## THF, ATTORNEY GENERAL OF TEXAS

Honorable Robert E. Johnson Opinion No. M-1243 Executive Director Texas Legislative Council Re: Uponreturn to the Ford P. 0. Box 12128, Capitol Station Foundation of the unexAustin, Texas 78711 pended balance of agrant should the interest earned onthe deposits bereturned with the principal or retained bythe grantee, the Dear Mr. Johnson: Texas Legislative Council?

Inyour recent opinion request, you provided us with the following information:

“In 1964 the Legislative Council received agrant of $88,000 from the Ford Foundation for partial support of alegislative intern program. Theprogram is nowterminated and the Ford Foundation has asked for arefund of the unexpended balance of the grant.

“The balance in the internship account at this time is $10,183.21, consisting of $7,621.02 remainder of the original grant and $2,562.29 earned interest on deposits.

“It is our intent to refund the grant balance to the foundation. Our question is, should the full amount of $10,183.21 be forwarded to the Ford Foundation or should the interest earned on deposits be considered anadministrative earning and retained bythe Council? If so, would it be proper to deposit the interest earned to the General Revenue Fund?” According to Black’s LawDictionary, “grant” means “to bestow; to confer; upon someone other than the person or entity which makes the grant.”

Under the terms of the Ford Foundation’s grant to the Texas Legislative Council “grant funds will be returned to the -6088-Hon. Robert E. Johnson, page 2 (M-1243)

Foundation if these funds are not expended or committed for the purposes of the grant andwithin the period stated.”

Weview this grant as agift which could have been expended in its entirety during the five-year period of the grant. The funds were given to the Legislative Council for the use and benefit of the Council in its legislative internship program andwere deposited to the Council in aprivate account in alocal bank. Wedonot find that this grant created atrust or that the Council acted as trustees of these funds, but rather the Council was the beneficiary of the grant and the interest derived from time deposits became the property of the beneficiary and did not, as in atrust, accrue to the principal.

Return of the unexpended grant funds plus interest earned on the funds is more than is required bythe terms of the grant. Return of the unexpended funds and interest could be looked upon as an “investment” which is prohibited in grants of this type because such grants must be made for “charitable” purposes under the Tax Reform Act of 1969. Therefore wehold that only the unexpended balance of the grant funds, without the interest, should be returned to the Ford Foundation.

Article 2543d, Section 1, Vernon’s Civil Statutes, provides :

“Section 1. Interest received on account of time deposits of moneys in funds and accounts in the charge of the State Treasurer shall be allocated as follows: Toeach constitutional fund there shall be credited the pro rata portion of the interest received due to such fund. The remainder of the interest received, with the exception of that portion required byother statutes to be credited on apro rata basis to protested tax payments, shall be credited to the General Revenue Fund. The interest received shall be allocated on amonthly basis.” Weare of the opinion that the interest earned on the grant funds should be deposited to the credit of the General Revenue Fundbecause the interest actually belongs to the State, although the State Treasurer was onlv constructivelv and not directlv

“in charge” of the account which earned the interest, under’the holding in Boyett v. Calvert, 467 S.W.2d 205, 209 (Tex.Civ.App. 1971, reh.den.).

-6089-Hon. Robert E. Johnson, page 3 (M-1243)

SUMMARY Theunexpended balance of the Ford Foundation grant must be returned to the Foundation. The interest earned on the grant funds must be deposited to the General Revenue Fundunder Article 2543d, Vernon's Civil Statutes.

Prepared byLinda Neeley Assistant Attorney General APPROVED: OPINIONCOMMITTEE Kerns Taylor, Chairman W.E. Allen, Co-Chairman James Maxwell Jim Swearingen Lewis Jones Linward Shivers SAMUELD. MCDANIEL Staff Legal Assistant ALFREDWALKER Executive Assistant eneral of Texas

-6090-