T. H. BELL, SECRETARY OF EDUCATION, PETITIONER V. STATE OF NEW
JERSEY

   No. 83-2064

   In the Supreme Court of the United States

   October Term, 1984

   On Writ of Certiorari to the United States Court of Appeals For the
Third Circuit

   Brief for the Petitioner

            TABLE OF CONTENTS
   QUESTION PRESENTED
   Opinions below
   Jurisdiction
   Statutes and regulation involved
   Statement
   Summary of argument
   Argument:
      In reviewing a determination of audit deficiencies
      in a federal grant program, a court should apply
      the substantive standards of the law under which
      the grants were made
      A. The obligations and conditions of a voluntary
         contractual grant program between the federal
         government and a grantee are fixed as of the time
         of the grant agreement
      B. The 1978 Act, by its terms and legislative
         history, was intended to be prospective only
      C. The court of appeals erroneously applied a
         presumption in favor of retroactive application
         of the 1978 standards
      D. Repayment of misspent funds by respondent is
         necessary for effective enforcement of the terms
         and conditions of Title I, and will not injure
         the interests of Title I students in New Jersey
   Conclusion

                            OPINIONS BELOW

   The opinion of the court of appeals (Pet. App. 1a-5a) is reported
at 724 F.2d 34.  The prior opinion of the court of appeals (Pet. App.
6a-31a) is reported at 662 F.2d 208.  The decision of the Education
Appeal Board (Pet. App. 32a-58a) is not reported.

                             JURISDICTION

   The judgment of the court of appeals (Pet. App. 60a-61a) was
entered on December 27, 1983, and a petition for rehearing was denied
on February 17, 1984 (Pet. App. 62a).  On May 3, 1984, Justice Brennan
extended the time for filing a petition for a writ of certiorari to
and including June 16, 1984.  The petition was filed on June 15, 1984,
and was granted on October 1, 1984.  The jurisdiction of this Court is
invoked under 28 U.S.C. 1254(1).

                   STATUTES AND REGULATION INVOLVED

   20 U.S.C. (1976 ed.) 241e(a) provided in pertinent part:

         A local educational agency may receive a grant under this
      subchapter for any fiscal year only upon application therefor
      approved by the appropriate State educational agency, upon its
      determination (consistent with such basic criteria as the
      Commissioner may establish) --

         (1) that payments under this subchapter will be used for * *
      * programs and projects * * * (A) which are designed to meet the
      special educational needs of educationally deprived children in
      school attendance areas having high concentrations of children
      from low-income families * * *.

20 U.S.C. 2732(a)(1) provides in pertinent part:

      (A) local educational agency shall use funds received under this
      subchapter in school attendance areas having high concentrations
      of children from low-income families (hereinafter referred to as
      "eligible school attendance areas") * * *.  A local educational
      agency may designate any school attendance area in which at
      least 25 per centum of the children are from low-income families
      as an eligible school attendance area if the aggregate amount
      expended under this subchapter and under a State program meeting
      the requirements of section 2751(c) of this title in that fiscal
      year in each school attendance area of that agency in which
      projects assisted under this subchapter were carried out in the
      preceding fiscal year equals or exceeds the amount expended from
      those sources in that area in such preceding fiscal year.

45 C.F.R. 116.17(d) (1972) provided:

         A school attendance area for either a public elementary or a
      public secondary school may be designated as a project area if
      the estimated percentage of children from low-income families
      residing in that attendance area is as high as the percentage of
      such children residing in the whole of the school district, or
      if the estimated number of children from low-income families
      residing in that attendance area is as large as the average
      number of such children residing in the several school
      attendance areas in the school district.  In certain cases, the
      whole of a school district may be regarded as an area having a
      high concentration of such children and be approved as a project
      area, but only if there are no wide variances in the
      concentrations of such children among the several school
      attendance areas in the school district.

                          QUESTION PRESENTED

   Whether, in reviewing an agency audit of federal grant funds
expended in 1970-72, a court should apply substantive requirements
included in legislation governing federal grants during the period
1978-83 rather than the substantive requirements of the law under
which the grants at issue were awarded.

                               STATEMENT

   This case involves expenditures of federal grant funds in Newark,
New Jersey in the school years 1970-71 and 1971-72.  The statutory and
factual background is summarized in this Court's opinion in Bell v.
New Jersey, No. 81-2125 (May 31, 1983), slip op. 1-3.

   1. Title I of the Elementary and Secondary Education Act of 1965,
20 U.S.C. (1976 ed.) 241a et seq., and its successor program, Chapter
1 of the Education Consolidation and Improvement Act of 1981, 20
U.S.C. 3801 et seq., provide federal grants-in-aid to improve the
educational opportunities available to disadvantaged children.  "Local
educational agencies obtain federal grants through state education
agencies, which in turn obtain grants from the Department of Education
upon providing assurances to the Secretary that the local educational
agencies will spend the funds only on qualifying programs." Bell v.
New Jersey, slip op. 1-2 (footnotes omitted).  The purpose of the
programs is to provide special educational services -- typically
remedial reading and math and English as a second language -- to
educationally disadvantaged children in low-income areas.  H.R. Rep.
95-1137, 95th Cong., 2d Sess. 4, 6 (1978).

   One of the principal congressional concerns with the Title I
program has been to ensure that federally-funded services reach "areas
which have the highest proportions of children from low-income
families." S. Rep. 95-856, 95th Cong., 2d Sess. 7 (1978);  H.R. Rep.
95-1137, supra, at 5.  Accordingly, Congress enacted detailed
provisions governing both the allocation of federal Title I funds
among school districts and the suballocation of those funds among
schools and students within each district.  Federal funds were
allocated among school districts on the basis of the number of
low-income children residing in each district, and the state per-pupil
expenditure.  20 U.S.C. (1976 ed.) 241c.  /1/ The local school
districts, in turn, were permitted to expend the funds only on behalf
of children who were "educationally deprived" -- that is, who
performed at a level below normal for their age (see 45 C.F.R.
116.1(i) (1972)) -- and who lived in an area that had a high
concentration of children from families with incomes below the poverty
level.  20 U.S.C. (1976 ed.) 241e(a).

   Title I appropriations have never been sufficient to provide
services to all eligible students.  H.R. Rep. 95-1137, supra, at 7.
Rather than diffuse the limited funds by providing less than adequate
services to all eligible children, the policy of the Act has been to
concentrate services on a small number of children, serving them more
fully.  See 20 U.S.C. (1976 ed.) 241e(a)(1)(B) (Title I projects had
to be of "sufficient size, scope, and quality to give reasonable
promise of substantial progress toward meeting (the special
educational) needs" of the children served).

   Office of Education /2/ regulations in effect in 1970-72
established a comparative test for determining which school attendance
areas within a school district were eligible for Title I projects:  a
school attendance area could receive Title I funds if either the
percentage or the number of low-income children residing in the area
was at least as high as the district-wide average.  Alternatively, the
entire school district could be designated as eligible for Title I
services, but only if there were little variance in the concentrations
of low-income children among school attendance areas within the
district.  45 C.F.R. 116.17(d) (1972).  Whatever the method chosen,
the area designated for Title I services had to "be sufficiently
restricted in size in relation to the nature of the project as to
avoid jeopardizing its effectiveness in meeting the aims and
objectives of the project." 45 C.F.R. 116.17(c) (1972).

   The effect of these regulations was to concentrate the limited
Title I funds in the poorest areas of each school district, even
though an ineligible area in one of the more disadvantaged districts
in a state might well be needier than an eligible area in a wealthier
district.  For example, a school attendance area in Newark with 32% of
its children from families under the poverty line would have been
ineligible for Title I services in 1970-72 (since Newark's
districtwide percentage was 33.9();  yet an area with that percentage
of low-income children might well have been eligible had it been
located in other, less disadvantaged, districts in the State.

   In subsequent years, the standards for selecting eligible school
attendance areas have changed many times.  In 1976, the Office of
Education modified its regulations to permit school attendance areas
with more than 30% of their children from families below the poverty
line to be considered eligible for Title I services, under certain
conditions, even though the district-wide percentage might exceed 30%.
 45 C.F.R. 116a20(b)(2) (1977).  /3/ Then, in 1978, Congress lowered
this percentage to 25%.  At the same time, Congress restricted use of
this alternative standard to situations in which the local school
district could guarantee that each eligible attendance area receiving
Title I services in the preceding year (i.e., those areas with
percentages of low-income children at or above the district-wide
average that actually had Title I projects) would continue to receive
as much or more state and federal compensatory education funding as
the area had received the previous year.  20 U.S.C. 2732(a)(1).  In
other words, under this "maintenance of effort" proviso, Title I funds
could be spread among more areas, where 25% or more the families were
below the poverty line, but only if the resources available to the
neediest areas were not thereby reduced.  As will be explained in
greater detail below, it is this provision that the court of appeals
applied retroactively to this case.

   In 1981, the Department of Education promulgated a regulation
interpreting 20 U.S.C. 2732(a)(1) to permit calculation of the
"maintenance of effort" proviso on the basis of per-pupil expenditures
rather than aggregates.  34 C.F.R. 201.51(d)(ii) (1981).  Later in
1981, Congress passed the Education Consolidation and Improvement Act
of 1981, 20 U.S.C. 3801 et seq., which, among many other changes in
Title I, superseded the eligibility standards of 20 U.S.C. 2732(a)(1)
and replaced them with the following (20 U.S.C. 3805(b)):

      the programs and projects described (in the school district's
      application to participate in the program must) --

         (1)(A) (be) conducted in attendance areas of such (local
      school district) having the highest concentrations of low-income
      children;

         (B) (be located in all attendance ares of (a local school
      district) which has a uniformly high concentration of such
      children;  or

         (C) (be) designed to utilize part of the available funds for
      services which promise to provide significant help for all such
      children served by such (local school district).

   No provision for eligibility of areas with at least 25%
concentrations of low-income children (as in the 1978 standards) was
included in the 1981 legistion.  Department of Education regulations
interpreting the 1981 Act also omitted the prior 25% rule.  34 C.F.R.
200.49 (1983).

   Finally, in December 1983, Congress amended Chapter 1 to permit
school districts to designate any attendance area with at least a 25%
concentration of low-income families as a Chapter 1 project.  Pub. L.
No. 98-211, Section 3, 97 Stat. 1413 (to be codified at 20 U.S.C.
3805(d)).  Unlike the 1978 Act, however, the 1983 Act did not attach
any "maintenance of effort" limitation to this provision.  Ibid.

   2. As a condition to receiving Title I funds for the 1970-72 school
years, respondent was required to give assurances that its Title I
funds would be spent only for services that satisfied all the
applicable requirements, including the school attendance area
eligibility standards just discussed.  Title I provided (20 U.S.C.
(1976 ed.) 241f(a)) that "(a)ny State desiring to participate (in the
program) * * * shall submit through its State educational agency * * *
an application." The application had to contain "satisfactory
assurance" that Title I funds "will be used only for programs and
projects which have been approved by the State educational agency * *
* and which meet the applicable requirements" of Title I, specifically
including the attendance area eligibility standards of Section
241e(a).  20 U.S.C. (1976 ed.) 241f(a)(1).  See also 20 U.S.C. (1976
ed.) 241e (requiring local school districts to file applications with
state educational agencies, including assurances that they would
comply with all applicable Title I requirements).

   Title I regulations further specified that state grantees had to
provide an assurance that they would "comply with the requirements of
Title I of the Act and the regulations in subpart C (which included 45
C.F.R. 116.17(d))" and that they would require each local school
district "to carry out all assurances given by it * * * and * * *
perform all obligations imposed on it." 45 C.F.R. 116.31(c) (1972).

   3. A federal audit of the New Jersey Title I program for the school
years 1970-71, 1971-72, and 1972-73 was completed in 1975.  See J.A.
9-51.  The auditors concluded that the Newark Board of Education had
used Title I funds totalling over $1.1 million in 1970-72 in school
attendance areas that did not satisfy the eligibility requirements of
the Title I regulations.  Id. at 14.  The auditors also determined
that Newark had made proper eligibility determinations for 1972-73.
Id. at 15.

   The principal issue in the audit was the city's method for
calculating eligibility of school attendance areas in 1971-72.  /4/ As
explained in the Title I Program Guide No. 44, issued to Chief State
School Officers on March 18, 1968 (J.A. 17), a school district could
use one of the two methods for calculating the percentage of
low-income children in a school attendance area:  the district could
make its calculations on the basis of children eligible to attend the
public schools involved, or on the basis of the children actually
attending those schools, depending on whether the attendance areas had
well-defined geographical boundaries.  The program guide suggested
various sources of income data that could be used -- recommending
especially Aid to Families with Dependent Children and School Lunch
Program statistics -- but stressed that, whatever data base was used,
it had to be used uniformly throughout the district.  J.A. 17.

   The Newark Board of Education computed a ratio of the total number
of AFDC-ELIGIBLE children enrolled in all schools (elementary, junior,
and senior high) within each elementary school attendance area to the
enrollment of the elementary school in question.  This had the effect
of substantially overstating the percentage of low-income children in
the school, since the numerator of the ratio included low income
children of all ages while the denominator included only children of
elementary school age.  See J.A. 21-22.  Newark used "a different (and
also incorrect) method to compute the low-income percentages for the
junior and senior high schools . . . by averaging the low-income
percentages of the 'feeder or pipe-line' elementary schools" (Pet.
App. 45a;  see J.A. 23-24).  Low-income children were thus
double-counted in the calculations for individual school attendance
areas at all grade levels;  those improperly computed ratios were then
compared to a proper calculation of the district-wide percentage of
low-income children (33.9%).  Pet. App. 42a-45a.  In subsequent
proceedings before the Education Appeal Board, the State acknowledged
(id. at 45a):

      The flaw in the initial formula was that it tended to inflate
      the low-income percentages in attendance areas in that its
      numerator consisted of all low-income students in an area while
      its denominator described only elementary school enrollment.

   Correcting Newark's calculations, the auditors found that ten
elementary and three secondary schools deemed eligible by the city had
in fact been ineligible.  The result was that $1,029,630 in Title I
funds were improperly spent during the 1971-72 school year.  J.A. 25.
On June 11, 1976, the Deputy Commissioner for the Bureau of Elementary
and Secondary Education issued a final determination letter to
respondent demanding repayment of the misspent funds.  J.A. 52-58.

   Respondent appealed the Deputy Commissioner's determination to the
Title I Audit Hearing Board.  Respondent contended, inter alia, that
the Commissioner (now Secretary) of Education was without authority to
compel repayment of Title I funds improperly spent, that under certain
recalculations many of the schools deemed ineligible by the audit
report were in fact eligible, and that the whole of the Newark
district could have been designated as a Title I project area.
Respondent did not contend that the city's original computations were
correct (Pet. App. 36a, 40a).  /5/ Nor did respondent contend that the
revised eligibility standards adopted by the Office of Education in
1976 (see page 6, supra) or by Congress in 1978 (see pages 6-7, supra)
should be applied to the case, even though both changes were made
before the Board heard oral argument on the appeal.

   In a decision rendered February 19, 1980, the successor Education
Appeal Board rejected each of respondent's arguments (Pet. App.
32a-58a).  The Board first concluded that the Commissioner was
authorized to compel repayment of misspent funds -- a position
ultimately affirmed by this Court in Bell v. New Jersey, supra.  The
Board then turned to respondent's proposed recalculations of
low-income percentages for the 1971-72 school year.  Under these
revised calculations, respondent's liability for misspent funds would
have been reduced to $18,779 (respondent's calculation) or $342,657
(Deputy Commissioner's calculation).  Pet. App. 46a.

   While expressing doubts that respondent's post hoc recalculations
could properly be considered germane to the appeal, /6/ the Board
rejected them on the merits.  Respondent's proposed revised method of
calculation would have compared the total number of low-income
children within an attendance area (regardless of age) to the total
number of children eligible to attend public school in the attendance
area in question (regardless of age).  Pet. App. 50a-51a.  The Board
concluded that this method overstated the low-income percentages for
elementary schools because the junior and senior high school cohorts
had significantly higher concentrations of low-income children.  /7/
"By building the junior and senior high school enrollments * * * into
the ratio," the Board found (id. at 53a), "New Jersey inflated the
elementary school low-income percentages so that eight of the ten
originally disqualified schools became qualified.  New Jersey's method
of recalculation is unacceptable."

   The Board also rejected respondent's contention that "the whole of
the Newark school district could have been considered educationally
disadvantaged so as to be a Title I area" (Pet. App. 54a (citation
omitted)).  As noted above, at the time of Newark's application for
the 1971-72 school year, Title I regulations provided (45 C.F.R.
116.17(d) 1972)):

      In certain cases, the whole of a school district may be regarded
      as an area having a high concentration of (children from
      low-income families) and be approved as a project area, but only
      if there are no wide variances in the concentrations of such
      children among the several school attendance areas in the school
      district.

Respondent contended that Newark would have qualified as a Title I
project area under this provision.

   The Deputy Commissioner opposed this position, contending:  (1)
that, since the city had not applied to be treated as eligible under
this provision, it was irrelevant whether, had it done so, it might
have qualified, and (2) that, since Newark's application showed a very
wide variance in low-income percentages, from a high of 84.7% to a low
of 10%, it would not have qualified for treatment as a Title I project
area under the regulation.  Pet. App. 56a-57a.  The Board agreed (id.
at 57a), and accordingly ordered respondent to repay $1,674 for
1970-71 and $1,029,630 for 1971-72 (id. at 58a).

   The Secretary declined to review the Board's order, which
accordingly became final (Pet. App. 59a).

   4. Respondent petitioned for judicial review in the United States
Court of Appeals for the Third Circuit (J.A. 93), challenging both the
Secretary's authority to require recoupment and the validity of the
administrative determination that the funds had been misspent.  The
court of appeals agreed with respondent's argument on the Secretary's
recoupment authority and therefore did not consider the alternative
claim on the merits (Pet. App. 6a-31a).  This Court reversed in a
unanimous opinion.  Bell v. New Jersey, supra.  The Court "conclude(d)
that the Secretary has followed the proper procedures.  He has
administratively determined the amount of the debt owed by
(respondent) to the Federal Government * * * as he is empowered to do"
(slip op. 18-19).  The Court remanded the case to the court of appeals
for consideration of respondent's objections to the merits of the
Secretary's determination (slip op. 19).

   On remand, respondent contended for the first time that its
compliance should be tested by the standards contained in the 1978
reauthorization of Title I (see pages 6-7, supra), rather than by the
standards that were in effect when respondent agreed to comply with
them and the funds were furnished.  /8/ The 1978 standards permitted
the use of grant funds in school attendance areas "in which at least
25 per centum of the children are from low income families * * * if
the aggregate amount expended under (Title I) and under a (qualifying)
State program * * * in that fiscal year in each school attendance area
of that (local school district) in which projects assisted under
(Title I) were carried out in the preceding fiscal year equals or
exceeds the amount expended from those sources in that area in (the)
preceding fiscal year" (20 U.S.C. 2732(a)(1)).  Respondent asserted
that, if tested by this more lenient standard, most of the 1970-72
Newark expenditures would be allowable.

   The court of appeals agreed that the eligibility standards
contained in the 1978 reauthorization legislation should be applied to
the 1970-72 grant fund expenditures, on the theory that "(a) federal
court or administrative agency must 'apply the law in effect at the
time it renders its decision, unless doing so would result in manifest
injustice or there is statutory direction or legislative history to
the contrary'" (Pet. App. 4a, quoting Bradley v. Richmond School
Board, 416 U.S. 696, 711 (1974)).  Finding no such manifest injustice
or contrary statutory indication, the court concluded that retroactive
application of the 1978 standards was appropriate, particularly
because those changes were assertedly "remedial," and the case
"involves a public matter of great national concern * * * (rather
than) the routine private lawsuit in which a retrospective application
of a law would disadvantage a private party who had relied on a
settled body of private law" (Pet. App. 4a-5a).  The court accordingly
remanded the case to the Secretary to determine, for the disputed
school attendance areas, whether the 1970-72 expenditures conformed to
the 1978 standards.

                          SUMMARY OF ARGUMENT

   The Title I program was reauthorized in 1978, just as it was again
reauthorized, under a different name (Chapter 1 of the Education
Consolidation and Improvement Act), in 1981.  In each instance,
Congress conducted extensive hearings and investigations into the
operation of the program and adopted numerous changes designed to make
the program achieve its objectives more effectively.  The court of
appeals, when reviewing an audit of Title I expenditures made in the
school years 1970-71 and 1971-72, concluded that one of the 1978
changes in program requirements (a modification in school attendance
area eligibility standards) must be applied retroactively to the
1970-72 audits.  The court reached this somewhat startling conclusion
on the basis of a supposed presumption in favor of retroactive
application of statutory amendments, purportedly strengthened in this
case by assertions that the 1978 reauthorization legislation was
"remedial" in nature and that the case involves "a public matter of
great national concern" litigated on appeal by "two public agencies."
Pet. App. 4a-5a.

   We submit that the court of appeals' retroactivity analysis is
fundamentally flawed -- indeed, that every relevant consideration
points toward a purely prospective application of the 1978 Title I
program requirements.

   First, the court of appeals disregarded the contractual nature of
respondent's assurances in 1970 and 1971 that it would comply with and
enforce all Title I program requirements applicable to its grants.
Viewed as a contract, it is not remotely plausible to construe the
assurances as incorporating future changes in law.  Neither respondent
nor the federal government would ever have agreed to allow their legal
rights and obligations to fluctuate with subsequent changes in
congressional or administrative policy.  And the conduct of the
parties confirms that their contemporaneous understanding of the Title
I grant agreement was that it embodied the program requirements of the
day.  As Justice White noted in the prior decision in this case, Bell
v. New Jersey, slip op. 2 (concurring opinion), the states have "no
legitimate claim" to be able to breach these "contractual-type
agreements" with impunity.

   Second, the court of appeals virtually ignored clear indications of
congressional intent that the 1978 legislation apply only
prospectively.  The statute itself specified that it would apply to
grants beginning in fiscal year 1978.  Canons of construction applied
by the Comptroller General, statements in the legislative history, and
the general savings clause, 1 U.S.C. 109, all confirm this
understanding.

   Third, the court of appeals misunderstood the correct retroactivity
presumption applicable to substantive legislation of this sort.  The
court purportedly relied on language in Bradley v. Richmond School
Board, 416 U.S. 696 (1974), but failed to honor the exceptions and
limitations discussed in that opinion and reflected in numerous
decisions by this Court.  In the absence of unambiguous indications of
congressional intent, statutes affecting substantive rights or
obligations are considered prospective only.  This case clearly falls
into that category -- not into the category of cases involving
procedures, remedies, or prospective relief, where this Court has
treated statutory changes as applying to pending cases.

   Fourth, the court of appeals' implicit judgment that it would be
bad policy to hold respondent accountable for misspent funds in a case
of this nature is contrary to congressional intent, as explored in
Bell v. New Jersey, slip op. 8-16.  The judgment below would have a
devastating effect on the federal government's ability to enforce the
terms and conditions attached to federal grant programs.

                               ARGUMENT

 IN REVIEWING A DETERMINATION OF AUDIT DEFICIENCIES IN A FEDERAL GRANT
PROGRAM, A COURT SHOULD APPLY THE SUBSTANTIVE STANDARDS OF THE LAW
UNDER WHICH THE GRANTS WERE MADE

   In 1970 and 1971, respondent applied for and received substantial
grants of federal funds for the 1970-72 school years, expressly on the
condition -- solemnized by written assurances -- that it would comply
with all Title I requirements, including requirements regarding
eligibility of school attendance areas.  The books for that school
year closed, and in due time federal auditors discovered that the
Newark School Board has spent approximately $1.1 million to provide
services to children in schools that were not eligible for them under
the standards then in effect.

   In the succeeding years, the standards for determining eligible
school attendance areas were modified many times.  After remaining
unchanged from 1967 through 1976, the standards were modified by the
Commissioner of Education in 1976, by Congress in 1978, by the
Secretary of Education in 1981, by Congress also that same year, and
again by Congress in 1983.  The question before the Court is:  which
standards should auditors and reviewing courts apply in assessing the
legality of respondent's program operations in 1970-72?  We submit
that they should apply the standards in effect at the time.

 A. The Obligations And Conditions Of A Voluntary Contractual Grant
Program Between The Federal Government And A Grantee Are Fixed As Of
The Time Of The Grant Agreement

   Like other federal grant-in-aid programs, Title I was (and Chapter
1 is) based on the concept of "cooperative federalism." See King v.
Smith, 392 U.S. 309, 316 (1968).  Participation in the program by the
state grantees was purely voluntary, but in choosing to participate, a
grantee committed itself to abide by the terms and conditions
prescribed by Congress (or, through delegation of authority, by the
Secretary or the Commissioner).  Id. at 316-317.  See pages 8-9, supra
(describing assurances required of respondent).  The Title I program
was, therefore, "much in the nature of a contract:  in return for
federal funds, the States agree(d) to comply with federally imposed
conditions." Pennhurst State School & Hospital v. Halderman, 451 U.S.
1, 17 (1981).  /9/

   Justice White aptly characterized the nature of respondent's legal
obligation in his concurring opinion in this Court's prior decision in
this case, Bell v. New Jersey, No. 81-2125 (May 31, 1983), slip op. 2:

      The States enter into contractual-type agreements with the
      United States to disburse the (Title I) monies in accordance
      with specified conditions.  The States had no legitimate claim
      to a right to be able to breach these agreements with impunity.
      In the absence of any contrary congressional intent, agreements
      such as these are surely enforceable.

The question in this case, therefore, is not so much what law to
apply, but what did the contract between respondent and the federal
government in 1970-72 mean.

   Viewed as a contract, it is quite obvious that respondent's
assurances incorporated the Title I requirements as they existed at
the time.  Neither respondent nor the federal government could
reasonably be thought to have agreed to terms and conditions that
would not be enacted until some six years after all activities under
the contract had been completed.  The legitimacy of Congress's
imposition of terms and conditions on the Title I program depended on
whether the states could "voluntarily and knowingly accept() the terms
of the 'contract.'" Pennhurst, 451 U.S. at 17 (citations omitted).
And there could have been no "knowing acceptance" of those terms by
respondent if -- as would be the case if the commitment referred to
future law rather than current law -- the State were "unable to
ascertain what (was) expected of it." Ibid.  It is inconceivable that,
when respondent and the Commissioner of Education executed this
contract in 1970-72, they intended respondent's performance of its
obligations to be measured by standards not yet enacted -- to be
determined by the fortuity of when respondent's petition for review of
the Commissioner's determination of deficiencies, if any, might be
heard.

   Moreover, the plain terms of the State's required assurances and
the nature of its obligations preclude any possibility that future
legislative changes were expected to apply retroactively.  The
assurance required under 20 U.S.C. (1976 ed.) 241f(a) stated that the
Title I funds would be used only for programs and projects that met
the applicable requirements of Section 241e(a), i.e., the attendance
area eligibility requirements, among others.  The assurance did not
state that the programs and projects would meet the requirements of
Section 241e(a) as they might subsequently be amended.  /10/ If the
parties had intended their rights and obligations under the contract
to fluctuate according to future changes in law, they surely would
have said so.

   By its assurances, respondent also undertook an enforcement
responsibility, the duty to screen local applications and oversee
local operations to ensure that Title I funds would be used only for
programs and projects that satisfied the requirements of Section
241e(a).  See 20 U.S.C. (1976 ed.) 241f(a)(1)).  The pertinent
question now must be whether respondent complied with its commitments
as they were understood at that time.  It makes nonsense out of those
assurances to allow respondent to excuse its failure to enforce
compliance with Section 241e(a) on Congress's later decision to amend
the law.

   The conduct of the parties to the contract also casts light on the
contemporaneous understanding of its meaning.  If, as respondent now
contends, the assurances it provided were understood to incorporate
subsequent amendments to the Title I standards, then respondent would
have litigated this case on that understanding.  The standards for
determining school attendance area eligibility first changed in
September 1976, and according to respondent (see Supp. C.A. Br. 14-15.
 n.*), under those revised standards, respondent's liability would
have dropped from $1.1 million to about $470,000.  Yet respondent's
application for review of the final audit determination, filed on
October 21, 1976 (J.A. 59), relied exclusively on the prior Title I
standards;  nowhere in its application did respondent suggest that
revisions in the standards might have affected its obligations.  See
page 11, supra.  Nor did respondent rely on the 1976 regulations in
subsequent proceedings before the Board.  In 1978, Congress again
changed the standards.  Under those standards (assuming it otherwise
satisfied the statutory criteria), respondent's liability would have
fallen to about $248,000 (according to respondent's figures, see Nov.
10, 1983 letter to the clerk of the court of appeals, at 2).  Again,
however, respondent made no claim at the time that the new standards
should apply.

   Respondent's current argument is no more than a post hoc
rationalization;  at the time of the contract and for some ten years
thereafter, respondent understood its assurances to refer to the
1970-72 standards.  That contemporaneous understanding, which is
consistent with the terms of the assurances, with the views of the
agency charged with enforcement of the grant conditions, and with
common sense, should govern the interpretation of this contract.  /11/

   This is not to say that a subsequent Congress would lack the power
to relieve a grantee of the consequences of having violated its
assurances.  Such a course might well make sense if a subsequent
Congress believed that the terms and conditions then imposed were
unfair.  /12/ However, neither respondent nor the court of appeals has
suggested that 20 U.S.C. 2732(a)(1), or any other statute, is an
exercise of this forgiveness power.  We will address the meaning of
Section 2732(a)(1) in detail below;  for present purposes it suffices
to note that nothing in the language or legislative history even
remotely indicates an intention to interfere with remedies for past
violations.

 B. The 1978 Act, By Its Terms And Legislative History, Was Intended
To Be Prospective Only

   The question of prospectivity or retroactivity of legislation
(constitutional considerations aside) is one of statutory
construction.  This Court has often addressed the factors to be
considered when a statute, together with its legislative history, does
not expressly indicate whether it was intended to be applied to
conduct that has already taken place.  See pages 33-41, infra.  But
"(w)here Congress has expressly provided, or the legislative history
had indicated, that legislation was to be given only prospective
effect, the courts * * * generally have followed that lead." Bradley
v. Richmond School Baord, 416 U.S. 696, 715-716 n.21 (1974).  In such
a case, there is no call to consult presumptions or canons of
construction.  Congress has spoken.

   The court of appeals was therefore in error when it held that
substantive provisions of the 1978 Title I reauthorization legislation
were intended to be applied retroactively to govern judicial review of
audit determinations concerning grants made pursuant to prior law.
The court's statement (Pet. App. 4a) that "nothing in the 1978
amendments or the legislative history indicates that the amendments
were not intended to be applied retroactively" is simply unfounded.

   The intention of Congress in this regard could hardly be clearer.
The 1978 legislation expressly provided (20 U.S.C. 2702) that
"(d)uring the period beginning October 1, 1978, and ending September
30, 1983, the Secretary shall, in accordance with the provisions of
this sub-chapter, make payments to State educational agencies for
grants made on the basis of entitlements created under this
sub-chapter." See also Pub. L. No. 95-561, Section 1530, 92 Stat. 2380
(effective date of 1978 Act would be October 1, 1978).  /13/ The plain
meaning of 20 U.S.C. 2702 is that the substantive standards enacted by
the 1978 legislation were to apply to grants between October 1, 1978
and September 30, 1983 -- and not before.  /14/ Where, as here,
Congress has explicitly provided that the substantive provisions of
reauthorization legislation are to apply during a specific,
prospective period of time, it is patent misconstruction to apply
those provisions to an earlier era.

   This accords with the general theory of the law of federal grants.
The terms and conditions reflected in grant assurances are "strings"
attached to particular grants of money, which are themselves strictly
limited as to when they can be spent.  /15/ The assurances thus embody
the conditions a Congress chooses to attach to the monies it expends.
The allowability of expenditures under a particular grant must depend
on the conditions attached by Congress to that grant;  it is
irrelevant whether subsequent Congresses may decide to alter the
conditions attached to other grants.

   Accordingly, the Comptroller General -- the federal official
charged with determining the legality of actions taken with regard to
the use of public funds -- has consistently held that changes in
appropriation or authorization statutes must be applied prospectively
only.  They are not to be applied to expenditures made under prior
statutes unless the changes are made retrospective by express language
or by necessary implication.  Office of General Counsel, GAO,
Principles of Federal Appropriations Law 2-48 (1982);  see, e.g., 62
Comp. Gen. 396, 398 (1983);  38 Comp. Gen. 103, 104 (1958);  28 Comp.
Gen. 162, 162 (1948);  16 Comp. Gen. 1051, 1054 (1937).  In light of
Congress's reliance on the Comptroller General for authoritative
advice and interpretation of statutes, principles, and procedures in
the area of federal expenditures, /16/ his views are entitled to
considerable weight in determining congressional intent.

   The legislative history confirms this prospective interpretation of
the statutory language.  The 1978 amendments were part of a general
reauthorization and revision of the Title I program.  The focus of
legislative consideration was on how future Title I grants could be
simplified, clarified, and improved.  See H.R. Rep. 95-1137, 95th
Cong., 2d Sess. 2 (1978);  124 Cong. Rec 15935 (1978) (statement of
Rep. Chisholm);  id. at 27533 (statement of Sen. Byrd).  The House
Report stated that the changed requirements clarify "the manner in
which school districts are to distribute Title I funds among eligible
schools and children," thus explicitly indicating that the changes
were understood to apply prospectively.  H.R. Rep. 95-1137, supra, at
21.

   The amendment with which this case is concerned -- affecting school
attendance area eligibility standards -- reflected a change in policy
arising from "a concern that inflexible targeting requirements could
force some school districts with very high incidences of poverty to
declare school(s) with 20 percent low-income enrollment ineligible,
while schools with only 10 percent low-income enrollment or less might
be eligible in wealthier neighboring districts." H.R. Rep. 95-1137,
supra, at 22.  The problem arose because Title I was not funded at a
level adequate to serve all eligible children , and thus some form of
allocation among eligible children had to be adopted.  The regulation
in place from 1967 to 1976, 45 C.F.R. 116.17(d), attempted to deal
with the scarcity of resources by requiring each district to confine
its Title I projects to the neediest half of its school attendance
areas.  When viewed from an intradistrict perspective, the effect of
the regulation was consistent with the congressional objective of
serving "areas which have the highest proportions of children from
low-income families" (S. Rep. 95-856, 95th Cong., 2d Sess. 7 (1978)).
Indeed, any other approach would result in shifting limited resources
from needier to less needy areas within the district and diluting
Title I programs in the schools with the greatest percentages of
low-income children.  When viewed on a statewide basis, however, there
was an anomaly that an attendance area with a given percentage of
children from low-income families would have a greater chance of being
designated as an eligible area if it were located in a wealthier,
rather than a poorer, district.  /17/

   Thomas C. Schmidt, Rhode Island Commissioner of Education,
summarized the problem as follows, in testimony on behalf of the
Education Commission of the States:

      Essentially, (the) process requires a (local school district) to
      determine the district-wide percentage of economically
      disadvantaged students.  Any school which has a higher incidence
      of economically disadvantaged students is eligible for Title I
      funds. * * * Within a school district this is a quite rational
      means of concentrating Title I money.  Within a state it is not
      consonant with the expressed objective of the legislation for
      the simple reason that the incidence of low-income students
      varies enormously among (local school districts) in any given
      state and as a result there are wide variations in target school
      levels among districts.

Education Amendments of 1977:  Hearings on S. 1753 Before the Subcomm.
on Education, Arts and Humanities of the Senate Comm. on Human
Resources, 95th Cong., 1st Sess. 92 (1977) (hereinafter cited as
Senate Hearings).

   Although several witnesses advocated selection of eligible
attendance areas on a statewide basis (a proposal that would have
caused a major shift in Title I resources from less disadvantaged to
more disadvantaged areas within each state), /18/ Congress decided
instead to lower the threshold for eligibility from the 30% standard
in the 1976 regulations to 25%, subject to certain restrictions
explained at pages 6-7, supra.  As 20 U.S.C. 2702 indicates, the new
standard was intended to apply to future grants under the reauthorized
Title I program.  Not one member of Congress or witness before the
congressional committees suggested that this new threshold would or
should apply to prior grants.  /19/

   Indeed, there was explicit recognition that the need for the change
had become apparent only after extensive experience with the program.
Pennsylvania's Secretary of Education, for example, testified that the
prior regulations "made sense in the early years of the Title I
program." Part 19:  Title I -- Funds Allocation:  Hearings on H.R. 15
Before the Subcomm. on Elementary, Secondary, and Vocational Education
of the House Comm. on Education and Labor, 95th Cong., 1st Sess.
858-859 (1977) (hereinafter cited as Part 19:  House Hearings).  See
also 124 Cong. Rec. 27528 (1978) (comments of Sen. Kennedy) ("(i)n
developing the legislative provisions for Title I, the committee was
guided by the wealth of research and evaluative information which is
now available concerning the program").

   Merely because Congress believed the 1978 amendments would make the
Title I program more effective in achieving its objectives does not
imply that Congress intended the amendments to apply retoractively.
The entire legislative history is consistent with the interpretation
that Congress intended to improve the program for the future, not to
remake the past.

   The court of appeals casually disregarded all of this evidence of
congressional intent, stating that the legislative history is "replete
with evidence that Congress enacted these amendments to correct the
injustice that the earlier ineligibility standards worked on areas
with high concentrations of low income families" (Pet. App. 4a).  Even
if accurate, this portrayal of the legislative history would be not
substitute for actual indications that Congress intended the 1978
changes to apply retroactively.  As we have discussed, all the direct
evidence points the other way.  But the portrayal is not accurate.
The scant discussion of the issue in the mammoth legislative history
of the 1978 Act (one substantive discussion in a House Report;  fewer
than a dozen references by witnesses in some 25 volumes of hearings)
contains not one reference to "injustice" or any synonym thereof.
/20/ Congress was simply fine-tuning the attendance area eligibility
standards.

   Any possible doubt regarding the legislative intent in this regard
is laid to rest by the general statutory savings clause, 1 U.S.C. 109,
which provides that "(t)he repeal of any statute shall not have the
effect to release or extinguish any * * * liability incurred under
such statute, unless the repealing Act shall expressly so provide, and
such statute shall be treated as still remaining in force for the
purpose of sustaining any proper action or prosecution for the
enforcement of such * * * liability."

   This statute embodies a congressional policy, binding on the
courts, against retrospective application of statutory changes that
would impair the government's ability to enforce liabilities --
whether civil or criminal -- for violations of prior law.  It applies
to amendments as well as to outright repeals.  Warden v. Marrero, 417
U.S. 653, 660 (1974);  United States v. Mechem, 509 F.2d 1193, 1194
n.3(10th Cir. 1975);  Moorehead v. Hunter, 198 F.2d 52, 53 (10th Cir.
1952).  Moreover, "the term 'liability' as used in the general savings
statute has been broadly construed by courts to comprehend all
obligations arising out of any breach of a statutory duty." NLRB v.
National Garment Co., 166 F.2d 233, 237 & n.4 (8th Cir. 1948) (citing
cases).  Accord, Hertz v. Woodman, 218 U.S. 205, 217-218 (1910);  see
also United States v. Carter, 171 F.2d 530 (5th Cir. 1948) (applying
statute to require restitution of overcharges to purchasers of housing
under expired statute).  /21/

   The court of appeals' retroactive application of the 1978
reauthorization of Title I plainly contravenes that congressional
policy.  Nothing in the 1978 legislation expressly prohibited the
continuing applicability of the substantive standards under which the
1970-72 grants were made;  the general savings statute thus requires
that liabilities incurred under those standards remain enforceable.

 C. The Court Of Appeals Erroneously Applied A Presumption In Favor Of
Retroactive Application Of The 1978 Standards

   The 1978 amendments -- both their language and their legislative
history -- evince a clear intention to apply prospectively, and the
general savings clause, 1 U.S.C. 109, further reinforces the
congressional judgment to preserve liabilities incurred under prior
law.  But even if the direct evidence of congressional intent were
less clear, the court of appeals still would have erred in indulging a
presumption in favor of retroactivity of the type of substantive
legislative change at issue here.  /22/

   In Bradley v. Richmond School Board, 416 U.S. 696 (1974), this
Court reviewed the precedents concerning application of a change in
law to cases pending on appeal.  Under the circumstances of that case,
the Court applied the general principle (id. at 711) that:

      a court is to apply the law in effect at the time it renders its
      decision, unless doing so would result in manifest injustice or
      there is statutory direction or legislative history to the
      contrary.

The Court also stated, however, that its decision did not "hold that
courts must always thus apply new laws to pending cases in the absence
of clear legislative direction to the contrary" (id. at 715), and it
expressly reaffirmed precedents such as Greene v. United States, 376
U.S. 149 (1964), and Union Pac. R.R. v. Laramie Stock Yards Co., 231
U.S. 190 (1913), which establish the limits to the general principle.
See 416 U.S. at 716-717 & n.24, 720.

   Those decisions, at first blush, appear at tension with the general
principle enunciated in Bradley.  In Greene and Laramie Stock Yards,
this Court stated:

      the first rule of construction is that legislation must be
      considered as addressed to the future, not to the past . . .
      (and) a retrospective operation will not be given to a statute
      which interferes with antecedent rights . . . unless such be
      "the unequivocal and inflexible import of the terms, and the
      manifest intention of the legislature."

Greene, 376 U.S at 160 (citations omitted;  ellipses and brackets in
original);  Laramie Stock Yards, 231 U.S. at 199.  /23/

   The tension, we submit, is more apparent than real.  In Bradley,
the Court stated two broad limiting principles, the combined effect of
which is to enshrine as exceptions to the general rule essentially the
same category of statutory changes that were treated as presumptively
prospective in Greene and like cases.  In other words, the canon of
construction favoring purely prospective application of new laws was
"dropped from the formulation of a general 'rule' concerning
retroactivity of intervening statutes, only to reemerge as an
important basis for determining when an exception to the general rule
should be made." Litton Systems, Inc. v. American Telephone &
Telegraph Co., No. 83-7744 (2d Cir. Oct. 16, 1984), slip op. 6688.

   The first such limiting principle stated in Bradley is that any
presumption of retroactivity must yield to "statutory direction or
legislative history to the contrary" (416 U.S. at 711;  see id. at
715-716 n.21).  The Court expressly rejected two extremes -- (1) that
a statute may be applied retrospectively only where congressional
intention to do so is "clear and stated," and (2) that a statute must
"always" be applied retrospectively "in the absence of clear
legislative direction to the contrary" (416 U.S. at 715).  Bradley
thus stands for the proposition that the retroactivity of a
prospectivity of a statute should be judged in accordance with the
fair import of its language and legislative history, without excessive
reliance on presumptions, whether for or against retroactivity.  /24/
As discussed in the previous section of this brief, the fair import of
the language and legislative history of 20 U.S.C. 2732(a)(1) points
toward a prospective application of the 1978 changes in school
attendance area standards under Title I.  Moreover, Congress has
expressly directed that repeals and amendments of statutory law are
not to be interpreted as releasing or extinguishing liability incurred
under prior law, in the absence of explicit provision in the repealing
or amending act.  1 U.S.C. 109.  See pages 32-33, supra.

   Bradley's second limiting principle is that the presumption of
retroactivity should not be applied where it would result in "manifest
injustice." 416 U.S. at 711.  The Court interpreted the concept of
"manifest injustice" broadly, recognizing the force of the argument
against retrospective application in a wide variety of circumstances.
For our purposes here, the most significant aspect of the "manifest
injustice" inquiry specifically discussed in Bradley is that an
intervening change in law should not be presumed to apply to a pending
case if "to do so would infringe upon or deprive a person of a right
that had matured or become unconditional" (id. at 720).  /25/ This
would seem virtually identical to the Court's formulation in Greene
and Laramie Stock Yards, i.e., that "a retrospective operation will
not be given to a statute which interferes with antecedent rights * *
*." See also United States v. Security Industrial Bank, 459 U.S. 70,
79 (1982) (quoting same).  /26/

   The 1978 revision of Title I attendance area eligibility standards
is a classic instance of a change in law that, if applied
retroactively, would interfere with antecedent rights and obligations.
 Respondent's administration of the 1970-72 Title I program ended in
1972;  its rights and obligations "had matured or become
unconditional" as of that time.  The auditors, whose task was to
determine whether the federal funds were properly spent, concluded
that some $1.1 million was spent in violation of the grant agreement.
As this Court held in Bell v. New Jersey, slip op. 17, the federal
government has a substantive "right * * * to recover funds misused by
the States." That right matured when the funds were misspent, and
should not be defeased because of the fortuity that Congress changed
the substantive standards for future grants some six years later,
while administrative review processes were still dragging on.  /27/

   In general outline, then, Bradley and Greene exemplify not
different principles, but application of a comprehensive general
principle to different categories of change in statutory law.  Whether
the issue is viewed under the "manifest injustice" exception of
Bradley or under Greene's general rule against retroactivity is
immaterial.  Absent contrary indications of congressional intent,
statutory changes in procedures or remedies, and those affecting
future rights and obligations, are deemed retroactive in the sense
that they apply to pending litigation even when it involves conduct or
transactions that took place before the statutory change was enacted.
Thus, an attorney's fee statute, /28/ revised procedures to be
followed before evicting a public housing tenant, /29/ and a new
process for a citizen to obtain injunctive relief against election law
violations, /30/ to name three recent examples, election law
violations, /30/ to name three recent examples, have all been applied
to cases that had their genesis before the governing law was changed.
However, statutes are presumed not to alter substantive rights or
obligations arising from past conduct or transactions.  Thus,
bankruptcy laws have been construed not to eliminate property rights,
such as liens, that were obtained under prior law, /31/ and
regulations adding new substantive prerequisites have been construed
not to defeat rights to compensation for wrongful discharge under
prior law.  /32/ Presumably this is because of the deeply rooted
principle in Anglo-American jurisprudence that it is unjust to apply
new substantive legal standards to conduct or transactions that
occurred in the past.  See Smead, The Rule Against Retroactive
Legislation:  A Basic Principle of Jurisprudence, 20 Minn. L. Rev. 775
(1936).  /33/

   This Court's opinion in Bell v. New Jersey exemplifies these
constraints.  The Court held that the forum for administrative review
of the audit determinations in this case was altered by the 1978
reauthorization legislation, but only "(t)o the extent that (the 1978
Act) merely changed the forum for assertion of a pre-existing right."
Slip op. 8 n.7;  see also id. at 3-4 n.3, 7 n.6, 18.  The Court quoted
Justice Holmes' opinion in Hallowell v. Commons, 239 U.S. 506, 508
(1916), to the effect that "a change of forum 'takes away no
substantive right' and thus can apply retroactively" (Bell v. New
Jersey, slip op. 3-4 n.3 (emphasis added) ).  Here, as the remand from
this Court to the court of appeals makes clear (id. at 7 n.6), the
question is what "substantive standards" apply to the 1970-72
expenditures;  the court of appeals' retroactive application of
"substantive standards" to conduct that occurred years before is thus
contrary to the consistent practice of this Court.

   The court of appeals nonetheless concluded that the 1978 change in
the attendance area eligibility requirements must be presumed to apply
retroactively.  /34/ It found the "presumption of retroactivity (to
be) particularly strong" because the 1978 legislation was "remedial"
(Pet. App. 4a).

   It is, indeed, frequently stated that "remedial" statutes are to be
applied to cases pending at the time of enactment.  See, e.g., Koger
v. Ball, 497 F.2d 702, 705-706 (4th Cir. 1974);  Silverlight v.
Huggins, 488 F.2d 107, 109 (3d Cir. 1973);  Connett v. City of
Jerseyville, 96 F.2d 392, 400 (7th Cir. 1938);  cf. Funkhouser v. J.B.
Preston Co., 290 U.S. 163, 167-168 (1933).  But the court of appeals
misunderstood this principle.  For purposes of retroactivity analysis,
a "remedial" statute is one that relates to remedies -- one that
neither enlarges nor impairs substantive rights, but relates to the
means and procedures for enforcing those rights.  McGee v.
International Life Ins. Co., 355 U.S. 220, 224 (1957);  Winfree v. N.
Pac. Ry., 227 U.S. 296, 301-302 (1913);  2 C. Sands, Sutherland's
Statutory Construction, Section 41.09, at 280-286 (4th ed. 1973);  see
also Bell v. New Jersey, slip op. 3-4 n.3 7 n.6, 8 n.7.  /35/ As noted
above, this Court has already determined that the issue here involves
"the substantial standards" applicable to pre-1978 Title I grants (id.
at 7 n.6);  it has nothing to do with remedies.

   The court of appeals also considered it significant that "the case
* * * involves a public matter of great national concern and is argued
on direct appeal by two public agencies," as opposed to being "the
routine private lawsuit in which a retrospective application of a law
would disadvantage a private party" (Pet. App. 5a, citing Bradley, 416
U.S. at 716-721).  In this regard as well, the court below
misinterpreted Bradley.  The opinion in Bradley does not remotely
suggest that retroactivity analysis must overlook unfairness to
governmental entities or the public.  Indeed, the Court expressly
noted (id. at 720) that an award of attorney's fees would not be
unfair to the School Board, which from the outset of the litigation
had had a constitutional obligation to provide a nondiscriminatory
education and also knew that it faced the possibility that it would be
required to pay attorney's fees (id. at 721).

   Instead, the Court in Bradley was making an affirmative point:
that attorney's fees in that context would further the "great national
concern" of eradicating racial segregation (416 U.S. at 419), and that
the public entity involved, no less than the public at large, stood to
benefit from the vindication of constitutional rights (id. at 418).

   Comparable concerns in the instant case point against retroactive
application of the 1978 standards.  The "great national concern"
implicated in this case is the federal government's ability to ensure
that grantees comply with the terms and conditions of their grants.
The "two public agencies" involved in this case (Pet. App. 5a) both
stand to gain, in the long run, from certainty and predictability in
the substantive requirements of federal grants.  The government's
ability to enforce -- and the grantees' incentive to comply with --
Congress's decisions regarding the expenditure of Title I funds would
be greatly impaired by a decision rendering the terms and conditions
of Title I grants subject to subsequent shifts in congressional or
administrative policy.

 D. Repayment Of Misspent Funds By Respondent Is Necessary For
Effective Enforcement Of The Terms And Conditions Of Title I, And Will
Not Injure The Interests Of Title I Students In New Jersey

   The requirements violated by respondent's program in Newark were
designed to ensure that limited Title I funds would be spent only in
the neediest areas within each school district.  Although the wisdom
of the policy reflected in the regulations violated by respondent is
subject to honest debate -- and indeed that policy was modified by
regulation in 1976 and statute in 1978 -- there is no serious doubt
that the regulations were a lawful exercise of the rulemaking
authority specifically granted to the Commissioner.  20 U.S.C. (1976
ed.) 241e(a), 242(b).  Certainly nothing in the decision below
suggests otherwise.  Nor is there any doubt that respondent materially
violated those regulations.  Respondent does not contend otherwise.
Nor can there be any claim that selection of eligible attendance areas
is a "technical" or insignificant matter that might easily be
overlooked.  See Bell v. New Jersey, slip op. 2 (White, J.,
concurring).  The careful attention paid by Congress and the agency to
this issue refutes any such suggestion.  Designation of eligible areas
plays a central role in fulfilling the basic purpose of Title I to
concentrate limited resources in areas with high percentages of
children from low-income families.  /36/

   The sole issue here is whether a grant recipient can avoid
liability for misspent funds, even though it has failed to fulfill an
assurance made when the funds were received and expended, simply on
the ground that subsequent grants did not require the giving of that
assurance.  Such a principle would be devastating to the federal
government's ability to enforce the terms and conditions of federal
grants.

   Even where the terms and conditions of grants remain fixed, the
auditor's task of determining compliance with all program requirements
is massive.  The sheer number of programs to be audited, coupled with
the profusion of legal rules, both categorical and cross-cutting,
makes the auditing process an extremely difficult enterprise.  One
commentator has noted that "determining whether a grant project has
been conducted 'properly' is a very complex undertaking. * * * Not
only must the audit team master the intricacies of the (general rules
applicable to grants), but it must also master the individual
trappings -- often unbelievably complicated -- of law, regulation,
manual, forms, instructions, and practices of each of the hundreds of
separate grant programs." R. Cappalli, Federal Grants and Cooperative
Agreements Section 6:01, at 6-3 (1982).  This is aggravated by the
fact that most auditors are not lawyers.

   If, in addition to the other difficulties, the substantive
standards applicable to grants are deemed to fluctuate over time, as
Congress or the agency adopts a new policy, the audit problems will be
magnified many times over.  The difficulty is expecailly acute with
regard to a program like Title I, where close congressional and
administrative oversight results in frequent statutory and regulatory
changes in the conditions under which grants are made.  An audit
necessarily assumes that the standards to be applied are fixed --
otherwise, there is no way to determine whether the expenditures were
proper.  As the Education Appeal Board, a body with extensive
experience in this area, observed (Pet. App. 48a):  "auditors could
not conduct an effective audit if the grantees were permitted, years
after the funds had been spent, to use new methods for computing
attendance area eligibility."

   Retroactive changes in program standards would sow other seeds of
confusion as well.  The records and data needed to evaluate compliance
under a different standard than that prescribed at the time might not
be available.  /37/ The uncertainty caused by the court of appeals'
rule may thus have a tendency to stimulate unnecessary record creation
and retention.  Under the court of appeals' approach, parties might
gain an interest in delaying audit review proceedings, in the hope
that a more favorable standard might be adopted.  Different standards
would apply to different grantees, depending on when their appeal was
ultimately settled -- with all the attendant injustice and claims for
relief that such disparate treatment would generate.  The simple need
for fairness and finality thus argues strongly against the result
below.

   The House of Representatives has recently considered, and rejected,
a provision in a committee bil that would have required application of
"current law" in all Title I audit cases.  Representative Ford
explained the case against the proposal.  His reasoning applies
equally to the decision below.  130 Cong. Rec. H7814 (daily ed. July
25, 1984):

      Such a standard would violate the basic principle that grantees
      should be held accountable for the expenditures of funds under
      the law as it was when they received the funds.  A current law
      standard would treat differently grantees who received funds at
      the same time.  Depending on when they were audited, grantees
      would be held to different program requirements based upon the
      state of the law when they were audited.  A grant might be made
      on the basis of one set of standards, an audit conducted on a
      second, an administrative appeal heard on a third, and judicial
      review sought on a fourth.

   If changes in statutory or regulatory standards were to impose more
stringent -- or simply different -- conditions on the grant recipients
than those to which they agreed to conform when they received and
expended the funds, it is clear that the failure to comply with the
subsequent conditions, no matter how desirable they might be as a
matter of policy, would be no ground for demanding the recoupment of
funds that were properly expended under the conditions applicable at
the time the expenditures were made.  See Pennhurst, 451 U.S. at 24.
The result should be no different when the subsequent conditions are
less, rather than more, stringent.  The propriety of the expenditures
depends on the standards in effect when they were made, not on those
subsequently enacted for later grants.

   The court of appeals' apparent reluctance to permit the Secretary
to invoke the recoupment remedy in these circumstances flies in the
face of the clear congressional intention, reviewed by this Court in
Bell v. New Jersey, slip op. 8-16, that the Department recapture
misspent funds.  Indeed, Congress made the agency's agreement to
undertake actions to recapture misspent funds "an essential condition
for enacting the proposed legislation." 111 Cong. Rec. 7690 (1965),
quoted at Bell, slip op. 9.  There is no need to reiterate that
history here.  It suffices to say that the court of appeals apparently
substituted its own view of salutary public policy for that of
Congress.

   It should be noted that the cost of a repayment order does not fall
on the schoolchildren served by Title I.  Rather, the liability runs
against the grantee, which has the obligation to repay the misspent
funds and to maintain the full level of Title I programs.  Bell, slip
op. 9 n.8.  Moreover, even with respect to the state grantees,
Congress has mitigated the harshness of the remedy.  It has authorized
the Secretary to return to the states up to 75% of repaid funds where
the practices that led to the misuse have been corrected (as here),
and where the returned funds will, to the extent possible, be used to
benefit the population affected by the misuse and will serve to
achieve the purposes of the state Title I program.  20 U.S.C.
1234e(a).  /38/ This approach, established by law, is the appropriate
means for addressing any perceived harshness in the treatment of
respondent here.  The court of appeals seriously erred in attempting
to achieve the same objective by making a disruptive and unwarranted
change in the law applicable to federal grants.

                              CONCLUSION

   The judgment of the court of appeals should be reversed.

   Respectfully submitted.

   REX E. LEE

      Solicitor General

   KENNETH S. GELLER

      Deputy Solicitor General

   MICHAEL W. MCCONNELL

      Assistant to the Solicitor General

   STEPHEN H. FREID

      Attorney Department of Education

   NOVEMBER 1984

   /1/ There is no dispute in this case that the Newark school
district received its correct allocation of Title I funds.

   /2/ Prior to May 4, 1980, the Office of Education of the Department
of Health, Education, and Welfare was the federal agency responsible
for administration of Title I.  After that date, those
responsibilities were assumed by the Department of Education.  See 20
U.S.C. 3411, 3441.

   /3/ Attendance areas could be so treated only upon "specific
request" by the local school district and approval by the state.  45
C.F.R. 116a20(a) and (b)(2) (1977).

   /4/ Because of the statute of limitations, only $1,674 remains at
issue from the 1970-71 school year (Pet. App. 36a-37a).

   /5/ Indeed, at oral argument before the Board, respondent stated
that the recalculations "are in fact an acknowledgement of the fact
that there were irregularities in the original grant approval process"
(Pet. App. 46a (citation omitted) ).

   /6/ The Board observed (Pet. App. 48a) that Title I "auditors could
not conduct an effective audit if the grantees were permitted, years
after the funds had been spent, to use new methods for computing
attendance area eligibility." In light of its conclusion that the
recalculations themselves were substantively improper, however, the
Board found it unnecessary to decide whether to reject respondent's
argument on this ground.  Id. at 49a.

   /7/ The percentage of low-income enrollment for the ten elementary
schools in question was 23.8%, while the percentage of low-income
enrollment for the junior and senior high schools included in
respondent's recalculations were 50.9% and 35.2%, respectively.  Pet.
App. 52a.

   /8/ Although the court of appeals acknowledged that appellate
courts do not generally consider issues that have not been passed on
by the agency or court whose decision is under review, it concluded
that an exception to this rule was appropriate here because the issue
is one "of national importance, which is singularly within the
competence of appellate courts and is not predicated on complex
factual determinations" (Pet. App. 3a-4a n.1).

   /9/ Although Title I involves only state grantees and local school
district sub-grantees, the principles of this case apply equally to
any federal grantee, public or private.

   /10/ Similarly, the assurance under the Title I regulations
required that the State comply with the requirements in subpart C of
the regulations, which included the specific regulatory provision at
issue (45 C.F.R. 116.17(d) (1972)) -- and not future revisions to
those regulations.  See 45 C.F.R. 116.31(c) (1972).

   /11/ Other courts of appeals have consistently analyzed federal
grantees' compliance with the terms of their grant agreements by
reference to the standards in effect at the time the grants were made.
 See, e.g., Indiana v. Bell, 728 F.2d 938, 941 n.6 (7th Cir. 1984)
(Title I);  North Carolina Comm'n of Indian Affairs v. Dep't of Labor,
725 F.2d 238, 239 (4th Cir. 1984) (CETA);  Woods v. United States, 724
F.2d 1444, 1446 n.1 (9th Cir. 1984) (Food Stamps);  Kentucky v.
Secretary of Education, 717 F.2d 943, 945, 947 n.9 (6th Cir. 1983),
cert. granted, No. 83-1798 (Oct. 1, 1984) (Title I);  West Virginia v.
Secretary of Education, 667 F.2d 417, 420 (4th Cir. 1981) (Title I).

   /12/ Indeed, the House of Representatives passed a bill that would
have required the Secretary to apply the provisions of 20 U.S.C.
2732(a)(1) retroactively to any audit determinations of pre-1978
expenditures now pending.  H.R. 11, 98th Cong., 2d Sess. Section
808(a)(4) (1984);  see 130 Cong. Rec. H7903 (daily ed. July 26, 1984).
 The provision was deleted from the legislation in conference.  See
H.R. Rep. 98-1128, 98th Cong., 2d Sess. 53-54 (1984);  see 130 Cong.
Rec. H10756 (daily ed. Oct. 2, 1984).  Had the provision been enacted,
the effect would have been to relieve states of the obligation to
repay misspent funds.  It would not, of course, have had any bearing
on whether respondent or other states in fact complied with the
assurances they had given in prior years.

   /13/ This Court has held that statutes must be read in light of
their stated effectiveness date.  White v. United States, 191 U.S.
545, 553 (1903).  Cf. LTV Federal Credit Union v. UMIC Government
Securities, 704 F.2d 199, 202 (5th Cir. 1983) (absence of effective
date supports finding that legislative intent concerning retroactivity
is ambiguous).

   /14/ Similarly, prior law (20 U.S.C. (1970 ed.) 241b) had provided
that "(t)he Commissioner shall, in accordance with the provisions of
this subchapter, make payments to State educational agencies for the
period beginning July 1, 1965, and ending June 30, 1973." See also 20
U.S.C. (1976 ed.) 241b (intervening period).  There is obviously no
conflict between these provisions, and no basis for applying the
standards expressly enacted for 1978-83 to grants made during the
period 1965-73.

   /15/ Title I funds were available for a two-year period.  20 U.S.C.
(1976 ed.) 1225(b).

   /16/ The Comptroller General, whose tenure in office is largely
subject to congressional control (31 U.S.C. 703), is generally
considered an "arm of the Congress" in addition to being the federal
government's chief fiscal supervisor.  Among other responsibilities,
the Comptroller General "investigates all matters related to the
receipt, disbursement, and use of public money" and advises Congress
regarding such matters.  31 U.S.C. 712, 717, 719;  see generally
Bowsher v. Merck & co., 460 U.S. 824 (1983).  Specifically, the
Comptroller General is required to report to Congress regarding
"expenditures * * * an agency makes in violation of law." 31 U.S.C.
719(c)(1).  The Comptroller General is also consulted by Congress when
it is considering proposed legislation in areas within his expertise.
31 U.S.C. 719(i)(2).  Accordingly, Congress is likely to have drafted
legislation within the Comptroller General's purview in light of his
canons of construction.

   /17/ This effect was mitigated somewhat by the fact that a
comparatively more disadvantaged district would receive a
correspondingly higher per-pupil allotment of Title I funds.  See 20
U.S.C. (1976 ed.) 241c.  Because of its high poverty rates, the Newark
school district received substantial amounts of Title I funds during
the period audited.  In 1970-73, Newark received over $28,000,000 in
Title I funds -- over 18% of the State's allocation.  J.A.14.

   /18/ See, e.g., Senate Hearings, 94-95 (testimony that all major
state education organizations supported state-wide eligibility
determinations);  Part 12:  National Organization:  Hearings on H.R.
15 Before the Subcomm. on Elementary, Secondary, and Vocational
Education of the House Comm. on Education and Labor, 95th Cong., 1st
Sess. 394-395 (1977) (testimony of Ruth Mancuso, Vice President of the
National Ass'n of State Boards of Education);  Part 19:  Title I --
Funds Allocation:  Hearings on H.R. 15 Before the Subcomm. on
Elementary, Secondary, and Vocational Education of the House Comm. on
Education and Labor, 95th Cong., 1st Sess. 858-859 (1977) (testimony
of Caryl Kline, Secretary of the Pennsylvania Dep't of Education).

   /19/ The Senate Report characterized the 1978 reauthorization
legislation as a "complete rewrite" of Title I.  S. Rep. 95-856, 95th
Cong., 2d Sess 130 (1978).  Although one of the purposes of the
legislation was to "clarify and logically structure the present
requirements" (ibid.), it cannot be argued that the 1978 Act was
intended merely to restate or clarify prior law.  In some respects,
the 1978 Act added new or more stringent requirements.  See, e.g., 20
U.S.C. 2735 (parental involvement);  20 U.S.C. 2738 (complaint
resolution).  With reference to the change in school attendance area
eligibility standards, the legislative history does not suggest that
the 1978 provision was a mere clarification of prior law;  rather, an
independent purpose of the 1978 Act was to "insure systematic methods
for the distribution of Title I funds by local educational agencies
among project areas" (S. Rep. 95-856, supra, at 130).

   /20/ The court of appeals cited three passages from the House
hearings.  Pet. App. 4a n.2.  The first, Part 16:  Services and
Student Development:  Hearings on H.R. 15 Before the Subcomm. on
Elementary, Secondary, and Vocational Educational Education of the
House Comm. on Education and Labor, 95th Cong., 1st Sess. 194-197
(1977), was a tabular response to Rep. Quie's request for data on how
often school districts used the alternative provisions of the 1976
regulations (see page 6, supra).  No opinions were expressed.  The
second, Part 18:  Administration of Title I of ESEA:  Hearings on H.R.
15 Before the Subcomm. on Elementary, Secondary, and Vocational
Education of the House Comm. on Education and Labor, 95th Cong., 1st
Sess. 134-141 (1977), was testimony by the Superintendent of the
Baltimore Public Schools that the formula for distributing funds
should "remain essentially the same, * * * in accordance with
regulations comparable to those in use over the past several years"
(id. at 137, 141), but that an additional tier of funding should be
provided for major metropolitan areas.  The third, Part 19:  House
Hearings 857, was testimony, quoted in part in text at page 30, supra,
that although the prior school attendance area eligibility standards
"made sense in the early years of the Title I program," they now
"impede the program's effectiveness." Part 19:  House Hearings 859.
By no stretch of the imagination could these three brief passages in
the hearings be considered evidence that Congress thought the prior
standards were an "injustice" that should be changed retroactively.

   /21/ That respondent's liability here arose from its violation of a
regulation rather than the Title I statute itself does not affect the
applicability of the savings clause.  A liability incurred under a
valid regulation is, for all legal purposes, "incurred under" (1
U.S.C. 109) the statute;  the regulation, no less than the statute,
has "legislative effect." See Batterton v. Francis, 432 U.S. 416, 425
(1977).

   /22/ The terminology used in this area -- "retroactive" (or its
synonym, "retrospective") versus "prospective" application of law --
is not always used consistently.  The classic definition (and that
adopted for purposes of this brief) was stated by Justice Story in
Society for the Propagation of the Gospel in Foreign Parts v. Wheeler,
2 Gall. 105, 139 (C.C.D.N.H. 1814):

      (E)very statute, which takes away or impairs vested rights
      acquired under existing law, or creates a new obligation,
      imposes a new duty, or attaches a new disability in respect to
      transactions or considerations already past, must be deemed
      retrospective.

Accord, 2 C. Sands, Sutherland's Statutory Construction, Section
41.01, at 245-246 (4th ed. 1973).  This understanding holds whether
the change in law occurs during the pendency of litigation on the
issue (e.g., Greene v. United States, 376 U.S. 149 (1964);  United
States v. Schooner Peggy, 5 U.S. (1 Cranch) 103 (1801)), or whether
the change in law precedes any litigation in the matter (e.g., United
States v. Security Industrial Bank, 459 U.S. 70, 79 (1982);  Union
Pac. R.R. v. Laramie Stock Yeards Co., 231 U.S. 190 (1913)).  The
question is simply whether a new statute is intended to affect the
treatment of conduct or transactions completed under prior law.

   This question should be differentiated from the related question
(frequently faced by this Court) whether a judicial decision that
"changes" the law (by reinterpreting it or holding a statute
unconstitutional) should be applied "retroactively." See, e.g.,
Chevron Oil Co. v. Huson, 404 U.S. 97 (1971);  Linkletter v. Walker,
381 U.S. 618 (1965);  Chicot County Drainage Dist. v. Baxter State
Bank, 308 U.S. 371 (1940).  Traditionally, changes in statutory law
were viewed as prospective, and changes in decisional law as
retrospective.  United States v. Security Industrial Bank, 459 U.S. at
79.  Even now, when significant exceptions have been recognized to
both general priniciples, the relevant considerations in the two
classes of cases remain distinct.

   /23/ Many other decisions of this Court, both before and after
Bradley, state the principle similarly.  See, e.g., United States v.
Security Industrial Bank, 459 U.S. 70, 79 (1982) ("(t)he principle
that statutes operate only prospectively, while judicial decisions
operate retrospectively, is familiar to every law student");  United
States v. Magnolia Petroleum Co., 276 U.S. 160, 162-163 (1928) ("(s)
tatutes are not to be given retroactive effect or construed to change
the status of claims fixed in accordance with earlier provisions
unless the legislative purpose so to do plainly appears" (citing
cases));  United States v. St. Louis, S.F. & T. Ry., 270 U.S. 1, 3
(1926) ("(t)  hat a statute shall not be given retroactive effect
unless such construction is required by explicit language or by
necessary implication is a rule of general application");  Cameron v.
United States, 231 U.S. 710, 720 (1914) ("(i)n the absence of a
clearly expressed legislative intent to the contrary the court will
presume that the law-making power is acting for the future and does
not intend to impair obligations incurred or rights relied upon in the
past conduct of men when other legislation was in force");  United
States Fidelity & Guaranty Co. v. United States ex rel. Struthers
Wells Co., 209 U.S. 306, 314 (1908) ("(t)he presumption is very strong
that a statute was not meant to act retrospectively, and it ought
never to receive such a construction if it is susceptible of any
other");  see Smead, The Rule Against Retroactive Legislation:  A
Basic Principle of Jurisprudence, 20 Minn. L. Rev. 775 (1936).

   /24/ In Bradley itself, the Court concluded that, while the
legislative history was to some extent "supportive of either
position," it provided "at least implicit support for the application
of the statute to pending cases." 416 U.S. at 716.

   /25/ There is no doubt that the rule of construction against
retroactivity in these circumstances protects the United States, no
less than any other litigant.  See United States v. Magnolia Petroleum
Co., supra.  Indeed, the general savings statute, 1 U.S.C. 109,
expressly preserves liabilities incurred under former statutes.  See
pages 32-33, supra.

   /26/ The Comptroller General's position that authorization and
appropriations legislation must ordinarily be applied prospectively
(see page 26 & note 16, supra), is a valid generic application of this
principle.  On grounds both of congressional intent and of principles
of federal grant law (see pages 25-26, supra), the rights and
obligations of the federal government and its grantees mature and
become fixed (absent explicit congressional action) at the time of the
grants.

   /27/ The contrast to Bradley is striking.  The change of law at
issue in Bradley (passage of an attorneys fees statute) affected "no
change in the substantive obligation of the parties" (416 U.S. at
721);  it merely redistributed part of the cost of obtaining a remedy.
 Even as to that, the statute served "merely * * * to create an
additional basis or source for the (defendant's) potential obligation
to pay attorneys' fees.  It (did) not impose an additional or
unforeseeable obligation upon the defendant" (ibid.).

   /28/ Hutto v. Finney, 437 U.S. 678, 694-695 (1978);  Bradley v.
Richmond School Board, supra.

   /29/ Thorpe v. Housing Authority, 393 U.S. 268, 281-283 (1969);
cf. Ziffrin, Inc. v. United States, 318 U.S. 73 (1943) (ICC permit
application requirements).

   /30/ Cort v. Ash, 422 U.S. 66, 74-77 (1975);  cf. United States v.
Alabama, 362 U.S. 602 (1960) (statute authorizing action against a
state).

   /31/ United States v. Security Industrial Bank, 459 U.S. at 79-81.

   /32/ Greene v. United States, supra.

   /33/ The celebrated case of United States v. Schooner Peggy, 5 U.S.
(1 Cranch) 103 (1801), falls into this latter category of cases in
which substantive rights under prior law would be impaired by
retroactive application of a change in law (there, a treaty with
France).  Thus, Chief Justice Marshall stated that a court "will and
ought to struggle hard against a construction which will, by a
retrospective operation, affect the rights of parties." Id. at 110.
There, however, the intervening change in law applied unmistakably to
pending cases;  especially in light of the great national concerns
implicated by the treaty, the Court felt constrained to interpret the
treaty not in accordance with the usual presumption against
retroactivity, but according to "its manifest import." Ibid.

   /34/ It is something of a mystery why the court of appeals chose to
apply the 1978 standards.  By the time this case was briefed before
the court of appeals on remand from this Court, the 1978 Act had been
superseded by the Education Consolidation and Improvement Act of 1981,
20 U.S.C. 3801 et seq., which, as discussed at pages 7-8, supra, again
altered the standards.  And by the time the case was decided by the
court of appeals, the standard had again been amended.  Pub. L. No.
98-211, Section 2(b), 97 Stat. 1412-1413.  See page 8, supra.  One of
the vices of the court of appeals' holding is that the substantive
standards to be applied to a supposedly retrospective audit come to
depend on mere fortuity.

   /35/ Tcherepnin v. Knight, 389 U.S. 332 (1967), upon which the
court of appeals relied (Pet. App. 4a-5a), did not relate to the
question of retroactivity.  The Securities Exchange Act, at issue
there, was "remedial" in the sense that it provided a new substantive
remedy for previously inadequately protected interests;  the Court
simply noted that it should be interpreted to effectuate that remedial
purpose.  The Court certainly did not suggest that, because the Act
was remedial in that sense, it should apply to conduct occurring
before it was passed.

   /36/ The Comptroller General has designated the grantee's "coverage
of services" as one of the most important items for an auditor to
examine with respect to conformity to legal and regulatory
requirements, noting that "(i)f funds are used to provide services to
ineligible recipients * * *, the total amount of the award may have to
be returned to the grantor agency." Guidelines for Financial and
Compliance Audits of Federally Assisted Programs, 45 Fed. Reg. 21837,
21844 (1980).  The Comptroller General is entrusted by statute with
the responsibility for establishing principles for federal audits.  31
U.S.C. 3511.

   /37/ This case is a prime example.  The court of appeals directed
the Secretary to determine whether respondent satisfied the
requirements of the 1978 Act for each disputed attendance area, but
there is no assurance that the records necessary to make that
determination for 1970-72 are still available, or indeed were ever
collected.  Under regulations in effect at the time, Title I
expenditure records were not required to be maintained beyond five
years unless they were involved in an audit;  there was no requirement
that a state even compile expenditure records of the kind necessary
for a determination of compliance with the new standard (20 U.S.C.
2732(a)(1)).  45 C.F.R. 116.54 (1972).  Accord, 34 C.F.R. 200.56
(Chapter 1 recordkeeping requirement).

   /38/ This grantback authority has been exercised by the Secretary
on numerous occasions.  See, e.g., 49 Fed. Reg. 34886-34887 (1984)
(Rhode Island);  49 Fed. Reg. 13899-13900 (1984) (West Virginia);  49
Fed. Reg. 8474-8476 (1984) (South Carolina);  47 Fed. Reg. 20343-20345
(1982) (Wisconsin);  47 Fed. Reg. 23002-23003 (1982) (District of
Columbia).