US SUPREME COURT DECISIONS

Respondent States received funds as part of the federal grant-in-aid prog1am under Title I of the Elementary and Secondary Education Act of 1965 (ESEA) a program designed to improve the educational opportunities available to disadvantaged children. Subsequently, federal auditors determined that each State had misapplied the funds. The Education Appeal Board (Board), while modifying the auditors' findings, assessed deficiencies against both States. The Secretary of Education (Secretary) declined to review the orders establishing the deficiencies, and, after a period for comment, the orders became final. Both States filed petitions for review in the Court of Appeals, which consolidated the cases and held that the Department of Education did not have the authority to issue the orders.

Held:

1. The Court of Appeals had jurisdiction of the cases under both § 195 of ESEA -- which permits judicial review in the courts of appeals of the Secretary's final action with respect to audits -- and § 455 of the General Education Provisions Act (GEPA) -- which permits such review of actions of the Board. In the absence of an appealable collateral order, federal courts may exercise jurisdiction only over a final order of the Department of Education. Here, the fact that the Board's order merely established the amount of the deficiencies, leaving for further "discussion" the method of repayment, did not render the orders less than "final." The agency's determination of the deficiencies represented a definitive statement of its position, determining the rights and obligations of the parties. Pp. 461 U. S. 777-780.

2. The provisions of § 207(a)(1) of ESEA and § 115 of GEPA -- which required payments of federal grants to States under ESEA to take into account or make adjustments for any overpayments or underpayments in previous grants -- in effect during the periods in which the audits in these cases were conducted gave the Government the right to recover misused funds granted to a State under Title I of ESEA. Pp. 461 U. S. 780-790.

(a) The plain language of the statutes recognized this right, and the legislative histoly suppolts this reading. Pp. 461 U. S. 782-787. chanrobles.com-red

Page 461 U. S. 774

(b) Even if § 415 were interpreted to cover payments made "accidently," it covers misused payments. Grants of misused funds result from the "accident" of the Secretary's reliance on assurances by the State that it will use the funds in a program that complies with Title I, when in fact the recipient misuses the funds. P. 461 U. S. 787.

(c) To construe §§ 207(a)(1) and 415 to provide for liability does not leave meaningless § 185 of the Education Amendments of 1978, which was enacted after the audits here occurred and makes explicit the Secretary's authority to recover funds misspent by the recipient State. On the contrary, § 185 plays an important role in specifying the procedures to be followed in determining the amount of the deficiency and in collecting it. Pp. 461 U. S. 788-790.

3. Imposition of liability fo misused funds does not intrfere with state sovereignty in violation of the Tenth Amendment. Requiring States to honor the obligations voluntarily assumed as a condition of federal funding before recognizing their ownership of the funds does not intrude on their sovereignty. If the conditions for receiving the funds are valid, the State has no sovereign right to retain the funds without complying with those conditions. Pp. 461 U. S. 790-791.

4. The initial determination of the existence and amount of the liability for funds misused by a State is to be made administratively by the Department of Education. And the State may seek judicial review of such determination in the courts of appeals as to whether the Secretary's findings are supported by substantial evidence and reflect application of the proper legal standards. Pp. 461 U. S. 791-792.

662 F.2d 208, reversed and remanded.

O'CONNOR, J., delivered the opinion for a unanimous Court. WHITE, J., filed a concurring opinion, post, p. 461 U. S. 793. chanrobles.com-red

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