MARK WHITE Attorney General

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# The Attorney General of Texas

December 22, 1981

Mr. VernonM. Arrell COlIUUiSSiOIler Texas RehabilitationCommission 118 East RiversideDrive Austin, Texas 78704 OpinionNo.m-416
Re: Whether article 4350, V.T.C.S.,may be used to assist the Texas Rehabilitation Commission in the collection of money due from rehabilitation facilitiesin default
DearMr. Arrell:
You have requestedour opiniononwhether article 4350, V.T.C.S., authorizes the comptrollerof public accounts towithhold the issuance of warrants to an independent school district acting as fiscal agent for a private nonprofit rehabilitation entity, where financial audit exceptions have been taken on an establishment grant made by the commission. Such grants may be made for the establishment of nonprofit rehabilitationfacilitiespursuant to the RehabilitationAct of 1973. 29 U.S.C. §§706(4), 711(c), 723(b). See also Human Res. Code $5111.054, 111.056. You have submitted correspondence and documentsconcerninga grantmade to an independentschooldistrictas fiscal agent for a Multi-County Special Education Cooperative serving a number of schooldistricts. The governingboard of the cooperative consistsof the fiscal agent and three electedmemberswho are school superintendents of participating schools. The grant applicationwas signedby the superintendentof the school district serving as fiscal agent. Correspondence relating to the audit of the grant and requesting a refund of the entire grant award was also addressed to him. Our opinion,necessarily, is limited to the facts and questions you present. Article 4350,V.T.C.S., readsas follows:
No warrant shallbe issued to any person indebted or owing delinquent taxes to the State, or to his agent or assignee, until such debt or taxes are paid.
In our opinion, the school district is not indebted to the state within the meaning of article 4350. Therefore,we need not consider whether the statute applies to warrants to be issued to a school

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district. Your question raises the issue of whether an independent school district in the capacity of fiscal agent for nonprofit rehabilitationentity thathas receivedan establishmentgrantbecomes "indebted" to the state when financial audit exceptions are taken thereunder by the Texas Rehabilitation Commission. To resolve this issue, initiallywe turn to the languageof the agreementaccompanying your request. This agreement is the document entitled "Application for an EstablishmentGrant...,"which provides the followingterms and conditions: (1) Grant fundswill be utilized to develop

rehabilitation services for handicapped individuals. (2) Programs and procedures will be initiated to enable the applicant organization to make substantial progress toward meeting the standards developed by the Texas Rehabilitation Commission. (3) Appropriate, complete and detailed administrative and financial records will be maintained in accordance with instructions from the TexasRehabilitationCommission. Such records will be made available for audit at the commissioner'srequest. (4) The Assurance of Compliance (Form HEW-441) previously filed or attached hereto, applies to thisproject. (5) If staff is involved, salaries and qualifications will be commensurate with the dutiesperformed. (6) Matching funds made available by the applicant will not be used to obtain any other Federal funds. The foregoing,includingagreement to complywith all guidelines, rules, and other appropriate regulatorymatter provided by the Texas Rehabilitation and Service Administration, is subscribed to by the independentschooldistrictandwould appear to represent its complete undertaking. Clearly, no express statementwith respect to financial liability ispresent in the application.
Over the years, this office has addressed a number of questions on the scope of article 4350, V.T.C.S. In a fairly recent Letter Advisory, this office stated that for a warrant to be validly

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Mr. VernonM. Arrell - Page 3 (MW-416)

withheld, the article requires that a debt be established either by agreement between the state and the debtor; by the state's proper allegation of the existence of a debt by statutory reference; or by some other lawfully effectivemeans. Letter Advisory No. 57 (1973). Even earlier, this office concluded that a warrant should not issue under circumstances where a statute required the comptroller to disallow a refund claim. Attorney General Opinion O-2765 (1941). Again, a later opinion involving local government, approved withholding delivery of a warrant by statutory authority. Attorney General Opinion O-4824 (1942). These opinions established that warrants may be withheld only on a proper statutory allegationof the existence of the debt, either by agreement or by lawfully effective means. Conversely, there is no authority to withhold warrants under article 4350, V.T.C.S., where there is a contrary statute. Attorney General Opinion O-4655 (1942);or where no "debt" exists in the usual and ordinary sense of the word. Attorney General Opinion O-5249 (1943).
On thebasis of the instrumentsand correspondencepresentedwith your request, we are of the opinion that the terms, conditions and assurances in the "Application for an Establishment Grant...," constitute a full and complete agreement between the subscribing independent school district and the commission. We find nothing, express or implied, in the agreement found in the application that would support financial liability on the part of the district for audit exceptions that may ultimately be taken by the commission. It follows thata subscribingindependentschooldistrictdoes not become "indebted" to the stateunder article 4350,V.T.C.S., solelyby virtue of its role as fiscal agent for a private nonprofit rehabilitation facility or entity, in the absence of an agreement or statutory authority to the contrary. Accordingly, if there is no "debt" established, the comptroller of public accounts is without authority towithholdwarrants otherwisedue and payable to the district.
You inquire further, if article 4350, V.T.C.S.. reaches the private nonprofit rehabilitationentity alone. We would conclude, in this instance, that the debt must first be establishedby a lawfully effective means, s, become an established legal obligation, by which is meant such obligation as would form the basis of a judgment in a court of competent jurisdiction. Finally, you ask if an applicable statute of limitation would foreclose a civil action against either the independent school district or the private nonprofit facility. With respect to the state, article 5517, V.T.C.S., reads in part: "The right of the state. all counties, incorporated cities and all school districts shall not be barred by any of the provisions of this Title...." The title referred to is Title 91,V.T.C.S.,Limitations. We believe that if a debt owed the state is established,limitationswill not be a bar

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to the state's right of action. Hemphill Countyv. Adams, 408 S.W.2d 926 (Tex. 1966). However, with respect to the independent school district, the state, in effect,would be suing itself. Under article 4413 (32~). section 3(l),V.T.C.S., a school district is defined as a "local government" and political subdivision of the State of Texas. As to a private nonprofit entity, applicable provisions of Title 91, V.T.C.S., control.
SUMMARY

The state comptroller of public accounts is without authorityunder article 4350,V.T.C.S., to withhold warrants otherwise due and payable to an independentschooldistrictacting as fiscalagent for a privatenonprofit rehabilitationentity that has receivedan establishmentgrant from theTexas Rehabilitation Commission, where such grant becomes subject to the financial audit exceptions under the existing application for grant funds presently inuse by the commission.
AZ%

Attorney General of Texas
JOHN W. FAINTER,JR. FirstAssistantAttorneyGeneral
RICHARD E. GRAY III ExecutiveAssistantAttorneyGeneral Preparedby Ward A. White AssistantAttorneyGeneral
APPROVED: OPINION COMMITTEE
SusanL. Garrison,Chairman Jon Bible Rick Gilpin Eva Loutzenhiser Jim Moellinger Ward A. White

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