                  UNITED STATES COURT OF APPEALS
                       for the Fifth Circuit

              _____________________________________

                           No. 92-5056
              _____________________________________

                       UNITED STATES OF AMERICA,

                                                   Plaintiff-Appellee,

                                VERSUS

                           WILLIAM J. LONG,

                                                   Defendant-Appellant.

     ______________________________________________________

           Appeal from the United States District Court
               for the Western District of Louisiana
      _____________________________________________________
                          (July 16, 1993)

Before SMITH, DUHÉ, AND WIENER, Circuit Judges.

DUHÉ, Circuit Judge:

     William J. Long appeals his conviction following a conditional

plea to theft of federal government funds in violation of 18 U.S.C.

§ 641.

                              Background

     The defendant, William Long, was an associate professor at

Northwestern State University.     He was also the director of the

Louisiana Research and Development Center (LRDC).       LRDC contracted

with the Louisiana Department of Employment and Training (LDET) to

research economic development in Louisiana.          LDET is the state

agency set up by the Governor to administer programs under the Jobs

Training Partnership Act (JTPA), 29 U.S.C. §§ 1501-1792b.         LDET
funded LRDC with funds from Louisiana's JTPA                     allotment.1   In

addition to the JTPA funds, LRDC received funds from various other

private sources.

        The United States Department of Labor ("DOL") conducted an

audit of LDET which revealed that the LRDC was not using the funds

for purposes allowable under the JTPA.2             The funds were being used

for economic development and not job training.               The DOL disallowed

and nullified the contracts between LDET and LRDC.                   The federal

government worked out a compromise with the State, and the State

agreed to reimburse the federal government for the misused funds.

        On   the   basis   of   alleged       violations    by   Long   of   state

regulations, Long was indicted by the federal government for theft

of government property (the JTPA funds).                   Long argued that the

allegedly stolen funds lost their federal character when they were

transferred to the state, therefore he could not be guilty of

stealing federal government property as required under 18 U.S.C. §

641.3

        Long was charged with 9 specific instances of theft of federal

government funds under 18 U.S.C. § 641 and 3 counts of mail fraud.

        1
        At the time, the State of Louisiana had approximately $8
million of unused funds in its JTPA fund allocations which the
State had to use or forfeit.
        2
       The purpose of the JTPA is to provide job training for the
young, unskilled adults, economically disadvantaged, or other
individuals facing serious barriers to employment. 29 U.S.C. §
1501.
        3
        18 U.S.C. § 641 makes it a crime for anyone to embezzle,
steal, purloin, or knowingly convert to his use or the use of
another, or without authority, sell, convey, or dispose of any
record, voucher, money, or thing of value of the United States.

                                          2
Long plead guilty to Count I of the indictment reserving the right

to appeal the denial of his Motion to Dismiss on the issue of the

federal   character   of   the   funds.       The   remaining   counts   were

dismissed.

                                 Discussion

     The sole issue to be decided in this case is whether the JTPA

funds received by LRDC retained their federal character within the

context of 18 U.S.C. § 641.         When the question of ownership of

property depends upon the construction or existence of a statute,

it is a matter of law for the court's determination, and therefore

subject to de novo review.       See United States v. Evans, 572 F.2d

455, 470-71 (5th Cir.), cert. denied, 439 U.S. 870 (1978).

     The test in this Circuit for when federal funds lose their

federal character is measured by the control exercised by the

federal government over the ultimate disposition of the funds.

United States v. McIntosh, 655 F.2d 80, 83 (5th Cir. 1981), cert.

denied, 455 U.S. 948 (1982). "[T]he critical factor in determining

the sufficiency of the federal interest . . . is the basic

philosophy of ownership reflected in the relevant statutes and

regulations. . . .    The key factor involved in this determination

of federal interest is the supervision and control contemplated and

manifested on the part of the government."          Evans, 572 F.2d at 472

(citations omitted).

     Long argues that although the district court applied the

"supervision and control" test to analyze the character of the

funds, it failed to apply the test within the statutory and


                                     3
regulatory framework of the JTPA.             Because the government focused

its argument in the district court on the terms and conditions of

the contracts between the State and LRDC, Long surmises that the

court erroneously based its decision only on an analysis of the

contracts4      and   not      the    statute,     legislative    history,    and

regulations.       We disagree.

      After analyzing the statutory framework in combination with

the contracts, we believe that there is ample evidence to support

the district court's conclusion.              Although the JTPA gives more

latitude to the states in the operations of the jobs training

programs, we see no indication that Congress intended to relinquish

control of the federal purse strings.              We find most convincing the

oversight duties retained by the Secretary of Labor.

      For     example,   the    Secretary     of   Labor   is   responsible   for

determining performance standards under the Act. 29 U.S.C. § 1516;

20   C.F.R.    §   629.46.      The    secretary    is   also   responsible   for

monitoring the recipients and subrecipients of JTPA funds.                     29

U.S.C. § 1573; Pub. L. No. 97-300, 1982 U.S.C.A.N. (96 Stat.) 2659;

20 C.F.R. § 629.43. Specifically, the secretary is given authority

to

      investigate any matter the secretary deems necessary to
      determine compliance with this chapter and regulations
      issued under this chapter. The investigations authorized
      by this sub-section may include examining records
      (including making certified copies thereof), questioning

      4
        A question arose as to whether this court could properly
consider the contracts, as they were not formally admitted into
evidence. After reviewing the briefs submitted by both parties
subsequent to oral argument, we conclude that we may consider the
contracts.

                                          4
     employees, and entering any premises or onto any site in
     which any part of a program of a recipient is conducted
     or in which any of the records of the recipient are kept.

29 U.S.C. § 1573(b).       The secretary is also given authority to

"impose any sanction consistent with the provisions of this chapter

and any applicable federal or state law directly against any sub-

grantee for violations of this chapter or the regulations under

this chapter." 29 U.S.C. § 1574(e)(3). Furthermore, recipients of

JTPA funds are required to keep records adequate "to permit the

preparation of reports . . . and to permit the tracing of funds to

a level of expenditure adequate to insure that the funds have not

been spent unlawfully."     29 U.S.C. § 1574(a)(1).          Lastly, in the

event funds are misspent, the secretary may offset such amounts

against future grants, and when a mis-expenditure is due to willful

disregard of the requirements of the Act, the recipient and sub-

recipient are liable for the repayment of the funds from other than

funds   received   under   the   Act.      Pub.   L.   No.    97-300,   1982

U.S.C.C.A.N. (96 Stat.) 2662.

     In addition to the responsibilities held by the Secretary of

Labor, Congress also gave the Office of Management and Budget in

consultation with the Comptroller General of the United States the

responsibility of establishing guidance for the proper performance

of audits.   That guidance is to include review of fiscal controls

and fund accounting procedures.         The comptroller general is also

responsible for evaluating expenditures made by the recipients of

grants and determining whether purposes of the Act have been

accomplished. These references to the Act and legislative history,


                                    5
while not exhaustive, evince Congress' intent to control JTPA

funds, regardless of who actually runs the jobs training programs.

       The contracts between the LRDC and the LDET also offer strong

support in establishing the federal government's manifested intent

to supervise and control the JTPA funds.      The contracts indicate

that the state is acting merely as an administrator and conduit of

federal funds.    Several times in the contract, the defendant is

placed on notice that these are federal funds.         The contracts

expressly state that federal law is looked to in determining proper

expenditures under the contract, that audits are required in

accordance with the JTPA, that the LRDC is subject to federal

ethical regulations, that all property obtained with JTPA funds

belongs to the federal government, and that this property may only

be used for purposes authorized by the JTPA.         These extensive

limitations and responsibilities contained in the contracts are the

direct result of compliance with federal regulations.

       The statutory scheme of the JTPA makes clear that the state is

but an administrator entrusted with the funds only to the extent

that it complies with the federal regulations and guidelines.

Finally, the statutory scheme emphasizes that the state, through

its contracts with the sub-recipients, make clear that the funds

are federal funds which must be used in compliance with federal

law.

       For the foregoing reasons, the judgment of the district court

is

AFFIRMED.


                                  6
