Document: 470 U.S. 656 105 S.Ct. 1544 84 L.Ed.2d 590 William J. BENNETT, Secretary of Education, United States Department Petitionerv.KENTUCKY DEPARTMENT OF EDUCATION. No. 83-1798. Argued Jan. 8, 1985. Decided March 19, Syllabus Title I the Elementary and Secondary Education Act 1965, as amended, provided for federal grants to support compensatory education programs disadvantaged children upon States' assurances that would be used only eligible under I. At time involved in this case, both statute its implementing regulations required funds supplement, not supplant, state local expenditures education. Federal auditors found Kentucky had approved fiscal year 1974—involving "readiness classes" offered by some agencies educationally place regular first- second-grade classes—that violated prohibitions on supplanting expenditures. Administrative proceedings ultimately resulted a determination (Secretary) occurred, demanded repayment from State misused funds. In reviewing administrative order, Court Appeals acknowledged Secretary's interpretation was reasonable govern subsequent grants, but concluded it unfair assess penalty against since there no evidence bad faith disputed complied with law. Held: The properly determined compliance requirements approving thereby Pp. 662-674. (a) erred characterizing issue fairness imposing sanctions failure comply substantially requirements. Although recovery clearly is intended promote grant program, demand more nature an effort collect debt than penal sanction. Because obligation repay funds, "substantial compliance" applicable legal does affect liability. Nor absence absolve liability if were fact spent contrary terms agreement. And barred asserted ground did accept "knowing acceptance" terms. chose participate program agreed abide I's condition receiving Pennhurst School Hospital v. Halderman, 451 1, 101 1531, 67 694, distinguished. 662-666. (b) has court should consider whether findings are supported substantial reflect application proper standards. Although, Kentucky, agreements have contractual aspect, cannot viewed same manner bilateral contract governing discrete transaction so require any ambiguities respect State's obligations invariably resolved Government party who drafted Given structure simply prospectively resolve every possible ambiguity concerning particular applications However, unnecessary here adopt Government's suggestion may rely determine previous conditions. Since with, by, when made, informed statutory provisions, regulations, other guidelines at grants. 666-670. (c) existing regulatory provisions prohibited supplanting. pay all costs basic students readiness classes, absent these classes participating received instruction funding maintained level grades, because placed separate consequence increase per-pupil remained classes. No plausible reading or suggests such result comported Moreover, shown present position inconsistent earlier guidelines. possibility might unclear contexts resolution case. 670-673. 717 F.2d 943 (CA 6 1983), reversed remanded. Kenneth S. Geller, Washington, D.C., petitioner. Robert L. Chenoweth, Frankfort, Ky., respondent. Justice O'CONNOR delivered opinion Court. 1 This like Bennett New Jersey, 632, 1555, 572 (1985), concerns recover allegedly State. There contention changes apply Instead, dispute correctly based Sixth Circuit inter- 2 WHITE BLACKMUN join Parts I, II, IV, V opinion. pretation nonetheless excused grounds 943, 948 (1983). We granted certiorari, 469 814, 78, 83 26 (1984), we disagree standard adopted Appeals, reverse. 3 * As explained fully post, 1557 - 1558, Pub.L. 89-10, 79 Stat. 27, 20 U.S.C. § 2701 et seq., children. order assure additional services otherwise available, outset use merely replace prohibition initially contained see 45 CFR 116.17(f) (1966); 116.17(h) (1968), guide distributed agencies. Office Program Guide 44, &Par; 4.1, 7.1 (1968). Despite Education1 public complaints being been See S.Rep. 91-634, pp. 9-10 (1970), U.S.Code & Admin.News 1970, p. 2768. Congress responded amending 1970 add provision specifically Id., 9-10, 14-15. That provision, effect case 4 elaborated supplant funds: 5 "Each . shall contain assurance will decrease deprived residing project area which, Act, made available neither nor therein penalized Act. (1) extent practical increase, would, pupils project; (2) pupils." (1974). 1976, 1974 App. 11-21. 50 Pet. Cert. 22a. Participating their entire academic number expected promoted next higher grade following year. 16-17. instructional salaries portion Students receive locally funded "enrichment services," i.e., art, physical education, music, library, enrolled Ibid. It disputed, however, defrayed educating 15, 17. occurred grade. 17, 19; 30a. Based finding, estimated $704,237 misused, issued final letter demanding repayment. 22-23. 7 sought further review. Appeal Board (Board), after extensive proceedings, initial decision 1981 sustaining auditors' findings. 17a-32a. rejected argument satisfied reduced school districts, schools, levels involved. 24a. concluded, 24a-25a. On remand Secretary, id., 33a-35a, reaffirmed decision. 36a-37a. subsequently affirmed Board's finding $338,034 benefits presumed smaller pupil-teacher ratios 38a-42a. 8 repayment, F.2d, 946-947, 948. Nonetheless, liable misusing during 1974. "the Commonwealth 'failure comply' [of I]." 947, quoting §§ 1234b(a), 1234c(a). supplanting, maintained, "unambiguous." gave officials discretion develop circumstances, where Relying 1539, 694 (1981), reasoned now seeks impose, therefore justified 950. II 9 note Bell 461 773, 782, 103 2187, 2192, 76 312 certain those entitled amounts 791, S.Ct., 2197. More specifically, which reviewed agency met 241f(a)(1) (1976 ed.). punitive measures, instead failed fulfill 10 also below affects relied authorize pursuant specified procedures, withhold cease-and-desist orders recipient fails Cf. 2836 (specific authority funds). These references prospective relief do own 1234a(c) (filing review audit take adverse actions); 124 Cong.Rec. 20612 (1978) (remarks Rep. Corrada) (noting post-audit withholding distinct enforcement mechanisms). Other address limit instances obligations. 1226a-1, 1234a, 2835(b). silence ascribed legislative inattention details limited five years preceding written notice authorized settle claims involving less $50,000. 1234a(f), 1234a(g). detailed determinations believe impliedly engraft section expressly stated 1234b 1234c relief.2 11 think absolves Jersey obtains providing right retain misused. U.S., 787, 790-791, 2195, 2197-2198. 10, (assurances must enforced recovered). Our discussion way suggested "misuse" depended subjective intent attributable recipients. indicates conditions Provisions 1978 Amendments clarifying recipient's faith. Indeed, grantees burden "demonstrat[ing] allowability [disputed] expenditures" before Board. 1234a(b). indication avoid showing improper good faith.3 12 Finally, agree bars Pennhurst, acceptance Developmentally Disabled Assistance Bill Rights 42 6000 provide mentally handicapped persons appropriate treatment least restrictive environment. Such requirement, noted, imposed "massive" "largely indeterminate" financial States. 24, 1543. observed: "Congress express impose can knowingly decide funds." requisite clarity I; 790, n. 2197, condition, suggest expenditure identified proscribed advance. III 13 646, 1563-1564; 792, 2198. disagreement supplement argues defer long reasonable. Without disputing reasonableness advanced contends contract, agreement, Government. Thus, parties fundamental assumed I: guaranteed satisfy whatever reasonably adopt; misuse results violation unambiguous requirement. 14 contentions evaluated background actual operation aid children, left selection development projects control. monitored obtained Government, channeled money back level. essentially served conduits what became massive flow grew annual appropriation $959 million 1966 $3 billion 1981, assisted 14,000 districts. Dept. Fiscal Year Annual Evaluation Report (1981); National Institute Administration Compensatory xiii (1977) (hereinafter NIE Report). During period 1974, $32 11. 15 1965 articulated general goals precisely outline permissible means goals. Uncertainty regard compounded first passage vigorously enforce program. McDonnell M. McLaughlin, Policy Role 13, 90-91 (1982); Murphy, ESEA: Politics Implementing Reform, 41 Harv.Ed.Rev. 35, 41-45 (1971). weaknesses administration, directed strengthen monitoring 8-10. Management improved 1970's, problems remained. Berke Kirst, Aid Education: Who Benefits? Governs? 377-378 (1972). conduct comprehensive 3-year study programs, including 93-380, 821, 88 599. 16 primary impetus 1978. considering Amendments, noted "implementing clear consistent, inconsistency confusing about obligations." H.R.Rep. 95-1137, 49, (1978), Cong. 1978, 4971, 5019; 95-856, 27 (1978). confusion, observed, part diffuse framework addition sent guides explaining situations. 34; 55. Review teams visited advice, interpretative letters response inquiries. 18, 27; 24 (1968) (compilation letters). 17 accepted NIE's conclusion many questions various materials prepared "assembled, summarized, interrelated." 55, 5025. Accordingly, prepare policy manual compiling statutes, advisory opinions, materials. 2837. indicated help "ensure uniformly interpret, apply, throughout country." 138; 161, 5131. administration indicate while always clear, evolved specific over beyond regulations. 18 638, 1559, transaction. Seckinger, 397 203, 210, 90 880, 884, 25 224 (1970) ("[A] construed most strongly drafter, States"). Unlike normal undertakings, originate remain governed expressing judgment desirable policy. R. Cappalli, Remedies Under Grants 53-55 (1979). example, multiple government cooperative established allocation follow developed operated could Heckler Community Health Services Crawford County, Inc., 467 51, 64, 104 2218, 2226, 81 (1984). ongoing, meant recipients opportunity seek clarification drafter 19 find explains how intermediary role clear. context, reluctant conclude performance later "arbitrary, capricious, manifestly [Title Chevron U.S.A. Inc. Natural Resources Defense Council, 837, 844, 2778, 2782, 639, 1559-1560, 1563, made. Consequently, evaluating past expenditures, time. infra, occasion any, reliance Department, cf. 794, 2199 (WHITE, J., concurring), held ambiguous requirement IV undisputed Absent Both programs. declared "to non-Federal sources subchapter, sources." 241e(a)(3)(B) (1970 regulation similarly provided: "Federal [and] 21 language regulation, district, school, Separate spending 241g(c)(2) ed.); 116.45 (1974), individual schools. 241e(a)(3)(C) 116.26 generally (explaining relationship provisions). comports Board, uncertain point, Education. 27a. fact, districts explain: 22 "How you organize component activity service they ordinarily funds?" 23 moreover, taken Department. notes schools objection challenge 23a, record financing classes.4 demonstrated modified reduce unpersuasive. modification reflects ratios, cast doubt occurred. note, finally, our Congress, observed applied manner. 29, 49; 27. situation debate within desirability practicality measuring students. 29-38. Difficult well arise determining prior irrelevant regard. conclude, then-existing situations debates arose avail here.5 hold Before challenged calculation amount repaid. argument, 950, renew remand. reversed, remanded consistent ordered. POWELL took consideration predecessor responsible until 1980. 776, 2189, Unless distinction significant, refer "(i) and, practical, (ii) authorizing judicial decisions retroactively. 777-778, 3, 2190-2191, 3. declined decide, allowing retroactive, 415 General 91-230, 170, created 784, 2193, Neither affected need latter remedial, rather substantive, thus retroactive. 1559 (substantive standards retroactive). view definitively establish meaning enactment, persuasive value. 784-785, 2193-2194. proposal amend standard. 130 H7902-H7903 (July 26, 1984) (§ 808(a) H.R. 11); H10756 (Oct. 2, (deletion conference). Similarly, excuse debated defeated point Members notwithstanding fraud 127 10644 (1981) Sen. Thurmond); 10646 Stennis). actions Congresses understood conditioned oral argued "measure estoppel" operate moved reopen evidence. ruled estoppel affirmative misconduct alleged misconduct, record. 28a. discuss arguments, making claim. Tr. Oral Arg. 39, 43. defense estoppel. 57, 60, 2224, (1984) (reserving assertion private Government). substantive technical concurring).

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