                                   The Attorney                General of Texas
                                                         December 22, 1981
MARK WHITE
Attorney General


Supreme Court Building
                               Mr. Vernon M. Arrell                           Opinion No.m-416
P. 0. Box 12546                COlIUUiSSiOIler
Austin, TX. 76711              Texas Rehabilitation Commission                Re:   Whether article 4350,
5121475.2501                   118 East Riverside Drive                       V.T.C.S., may be used to assist
Telex 9101674-1367
                               Austin, Texas   78704                          the    Texas    Rehabilitation
Telecopier   512/4750266
                                                                              Commission in the collection
                                                                              of money due from rehabilita-
1607 Main St., Suite 1400                                                     tion facilities in default
Dallas, TX. 75201
21417428944
                               Dear Mr. Arrell:

4024 Alberta Ave., Suite 160        You have requested our opinion on whether article 4350, V.T.C.S.,
El Paso, TX. 79905             authorizes the comptroller of public accounts to withhold the issuance
915/533-3464                   of warrants to an independent school district acting as fiscal agent
                               for a private nonprofit rehabilitation entity, where financial audit
1220 Dallas Ave., Suite 202
                               exceptions have been taken on an establishment grant made by the
Houston, TX. 77002             commission.   Such grants may be made for the establishment of
71rY650-0666                   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
SO6 Broadway, Suite 312
Lubbock, TX. 79401
                               documents concerning a grant made to an independent school district as
606/747-5236                   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
4309 N. Tenth, Suite 6
                               superintendents of participating schools. The grant application was
McAllen, TX. 76501
51216624547
                               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
200 Main Plaza, Suite 400      him. Our opinion, necessarily, is limited to the facts and questions
San Antonio, TX. 76205
                               you present.
512/225-4191

                                       Article 4350, V.T.C.S., reads as follows:
An Equal Opportunity/
Affirmative Action Employer                      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




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