Request By:
Ms. Alice McDonald
Superintendent of Public Instruction
Department of Education
Capital Plaza Tower
Frankfort, Kentucky 40601
Opinion
Opinion By: David L. Armstrong, Attorney General; Kevin M. Noland, General Counsel
Pursuant to KRS 15.025(1), you have made a written request for an Attorney General Opinion as to whether a Community Action Corporation organized pursuant to KRS 273.410 to 273.455 is a unit of local, municipal, county, or state government.
In your letter, you indicate that you are submitting this question to our office as a result of an audit conducted by the Food and Nutrition Services of the United States Department of Agriculture (USDA), which takes exception to funds provided to several Community Action Agencies (CAAs) for food service at summer camps operated by the CAA.
To determine who are eligible sponsors for the Federal Summer Food Service Program, we first consider 7 CFR Section 225.18(a), which states:
"(a) Sponsor eligibility. Applicants eligible to sponsor the Program include:
* * *
* * *
(3) Units of local, municipal, county, or State governments."
You indicate that the USDA has taken the position that the CAA summer camps in question were not eligible as sponsors because they do not fall under any of the sponsor requirements of 7 CFR Section 225.18(a), while the Department of Education believes these CAA summer camps are eligible.
State law controls the issue of whether a CAA is a unit of government, according to 7 CFR Section 225.2, the definitional section:
"'Unit of local, municipal, county, or State government' means an entity which is so recognized by the State constitution or State laws, such as the State administrative procedures act, tax laws, or other applicable State laws which delineate authority for government responsibility in the State."
Therefore, we need to look at state law to determine whether CAAs are units of government. The statutes which define, mandate and describe CAAs are KRS 273.405 - 273.453. KRS 273.405 provides: "There shall be established community action agencies throughout political subdivisions of the Commonwealth." KRS 273.410(2) defines a community action agency as follows:
"(2) 'Community action agency' means a corporation organized for the purpose of alleviating poverty within a community or area by developing employment opportunities; by bettering the conditions under which people live, learn, and work; and by conducting, administering, and coordinating similar programs."
The above quoted statutes clarify that state law mandates the establishment of CAAs throughout political subdivisions and that CAAs have as their purpose alleviating poverty. The duties of CAAs are set out in KRS 273.441.
Over the years CAAs have been involved in various public welfare programs, including energy conservation, federal food commodity distribution, head start programs, employment and training, counseling, nutrition, retired senior volunteer programs, and summer youth employment. These CAAs typically operate with public funds through various grants and contracts.
The public welfare nature of CAAs is supported by KRS 273.443, which dictates how community services block grant appropriations under the Federal Omnibus Budget Reconciliation Act of 1981, P.L. 97-35, and its amendments, shall be used by the CAAs as grantees of the funds. Finally, under KRS 273.448 extensive responsibilities and powers over the CAAs are given to the state administering agency.
The above discussed statutes document the public welfare nature of CAAs. But to determine whether CAAs are governmental units, we must also consider other factors, such as how CAAs are designated. KRS 273.435 states:
"(1) A community action agency may be designated by the following political subdivisions:
(a) One (1) or more counties;
(b) One (1) or more municipal corporations; or
(c) One (1) or more counties and one (1) or more municipal corporations.
"(2) The chief elected official of the designating political subdivision may designate:
(a) The political subdivision as the community action agency, with the concurrence of the legislative authority of the political subdivision; or
(b) An eligible private nonprofit corporation as a community action agency if such corporation's board of directors is established pursuant to KRS 273.437.
"(3) In the event a political subdivision elects not to designate a community action agency as provided under this section, the governor may designate an eligible private nonprofit corporation as the community action agency for the political subdivision; provided, however, that the board of directors for the community action agency shall be established pursuant to KRS 273.437.
"(4) The designating political subdivision shall:
(a) Publish, pursuant to KRS Chapter 424, a notice containing the designation of a community action agency, a summary of the plan for such agency, a location at which the plan can be reviewed, and the time, date, and location of a hearing on the plan; and
(b) Not less than thirty (30) nor more than sixty (60) days from the publication of the notice in subsection (1), convene a public hearing specifically for the purpose of receiving public comment on the designation plan.
"(5) All community action agencies which were organized and operating subject to the provisions of KRS 273.410 to 273.455 as of September 30, 1981, shall be recognized as the community action agencies for each applicable political subdivision unless and until each political subdivision exercises the authority granted under this section.
"(6) No community action agency shall be created after July 15, 1982 unless the:
(a) Population of the political subdivision equals or exceeds fifty thousand (50,000); or
(b) Political subdivisions designating a new community action agency are geographically contiguous and include a combined population combined population equal to or exceeding fifty thousand (50,000)."
Basically, KRS 273.435, as quoted above, provides for designation of a CAA by a political subdivision for the alleviation of poverty. A county, a municipal corporation, or combinations of counties and/or municipal corporations may designate the CAA. Additionally, KRS 273.435(2), allows for certain procedures whereby the chief elected official of the designating political subdivision may designate the CAA for that political subdivision.
A review of the applicable statutes leads us to the conclusion that no across-the-board statement may be made as to whether all CAAs in Kentucky are "units of local, municipal, county, or State government." Rather, the circumstances, such as the relationship between the CAA and the local government, and the activity under review must be considered as to each CAA in question before a conclusion may be reached which would be helpful in resolving whether the summer food program monies were properly granted to the CAAs in question.
As a result, our office has made requests to your Department for copies of the resolutions of designation of the CAAs by the political subdivisions. In response, your Department has indicated that the USDA has questioned receipt of summer food program monies by six particular CAAs. However, your Department has provided us with copies of resolutions of designation by several fiscal courts for only one of the CAAs involved, Audubon Area Community Services, Inc. Your Department has indicated that it is having difficulty securing copies of resolutions relating to the other five CAAs, but that it is your Department's understanding that very similar resolutions were adopted several years ago for the other CAAs.
Despite the fact that we have not received copies of the local government resolutions regarding five of the six CAAs in question, we will attempt to respond with your assumption that resolutions were adopted by the five CAAs similar to the resolutions regarding the Audubon Area Community Services, Inc.
Resolutions which you provided to our office all relate to reorganization of the local CAA and designation of Audubon Area Community Services, Inc., as the CAA for Daviess County, Hancock County, Henderson County, McLean County, Ohio County, Union County, and Webster County. These resolutions designating the Audubon Community Services, Inc., to serve the named counties were adopted in 1973, and therefore KRS 273. 435(5), as quoted above would seem to apply. Again, that statute states: "All community action agencies which were organized and operating subject to the provisions of KRS 273.410 to 273.455 as of September 30, 1981, shall be recognized as the community action agencies for each applicable political subdivision unless and until each political subdivision exercises the authority granted under this section."
Given the fiscal court resolutions, the applicable statutes discussed above, and the public welfare/ alleviation of poverty purposes of CAAs, one may reasonably conclude that the CAAs in question are governmental units for the purposes of the federal Summer Food Service Program. Nevertheless, given the current state of the law, a definitive conclusion cannot be made. However, there is still one additional avenue to be explored, i.e., whether the CAAs in question may be considered special districts and thus local governmental units for purposes of 7 CFR Section 225.18(a). A discussion of this consideration follows.
In OAG 82-196, our office opined that under some statutes CAAs are special districts, while under other statutes they are not. The conclusions reached in OAG 82-196 include:
"A Community Action Corporation is not a special district for purposes of KRS 65.160 to 65.162 which permits two or more counties to join together to form a special district to fulfill any purpose which any individual county is authorized to fulfill. A Community Action Corporation is also not a district for purposes of KRS 65.164 to 65.176 [regarding the procedure for alteration or dissolution of a district by a fiscal court] as it is not among the boards, commissions or special districts created pursuant to the statutory provisions set forth in KRS 65.164."
While it was concluded in OAG 82-196 that for purposes of certain statutes a CAA is not a special district, this office did conclude in that opinion that a CAA is a district within KRS 65.060. That statute provides in part that, as used in KRS 65.065 and 65.070, the term "district" shall apply to any board, commission, or special district created pursuant to specifically enumerated statutes, including KRS 273.405 to 273.453. KRS 65.065 requires the governing body of each district (including CAAs) to annually prepare a budget, financial statement, and to provide for the performance of an audit. KRS 65.070 requires in part that a district must file with the county clerk of each county with territory in the district a certification as to changes since the last filing, reporting information such as the name of the district, a map or general description of its service area, the statutory authority under which it was created, and the names, addresses, and the date of expiration of the term of office of the members of its governing body and chief executive officer. Additionally, under KRS 65.070 the district is required to file a copy of the district budget, financial statement if prepared, and an audit, when performed, with the county judge/executive of each county with territory in the district.
As a result, another conclusion reached in OAG 82-196 is that a CAA organized and functioning pursuant to the terms and provisions of KRS 273.410 to 273.455 (now KRS 273.405 to 273.453) is a "district" for purposes of KRS 65.060 to 65.070. Finally, this office concluded in OAG 82-196 that a CAA organized and functioning pursuant to the terms and provisions of KRS 273.410 to 273.455 (now KRS 273.405 to 273.453) can be a "special district" as defined in KRS 65.005 (which requires notice to the county clerk of the establishment or existence of a political subdivision) , since the definition includes an "agency", if that CAA has been designated as an agency of a city or county government (KRS 273.435). Of course, it is a question of fact as to each CAA in question whether the CAA has been designated as an agency of a city or county government, and thus, would be considered a special district as defined in KRS 65.005. Given the resolutions adopted by certain fiscal courts regarding the Audubon Area Community Services, Inc., and given the applicable statutes and purposes of the CAAs, it may be reasonably argued that the CAAs in question may be considered special districts as defined in KRS 65.005. However, the lack of any clear guidance in the existing statutes and case law on this issue require any conclusion to be reached on this issue to be nondefinitive.
Nevertheless, it is clear that the CAAs organized and functioning pursuant to KRS 273.405 to 273.453 are districts as that term is used in KRS 65.060 to 65.070. And, as a district, these CAAs may be considered local governmental units.
In conclusion, the relevant statutes do not consider CAAs to be special districts or units of county or municipal government for all purposes. However, given the public welfare nature of CAAs, the applicable statutes (including KRS 273.405 to 273.453, as well as KRS 65.060 to 65.070 and 65.005), and considering the fiscal court resolutions with which our office has been provided, we conclude that the CAAs which received funds for food service at summer camps operated by the CAAs are governmental units for purposes of 7 CFR Section 225.18(a). However, given the lack of clear guidance in the statutes and the lack of relevant case law, we are not making a blanket statement that CAAs are special districts or otherwise are local governmental units for all purposes. Rather, this conclusion is limited to the facts presented in the dispute regarding the federal Summer Food Service Program funds received by these certain CAAs.
Finally, we must point out an issue that has been raised by the Food and Nutrition Services Division of the USDA. The USDA asserts that in order to be considered a unit of government, the organization must be able to refer to the unit of government, other than the board of the non-profit agency, which accepts final financial and administrative responsibility for total program operations as specified by Part 226.18(b)(1) of the applicable regulations. In response, we first note the controlling language of the federal regulation, 7 CFR 225.18(b)(1), which states:
"No applicant sponsor shall be eligible to participate in the Program unless it:
"(1) Demonstrates financial and administrative capability for Program operations and accepts final financial and administrative responsibility for total Program operations at all sites at which it proposes to conduct a food service. "
Eligible applicant sponsors are listed in 7 CFR Section 225.18(a), and this listing includes "units of local, municipal, county, or State governments." We have concluded above that for the purposes of the issue before us, the CAAs in question are local governmental units. As such, they are eligible applicant sponsors, and 7 CFR Section 225.18(b)(1) requires the applicant sponsor to accept final financial and administrative responsibility for total Program operations at all sites at which it proposes to conduct a food service. In order words, the CAA would be accepting ultimate responsibility for possible overclaims, should such overclaims ever be alleged and proved in the future. This is to be distinguished from municipal or county governments, as they are not the entities accepting final financial and administrative responsibility, since only the applicant sponsor, i.e., the CAA, is required to so accept.
We hope this adequately responds to your request.