MARK WHITE 

Attorney General 

Supreme Court Building 

P. 0. Box 12546 

Austin, TX. 76711 

5121475.2501 

Telex 9101674-1367 

Telecopier 512/4750266 

1607 Main St., Suite 1400 

Dallas, TX. 75201 

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El Paso, TX. 79905 

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1220 Dallas Ave., Suite 202 

Houston, TX. 77002 

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McAllen, TX. 76501 

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An Equal Opportunity/ 

Affirmative Action Employer 

The Attorney General of Texas 

December 22, 1981 

Mr. Vernon M. Arrell 

COlIUUiSSiOIler 

Texas Rehabilitation Commission 

118 East Riverside Drive 

Austin, Texas 78704 

Opinion No.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 facilities in default 

Dear Mr. Arrell: 

You have requested our opinion on whether article 4350, V.T.C.S., 

authorizes the comptroller of public accounts to withhold 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 rehabilitation facilities pursuant to the Rehabilitation Act 

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 

documents concerning a grant made to an independent school district as 

fiscal agent for a Multi-County Special Education Cooperative serving 

a number of school districts. The governing board of the cooperative 

consists of the fiscal agent and three elected members who are school 

superintendents of participating schools. The grant application was 

signed by the superintendent of 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., reads as follows: 

No warrant shall be 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 

p. 1418 
Mr. Vernon M. Arrell - Page 2 (MW-416) 

district. Your question raises the issue of whether an independent 

school district in the capacity of fiscal agent for nonprofit 

rehabilitation entity that has received an establishment grant becomes 

"indebted" to the state when financial audit exceptions are taken 

thereunder by the Texas Rehabilitation Commission. To resolve this 

issue, initially we turn to the language of the agreement accompanying 

your request. This agreement is the document entitled "Application 

for an Establishment Grant...," which provides the following terms and 

conditions: 

(1) Grant funds will 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 Texas Rehabilitation Commission. Such records 

will be made available for audit at the 

commissioner's request. 

(4) The Assurance of Compliance (Form 

HEW-441) previously filed or attached hereto, 

applies to this project. 

(5) If staff is involved, salaries and 

qualifications will be commensurate with the 

duties performed. 

(6) Matching funds made available by the 

applicant will not be used to obtain any other 

Federal funds. 

The foregoing, including agreement to comply with all guidelines, 

rules, and other appropriate regulatory matter provided by the Texas 

Rehabilitation and Service Administration, is subscribed to by the 

independent school district and would appear to represent its complete 

undertaking. Clearly, no express statement with respect to financial 

liability is present 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 

p. 1419 
. ,. 

Mr. Vernon M. 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 effective means. 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 allegation of 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 the basis of the instruments and correspondence presented with 

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 that a subscribing independent school district does not become 

"indebted" to the state under article 4350, V.T.C.S., solely by 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 

to withhold warrants otherwise due and payable to the district. 

You inquire further, if article 4350, V.T.C.S.. reaches the 

private nonprofit rehabilitation entity alone. We would conclude, in 

this instance, that the debt must first be established by 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, limitations will not be a bar 

p. 1420 
Mr. Vernon M. Arrell - Page 4 (MW-416) 

to the state's right of action. Hemphill County v. 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 authority under article 4350, V.T.C.S., to 

withhold warrants otherwise due and payable to an 

independent school district acting as fiscal agent 

for a private nonprofit rehabilitation entity that 

has received an establishment grant from the Texas 

Rehabilitation Commission, where such grant 

becomes subject to the financial audit exceptions 

under the existing application for grant funds 

presently in use by the commission. 

AZ% 

Attorney General of Texas 

JOHN W. FAINTER, JR. 

First Assistant Attorney General 

RICHARD E. GRAY III 

Executive Assistant Attorney General 

Prepared by Ward A. White 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

Susan L. Garrison, Chairman 

Jon Bible 

Rick Gilpin 

Eva Loutzenhiser 

Jim Moellinger 

Ward A. White 

p. 1421