BNUMBER:  B-270654
DATE:  May 6, 1996
TITLE:  The Asia Foundation

**********************************************************************

Matter of:The Asia Foundation

File:     B-270654

Date:May 6, 1996

DIGEST

The Asia Foundation may not use its general support grant funds from 
the Department of State to match other federal grants from the Agency 
for International Development (AID) and the United States Information 
Agency (USIA).  Generally, funds derived from other federal grants do 
not qualify as matching funds unless statutorily authorized.  The Asia 
Foundation does not have specific statutory authority to use grant 
funds to match other federal grants.        

DECISION

This is in response to your request for an opinion concerning whether 
the Asia Foundation (Foundation) may use general support grant funds 
from the Department of State to satisfy cost-sharing requirements, 
that is, to match grants from other federal agencies.  As explained 
below, the Asia Foundation may not use its general support grant funds 
to match other federal grants from the Agency for International 
Development (AID) and the United States Information Agency (USIA).

The Asia Foundation is a private nonprofit corporation which promotes 
democracy and human rights throughout the East Asian and Pacific 
region.  The Asia Foundation receives financial support from the 
United States government through various means, including an annual 
grant from the Secretary of State as specifically authorized by 22 
U.S.C.  sec.  4402(a)(1992).    

        "The Secretary of State shall make an annual grant to The Asia 
        Foundation with the funds made available under section 4403 of 
        this title.  Such grants shall be in general support of the 
        Foundation's programs and operations.  The terms and 
        conditions of grants pursuant to this section shall be set 
        forth in a grant agreement between the Secretary of State and 
        The Asia Foundation."     

The Asia Foundation seeks grants from AID and USIA and proposes to use 
grant funds provided under section 4402 to satisfy AID and USIA 
cost-sharing requirements.  22 C.F.R. Parts 226.23 and 518.23.[1]  
These regulations provide that AID and USIA shall accept contributions 
as part of the recipient's cost sharing or matching if they meet 
certain criteria, one of which is that contributions "[a]re not paid 
by the Federal Government under another award, except where authorized 
by Federal statute to be used for cost sharing or matching."  AID and 
USIA have interpreted this provision as preventing the Asia Foundation 
from using funds derived from the State Department grant to meet 
cost-sharing requirements because the Asia Foundation does not have 
specific statutory authority to use grant funds from the Department of 
State to match federal grants.

The Foundation does not challenge the validity of the AID and USIA 
regulations; rather the Foundation claims that it has the requisite 
statutory authority to use grant funds from the Department of State to 
match AID and USIA grants.  The Foundation claims that the phrase 
"general support" as used in 22 U.S.C.  sec.  4402 indicates that Congress 
did not intend to attach any strings to the grant.  Accordingly, the 
Foundation maintains that AID and USIA must permit use of those funds 
for cost sharing requirements.  The Foundation points to the 
legislative history of the Asia Foundation Act which noted that it 
received funding from other agency grants, such as AID and USIA and 
that the State Department grant was for the purpose of general support 
of the Foundation's programs and operations.  See H.R. No. 130, 
reprinted in 1983 U.S.C.C.A.N. 1484, 1565.  The Foundation also claims 
that the State Department core grant does not restrict, nor could it 
restrict, the Foundation from using those funds to meet cost-sharing 
requirements.  

In determining whether an agency may use federal funds to match other 
federal grants, we have looked at the cost-sharing objectives of 
matching grants as well as statutory and regulatory provisions 
imposing restrictions on matching grants.  Generally, cost-sharing 
objectives of matching grants are intended to stimulate new grantee 
expenditures and/or to limit federal expenditures on the program 
activities involved.  Consistent with these objectives, the general 
rule is that a grantee may not use funds received under one federal 
grant as the matching share under a separate grant.  56 Comp. Gen. 
645, 648 (1977); 32 Comp. Gen. 561 (1953); 32 Comp. Gen. 141 (1952); 
and B-214278, Jan. 25, 1985 (Where a statutory provision specifies 
that the federal contribution to a local project will not exceed a 
particular percentage of project costs, the remaining project costs 
should be funded with nonfederal moneys in the absence of a clear 
indication of contrary congressional intent).  See also OMB Circular 
No. A-110, "Grants and Agreements with Institutions of Higher 
Education, Hospitals and Other Non-Profit Organizations", para. 
23(a)(5).  We apply this rule even where there is no express 
prohibition against such use in the relevant program statute because 
we have held that a matching requirement contemplates that both 
federal and nonfederal funds will be used to support authorized grant 
activities.  See B-214278, Jan. 25, 1985.
  
Normally, exceptions to this rule are in the form of express statutory 
authority.   See 59 Comp. Gen. 668 (1980).  Where Congress has 
authorized the use of federal grant funds to satisfy local share or 
matching requirements, it has very clearly conveyed its intent.  See 
59 Comp. Gen. 668 (1980) (Housing and Community Development Act of 
1974 expressly permits Community Development Block Grantees to use 
those funds to provide a local matching share required by another 
federal grant program); B-239907, July 10, 1991; and B-214278, Jan. 
25, 1985. 
  
We recognize that the statute authorizing the State Department grant 
and its legislative history indicate some flexibility in the 
Foundation's use of those funds.  However this statute also permits 
the imposition of restrictions on the grant:  "The terms and 
conditions of grants pursuant to this section shall be set forth in a 
grant agreement between the Secretary of State and The Asia 
Foundation."  22 U.S.C.  sec.  4402.  In any event, neither the statute nor 
its legislative history can be read to authorize the use of those 
funds to match funds for other federal grants.  

The Asia Foundation claims that its State Department grant is similar 
to the grant analyzed in 57 Comp. Gen. 710 (1978).  In that case a 
state proposed to use federal funds distributed under Title II of the 
Public Works Employment Act of 1976 as the state's required nonfederal 
share under the Medicaid program, but was opposed    by the 
predecessor of the Department of Health and Human Services (HHS).  
HHS's regulations stated the general rule that federal funds may not 
be utilized as the nonfederal share for HHS programs unless authorized 
by law.  45 C.F.R.  sec.  74.52(b)(5) (1976).  We determined that Congress 
considered the federal funds distributed under Title II as more in the 
nature of revenue sharing than traditional grants-in-aid of specific 
purposes.  We found that under Title II, an agency had no discretion 
in deciding whether to make an award and could not impose conditions 
on the use of the federal funds distributed under Title II.  
Furthermore, the method of distributing funds under Title II is 
accomplished by formula distribution defined by statute and not by an 
application or approval by a federal grantor agency.  Thus, we held 
that such funds were not subject to the restrictions applicable to 
grants, including the prohibition on the use of grant funds to match 
other grants nor were such funds subject to the HHS regulations 
regarding contracts or grants.

In this case, section 4402 specifically identifies the funds received 
by the Asia Foundation as a grant and states that the grant is 
governed by the grant agreement between the Foundation and the State 
Department.  The grant agreement applies general grant management 
principles such as cost allowance, accounting and reporting 
requirements.  There is no doubt that the Asia Foundation is a federal 
grant recipient and nothing in the statute or legislative history 
supports the proposition that Congress intended that the grant not be 
subject to the general rules regarding grants.[2]  We have no basis to 
conclude that the Foundation's grant funds are nonfederal and that AID 
and USIA regulations should not be applied in this case.  Accordingly, 
the Asia Foundation may not use funds from its State Department grant 
to match grants from AID and USIA.

/s/Robert P. Murphy
for Comptroller General 
of the United States

1. Both USIA and AID grant regulations implement the provisions of OMB 
Circular No. A-110 issued on November 19, 1993.  See 59 Fed. Reg. 
39440 (1994) and 60 Fed. Reg. 3743 (1995).

2. We also considered whether the Asia Foundation's grant was similar 
to the grants analyzed in 59 Comp. Gen. 668 (1980).  We there 
concluded that Community Development Block Grants (CDBG) were "local 
resources" for purposes of local matching requirements for community 
development programs such as the Coastal Zone Management Act and thus 
were available to match a grant under that Act.  The controlling 
distinction between that decision and here is that the Community 
Development Act of 1974 specifically authorized the use of CDBG funds 
as "non-federal share" for grants in community development programs, 
42 U.S.C.  sec.  5305 (1974), whereas here the Asia Foundation has no 
analogous statutory authority.