The Director of the Community Services Administration (CSA) requested a decision as to what action CSA should take concerning the expenditure of funds under the fiscal year (FY) 1979 Crisis Intervention Program (CIP) that were disbursed under a court order which was subsequently vacated. CSA asked whether it must recover from its grantees the funds it disbursed and whether it was obligated to those grantees to whom awards were made, but who had not received their funds before the order was vacated. CSA was terminated effective October 1, 1981, and the Department of Health and Human Services (HHS) is now handling its residual affairs. GAO held that, as successor to CSA, HHS should not recover funds expended pursuant to the court order. Although the order was subsequently vacated, the grant fund appropriation was validly obligated prior to the close of FY 1979 since, pursuant to legislation, CSA filed evidence of potential liability because of pending litigation. Further, the payments which CSA made to grantees were proper and need not be recovered, because the 1979 CIP funds were still available to liquidate the obligation at the time the grants were made under the court order. With respect to grantees which CSA had not paid before the order was vacated, the Government is obligated to pay them only to the extent that they incurred obligations or expended funds in reliance on the promise to reimburse them which CSA made under the order. Additionally, if prior to the vacating of the order a grantee did not expend funds or incur a legal obligation to do so in reliance on the CSA agreement to reimburse it, the Government is free to terminate the grant in accordance with its standard regulatory provisions.
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