TITLE: B-303845, Department of Education -- Grant Extensions, January 3, 2006
BNUMBER: B-303845
DATE: January 3, 2006
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B-303845, Department of Education -- Grant Extensions, January 3, 2006

   Decision

   Matter of: Department of Education -- Grant Extensions

   File: B-303845

   Date:  January 3, 2006

   DIGEST

   1. Department of Education's 4-year extension of a 5-year grant made to an
   Historically Black Graduate Institution (HBGI) was improper given the
   plain language of the authorizing statute limiting grants to HBGIs to a
   period not to exceed 5 years. 20 U.S.C. sect. 1063b(b).

   2. Department of Education's 4-year extension of a 5-year grant made to an
   Historically Black College and University (HBCU) amounted to an improper
   waiver of its regulations, which limited the duration of HBCU grant
   periods to 5 years. 34 C.F.R. sect. 608.11.

   DECISION

   Between July 2003 and August 2004, our Office undertook an examination of
   the Department of Education's (Education) management of grant programs to
   benefit low-income and minority serving postsecondary institutions
   authorized by Titles III and V of the Higher Education Act of 1965 (HEA),
   Pub. L. No. 89-329, 79 Stat. 1219 (Nov. 8, 1965), as amended, 20 U.S.C.
   sect. 1001 (2000). GAO, Low-Income and Minority Serving Institutions:
   Department of Education Could Improve Its Monitoring and Assistance,
   GAO-04-961 (Washington, D.C.: Sept. 21, 2004). During the course of that
   review, we became aware that, despite apparent statutory and regulatory
   limitations on grants to Historically Black Colleges and Universities
   (HBCU) and Historically Black Graduate Institutions (HBGI), Education, in
   some cases, had made 4-year "extensions" to the original 5-year grants
   awarded to those institutions.

   For the reasons explained below, we conclude that these extensions were
   improper. Education should strictly adhere to the duration restrictions
   for grant periods as set up in the authorizing legislation and
   implementing regulations, and terminate grants improperly extended. If, at
   that time, Education determines that additional assistance is warranted,
   Education could award a new grant to that institution. In the alternative,
   Education may wish to seek legislative changes that would allow for
   extensions to 5-year grants.

   BACKGROUND

   Title III, Part B of the Higher Education Act of 1965, as amended,[1] 20
   U.S.C. sections 1060--1063c, contains provisions which provide for and
   govern grants to HBCUs and HBGIs. Section 1063b, which specifically
   applies to HBGIs, provides that "[g]rants shall be made for a period not
   to exceed 5 years." 20 U.S.C. sect. 1063b(b). The Act does not contain a
   similar limitation regarding grant duration for HBCUs. See 20 U.S.C.
   sections 1060--1063, 1063a, 1063c. Education's implementing regulations,
   however, provide that grants to both HBCUs and HBGIs may be awarded "for a
   period of up to five academic years." 34 C.F.R. sect. 608.11 (HBCUs),[2]
   sect. 609.11(HBGIs) (2004).

   In our 2004 review of Education's management of Title III and Title V
   grant programs, we found that grantees commonly reported difficulties
   implementing their grant projects, including problems related to hiring
   and staffing, "construction delays, challenges implementing technology and
   distance learning, and state budget shortages." GAO-04-961 at 13. As a
   result of these challenges, "grantees often needed additional time to
   complete planned activities." Id. We learned that Education, in some
   cases, had extended grants to HBCUs and HBGIs for an additional 4 years
   beyond their initial five-year period, that is, gave them 4 more years in
   which to obligate grant funds awarded in the original 5-year grant which
   were not obligated at the end of the 5-year grant period. GAO-04-961 at
   14, fn.7; letter from Hubert Davis, Director, Institutional Development
   and Undergraduate Education Service, Education, to HBCU/HBGI Presidents,
   Sept. 2, 2003. Given that the plain language of the authorizing
   legislation for HGBIs and the implementing regulations for HBCUs and HBGIs
   limit the duration of grants to HBCUs and HBGIs to no more than 5 years,
   we asked Education's General Counsel, in October 2004, for his response to
   a series of questions regarding these extensions. Letter from Dayna K.
   Shah, Associate General Counsel, GAO, to Brian W. Jones, General Counsel,
   Department of Education, Oct. 25, 2004.

   In November 2004, Education's General Counsel responded that the 5-year
   limitation applies only to "the initial term of the grant at the time of
   award," and that the subsequent extension of a grant is not barred by the
   governing provisions. Letter from Brian W. Jones, General Counsel,
   Department of Education, to Dayna K. Shah, Associate General Counsel, GAO,
   November 29, 2004 (Jones Letter). Moreover, the General Counsel pointed
   out that the implementing regulations for HBCU and HBGI grants, 34 C.F.R.
   sections 608.3(a)(2) and 609.3(a)(2), respectively, incorporate 34 C.F.R.
   sect. 75.261, which permits extension of the grant award period under
   certain circumstances. Id.

   ANALYSIS

   The issues presented are: (1) whether Education has authority to make
   4-year extensions to 5-year grants to HBGIs; and (2) whether the 4-year
   extensions to 5-year grants to HBCUs are permissible.

   Extensions to HBGI Grants

   The statute at issue with respect to the HBGI grants reads, in relevant
   part, as follows: "Grants shall be made for a period not to exceed 5
   years." 20 U.S.C. sect. 1063b(b).

   The starting point for interpreting a statute is the plain meaning of the
   statutory language. Consumer Product Safety Comm'n v. GTE Sylvania, Inc.,
   447 U.S. 102, 108 (1980). If the statute is unambiguous, the literal
   language of the statute controls. Webb v. Hodel, 878 F.2d 1252, 1255
   (10^th Cir. 1989). The plain meaning of section 1063b(b) is that grants
   can be made for any period up to, but for no more than, five years; there
   is no ambiguity. We have consistently interpreted legislative language
   "not to exceed" as establishing a maximum limitation. See, e.g., 64 Comp.
   Gen. 263, 264 (1985) (an appropriation of "not to exceed $15,000" "is
   susceptible of but one meaning which is that [the agency] may not expend
   more than $15,000"). Moreover, our review of the legislative history of
   section 1063b(b) provides no basis to believe that anything other than the
   phrase's plain meaning was intended. H.R. Rep. No. 99-383, at 1, 20--23
   (1986), H.R. Conf. Rep. No. 99-861, at 361--368 (1986), and H.R. Rep. No.
   104-504, at 1--5 (1996). "Where the language is plain and admits of no
   more than one meaning, the duty of interpretation does not arise, and the
   rules which are to aid doubtful meanings need no discussion." Caminetti v.
   United States, 242 U.S. 470, 485 (1917). The plain meaning of the statute
   is that Education may award grants to HBGIs for a period no greater than 5
   years.

   Education argues that the 5-year limitation applies only to the initial
   grant, and that it may thereafter make extensions since there is no
   express prohibition of extensions in the statute. Jones Letter. As a
   general proposition, an agency's interpretation of a statute it is charged
   with administering is entitled to deference. Chevron, U.S.A., Inc. v.
   Natural Resources Defense Council Inc., 467 U.S. 837, 843--44 (1984). This
   deference, however, is not without limits, as the agency's interpretation
   must be reasonable and based on a permissible construction of the statute.
   Id. at 843. Education's view that, essentially, it can infer authority to
   extend grants from the absence of an express prohibition in the statute,
   is not a permissible construction, for "[i]t is indeed well established
   that the absence of a statutory prohibition cannot be the source of agency
   authority." FAG Italia S.p.A. v. United States, 291 F.3d 806, 816 (Fed.
   Cir. 2002). In Railway Labor Executives' Ass'n v. National Mediation
   Board, 29 F.3d 655 (D.C. Cir. 1994), the court explained the reasoning
   behind this rule: "Were courts to presume a delegation of power absent an
   express withholding of such power, agencies would enjoy virtually
   limitless hegemony, a result plainly out of keeping with Chevron and quite
   likely with the Constitution as well." Id. at 671. We therefore cannot
   accept Education's interpretation of the statute to permit the extensions.

   Education also argues that the implementing regulation found at 34 C.F.R.
   sect. 609.3(a)(2), which incorporates 34 C.F.R. sections 75.261(a) and
   (c), provides for the extension of grants. Section 75.261(a) provides
   grantees a one-time extension "for a period up to twelve months," without
   Education's approval, but only if certain additional requirements are met,
   including "ED regulations ... , statutes or the conditions of an award do
   not prohibit the extension." On its face, a 4-year extension cannot be
   justified by this provision; the regulation permits only a 1-year
   extension. In any case, at issue here are 5-year HBGI grants, and any
   extension to a 5-year HBGI grant would violate the statutory 5-year
   limitation on HBGI grants at 20 U.S.C. sect. 1063b(b), hence not meeting
   the requirements of section 75.261(a) that an extension is permitted only
   if there is no statute that prohibits the extension.[3]

   Section 75.261(c) provides the terms under which Education may grant an
   extension when agency approval is required. However, one of the
   requirements is that "[t]he extension does not violate any statute or
   regulations; ... ." Again, since extensions beyond an aggregate 5 years
   (base term plus any extensions) violate the 5-year statutory limitation at
   20 U.S.C. sect. 1063b(b), the extensions cannot be justified by 34 C.F.R.
   sect. 75.261(c). Since the statute limits the duration of HBGI grants to 5
   years, Education, in extending the grants by 4 years, essentially has
   created 9-year grants, and therefore exceeded its authority.

   Extensions to HBCU Grants

   While the grant authorizing legislation, 20 U.S.C. sections 1060--1063c,
   contains no restriction on grant duration with respect to grants to HBCUs,
   Education's implementing regulations for grants to HBCUs, 34 C.F.R. part
   608, contain the following limitation: "The Secretary may award a grant
   under this part for a period of up to five academic years." 34 C.F.R.
   sect. 608.11.

   To determine the effect of this regulation upon the agency's grantmaking
   discretion, we look to the Administrative Procedure Act (APA), 5 U.S.C.
   sections 551--706, which generally governs agency rulemaking and
   adjudications. The APA section on rulemaking, section 553, draws a
   distinction between substantive rules, also called legislative rules, and
   "interpretative rules, general statements of policy, or rules of agency
   organization, procedure, or practice." 5 U.S.C. sect. 553(b)(A), (d);
   Chrysler Corp.v. Brown, 441 U.S. 281, 302--03, 313--14 (1979).
   Substantive, or legislative, rules must be published in the Federal
   Register for notice and comment under 5 U.S.C. sect. 553(b), (d), and when
   duly promulgated in that manner, they are "binding," or have the "force
   and effect of law." Chrysler Corp., 441 U.S. at 302--03, n.31; Appalachian
   Power Co. v. Environmental Protection Agency, 208 F.3d 1015, 1020 (D.C.
   Cir. 2000). An agency is bound by its own legislative regulations and may
   not waive them.[4] National Family Planning and Reproductive Health Ass'n,
   Inc. v. Sullivan, 979 F.2d 227, 234 (D.C. Cir. 1992); Tyler v. U.S. Dept.
   of Labor, 752 F. Supp. 32, 37 (D. Me. 1990); B-243283.2, Sept. 27, 1991.
   In contrast, the publication and comment requirements do not apply to
   interpretative rules, general statements of policy, or rules of agency
   organization, procedure, or practice, and they do not have the force and
   effect of law. 5 U.S.C. sect. 553(b)(A), (d); Gossett v. Barnhart, 374 F.
   Supp. 2d 505, 510 n. 7 (E.D. Tex. 2005).

   In Troy Corp. v. Browner, 120 F.3d 277 (D.C. Cir. 1997), the D.C. Circuit
   Court of Appeals defined a legislative rule as "one that (1) `supplements'
   a statute; (2) `effect[s] a change in existing law or policy'; or (3)
   `grant[s] rights, impose[s] obligations, or produce[s] other significant
   effects on private interests.'" Id. at 287 (citation omitted). In National
   Family Planning and Reproductive Health Ass'n v. Sullivan, 979 F.2d at
   237, the court explained that a substantive or legislative rule is "one
   that does more than simply clarify or explain a regulatory term, or
   confirm a regulatory requirement, or maintain a consistent agency policy."
   Explained still another way, "[i]nterpretive rules state what the
   administrative officer thinks the statute or regulation means, while
   legislative rules `affect individual rights and obligations,' and create
   law." Davidson v. Glickman, 169 F.3d 996, 999 (5^th Cir. 1999) (citation
   omitted).

   Applying these principles, we conclude that 34 C.F.R. sect. 608.11 is a
   legislative rule, and as such, is binding on the agency. It imposes a
   5-year limitation on the term of grants awarded under the program which
   does not exist in the authorizing statute; in the words of the standard
   defined in Troy, it "supplements" the statute. Furthermore, section
   608.11, as well as all the regulations found at 34 C.F.R. sections 608 and
   609, was promulgated through notice and comment rulemaking procedures
   after the HBCU and HBGI programs were created in 1986. See 52 Fed. Reg.
   22,274--22,281 (June 10, 1987) and 52 Fed. Reg. 30,536--30,543 (Aug. 14,
   1987). The June 10, 1987, Notice of Proposed Rulemaking states:

   "The Secretary proposes regulations to govern the [HBCU] Program and the
   [HBGI] Program. The regulations are needed to implement these two new
   programs, each of which is authorized under Part B of Title III of the
   Higher Education Act of 1965 (HEA) as amended by the Higher Education Act
   Amendments of 1986, Pub. L. 99-498."

   52 Fed. Reg. 22,274. Subsequently, on August 14, 1987, the "Final
   regulations" were published, again stating the agency's purpose as the
   implementation of the HBGI and HBCU programs, along with an explanation of
   the comments received and the agency's ultimate decisions after
   considering the comments. See 52 Fed. Reg. 30536. The agency's actions
   suggest that officials intended the regulations to have legislative
   effect. Moreover, the fact that Education published section 608.11 in the
   Code of Federal Regulations, which includes only regulations with legal
   effect, 44 U.S.C. sect. 1510(a), is also indicative that the agency
   intended the regulation to be binding. Brock v. Cathedral Bluffs Shale Oil
   Co., 796 F.2d 533, 538--39 (D.C. Cir. 1986).

   Having determined that the regulation here is binding on Education, we
   turn to the interpretation of its language. "To interpret a regulation we
   must look at its plain language and consider the terms in accordance with
   their common meaning." Lockheed Corp. v. Widnall, 113 F.3d 1225, 1227
   (Fed. Cir. 1997). The plain language of the regulation authorizes the
   agency to award grants for periods of up to five academic years.[5] We
   conclude, therefore, that Education can award grants to HBCUs for periods
   no longer than 5 academic years. The 4-year extensions to 5-year grants
   certainly have the effect of creating grants of periods longer than 5
   years, and therefore are improper.

   CONCLUSION

   We conclude that: (1) the 4-year extensions made to 5-year grants to HBGIs
   were improper, since the plain language of the authorizing statute
   specifies that grants to HBGIs are not to exceed 5 years; and (2) the
   4-year extensions made to 5-year grants to HBCUs were improper since
   Education's binding regulations limit those grants to 5 years. Adherence
   to the existing framework for grantmaking, as laid out in the statute and
   implementing regulations, provides structure and consistency, which in
   turn promotes the goals of proper administration and accounting, as well
   as fairness to all grant applicants. Education therefore should strictly
   adhere to the duration restrictions for grant periods and terminate grants
   improperly extended.

   To the extent that Education determines at that time that additional
   assistance is warranted, Education could award a new grant to that
   institution. A new grant, of course, would constitute a new obligation of
   Education that would be chargeable to appropriations current at the time
   Education awards the new grant. B-289801, Dec. 30, 2002. Education will
   need to recover from grantees any amounts from a terminated grant that the
   grantee had not obligated as of the end of the 5-year grant period, and
   credit those amounts to the Education appropriation from which Education
   had made the initial grant award. If that appropriation were a fiscal year
   appropriation, those amounts are no longer available to Education, and
   they must be deposited into the proper expired appropriation. In the
   alternative, Education may wish to seek legislative changes that would
   allow for extensions to 5-year grants.

   /signed/

   Anthony H. Gamboa

   General Counsel

   ------------------------

   [1] The Higher Education Amendments of 1986, Pub. L. No. 99-498, 100 Stat.
   1268 (Oct. 17, 1986); the Omnibus Budget Reconciliation Act of 1986, Pub.
   L. No. 99-509, 100 Stat. 1874 (Oct. 21, 1986); and the Higher Education
   Technical Amendments Act of 1987, Pub. L. No. 100-50, 101 Stat. 335 (June
   3, 1987).

   [2] For reasons unclear, section 608.11 cites 20 U.S.C. sect. 1063b(b) as
   authority for this 5-year limitation on HBCU grants, although
   section 1063b, by its terms, applies only to HBGIs.

   [3] In the November 29, 2004, response, Education's General Counsel also
   refers to a grant extension provision at 34 C.F.R. sect. 74.25(e)(2)(i).
   However, like section 75.261(a), this provision too is limited to 12
   months and could not justify 4-year extensions.

   [4] Under the APA, regulations governing "public property, loans, grants,
   benefits, or contracts" are ordinarily exempt from the notice and comment
   requirements for legislative rulemaking. 5 U.S.C. sect. 553(a)(2).
   However, Education (by its predecessor, the Department of Health,
   Education and Welfare) waived this exemption in 1971, see 36 Fed. Reg.
   2532 (Feb. 5, 1971), subjecting the agency to the notice and comment
   requirements of 5 U.S.C. sect. 553 for substantive regulations regarding
   any of the above named matters, including grants. See Mission Group
   Kansas, Inc. v. Riley, 146 F.3d 775, 782, fn. 7 (10^th Cir. 1998). In
   1994, Congress statutorily waived application of the exemption for
   Education grant regulations, except for regulations "(1) that govern the
   first grant competition under a new or substantially revised program
   authority as determined by the Secretary; or (2) where the Secretary
   determines that the requirements of this subsection will cause extreme
   hardship to the intended beneficiaries of the program affected by such
   regulations." Pub. L. No. 103-382, sect. 247, 108 Stat. 3923, codified at
   20 U.S.C. sect. 1232(d).

   [5] In addition, our review of the Notice of Proposed Rulemaking, 52 Fed.
   Reg. 22,274-22,281 (Jun. 10, 1987), and the Final Rule, 52 Fed. Reg.
   30,536-30,543  (Aug. 14, 1987), for this regulation when it was first
   promulgated in 1987, revealed no contrary intent.