San Carlos Apache Tribe of Arizona, DAB No. 369 (1982)

GAB Decision 369

December 28, 1982 San Carlos Apache Tribe of Arizona; Docket No 82-93
Ford, Cecilia; Teitz, Alexander Garrett, Donald


San Carlos Apache Tribe of Arizona (Grantee) appealed a determination
by the Office of Human Development Services (Agency) disallowing a
portion of the amount charged by Grantee to its Headstart grant for the
year ended December 31, 1980.Specifically, the Agency determined that
$54,783 was allocable to children who were ineligible for the Headstart
program, and was thus unallowable. The Agency also determined that
Grantee earned $7,057 in interest on federal funds held by it, and that
it was required to refund that amount to the federal government. During
the course of proceedings before the Board, the Agency stated that it
was withdrawing $22,513 of the disallowance related to the ineligible
children. It stated, however, that it had erred in calculating the
original amount of that disallowance, which should have been $56,243
rather than $54,783, so that the disallowance for ineligible children
was only reduced to $33,730 ($56,243-$22,513). (Agency's brief dated
August 13, 1982, p. 3) Grantee in its reply brief also indicated that
$56,243 was the correct figure. (Grantee's reply brief dated August 30,
1982, p. 1) For the reasons discussed below, we reverse the remaining
disallowance related to the ineligible children and sustain the
disallowance of the interest. This decision is based on the written
record before the Board.

I. Disallowance for Ineligible Children

Regulations applicable to Grantee's Headstart program required that
at least 90% of enrollees be from low-income families. 45 CFR 1305.4
(1979). The Agency found that the percentage of children participating
in Grantee's program who were not from low-income families ("ineligible
children") was 39% of the total enrollment, and calculated the
disallowance by multiplying the total allowable costs of the program by
29% (39% minus 10%). (Agency's brief dated August 13, 1982, p. 4)
Grantee did not dispute that it failed to comply with the regulation.
It argued, however, that it qualified for an exemption to the regulation
provided in the authorizing legislation for the Headstart program, which
states that a Headstart program operated in a community with a
population of 1,000 or less individuals and meeting certain other
requirements". . . shall establish the (2) criteria for eligibility. .
." 42 U.S.C. 2928g(a)(2) (currently codified at 42 U.S. C. 9840(a)(2).
Grantee asserted that it had chosen under this provision to have no
income requirement; hence, there were no ineligible children.
(Grantee's letter dated September 28, 1982, p. 1)

The Agency took the position, however, that Grantee's Headstart
program was not operated in community with a population of less than
1,000, /1/ so that it was not entitled under 42 U.S.C. 2928g(a)(2) to
establish its own eligibility criteria. The Agency also argued that the
statute required a grantee to apply for the exemption before a grant was
awarded, and that to allow a grantee which had not done so to establish
its own eligibility criteria would in effect alter the terms of the
grant. It asserted that such an action was beyond the Board's
authority. (Agency's supplemental memorandum dated November 15, 1982)


A. Was the population requirement met?

Grantee asserted that it operated four Headstart programs, each
located in a community with a population of 1,000 or less. Each of the
"communities" identified by Grantee surrounded a Headstart center
operating out of the "chapter house" located in each of the four
political districts into which the Indian reservation was divided.
Although the "communities" identifed by Grantee bore the same names as
the four political districts, they represented only that part of each
district in which children attending the center live. Grantee estimated
the population in each "community" based on the population of
enumeration districts established by the Census Bureau. Grantee
contended that these "communities" satisfied the definition of that term
at 42 U.S.C. 2928c (b) as ". . . a city, county, multicity, or
multicounty unit within a State, or a neighborhood or other area
(irrespective of boundaries or political subdivisions) which provides a
suitable organization base and. . . the commonality of interest needed
to operate a Headstart program." It noted in support of this contention
that teachers, other staff, and program volunteers for each of the four
Headstart centers were residents of the area identified by Grantee as a
"community"; that there was a separate Headstart Parent Committee for
each of the four centers which had direct involvement in program
planning and operations for the particular center; and that separate
fund-raising efforts were organized by the parents of children enrolled
at each center. (Grantee's submission dated December 23, 1982, p. 2)

(3) The Agency contended that Grantee had not shown that the four
communities identified by it satisfied the statutory definition, stating
that ". . . it is doubtful that any organization on the Reservation,
other that the Tribe itself, has a suitable organization base capable of
administering the Headstart program." (Agency's supplemental memorandum
dated November 15, 1982, p. 3) It noted in support of its position that
all Headstart centers were answerable to the Tribal Council, and that
the individual centers did not make their own decisions as to
eligibility criteria. (Agency's supplemental memorandum dated November
15, 1982, p. 6)

In our view, however, the fact that each Headstart Center was staffed
by residents of the community identified by Grantee, that an
organization of parents from each community had a voice in how the
particular center was operated, and that each community provided some
financial support for its own center are all evidence that each
community had ". . . a suitable organizational base . . . and the
commonality of interest needed to operate a Headstart program." We do
not find this conclusion to be inconsistent with the fact that the
Tribe, not the individual communities, was the recipient of the
Headstart grant, and in that capacity was responsible for personnel and
established the eligibility criteria in question here. The statute does
not require that each community be able to operate a Headstart program
on its own, but simply that it be a cohesive unit capable of providing
the human resources vital to a Headstart program. There would be no
need for the statute to define the term "community" if the term
"Headstart agency" were interchangeable.

The Agency also argued that because there were no set boundary lines
by which attendance at a particular Headstart center was determined, the
relevant "community" was the Tribe itself. (Agency's supplemental
memorandum dated November 15, 1982, p. 5) We see no reason why a
community would need to have precise political or geographic boundaries
in order to possess a "suitable organizational base" and a "commonality
of interest," however. In particular, we note that the definition of
"community" at 42 U.S.C. 2928c(b) indicates that a community may exist
". . . irrespective of boundaries or political subdivisions."

The Agency also argued that the Tribe constituted a "community" under
the statute since the entire Tribe was designated as a medically
underserved area, one of the other requirements for a Headstart program
to be entitled to establish its own eligibility criteria under 42 U.S.
C. 2829g(a)(2). (Agency's supplemental memorandum dated November 15,
1982, p. 3) As Grantee pointed out, however, it was not the Tribe itself
but rather several Arizona counties which included the tribal
reservation which were designated as medically underserved areas.

(4) (Grantee's letter dated September 28, 1982, Exhibits C and D) It
is true that the Tribe was specifically designated as a health manpower
shortage area (another requirement for a Headstart program to be
entitled to establish its own eligibility criteria). (Grantee's letter
dated September 28, 1982, p. 3 and Exhibit E) However, since 42 U.S.C.
2928g(a)(2) requires that the community be". . . located in a health
manpower shortage area. . ." (emphasis added), we fail to see the
significance of the fact that the four communities identifed by Grantee
were not individually designated as health manpower shortage areas.

We therefore conclude that each of the four communities identified by
Grantee constituted a "community" within the meaning of 42 U.S.C.
2928c(b). The Agency did not dispute Grantee's assertion that each of
the communities had a population of 1,000 or less; accordingly, we find
that the population requirement in 42 U.S.C. 2928g(a)(2) was met.

B. Was Grantee required to apply for the exemption and when?

As noted above, the Agency asserted that Grantee, even if it met the
requirements of 42 U.S.C. 2928g(a)(2), was not entitled to establish its
own eligibility criteria unless it submitted an application showing that
it qualified for the exemption before the grant was awarded. (Agency's
supplemental memorandum dated November 15, 1982, p. 6) This position was
based on a statement in a senate report on an earlier version of the
bill which read as follows:

Applications to establish local eligibility criteria would involve
documentation by grantees that they meet the conditions specified in the
bill . . .

S. Rep. No. 95-892, 93d Cong. 2d. Sess 30 (1978)

This statement does not specify when such applications should be
submitted; the statute does not mention applications at all. A grantee
would clearly need to determine its eligibility criteria before it began
operating a Headstart program. However, we find nothing in the statute
or legislative history which would require that a grantee advise the
Agency in advance of its intent to apply its own criteria, (although as
a practical matter, a grantee would risk a disallowance if it did not do
so, since the Agency might determine that the grantee did not qualify
for the exemption and hence that ineligible children participated in the
program). We note, moreover, that the conference report cited by the
Agency also states that--

(regulations) will be needed to implement the provisions of the bill
relating to communities with populations of (5) 1,000 or less which may
be permitted to set local eligibility criteria for participation of
children in Head Start. (Id.)

It might have been within the Agency's discretion to require by
regulation that applications for the exemption be submitted in advance;
in the absence of any regulations, however, we do not find any merit in
the Agency's position that advance applications were required by the
statute.

The Agency also argued that this case was governed by the regulation
requiring that a grantee" . . . obtain prior approval for any change to
the scope of objectives of the approved project." 45 CFR 74.103(b)
(1979). (Agency's supplemental memorandum dated November 13, 1982, p.
4) We are not persuaded that the objectives of the grant, basically
those specified in the Headstart authorizing legislation at 42 U.S.C.
2928, /2/ would be changed by the composition of the children enrolled.
Moreover, we agree with Grantee that the scope of the grant does not
relate to the particular children enrolled since no program at the time
of making its grant application would know how many children would
actually be enrolled. (See 45 CFR 1305.6 (1979), providing that
enrollment applications". . . may be made at any time during the program
year.")


The Agency also argued that to allow Grantee to retroactively
establish its own eligibility criteria would violate the terms of the
grant, and that the Board had no authority to change those terms.
However, while the Agency alone has authority to determine whether a
grant should be awarded and on what terms, it may not impose
requirements from which a grantee is specifically exempted by statute.
As Grantee pointed out, the exemption is couched in mandatory terms (".
. .the Headstart program in each such locality shall establish the
criteria for eligibility. . .") which do not permit the Agency to decide
whether a grantee which has demonstrated its eligibility for the
exemption may in fact take advantage of it. /3/


(6) Accordingly, we find that Grantee was entitled to establish its
own eligibility criteria under 42 U.S.C. 2928g(a)(2), and that under
those criteria, there were no ineligible children participating in
Grantee's Headstart program and thus, no disallowance was warranted.

II. Disallowance of Interest Earned by Grantee

Grantee did not dispute that interest was earned on deposited
Headstart funds in the amount found by the Agency. Regulations
applicable to Grantee's Headstart program require that "(except) when
exempted by Federal statute. . ., grantees shall remit to the Federal
government any interest . . . earned on advances of HEW grant funds." 45
CFR 74.47(a) (1979). Grantee argued, however, that it was not
accountable for the interest under section 203 of the Intergovernmental
Cooperation Act (ICA), 42 U.S.C. 4213, which provides in part that
"States shall not be held accountable for interest earned on
grant-in-aid funds, pending their disbursement for program purposes."
(Grantee's brief dated July 16, 1982, p. 4; Grantee's reply brief dated
August 30, 1982, p. 3) The Agency took the position that Grantee was not
covered by the exemption in section 203 because Headstart was not a
"grant-in-aid" program and because Grantee was not a "State" as those
terms are defined by the ICA. (Agency's brief dated August 13, 1982,
pp. 8-11)

Although it appears that Headstart may in fact constitute a
grant-in-aid program within the meaning of the ICA, we need not decide
that question since we find that Grantee is not a State under the ICA.
Section 102 of the ICA, 42 U.S.C. 4201(2), defines the term "State" as--

. . . any of the several States of the United States, the District of
Columbia, Puerto Rico, any territory or possession of the United States,
or any agency or instrumentality of a State, but does not include the
governments of the political subdivisions of the State.

Grantee took the position that it met this definition, asserting that
the San Carlos Apache Tribe is a federal territory and possession.
(Grantee's reply brief dated August 30, 1982, pp. 5-6.) None of the
authorities cited by Grantee support its position, however.

Grantee cited first Mackey v. Coxe, 49 U.S. (18 How.) 100 (1855).
That decision holds that the Cherokees (another Indian tribe)". . . may
be considered a territory of the United States, within the act of 1812."
Id., p. 104. The "act of 1812" allowed a person to whom letters of
administration had been granted by proper authorities of the United
States or the territories thereof to maintain a suit in the District of
Columbia in the same manner as if the letters of administration had been
(7) granted in the District. Id., p. 103. While this decision does not
exclude the possibility that an Indian tribe may be considered a
territory for purposes other than the one specified by the Court, it
provides no basis for our finding that Grantee is a territory and hence
a State under the ICA.

A second case cited by Grantee, holding that a judgment of the tribal
court". . . stands on the same footing with those of the courts of the
territories of the Union," Standley v. Roberts, 59 F. 836, 845 (8th Cir.
1894) merely compares an Indian tribe to a territory for specific
purposes, and does not stand for the proposition that a tribe is a
territory.

Grantee also cited an Opinion of the Solicitor for the Department of
the Interior, dated July 28, 1966 (73 I.D. 333, M-36693), which found
that the San Carlos Apache Tribe did not have title to the land occupied
by it, and that it could not be compensated for the taking of such land
by the government since "(it) is constitutionally impossible for the
Executive by unilateral act to grant compensable interests in the
territory of the United States." The Opinion cited in this respect
Article IV, Section 3 of the Constitution, which provides that "(the)
Congress shall have power to dispose of and make all needful Rules and
Regulations respecting the terrritory or other property of the United
States. . ."

However, the word "territory" as used in this provision of the
Constitution has been construed to mean "lands." United States v.
Midway Northern Oil co., 216 F. 802, 804 (S.D. Cal. 1914). To read the
word "territory" as it appears in the ICA in that way would make no
sense since "lands" are not capable of earning interest of the sort
disallowed in this case.

Finally, Grantee cited a portion of a treatise, Federal indian law
(U.S. Department of the Interior, 1966). The treatise, however, also
refers to Article IV, Section 3 of the Constitution, and the fact that
it treats Indian tribes as a territory in that sense is not relevant
here.

Thus, the authorities cited by Grantee fail to clearly show that the
San Carlos Apache Tribe is a territory within the meaning of the ICA.
We therefore find that Grantee is not a State within the meaning of the
ICA and may not claim the exemption in section 203 from the general rule
requiring that interest earned on advances of grant funds be refunded to
the federal government.

Grantee also argued that it was not accountable for the interest
earned because the Secretary exceeded his rulemaking authority in
applying 45 CFR 74.47(a) to a federal instrumentality and sovereign
nation (8) such as the San Carlos Apache Tribe. (Grantee's brief dated
July 16, 1982, p. 5) As the Agency pointed out, however, the Headstart
regulations specifically make the provisions of 45 CFR Part 74 (with
exceptions not relevant here) applicable to Headstart grants. 45 CFR
1301.10(a) (1979).(Agency's brief dated August 13, 1982, p. 6) Grantee
may not retain the benefits of its Headstart grant yet claim that it is
exempt from the terms and conditions of that grant.

Conclusion

For the reasons discussed above, we reverse the Agency's disallowance
of $33,730 for ineligible children participating in Grantee's Headstart
program and sustain the disallowance of $7,057 in interest earned by
Grantee on advances of Headstart funds. /1/ The Agency conceded that
all other requirements of 42 U.S. C. 2928g(a) (2) were met.
/2/ This section provides for financial assistance". . . for the
planning, conduct, administration, and evaluation of a Headstart program
focused primarily upon children from low-income families who have not
reached the age of compulsory school attendance which (1) will provide
such comprehensive health, nutritional, educational, social, and other
services as will aid the children to attain their full potential, and
(2) will provide for direct participation of the parents of such
children in the development, conduct, and overall program direction at
the local level." /3/ The Agency did not contend that it would
have denied Grantee's application for a Headstart grant if Grantee had
indicated that it intended to establish its own eligibility criteria
(and Grantee qualified for the exemption).

OCTOBER 22, 1983