINCE ULTIMATE CONTROL OF THOSE FUNDS CLEARLY RESTS WITH THE ENDOWMENT ITSELF. WE DO NOT AGREE WITH THE ENDOWMENT'S IMPLICATION THAT ITS HANDS WERE TIED BY THE FACT THAT THE TWO STATUTORY SUBGRANTEES DID NOT SUBMIT GRANT PROPOSALS FOR THE FULL AMOUNT OF THE EARMARKS. RATHER, IT APPEARS THAT THOSE PROPOSALS WERE DRAWN TO CORRESPOND TO BUDGET AMOUNTS SET IN ADVANCE BY THE ENDOWMENT'S BOARD OF DIRECTORS. IT SEEMS UNLIKELY TO US THAT THE TWO ORGANIZATIONS IN QUESTION WOULD NOT HAVE PRESENTED GRANT REQUESTS FOR THE FULL AMOUNTS CONTAINED IN THE EARMARKS, IF GIVEN THE OPPORTUNITY BY THE ENDOWMENT. /3/ THE KIND OF EARMARKING OF AN APPROPRIATION USED BY CONGRESS IN THIS CASE WOULD APPEAR TO BE A DEVICE DESIGNED TO PREVENT THE VERY ALLOCATION THAT TOOK PLACE HERE.

BASED ON THE FOREGOING ANALYSIS, IT IS OUR CONCLUSION THAT THE EARMARK LANGUAGE OF THE ENDOWMENT'S AUTHORIZATION WAS BINDING ON THE ENDOWMENT IN ITS DISTRIBUTION OF GRANT FUNDS, EVEN THOUGH ACTUAL APPROPRIATION LEVELS WERE LESS THAN THE FULL AMOUNT CONTEMPLATED UNDER THE AUTHORIZATION.

REMEDIAL ACTION

AS A GENERAL RULE, GRANT FUNDS THAT HAVE BEEN MISAPPLIED BY A GRANTEE MUST BE RECOVERED BY THE GRANTOR AGENCY, EVEN IN THOSE CASES WHERE EXPENDITURES HAVE BEEN INCURRED INNOCENTLY BY THE GRANTEE. SEE 51 COMP.GEN. 162 (1971). IN THE PRESENT CASE, GRANT FUNDS WERE MISAPPLIED TO THE EXTENT THAT NON-EARMARKED ORGANIZATIONS-- ALTHOUGH OTHERWISE ELIGIBLE AS RECEIPIENTS-- RECEIVED ENDOWMENT FUNDING FROM THE EARMARK.

IT IS APPARENT HERE, HOWEVER, THAT THE ENDOWMENT'S OFFICERS AND BOARD OF DIRECTORS BELIEVED THAT SUBGRANT ALLOCATIONS WERE MADE IN ACCORDANCE WITH THE STATUTORY REQUIREMENTS; IT SEEMS TO US THAT THIS BELIEF WAS THE RESULT OF A MISINTERPRETATION THAT IS UNDERSTANDABLE IN VIEW OF THE LEGISLATIVE BACKGROUND DESCRIBED PREVIOUSLY. IN LIGHT OF THIS, WE WOULD NOT OBJECT IF USIA, AS THE GRANTOR AGENCY, DOES NOT RECOVER FISCAL YEAR 1984 FUNDS FROM THE ENDOWMENT THAT WERE PROVIDED TO NON-EARMARK SUBGRANTEES. RECOVERY OF FUNDS PROVIDED THESE SUBGRANTEES WOULD PLACE BOTH THE SUBGRANTEES AND THE ENDOWMENT IN JEOPARDY, SINCE ALL APPEAR TO HAVE NO SIGNIFICANT ALTERNATIVE SOURCE OF FUNDING FROM WHICH DISALLOWED GRANT COSTS COULD BE PAID.

WITH REGARD TO FISCAL YEAR 1985 FUNDS, WE NOTE THAT THERE IS NOW A SPECIFIC PROHIBITION ON THE PROVISION OF FUNDS TO THE INTERNATIONAL AFFAIRS INSTITUTES OF THE TWO MAJOR POLITICAL PARTIES. SEE DEPARTMENT OF STATE AND RELATED AGENCIES APPROPRIATION ACT, 1985, PUB.L. NO. 98 411, TIT. III, 98 STAT. 1545, 1570 (1984). WE UNDERSTAND THAT, OF $18.5 MILLION APPROPRIATED FOR THE ENDOWMENT FOR FISCAL YEAR 1985, THE ENDOWMENT HAS ALLOCATED THE FOLLOWING SUMS FOR THE FIRST HALF OF THE FISCAL YEAR: $11,560,788 TO THE FREE TRADE UNION INSTITUTE, $1,438,326 TO THE NATIONAL CHAMBER FOUNDATION, AND $1,080,565 TO OTHER PRIVATE SECTOR ORGANIZATIONS. THIS LEAVES $4,420,321 TO BE ALLOCATED FOR THE SECOND HALF OF THE FISCAL YEAR. IN ACCORDANCE WITH THE CONCLUSIONS STATED ABOVE, THE ENDOWMENT SHOULD ENSURE THAT ITS ALLOCATIONS TO THE TWO EARMARKED ORGANIZATIONS FOR THE SECOND HALF OF THE FISCAL YEAR ARE IN AMOUNTS SUFFICIENT TO FULFILL THE REQUIREMENTS OF SECTION 503(E) OF THE AUTHORIZING LEGISLATION.

WE HOPE THE FOREGOING IS OF ASSISTANCE TO YOU. AS AGREED TO BY YOUR STAFF, WE ARE SENDING COPIES OF THIS LETTER TO THE ENDOWMENT AND TO USIA.

/1/ THE NEGOTIATIONS WERE COMPLICATED BY THE ENDOWMENT'S CONTENTION THAT IT WAS ENTITLED TO A GRANT FOR THE FULL AMOUNT OF THE AUTHORIZATION, $31.3 MILLION (PRESUMABLY WITH USIA MAKING UP THE BALANCE FROM ITS OWN SALARIES AND EXPENSES ACCOUNT). THE ENDOWMENT EVENTUALLY ACCEPTED THE LESSER GRANT, WHILE RESERVING THE RIGHT TO CONTINUE "WITH EFFORTS TO PROCURE ADDITIONAL FUNDING." SEE MINUTES OF THE 1984 BOARD OF DIRECTORS MEETING. FOR A GENERAL REVIEW OF THE ESTABLISHMENT OF THE ENDOWMENT, SEE OUR REPORT "EVENTS LEADING TO THE ESTABLISHMENT OF THE NATIONAL ENDOWMENT FOR DEMOCRACY,"GAO/NSIAD-84 121, JULY 6, 1984.

/2/ THESE TWO FACTORS ARE CITED BY THE ENDOWMENT IN ARGUING THAT THE PRESENT CASE IS NOT COMPARABLE TO THE ACTION CASE DESCRIBED ABOVE. THE ENDOWMENT ALSO ATTEMPTS TO DISTINGUISH THE PRESENT CASE ON THE GROUNDS THAT IT, UNLIKE ACTION, IS REQUIRED TO FUND ONLY THOSE PROGRAMS CONSISTENT WITH THE PURPOSES SPECIFIED IN THE AUTHORIZING LEGISLATION. EVERY RECIPIENT OF FEDERAL GRANT FUNDS, HOWEVER, IS REQUIRED TO UTILIZE THOSE FUNDS ONLY FOR PURPOSES SPECIFIED IN THE LEGISLATION AUTHORIZING THE GRANT. 31 U.S.C. SEC. 1301(A) (1982); SEE 42 COMP.GEN. 682 (1963) (USE OF NIH GRANT FOR PURPOSES OTHER THAN THOSE AUTHORIZED). IN THIS RESPECT, THE ENDOWMENT IS NO DIFFERENT THAN ACTION.

/3/ DOCUMENTS DATING FROM THE PERIOD IN WHICH THE ORIGINAL GRANT AGREEMENT WAS NEGOTIATED WITH USIA, IN FACT, REFLECT CONCERN BY LABOR THAT THE AGREEMENT MIGHT IMPROPERLY GIVE THE ENDOWMENT DISCRETION TO DEVIATE FROM THE EARMARK LANGUAGE OF SECTION 503(E). SEE LETTER FROM LANE KIRKLAND, AFL/CIO PRESIDENT, TO ALLEN WEINSTEIN, NED ACTING DIRECTOR, DATED FEBRUARY 13, 1984 ("I, THEREFORE, CANNOT SUPPORT A GRANT AGREEMENT THAT SUGGESTS THAT SECTION 503(E) HAS SOME TRUE MEANING THAT CANNOT BE DISCERNED FROM ITS PLAIN LANGUAGE."). MR. WEINSTEIN'S RESPONSE, DATED FEBRUARY 21, 1984, DESCRIBES THE AUTHORIZATION AND APPROPRIATIONS ACTS AS "TWO CONFLICTING TEXTS," AND INDICATES THAT EARMARK LANGUAGE WAS TIED TO THE "BENCHMARK" OF $31.3 MILLION CONTAINED IN THE AUTHORIZATION. MR. WEINSTEIN REMINDED MR. KIRKLAND THAT USIA WAS UNWILLING TO NEGOTIATE USING THAT FIGURE. THE TWO LABOR AND BUSINESS ORGANIZATIONS APPEAR TO HAVE ACCEPTED THIS VIEW, ALTHOUGH IT IS LIKELY THAT THEY DID SO WITH THE UNDERSTANDING THAT THE EARMARKS WOULD BE HONORED SHOULD NED PERSUADE USIA TO PROVIDE ADDITIONAL FUNDING.

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