[Question Concerning Liability for Interest on Debt]

The Oklahoma Department of Education requested a decision on whether it was liable for interest that the U.S. Department of Education demanded in a letter stating that it owed on two separate debts under titles I and IV of the Elementary and Secondary Education Act. At the time of the demand, Education had not adopted regulations governing the collection of interest on debts. Oklahoma contended that it need not pay the interest because: (1) Education failed to give adequate notice of its intent to assess interest; and (2) the absence of regulations governing the collection of interest bars Education from assessing interest. Regulations state that: (1) the government's right to interest is based on principles of justice and equity in the enforcement of an obligation; (2) a creditor has the right, not dependent on statute, to charge interest on unpaid debts; and (3) there is no common law requirement that a government creditor notify a debtor of its intent to assess interest, but it is necessary for the creditor to make demands for payment of the underlying debt. GAO found that: (1) Education complied with common law requirements in notifying Oklahoma about the interest owed, but it did not mention the applicable rate of interest; and (2) Education's failure to publish final regulations on its policy for assessing interest does not relieve Oklahoma of its interest liability since it had actual notice of Education's interest policy. GAO believes that Education should bear the consequences of the interest rate confusion and reduce its interest claim to the lower amount it quoted. Accordingly, Oklahoma is liable for some interest.