B-152505, JAN. 30, 1964

B-152505, JAN. 30, 1964

TO MR. LOGAN WILSON:

YOUR LETTER OF SEPTEMBER 13, 1963, AND A SUPPORTING BRIEF, CONCERN THE DISPOSITION OF INTEREST AND OTHER INCOME EARNED ON PAYMENTS MADE UNDER THE VARIOUS STATUTES PROVIDING FOR FEDERAL GRANT-IN-AID PROGRAMS FOR SPECIFIED PURPOSES, PARTICULARLY IN THE CASE OF CASH GRANTS TO COLLEGES AND UNIVERSITIES UNDER THE PUBLIC HEALTH SERVICE ACT.

THE QUESTION HAS ARISEN AS A RESULT OF OUR AUDIT ACTIVITIES INVOLVING GRANTS-IN-AID TO COLLEGES AND UNIVERSITIES MADE BY THE NATIONAL INSTITUTES OF HEALTH, PUBLIC HEALTH SERVICE, FOR RESEARCH AND TRAINING UNDER 42 U.S.C. 421, AND RELATED PROVISIONS OF LAW.

YOU ADVISE THAT UPON EXAMINATION AND AUDIT OF THE ACCOUNTING WITH RESPECT TO GRANT FUNDS BY A CERTAIN UNIVERSITY, REPRESENTATIVES OF THIS OFFICE HAVE SUGGESTED THAT, IN THE MANAGEMENT OF ITS CASH AND OTHER ASSETS, THE INSTITUTION HAS, OVER THE YEARS SINCE 1951, REALIZED INCOME, A PORTION OF WHICH MAY BE PAYABLE TO THE UNITED STATES UNDER THE U.S.C. AND RULINGS OF THIS OFFICE. YOU STATE THAT INSOFAR AS COLLEGES AND UNIVERSITIES ARE CONCERNED THIS IS A NOVEL PROPOSAL, WHICH, IF UPHELD, WOULD HAVE FAR- REACHING IMPLICATIONS FOR ALL INSTITUTIONS RECEIVING GRANTS UNDER THE VARIOUS PROGRAMS OF THE FEDERAL GOVERNMENT.

YOU STATE THAT COLLEGES AND UNIVERSITIES RECEIVE A NUMBER OF GRANTS, THE MAJORITY OF WHICH ARE AWARDS UNDER THE PUBLIC HEALTH SERVICE ACT; THAT THE GRANTEE INSTITUTIONS ARE PAID ON A QUARTERLY BASIS; AND THAT THE INSTITUTIONS MAINTAIN INTERNAL ACCOUNTS SO THAT THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, AND THIS OFFICE MAY DETERMINE THAT THE FUNDS ARE EXPENDED FOR THE PURPOSE OF THE GRANT. YOU ADVISE THAT THE ACTUAL CASH PAID IS, UPON RECEIPT, CONSIDERED THE PROPERTY OF THE UNIVERSITY AND COMMINGLED WITH ITS OTHER CASH AND ASSETS AND THAT IN THE MANAGEMENT OF ITS FUNDS THE UNIVERSITY FOLLOWS THE PRACTICE OF ANALYZING ITS NEEDS AND OF KEEPING ON DEPOSIT IN ITS VARIOUS DEMAND ACCOUNTS ONLY SO MUCH CASH AS IS ACTUALLY NECESSARY FROM TIME TO TIME. YOU REPORT THAT THE EXCESS OVER IMMEDIATE CASH NEEDS FOR ALL PURPOSES IS INVESTED IN ACCORDANCE WITH POLICY SET BY THE UNIVERSITY'S BOARD OF TRUSTEES, A LARGE PORTION BEING HELD IN SHORT-TERM OBLIGATIONS OF THE GOVERNMENT. ACCORDING TO YOUR LETTER, IN THE CASE OF MANY INSTITUTIONS, THE ACTUAL CASH ON HAND AT ALL TIMES EXCEEDS THE TOTAL OF THE ACCOUNTING "BALANCES" WITH RESPECT TO GRANT FUNDS, WHICH, YOU STATE, IS, OF COURSE, THE ACCOUNTING RECORD OF DISBURSEMENT MADE IN ACCORDANCE WITH THE TERMS OF THE VARIOUS GRANTS. YOU ADVISE THAT IN THE CASE OF SOME INSTITUTIONS THE CASH ON HAND FROM TIME TO TIME IS OCCASIONALLY LESS THAN THE TOTAL BALANCE OF GRANT ACCOUNTS BUT THAT IN OTHER CASES THE ACCOUNTING BALANCE IN THE GRANT AWARDS ACCOUNTS MAY REGULARLY EXCEED THE CASH ON HAND. YOU ALSO NOTE THAT AT MOST INSTITUTIONS THERE ARE ACCOUNTS RECEIVABLE FROM THE FEDERAL GOVERNMENT WITH RESPECT TO CONTRACTS WITH THE DEPARTMENT OF DEFENSE AND OTHER FEDERAL AGENCIES WHICH TO A MAJOR DEGREE OFFSET ANY DIFFERENCE BETWEEN THE TOTAL OF THE RESEARCH GRANT ACCOUNT BALANCES AND THE ACTUAL CASH ON HAND AT ANY GIVEN MOMENT.

THE POSITION TAKEN IN YOUR LETTER AND THE SUPPORTING BRIEF IS THAT INTEREST OR OTHER INCOME EARNED BY GRANTEE INSTITUTIONS ON GRANTS MADE UNDER THE PUBLIC HEALTH SERVICE ACT BECOMES THE PROPERTY OF THE GRANTEE RATHER THAN OF THE UNITED STATES. YOUR POSITION IS PREMISED GENERALLY ON THE FOLLOWING CONTENTIONS:

I. GRANTS ONCE PAID ARE NO LONGER PUBLIC MONEYS BUT BECOME THE PROPERTY OF THE GRANTEE INSTITUTIONS --- ANY INCREMENT THEREON IS THE PROPERTY OF THE INSTITUTIONS AND NOT OF THE GOVERNMENT.

II. ANY CLAIM WHICH THE GOVERNMENT MAY HAVE UNDER DECISIONS OF THE COMPTROLLER GENERAL IS FOR ,INTEREST" ON SEGREGATED DEPOSITS. THE FAILURE OF THE GOVERNMENT TO "SAFEGUARD (ITS) RIGHTS" BY REQUIRING GRANTEE INSTITUTIONS TO MAINTAIN SEPARATE DEPOSITS FOR GRANT FUNDS CONSTITUTES A PROPER ABANDONMENT OF ANY CLAIM WHICH THE GOVERNMENT MAY HAVE HAD.

III. THE POLICY AND PRACTICE OF THE PUBLIC HEALTH SERVICE OF NOT INSISTING ON SEGREGATION OF GRANT FUNDS INTO SEPARATE DEMAND DEPOSITS WAS AN ENTIRELY PROPER ABANDONMENT BY THE GOVERNMENT OF ANY CLAIM TO INTEREST SINCE, UNDER THE FEDERAL BANKING STATUTES, NO INTEREST COULD HAVE BEEN EARNED HAD THE FUNDS BEEN SEGREGATED IN ORDER TO "SAFEGUARD THE CLAIM.'

IN SUPPORT OF THESE CONTENTIONS THERE ARE CITED IN YOUR LETTER AND THE BRIEF A NUMBER OF COURT CASES AS WELL AS DECISIONS OF THIS OFFICE.

YOU REQUEST THAT BEFORE MAKING ANY CHANGE IN THE LONG-ESTABLISHED AND APPROVED PRACTICES OF EDUCATIONAL INSTITUTIONS ACCOUNTING FOR GRANT FUNDS WHICH HAS RETROACTIVE APPLICATION, THAT WE GIVE CAREFUL CONSIDERATION OF THE ARGUMENTS PRESENTED IN YOUR LETTER AND THE SUPPORTING BRIEF.

WE HAVE LONG HELD THAT INCOME REALIZED BY A GRANTEE BY WAY OF INTEREST OR OTHERWISE FROM THE INVESTMENT OF FUNDS GRANTED BY THE UNITED STATES BELONGS TO THE UNITED STATES, RATHER THAN TO THE GRANTEE AND, UNDER 3617, REVISED STATUTES, 31 U.S.C. 484, IS REQUIRED TO BE DEPOSITED IN THE TREASURY TO THE CREDIT OF MISCELLANEOUS RECEIPTS. 24 COMP. DEC. 403; 1 COMP. GEN. 652; 3 ID. 956; A-91340, JANUARY 12, 1938; 20 ID. 610; 40 ID. 81; B-149441, DECEMBER 6, 1962, 42 COMP. GEN. 289.

IN B-149441, SUPRA, WE STATED THAT:

"* * * 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 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. (EMPHASIS ADDED.)

"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 RESPSONSIBILITY 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. (EMPHASIS ADDED.)

"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 DECISIONS, TOGETHER WITH OTHERS WAS CITED IN THE DECISION 40 COMP. GEN. 81. (EMPHASIS ADDED.)

"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 ACCOUNTED FOR AND DEPOSITED IN THE TREASURY AS MISCELLANEOUS RECEIPTS UNDER SECTION 3617, REVISED STATUTES, 31 U.S.C. 484. * * * "

WHAT IS SAID IN THE ABOVE-QUOTED EXCERPTS FROM B-149441 WOULD HAVE EQUAL APPLICATION TO GRANTS MADE UNDER THE PUBLIC HEALTH SERVICE ACT OR SIMILAR ACTS WHICH DO NOT MAKE OR AUTHORIZE UNQUALIFIED OR UNCONDITIONAL GRANTS OR GIFTS. WHETHER, FROM A LEGAL STANDPOINT, "GRANT FUNDS" PAID TO GRANTEES BE CONSIDERED "PUBLIC MONEYS" OR "TRUST FUNDS" OR FUNDS OF THE GRANTEE FOR CERTAIN PURPOSES, AND REGARDLESS OF WHETHER THE STATUTES AUTHORIZING THE GRANTS IMPOSE CUSTODIAL OR TRUSTEE DUTIES ON THE RECIPIENT OR WHETHER THE GRANT FUNDS ARE REQUIRED TO BE KEPT SEGREGATED, IT IS OUR VIEW, FOR THE REASONS SET FORTH IN B-149441, THAT INTEREST OR OTHER ACCRUALS ON SUCH FUNDS IN THE HANDS OF THE GRANTEE BELONG TO THE UNITED STATES, UNLESS THE STATUTORY LANGUAGE AUTHORIZING THE GRANT MAKES IT CLEAR THAT AN UNQUALIFIED OR UNCONDITIONAL GRANT OR GIFT IS INTENDED.

MOREOVER, WE FIND NOTHING IN THE COURT CASES OR DECISIONS OF THIS OFFICE CITED IN YOUR LETTER AND THE SUPPORTING BRIEF WHICH WOULD REQUIRE A DIFFERENT CONCLUSION. THE FEDERAL STATUTE INVOLVED AND CONSTRUED BY THE COURT IN KING COUNTY V. SEATTLE SCHOOL DISTRICT, 263 U.S. 361, DIRECTS THE SECRETARY OF THE TREASURY TO PAY A PERCENTAGE OF CERTAIN FEDERAL FUNDS TO AN ENTITLED STATE TO BE EXPENDED AS THE STATE LEGISLATURE MAY PRESCRIBE FOR SPECIFIC PURPOSES. THE STATUTE VESTS NO DISCRETION IN THE SECRETARY IN CONNECTION WITH SUCH PAYMENTS AND IT AUTHORIZES EXPENDITURE AS THE STATE LEGISLATURE MAY PRESCRIBE FOR THE PURPOSES SET FORTH IN THE ACT. OTHER WORDS THE STATUTE ITSELF MAKES AN OUTRIGHT GIFT OR GRANT INSOFAR AS ENTITLEMENT TO THE GIFT OR GRANT IS CONCERNED. IN VIEW OF THE LANGUAGE USED BY THE CONGRESS IN THE GRANTING STATUTE THE COURT HELD THAT MONEYS PAID OVER TO THE STATE UNDER THIS STATUTE BELONGED TO THE STATE AND THAT NO TRUST WAS CREATED. WHILE THE LANGUAGE USED IN THE PUBLIC HEALTH SERVICE ACT AUTHORIZES THE MAKING OF GRANTS, THERE IS NOTHING THEREIN WHICH WOULD DENOTE THAT THE CONGRESS MADE OR AUTHORIZED OR INTENDED TO MAKE OR TO AUTHORIZE AN UNQUALIFIED OR UNCONDITIONAL GRANT OR GIFT. AS TO THE CASES OF UNITED STATES V. MASON, 218 U.S. 517, AND UNITED STATES V. MACMILLAN, 253 U.S. 195, THE MONEYS INVOLVED IN THOSE DECISIONS WERE NOT FEDERAL GRANT FUNDS. UNDER THE STATUTES INVOLVED IN THE MASON AND MACMILLAN CASES CLERKS OF UNITED STATES DISTRICT COURTS WERE REQUIRED TO ACCOUNT FOR THE MONEYS THEY COLLECTED AS FEES AND EMOLUMENTS IN CONNECTION WITH ACTIONS BEFORE THE COURT AND TO PAY OVER THE SURPLUS, IF ANY, REMAINING AFTER PAYMENT OF THEIR COMPENSATION AND THE EXPENSES OF THEIR OFFICE. IN BOTH CASES A QUESTION AROSE AS TO WHETHER THE FEES AND EMOLUMENTS WHEN COLLECTED AND ANY SURPLUS SUBSEQUENTLY DETERMINED TO BE DUE TO THE GOVERNMENT WERE PUBLIC MONEYS WITHIN THE PURVIEW OF CERTAIN STATUTES. ALSO, SINCE THE FEES AND EMOLUMENTS COLLECTED WERE GENERALLY DEPOSITED IN A BANK BY THE CLERKS, IN THE MACMILLAN CASE A QUESTION AROSE AS TO WHETHER THE INTEREST EARNED ON SUCH DEPOSITS WAS IN AND OF ITSELF AN EMOLUMENT FOR WHICH THE CLERK WAS LIABLE TO ACCOUNT. THE COURT HELD IN BOTH CASES THAT IN VIEW OF THE HISTORY OF THE STATUTES INVOLVED THE FEES AND EMOLUMENTS COLLECTED BY THE CLERKS WERE NOT PUBLIC MONEYS OF THE UNITED STATES. IN THE MASON CASE THE COURT STATED THAT:

"BUT, FOR THE REASONS WE HAVE STATED, EVEN THE DUTY TO PAY THE SURPLUS SHOWN BY THE RETURN OR AUDIT IS NOT GOVERNED BY THE STATUTES, RELATING TO EMBEZZLEMENT, WHICH HAVE BEEN REFERRED TO IN SUPPORT OF THESE COUNTS. THE AMOUNT WITH WHICH THE CLERK IS CHARGEABLE UPON HIS ACCOUNTING IS NOT THE "PUBLIC MONEY" OR "THE MONEY OR PROPERTY OF THE UNITED STATES" WITHIN THE MEANING OF THEIR PROVISIONS. THE FEES AND EMOLUMENTS ARE NOT RECEIVED BY THE CLERK AS MONEYS OR PROPERTY BELONGING TO THE UNITED STATES, BUT AS THE AMOUNT ALLOWED TO HIM FOR HIS COMPENSATION AND OFFICE EXPENSES UNDER THE STATUTES DEFINING HIS RIGHTS AND DUTIES, AND WITH RESPECT TO THE AMOUNT PAYABLE WHEN THE RETURN IS MADE THE CLERK IS NOT TRUSTEE BUT DEBTOR. ANY OTHER VIEW MUST IGNORE NOT ONLY THE PRACTICAL CONSTRUCTION WHICH THE STATUTES GOVERNING THE OFFICE HAVE RECEIVED, BUT THEIR CLEAR INTENT.' (EMPHASIS ADDED.)

RELYING ON THE FOREGOING THE COURT FURTHER STATED IN THE MACMILLAN CASE IN CONNECTION WITH INTEREST EARNED ON THE FEES AND EMOLUMENTS DEPOSITED IN THE BANK THAT:

"CONCLUSIVELY DISPOSING AS THESE CASES DO OF THE CONTENTION OF THE GOVERNMENT AS TO PUBLIC MONEYS OF THE UNITED STATES, IT LEAVES ONLY FOR CONSIDERATION THE QUESTION OF WHETHER THE INTEREST ON THE SUM OF THE FEES AND EMOLUMENTS DEPOSITED BY THE CLERK IN BANK WAS IN AND OR ITSELF AN EMOLUMENT FOR WHICH HE WAS LIABLE TO ACCOUNT. BUT THAT QUESTION IS VIRTUALLY ALSO FORECLOSED IN VIEW OF WHAT WAS HELD IN THE MASON CASE, SINCE THE INDIVIDUAL CHARACTER OF THE BANK DEPOSIT AS THERE DEFINED AND THE RIGHT TO MAKE IT NECESSARILY CAUSES THE INCREMENT OF SUCH DEPOSIT, THAT IS, THE INTEREST, TO PARTAKE OF THE CHARACTER OF THE PRINCIPAL. AND BESIDES, ASIDE FROM THE RULING IN THE MASON CASE, IT HAD BEEN PREVIOUSLY HELD THAT A SUM COLLECTED BY A CLERK FOR A SERVICE NOT PERTAINING TO HIS OFFICE OR PROVIDED FOR IN THE SCHEDULE OF FEES ALLOWED HIM FOR OFFICIAL SERVICES WAS NOT A FEE OR EMOLUMENT IN THE SENSE OF HE STATUTE (UNITED STATES V. HILL, 120 U.S. 169).' IN OUR OPINION THERE IS A CLEAR DISTINCTION BETWEEN FEDERAL GRANT FUNDS IN THE HANDS OF A GRANTEE AND THE FUNDS INVOLVED IN THE MASON AND MACMILLAN CASES. THE HOLDINGS IN THOSE DECISIONS WERE BASED ON THE PARTICULAR STATUTES INVOLVED AND WOULD NOT NECESSARILY BE FOR APPLICATION TO FEDERAL GRANTS MADE PURSUANT TO STATUTES SUCH AS THE PUBLIC HEALTH SERVICE ACT. WE FOUND NOTHING IN THE COURT CASES OR DECISIONS OF THIS OFFICE, CITED IN YOUR LETTER AND THE SUPPORTING BRIEF, WHICH WOULD PRECLUDE FEDERAL GRANTS MADE PURSUANT TO STATUTES SUCH AS THE PUBLIC HEALTH SERVICE ACT FROM BEING CONSIDERED AS FUNDS HELD BY THE GRANTEE IN THE NATURE OF A TRUST FOR THE PURPOSES OF THE GRANT.

THE HOLDINGS IN THE DECISIONS OF THIS OFFICE CITED IN YOUR LETTER AND THE BRIEF AS HOLDING THAT GRANT FUNDS PAID OVER TO THE GRANTEE LOSE THEIR IDENTITY AS FEDERAL FUNDS AND BECOME FUNDS OF THE GRANTEE, IN GENERAL, WERE RENDERED IN CONNECTION WITH THE QUESTION OF WHETHER FEDERAL STATUTES APPLICABLE TO THE EXPENDITURE OF APPROPRIATED MONEYS BY AGENCIES OF THE UNITED STATES APPLY TO GRANT FUNDS IN THE HANDS OF THE GRANTEE. THERE WAS NOT CONSIDERED IN SUCH DECISIONS THE QUESTION OF ACCOUNTING FOR INTEREST ON GRANT FUNDS. IT SHOULD BE NOTED THAT SOME OF OUR DECISIONS PERTAINING TO ACCOUNTING FOR, OR ENTITLEMENT TO, INTEREST ON GRANTS WERE RENDERED WITH FULL KNOWLEDGE OF, AND AFTER GIVING DUE CONSIDERATION TO, THE DECISIONS HOLDING THAT GRANT FUNDS ONCE GRANTED BECOME THE PROPERTY OF THE GRANTEE. SEE FOR EXAMPLE, A 91340, JANUARY 12, 1938, 40 COMP. GEN. 81; AND B-149441, DECEMBER 6, 1962, 42 ID. 289.

FURTHER, AS INDICATED ABOVE, WHETHER THE GRANT FUNDS ARE SEGREGATED AND DEPOSITED IN SEPARATE ACCOUNTS OR ARE COMMINGLED WITH OTHER FUNDS OF THE GRANTEE IS IMMATERIAL AS FAR AS THE GOVERNMENT'S ENTITLEMENT TO INTEREST OR OTHER ACCRUALS EARNED ON SUCH FUNDS IS CONCERNED. IN OUR DECISION OF MARCH 22, 1933, A-46031 (CITED IN YOUR COUNSEL'S BRIEF) WE ADVISED THE SECRETARY OF AGRICULTURE THAT STATE AUTHORITIES SHOULD BE REQUIRED TO KEEP SEPARATE DEPOSIT ACCOUNTS FOR CERTAIN GRANT FUNDS WITH THE BANKS IN WHICH DEPOSIT ACCOUNTS ARE MAINTAINED. HOWEVER, IT IS CLEAR FROM A READING OF THE DECISION THAT THE PURPOSE INTENDED TO BE ACCOMPLISHED BY SEGREGATING THE GRANT FUNDS WAS "TO FACILITATE THE ACCOUNTING FOR THE INTEREST WHICH MAY ACCRUE ON FEDERAL FUNDS.'

SUBSEQUENTLY IN OUR DECISION OF JULY 25, 1941, A-46031, WE ADVISED THE SECRETARY OF AGRICULTURE, WITH RESPECT TO THE GRANTS CONSIDERED IN OUR DECISION OF MARCH 22, 1933, SUPRA, THAT WE WOULD NO LONGER REQUIRE THAT SEPARATE BANK DEPOSIT ACCOUNTS BE MAINTAINED FOR THE GRANT FUNDS IN QUESTION, SINCE "NO QUESTION OF INTEREST" ON SUCH FUNDS WAS INVOLVED. HOWEVER, THIS DECISION HAS NO BEARING ON ACCOUNTING FOR INTEREST, IF EARNED, ON GRANT FUNDS. AS INDICATED IN YOUR COUNSEL'S BRIEF, IT IS STATED IN OUR JULY 25 DECISION THAT "THE ORIGINAL REQUIREMENT BY THIS OFFICE THAT SEPARATE BANK DEPOSITS BE MAINTAINED WAS PRIMARILY FOR THE PURPOSE OF SAFEGUARDING THE RIGHTS OF THE FEDERAL GOVERNMENT TO ANY INTEREST WHICH MIGHT ACCRUE ON SUCH DEPOSITS.' HOWEVER, THE USE OF THE LAST QUOTED PHRASE WAS NOT INTENDED TO CONVEY THE IMPRESSION THAT SEGREGATION OF GRANT FUNDS WAS NECESSARY TO ENTITLE THE GOVERNMENT TO INTEREST EARNED, IF ANY, ON SUCH FUNDS, SINCE SUCH A QUESTION WAS NOT BEFORE US WHEN THE DECISION OF MARCH 22, 1933, WAS RENDERED.

IN ANY EVENT, AS TO RESEARCH AND TRAINING GRANTS MADE UNDER THE PUBLIC HEALTH SERVICE ACT, SINCE 1959 THE STATED POLICY OF THE PUBLIC HEALTH SERVICE HAS BEEN THAT:

"* * * GRANTS MADE TO INSTITUTIONS DO NOT PRIVILEGE THESE INSTITUTIONS TO USE THE GRANT MONEY TO PRODUCE INCOME IN AUGMENTATION OF THE GRANT OR FOR OTHER BENEFIT TO THE GRANTEE INSTITUTION; THEREFORE, INTEREST EARNED ON FUNDS GRANTED TO INSTITUTIONS * * * MUST REVERT TO THE UNITED STATES TREASURY.' (EMPHASIS ADDED.)

THE POLICY IS MADE KNOWN TO ALL GRANT APPLICANTS AND IS ONE OF THE CONDITIONS TO WHICH THE GRANTS ARE SUBJECT. MOREOVER, SINCE 1951 THE PUBLIC HEALTH SERVICE HAS CLEARLY REQUIRED THAT INTEREST EARNED ON RESEARCH GRANT FUNDS BE PAID TO THE GOVERNMENT. SEE LINE 2, AND INSTRUCTIONS PERTAINING THERETO, ON EXPENDITURE REPORT, APRIL 1951 REVISION, REQUIRED BY THE PUBLIC HEALTH SERVICE TO BE SUBMITTED BY GRANTEES.

SUMMARIZING, IT IS OUR VIEW THAT INTEREST AND OTHER INCOME EARNED ON FUNDS GRANTED BY THE PUBLIC HEALTH SERVICE OF THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE AND BY OTHER AGENCIES, FOR RESEARCH AND TRAINING PURPOSES, UNDER THE AUTHORITY CONTAINED IN THE PUBLIC HEALTH SERVICE ACT AND SIMILAR LEGISLATION, BELONG TO THE UNITED STATES AND WHEN PAID OVER TO THE UNITED STATES ARE FOR DEPOSIT INTO THE TREASURY PURSUANT TO 31 U.S.C. 484. WE WOULD LIKE TO POINT OUT, HOWEVER, THAT THE "FORMULA" REFERRED TO AT THE MIDDLE OF PAGE 2 OF YOUR LETTER IS BUT A METHOD USED BY OUR AUDITORS TO ARRIVE AT AN ESTIMATE OF INCOME EARNED BY ONE UNIVERSITY ON UNEXPENDED GOVERNMENT GRANT FUNDS DURING A SINGLE FISCAL YEAR IN LIGHT OF THE CIRCUMSTANCES OBTAINING AT THAT UNIVERSITY. BECAUSE OF POSSIBLE VARIATIONS IN FACTS AND CIRCUMSTANCES, AS BETWEEN GRANTEE INSTITUTIONS, THE METHOD MAY NOT NECESSARILY BE APPLICABLE TO ALL GRANTEES. MOREOVER, THE RETROACTIVE APPLICATION OF WHAT IS STATED HEREIN TO A PARTICULAR GRANTEE INSTITUTION WILL DEPEND ON ALL THE FACTS AND CIRCUMSTANCES EXISTING IN THAT PARTICULAR CASE.