This is the accessible text file for GAO report number GAO-03-642T 
entitled 'Corporation for National and Community Service: Preliminary 
Observations on the National Service Trust and AmeriCorps' which was 
released on April 10, 2003.



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Statement for the Record for the Subcommittee on Veteran’s Affairs, 

Housing and Urban Development, and Independent Agencies, Committee on 

Appropriations, U.S. Senate:



United States General Accounting Office:



GAO:



For Release on Delivery Expected at 10:00 a.m. EDT:



Thursday, April 10, 2003:



Corporation for National and Community Service:



Preliminary Observations on the National Service Trust And AmeriCorps:



Statement for the Record by Cornelia M. Ashby, Director, Education, 

Workforce and Income Security Issues, and Susan A. Poling, Associate 

General Counsel:



GAO-03-642T:



GAO Highlights:



Highlights of GAO-03-642T, statement for the record for the Chairman, 

Subcommittee on VA, HUD, and Independent Agencies, Committee on 

Appropriations, U.S. Senate 







Why GAO Did This Study:



In November 2002, the Corporation for National and Community Service 

suspended enrollments in the AmeriCorps program due to concern that the 

National Service Trust may not contain enough funds to meet the 

education award obligations resulting from AmeriCorps enrollments.  

This testimony reflects GAO’s preliminary review of the factors that 

contributed to the need to suspend enrollments and GAO’s preliminary 

assessment of the Corporation’s proposed changes



What GAO Found:



As shown in the figure below, the number of participants enrolled in 

AmeriCorps increased by about 20,000 from program year 1998 to program 

year 2001.  However, the number of AmeriCorps participants was not 

reconciled with the number of education awards that the National 

Service Trust could support.  



GAO identified several factors that led the Corporation to suspend 

enrollments.  The factors included inappropriate obligation practices, 

little or no communication among key Corporation executives, too much 

flexibility given to grantees regarding enrollments, and unreliable 

data on the number of AmeriCorps participants. 



The Corporation has established new policies that may improve the 

overall management of the National Service Trust if the policies are 

fully implemented. However, the Corporation has not made policy changes 

to correct a key factor—how it obligates funds for education awards.



www.gao.gov/cgi-bin/getrpt?GAO-03-642T.



To view the full report, including the scope

and methodology, click on the link above.

For more information, contact Cornelia M. Ashby at (202) 512-8403 

(ashbyc@gao.gov) or Susan A. Poling at 202-512-2667 (



[End of section]



Mr. Chairman and Members of the Subcommittee:



We are pleased to have the opportunity to comment on the preliminary 

findings from our ongoing study of the Corporation for National and 

Community Service’s (the Corporation) management and oversight of the 

National Service Trust (the Trust). The National Service Trust is a 

dedicated fund within the Corporation that is to maintain sufficient 

funds to pay national service educational awards to participants in the 

Corporation’s AmeriCorps program. In November 2002, AmeriCorps 

suspended enrollment of program participants. This statement will 

identify some of the factors that contributed to this suspension and 

related policy changes the Corporation has made since then.



These comments are primarily based on our preliminary analysis of 

documents and information obtained through interviews with Corporation 

staff. In addition, this statement reflects the April 9, 2003, opinion 

we provided the Committee concluding that the Corporation incurs an 

obligation for education benefits when it enters into a grant agreement 

for the approved number of new participants and therefore it must 

record the obligation against the budget authority available in the 

Trust. See appendix I for the opinion. In summary, the factors we 

identified, to date, that led the Corporation to suspend enrollments 

include inappropriate practices for obligating funds, little or no 

communication among key Corporation executives, and too much 

flexibility given to grantees--they were allowed to adjust authorized 

positions and were not required to provide timely information about the 

number of participants. While the Corporation has established new 

policies that may improve the overall management of AmeriCorps if the 

policies are fully implemented, the Corporation has not made policy 

changes to correct a key factor--how it obligates funds.



Background:



The Corporation for National and Community Service was created to help 

meet community needs in education, the environment, and public safety 

and to expand educational opportunity by rewarding individuals who 

participate in national service[Footnote 1]. The Corporation is part of 

USA Freedom Corps, a White House initiative to foster a culture of 

citizenship, service, and responsibility and help all Americans answer 

the President’s call to service. The Corporation receives 

appropriations to fund program operations and the National Service 

Trust. The Corporation makes grants from its program appropriations to 

help grant recipients carry out national service programs.



AmeriCorps is one of three national service programs the Corporation 

oversees.[Footnote 2] Most of the grant funding from the Corporation 

for AmeriCorps programs goes to state service commissions, which award 

subgrants to nonprofit groups and agencies that enroll the AmeriCorps’ 

participants. Participants in the AmeriCorps program can receive a 

stipend as well as health benefits and childcare coverage. For example, 

about one-half of AmeriCorps’ participants received an annual living 

allowance of $9,300 and health benefits. Those participants who 

successfully complete a required term of service earn an education 

award that can be used to pay for undergraduate school, or graduate 

school, or to pay back qualified student loans. In exchange for a term 

of service, full-time AmeriCorps participants earned an education award 

of $4,725 in program year 2002. Participants have up to 7 years from 

the date of completion of service to use the education award. 

AmeriCorps also enrolls participants on a part-time basis and as 

“education awards only” participants. Part-time participants who serve 

900 or fewer hours annually earn education awards proportional to those 

earned by full-time participants. Under the “education awards only” 

program, AmeriCorps does not pay the participant a living allowance or 

other benefits, but provides grant funding for administrative purposes 

only, about $400 per full-time participant annually. However, each 

participant receives an education award equivalent to that earned by a 

paid AmeriCorps participant. The number of AmeriCorps participants 

increased by nearly 20,000 from 1998 to 2001. The program year 2002 

data indicate the number of positions awarded will decrease by about 

8,000. (See figure 1.):



Figure 1: Figure 1. AmeriCorps Participants from 1998 to 2002:



[See PDF for image]



Note: Participants shown are for AmeriCorps*State and National programs 

only. Participants for AmeriCorps*National Civilian Community Corps and 

its VISTA programs are not included. Data for program years 1998 

through 2001 represents actual participants. Program year 2002 data 

represent awarded positions. Program year varies by grantee.



[End of figure]:



In November 2002, the Corporation suspended enrollments in AmeriCorps 

because total enrollments were potentially higher than the Corporation 

had expected. No new funds had been requested by and appropriated to 

the Trust for fiscal year 2002, and under the continuing resolution at 

the start of fiscal year 2003, no new funds would be deposited into the 

Trust until the Corporation’s fiscal year 2003 appropriations were 

enacted. The Corporation concluded that if its grantees and subgrantees 

were to fully enroll new participants up to the maximum number of 

enrollments the Corporation had approved in its grants, the Trust would 

not have a sufficient amount to provide the educational awards to those 

participants. Enrollments in AmeriCorps were frozen from November 2002 

through March 2003.



Three Factors Contributed to the Need to Suspend AmeriCorps 

Enrollments:



Three factors contributed to the Corporation’s need to suspend 

enrollments in AmeriCorps. Although the Corporation specified the 

maximum number of new participants in the grants it awarded, the 

Corporation did not recognize its obligation to fund participant 

education awards until it actually paid the benefits. Had the 

Corporation properly tracked and recorded its obligations in the Trust 

at the time of grant award when it approved new enrollments, it likely 

would not have needed to suspend enrollments. In addition, there was 

little, if any, communication among the AmeriCorps program office, the 

grants management office, and the Trust about the number of positions 

that the Trust could support. Furthermore, by allowing grantees various 

flexibilities and not requiring them to provide timely enrollment 

information, the Corporation and AmeriCorps managers could not be 

certain about the number of participants.



Inappropriate Obligation Practices:



The Corporation did not appropriately record or track its obligations 

for education awards to program participants. Generally, an agency 

incurs an obligation for the amount of the grant award with the 

execution of a grant agreement. The Corporation enters into grant 

agreements with state service commissions in which it specifies the 

budget and project period of the award, the total number of positions 

approved, the total amount awarded for program costs for the approved 

positions, and the terms of acceptance. The award for the program costs 

is used to pay participants’ stipends and health and child care 

coverage. The Corporation incurs an obligation for these program costs 

at the time of grant award.[Footnote 3] While the costs of education 

awards for the new participants are not specified in the grants, in the 

grant agreements the Corporation commits to funding education awards 

for all of the qualified positions initially approved in a grant if the 

subgrantee enrolls all of the participants before the Corporation 

modifies the terms or conditions of the grant. In other words, upon 

award of the grant, the Corporation, at a minimum, has accepted “[a] 

legal duty … which could mature into a legal liability by virtue of 

actions on the part of the other party beyond the control of the United 

States.” However, the Corporation has concluded that it is not 

necessary to obligate funds until an individual actually enrolls in 

AmeriCorps. Therefore, the Corporation recorded education award 

obligations on an outlay basis. That is, obligations were recorded at 

the time of the quarterly drawdown of amounts for education awards from 

the Trust.



By failing to recognize and record its obligations at the time of grant 

award, the Corporation had no assurance that the number of positions 

approved in grant awards did not exceed the amount of educational 

awards the Trust could support. Proper recording of obligations serves 

to protect the government by ensuring that it has adequate budget 

authority to cover all of its commitments and prevent agencies from 

over-obligating its budget authority.



Lack of Communication:



Corporation executives we interviewed said that there was little if any 

coordination between the AmeriCorps program office and officials 

responsible for the management of the Trust about the number of 

positions that the Trust could support. The AmeriCorps director said 

that she considered the grant budget independent from the Trust and she 

neither consulted with nor received direction from the Trust director 

when making decisions about the grants. In addition, in recent years, 

AmeriCorps has tried to increase the number of participants by 

enrolling them in the “education awards only” program. Under this 

program, which was an effort to lower the per participant program cost, 

AmeriCorps provides funding to grantees for administrative purposes 

only, currently about $400 per full-time participant annually. 

Increasing the number of participants in this way is at a low cost to 

the AmeriCorps program appropriation, but at full cost to the Trust, 

which funds the education awards, because each participant receives an 

education award equivalent to that earned by a paid AmeriCorps 

participant. Consequently, the number of positions funded by AmeriCorps 

grants was not reconciled with the number supportable by the Trust. 

According to Corporation officials we spoke with, the Trust’s funding 

needs were based on an expected enrollment of 50,000, while the 

AmeriCorps program office approved grants for about 75,000 

participants.



Corporation officials also said that prior to suspending enrollments in 

AmeriCorps, the Trust was so well funded it did not warrant their 

attention. They told us that early in the AmeriCorps program, a goal of 

50,000 participants annually was used for Trust budgeting purposes. 

However, it was found that fewer than that number of participants 

enrolled, and not all of those who participated earned education 

awards. Additionally, a Corporation budget official said that in the 

past those who earned education awards were not using them as quickly 

as expected. Even as the number of AmeriCorps participants grew, the 

Trust’s accounting records showed an unobligated balance that was high 

enough for Congress to rescind $111 million over fiscal years 2000 and 

2001, resulting in the deobligation of the Trust by this amount. Given 

this history, Corporation managers did not see the need to reconcile 

the number of positions created by grant funding with the number the 

Trust could support. The Trust balance was not viewed as a constraining 

factor. Because the number of positions approved in the grants was not 

reconciled with the Trust before grants were awarded, there was the 

potential for grantees to enroll more participants than the Trust could 

support.



Grantees Allowed to Adjust Authorized Positions and Not Required to 

Provide Timely Participant Information:



Two program management policies affected the number and type of 

participants and, therefore, the use of Trust funds. One policy 

permitted grantees to over enroll participants under certain 

circumstances with approval from their AmeriCorps program officer. 

Specifically, the policy allowed grantees to over enroll up to 20 

percent. The program year 2002-03 data indicate that while only a few 

of the grantees increased their enrollment, some increased theirs by 

more than 20 percent. Another policy allowed grantees to convert 

positions from full-time to part-time as long as the total number of 

full-time equivalents supported by the grant did not change. While this 

practice did not affect the program funds, it did affect the Trust. 

After the enrollments were suspended, Corporation officials determined 

that part-time participants used their education awards at a higher 

rate than full-time participants and therefore the number of part-time 

participants resulted in a relatively higher level of use for the 

education award.



The Corporation did not have reliable data on the number of AmeriCorps 

participants during the period leading up to the suspension. 

Enrollments are recorded by grantees through the Corporation’s Web-

Based Reporting System (WBRS). While the enrollment information in WBRS 

was uploaded into the Corporation’s database and used to track 

education award obligations on a weekly basis, Corporation officials 

said that discrepancies existed between the number of participants 

enrolled and the number the Corporation was aware of, because of the 

length of time between when a participant started to serve and when the 

grantee entered information into WBRS. A Corporation official said that 

it was not unheard of for some grantees to be 60 to 90 days late in 

entering an enrollment into WBRS.



By allowing grantees the flexibility to change the number and type of 

participants coupled with delays in receiving information on 

enrollments, the Corporation and AmeriCorps managers could not be 

certain about the number of participants. Corporation officials said 

that this resulting lack of confidence in the data was a contributing 

factor to the decision to suspend enrollments.



New Policies Established, but Additional Changes May be Needed:



In response to concerns that the AmeriCorps program may have enrolled 

participants without adequately providing for their education awards, 

the Corporation has developed several new policies. While the 

Corporation is modifying its practice of when it records obligations, 

the Corporation overlooks the legal duty it incurs at the time of grant 

award. Other policy changes are directed to improving communication 

among key executives, limiting grantees’ flexibilities and requiring 

more timely information on participants. While these policies were only 

recently introduced, they could, if implemented, help the Corporation 

keep track of the day-to-day aspects of the AmeriCorps program and 

provide information needed to monitor the use of the Trust in order to 

determine whether the Corporation should make adjustments, such as 

deobligating excess funds. However, data integration problems between 

WBRS and the program the Corporation uses to track the education awards 

earned by AmeriCorps participants may hamper the effectiveness of the 

new procedures.



New Policies for Obligating Funds:



The Corporation is in the process of modifying its practices regarding 

when it will record obligations. The Corporation’s General Counsel 

explained that the Corporation will record obligations at the time of 

enrollment, instead of on a quarterly drawdown basis and that the 

obligations will be based on estimates of what these enrolled members 

will draw down in the future. The Corporation is of the opinion that it 

does not incur an obligation for an education award until the time of 

enrollment because it may modify the terms and conditions of a grant, 

including a reduction in the number of new participants the grantee may 

enroll, prior to the enrollment of all positions initially approved in 

a grant, to prevent a shortfall in the Trust. The General Counsel also 

said “…a binding agreement between the Government and an AmeriCorps 

member [participant] exists only upon the member’s [participant’s] 

authorized enrollment in the Trust.”:



While it may be true that the Corporation has no binding agreement with 

a participant until the participant enrolls in AmeriCorps, this is not 

the controlling consideration for fund control purposes. In our 

opinion, this view overlooks the legal duty the Corporation incurs at 

the time of grant award when it commits to funding a specified number 

of participants and the constraint imposed on the Corporation by the 

National and Community Service Act. Specifically, the act says “…[t]he 

Corporation may not approve positions as national service positions…for 

a fiscal year in excess of the number of positions for which the 

Corporation has sufficient available funds in the National Service 

Trust for that fiscal year…”. The Corporation, by its own admission, 

may modify the number of approved participants only if it amends the 

grant agreement to reduce the number of enrolled positions prior to 

enrollment. When a grant is awarded, the number of new participants 

approved in the grant establishes a legal duty that can mature into a 

legal liability for education awards by virtue of actions of the 

grantee, unless the Corporation modifies the grant prior to participant 

enrollment. While the Corporation may unilaterally reduce the number of 

authorized positions awarded to a grantee prior to participant 

enrollment, from the time of grant award until the Corporation acts to 

reduce the approved number of positions, the grantee and its 

subgrantee, not the Corporation, will control the number of 

participants who may enroll, up to the maximum number of participants 

the Corporation has approved in the grant agreement.



It is also significant to note that the grantee and subgrantee, by 

their actions in enrolling participants, not the Corporation, control 

the amount, ultimately, of the Corporation’s liability. If the amount 

of liability to the government is under the control of the grantee, not 

the Corporation, the government should obligate funds to cover the 

maximum amount of the liability. As more information is known, the 

Corporation should adjust the obligation--deobligate funds or increase 

the obligation level--as needed.



The Corporation also said that at the time a member enrolls it would 

record its “…best estimate of the Government’s ultimate liability of 

education awards provided to members [participants] enrolled in the 

National Service Trust.” According to the Corporation’s General 

Counsel, the Corporation’s estimates of the amount that enrolled 

members [participants] will draw down is based on historical 

information, such as attrition rate and actual usage by participants 

who complete a term of service and earn an education award. It appears 

to us that the Corporation is confusing its accounting liability--

projections booked in its accounting systems for financial statement 

purposes, with its legal liability--amounts to be recorded in its 

obligational accounting systems and tracked in order to ensure 

compliance with fiscal laws. One of the federal financial accounting 

standards states that a liability for proprietary accounting purposes 

is a probable and measurable future outflow or other sacrifice of 

resources as a result of past transactions or events. Traditionally, 

projections of accounting liability consider the same factors, such as 

historical trends, that are considered in the Corporation’s model. To 

track its obligations, the Corporation should be recording its 

unmatured legal liability for the education awards, which is the total 

cost associated with the enrollment of all approved positions. The 

Corporation’s obligation should be recorded as it is incurred and 

should be calculated by multiplying the number of approved positions in 

a grant by the total cost of a national service educational award.



More Communication Planned among Key Corporation Managers:



Policy changes at Corporation headquarters are designed to improve 

communication between several key offices and officials. A major change 

is that the Trust balance is to be a limiting factor on grant awards 

and, therefore, enrollment levels. In addition, beginning with the 2003 

grant cycle[Footnote 4], one new policy calls for the AmeriCorps 

director to work with the grants director, the Chief Financial Officer 

(CFO), and the Trust director to compare projections of positions to be 

approved in grants with those supported by actual appropriations, and 

the Chief Executive Officer (CEO) will only approve the number of 

positions the Trust can support. Additionally, the CEO will approve all 

AmeriCorps grants after consultation with the CFO on the number of 

education awards that can be supported by the Trust. Also, the policy 

states that the CEO, CFO, the Trust director, and the AmeriCorps 

director will meet at least monthly to review and reconcile enrollment 

data and Trust data. Through bi-weekly reports, the AmeriCorps director 

and the Trust director are to keep the CEO and CFO informed of the 

number of approved and filled positions. The Trust director is to 

monitor factors relevant to forecasting Trust liabilities and report 

regularly to the CFO, highlighting deviations from assumptions in the 

model. Each month the CFO is to use actual enrollment data to re-

evaluate the model for forecasting Trust liabilities. If the revision 

results in a need to change enrollment targets, the CFO will notify the 

CEO and AmeriCorps director immediately. The CEO will take appropriate 

action and report any such action to Congress, the Corporation’s Board, 

and the Office of Management and Budget.



Regular meetings and attention to the enrollment data should help the 

Corporation keep track of the day-to-day aspects of the AmeriCorps 

program. Such updated information is an important step in monitoring 

the use of the Trust in order to determine whether the Corporation 

should make adjustments. For example, if the Corporation obligated the 

full cost for each of the positions approved at the time of grant 

award, and later determined that many of the positions will not be 

filled, it could reduce the number of approved positions and deobligate 

some of the funds. The policy changes and new procedures were announced 

in January. We will continue to monitor the implementation of these 

policy changes.



Grantees No Longer Permitted to Change Authorized Positions:



The Corporation has changed policies regarding its grantees ability to 

over enroll participants, replace participants who leave with new 

enrollees and change positions from full-time to part-time. In a 

January 22, 2003, memorandum, the director of AmeriCorps cancelled the 

policy that allowed grantees to over enroll members by up to 20 percent 

over the ceiling established in the grant award in order to take 

account of attrition. Furthermore, an official said AmeriCorps now 

considers a position to be filled for the term of the grant once the 

grantee enrolls a participant, even if the participant later drops out 

of the program, whether or not an education award was earned. The 

official said that in the past, grantees could enroll a new member to 

serve out the balance of the term if grant funds were available. A 

Corporation official also said that there is a new policy that 

restricts grantees from converting full-time positions to part-time 

positions. Grantees must now request and receive approval from the 

Corporation before such changes can be made.



Since grantees will not be permitted to modify the number and type of 

authorized positions, the Corporation’s ability to manage the 

AmeriCorps program should improve. Most 2003 grant positions have not 

yet been awarded; therefore, it is too early to tell whether these new 

policies will be effective. We will monitor these policies and assess 

the extent to which they have been implemented as we complete our work.



Grantees Will Be Required to Report Participant Information within 30 

days, but Data Reconciliation Problems May Need To Be Addressed:



In January 2003 the Corporation informed all grantees that AmeriCorps 

will require timely reporting of participant information to ensure that 

the Trust database receives current information on the number of 

participants eligible for an education award. Grantees will be required 

to keep AmeriCorps informed of the number of participants offered 

positions and the number who accept and enroll and to document 

enrollment through WBRS no later than 30 days after participants start 

working. The memorandum warns grantees that failure to comply with this 

requirement could result in reductions in the number of positions or 

termination of the grant. Additionally, the memorandum directs state 

commissions and other AmeriCorps grantees--the organizations 

responsible for the oversight of subgrantees--to implement procedures 

to ensure that timely notification of participant commitments and 

enrollments is part of their review and oversight functions.



Furthermore, the Corporation has made changes to WBRS, which is used to 

track participant, grant, and budget information. First, controls have 

been put in place to limit the number of positions listed in WBRS to no 

more than the number of approved positions. The Corporation’s Biweekly 

Trust Enrollment Summary, as of March 2003, shows that award totals are 

being tracked and compared with the data estimates in the Trust. 

However, officials told us that there are some data reconciliation 

problems between WBRS and the program used by the Corporation to track 

the education awards earned by AmeriCorps participants. Corporation 

staff have had to make manual adjustments to reconcile the data.



Accurate and timely information about enrollments should help the 

Corporation and AmeriCorps manage the program. As grants are awarded, 

we will be able to assess whether the policies have been fully 

implemented.



Conclusion:



The Corporation’s new policies, if fully implemented, should help the 

Corporation manage the AmeriCorps program by providing better 

information on day-to-day operations. However, without obligating the 

full amount associated with all of the positions authorized in the 

grants, the Corporation remains at risk of having the actual number of 

enrollments exceed the estimated number the Trust can support. We will 

monitor the implementation of the Corporation’s new policies as we 

continue our review.



GAO Contact and Acknowledgments:



For further information regarding this statement, please call Cornelia 

M. Ashby at (202) 512-8403 or Susan A. Poling at 202-512-5644. 

Individuals making key contributions to this testimony included Carolyn 

M. Taylor, Tom Armstrong, Anthony DeFrank, Joel Marus, and Hannah 

Laufe.



[End of section]



Appendix I: Obligational Practices of the Corporation for National and 

Community Service:



GAO:

Accountability * Integrity * Reliability:



United States General Accounting Office Washington, DC 20548:



B-300480:



April 9, 2003:



The Honorable Christopher Bond 

Chairman:



The Honorable Barbara Mikulski 

Ranking Minority Member 

Subcommittee on 

VA, HUD, and Independent Agencies Committee on Appropriations:



United States Senate:



Subject: Obligational Practices of the Corporation for National and 

Community Service:





This responds to your letter dated February 25, 2003. You requested 

that we determine whether the Corporation for National and Community 

Service (Corporation) incurs a legal liability for the award of 

national service educational benefits of AmeriCorps participants at the 

time it enters into a grant agreement authorizing a grantee to enroll a 

certain number of AmeriCorps participants, or at the time a participant 

enrolls in the AmeriCorps program. Subsequent to your letter, your 

staff explained to us that your question arises in the context of your 

efforts to ensure that the Corporation is properly recording 

obligations of the Corporation for National and Community Service 

National Service Trust (Trust).



As we explain in further detail below, the Corporation incurs an 

obligation for education benefits when it enters into a grant 

agreement. At the time of grant award, the Corporation approves the 

grantee’s enrollment of a specified number of new participants in the 

AmeriCorps program. By this action, the Corporation incurs a legal duty 

that once fully matured, by action of the grantee and participants 

outside the Corporation’s control, will require the Corporation to pay 

education benefits to qualified participants from the National Service 

Trust. As the Corporation incurs an obligation for the education 

benefits, it must record the obligation against the budget authority 

available in the Trust.



You also requested that we review the Corporation’s request for a 

deficiency appropriation for the Trust. We will provide a subsequent 

response addressing this request.



BACKGROUND:



The Corporation for National and Community Service was created to help 

community needs in education, the environment, and public safety, to 

expand educational opportunity by rewarding individuals who participate 

in national service, and to encourage citizens to engage in national 

service. National and Community Service Trust Act of 1993, Pub. L. No. 

103-82, 107 Stat. 785, 42 U.S.C. § 12501. One of the three national 

service programs the Corporation oversees is AmeriCorps. Participants 

in the AmeriCorps program who successfully complete a required term of 

service earn a national service educational award of up to $4,725 that 

can be used to pay for college, graduate school, an approved school-to-

work program, or qualified student loans. 42 U.S.C. § 12604(a); 45 

C.F.R. § 2527.10. Participants who earn the award have up to 7 years in 

which to use it. 42 U.S.C. § 12602(d)(1). While the Corporation pays 

the education benefits directly from the Trust, 42 U.S.C. § 12601(c), 

the Corporation also is authorized to make grants for the purpose of 

assisting grant recipients in carrying out national service programs. 

42 U.S.C. § 12571(a). The Corporation provides grant funds for program 

costs, including a stipend, and health and child care coverage. In its 

grants, the Corporation also approves enrollment of a specified number 

of new participants. See, e.g., AmeriCorps Grant Award to City Year, 

Inc., Aug. 3, 2000.[Note 1] Most of the grant funding from the 
Corporation for 

AmeriCorps programs goes to governor-appointed state service 

commissions, which award subgrants to nonprofit groups, who then enroll 

the AmeriCorps participants. Corporation for National and Community 

Service website, http://www.national service.org.



The AmeriCorps program is funded through the Departments of Veterans 

Affairs, Housing and Urban Development, and Independent Agencies 

Appropriations Act (VA-HUD Appropriations Act). Congress appropriates 

amounts in the VA-HUD Appropriations Act on a no-year basis to the 

National Service Trust. See e.g., VA-HUD Appropriations Act, 2001, Pub. 

L. No. 106-377, 114 Stat. 1441 (“not more than $70,000,000, to remain 

available without fiscal year limitation, shall be transferred to the 

National Service Trust account for educational awards authorized under 

subtitle D of title I of the Act”). The National Service Trust is a 

dedicated fund within the Corporation used to pay national service 

educational awards to eligible participants. 42 U.S.C. § 12601(c) 

(“[a]mounts in the Trust shall be available, to the extent provided for 

in advance by appropriation, for payments of national service 

educational awards in accordance with section 12604 of this title”). 

The amount deposited into the Trust is to be equal to the product of 

the value of a national service educational award and the total number 

of approved national service positions. 41 U.S.C. § 12571(c). Of 

significance is a provision that prohibits the Corporation from 

approving positions for a fiscal year unless sufficient funds are 

available in the National Service Trust. It states that “[t]he 

Corporation may not approve positions as approved national service

positions ... for a fiscal year in excess of the number of positions 

for which the Corporation has sufficient available funds in the 

National Service Trust for that fiscal year....” 42 U.S.C. § 12581(f).



Your question arises in the context of the Corporation’s decision to 

suspend participant enrollment in the fall of 2002 because the 

Corporation feared that the Trust would not have sufficient funds to 

cover education awards for all approved enrollees. For fiscal year 

2002, the President did not request and the Congress did not 

appropriate funds for the Trust, based apparently on the 

Administration’s determination that sufficient funds were available to 

support fiscal year 2002 education benefit outlays. Letter from Phillip 

J. Perry, General Counsel, Office of Management and Budget, to Susan A. 

Poling, Associate General Counsel, General Accounting Office (GAO), 

Mar. 31, 2003. According to the Corporation’s General Counsel, in the 

fall of 2002, internal controls alerted the Corporation to the fact 

that grantees were enrolling members at an unexpectedly high rate, and 

the Corporation determined that “in all likelihood the obligations 

associated with those approved positions would exceed budgetary 

resources in the National Service Trust.” Letter from Frank R. Trinity, 

General Counsel, Corporation for National and Community Service, to 

Susan A. Poling, Associate General Counsel, GAO, Mar. 21, 2003. In 

response, the Corporation amended all AmeriCorps grants to suspend 

enrollments as of November 15, 2002, and did not permit any additional 

enrollments until Congress appropriated additional funds to the Trust. 

Id. Notwithstanding these actions, according to the audit of the 

Corporation’s fiscal year 2002 financial statements, in fiscal year 

2002, the Corporation had approved AmeriCorps national service 

positions in excess of the number of positions that the Trust could 

support and thus violated 42 U.S.C. § 12581(f). Audit of the 

Corporation for National and Community Service’s Fiscal Year 2002 

Financial Statements, Audit Report 03-01 at 24, KPMG, Feb. 4, 2003.



ANALYSIS:



The issues presented are (1) when does the Corporation incur an 

obligation for education benefits, and (2) in what amount does the 

Corporation incur an obligation for these benefits. Understanding the 

concept of an obligation and properly recording obligations are 

important because an obligation serves as the basis for the scheme of 

funds control that Congress envisioned when it enacted such fiscal laws 

as the Antideficiency Act. 31 U.S.C. § 1341(a); B-237135, Dec. 21, 

1989. Under that act, an agency may not incur an obligation in excess 

of the amount available to it in an appropriation, 31 U.S.C. § 1341(a); 

accordingly, proper recording of obligations permits compliance with 

the Antideficiency Act by ensuring that government agencies have 

adequate budget authority to cover all of their obligations. 42 Comp. 

Gen. 272, 275 (1962).



Determining the Obligational Event:



A general definition of an obligation is “a definite commitment that 

creates a legal liability of the government for the payment of goods 

and services ordered or

received.” B-116795, June 18, 1954. A legal liability is defined, 

generally, as any duty, obligation or responsibility established by a 

statute, regulation, or court decision, or where the agency has agreed 

to assume responsibility in an interagency agreement, settlement 

agreement, or similar legally binding document. See Black’s Law 

Dictionary 925 (7th ed. 1999). While we ordinarily consider obligations 

as “legal liabilities,” for the concept to be meaningful for funds 

control purposes, we have not limited the definition solely to agency 

actions that create legal liabilities, but also have extended the 

definition to include “[a] legal duty on the part of the United States 

which constitutes a legal liability or which could mature into a legal 

liability by virtue of actions on the part of the other party beyond 

the control of the United States. . .” 42 Comp. Gen. 733, 734 (1963); 

see also McDonnell Douglas Corp. v. United States, 37 Fed. Cl. 295, 301 

(1997).



When the Corporation awards a grant, it enters into a binding agreement 

authorizing the grantee to enroll a specified number of new 

participants in the AmeriCorps program. In addition, when the 

Corporation enters into grant agreements with state service 

commissions, it specifies the budget and project period of the award, 

the total number of positions approved, the total amount awarded for 

related program costs for the approved positions, and the terms of 

acceptance. See, e.g., AmeriCorps Grant Award to City Year, Inc., Aug. 

3, 2000. The amounts awarded for related program costs are used by the 

grantee to pay participants’ stipends and health and child care 

coverage. The Corporation incurs an obligation for these program costs 

at the time of grant award[NOTE 2] See e.g. , B-289801, Dec. 30, 2002; 
B-

167790, Jan. 15, 1973. The costs of education benefits for the new 

participants are not specified in the grants.



Nevertheless, at the time of grant agreement, the Corporation commits 

to fund education benefits for all of the positions approved in the 

grant if all of the positions are enrolled before the Corporation 

modifies the terms or conditions of the grant. Letter from Frank R. 

Trinity, General Counsel, Corporation for National and Community 

Service, to Susan A. Poling, Associate General Counsel, GAO, Mar. 21, 

2003. At the time of grant award, when the Corporation approves 

enrollment of a specified number of new participants, the Corporation 

has taken an action that can mature into a legal liability for the 

education benefits of the new participants by virtue of actions taken 

by the grantee and participants, not the Corporation. In other words, 

upon award of the grant, the Corporation, at a minimum, has accepted 

“[a] legal duty ... which could mature into a legal liability by virtue 

of actions on the part of the grantee beyond the control of the United 

States.” 42 Comp. Gen. 733, 734 (1963). In our view, therefore, the 

Corporation incurs a recordable obligation at grant award for the 

education benefits of the approved number of new participants.



We think our view of when the obligational event occurs is entirely 

consistent with applicable provisions of the National and Community 

Service Trust Act. As noted above, the Act requires the Trust to have 

adequate funds to cover the total number of approved positions. 42 

U.S.C. § 12581(f). The language of section 12581(f) focuses on the 

Corporation’s approval of positions as the obligational event for fund 

control purposes: “[t]he Corporation may not approve positions as 

approved national service positions ... for a fiscal year in excess of 

the number of such positions for which the Corporation has sufficient 

available funds in the National Service Trust for that fiscal 

year....”:



The General Counsel of the Corporation has concluded, however, that the 

obligational event with respect to the education award occurs no 

earlier than the enrollment of an individual in the Trust. Letter from 

Frank R. Trinity, General Counsel, Corporation for National and 

Community Service, to Susan A. Poling, Associate General Counsel, GAO, 

Mar. 21, 2003. In the past, the Corporation recorded education award 

obligations on an outlay basis, i.e., it recorded an obligation at the 

time of the quarterly drawdown of education awards from the Trust. Id. 

The General Counsel explained, however, that the Corporation is in the 

process of modifying its procedures for recording obligations and now 

will record obligations at the time of enrollment based on estimates of 

what these enrolled members will draw down in the future. Id.



The General Counsel stated that the Corporation does not incur an 

obligation for an education award until the time of enrollment because 

the Corporation may modify the terms and conditions of a grant, 

including suspension of enrollment into the Trust, prior to the 

enrollment of all positions initially approved in a grant. According to 

the General Counsel, this permits the Corporation, if necessary, to 

prevent a shortfall in the Trust. The General Counsel also stated that 

“a binding agreement between the Government and an AmeriCorps member 

exists only upon the member’s authorized enrollment in the Trust.” Id. 

While it may well be true that the Corporation has no binding agreement 

with a participant until the participant enrolls, we do not view this 

as the controlling consideration for funds control purposes. In our 

opinion, this view overlooks the legal duty the Corporation incurs at 

time of grant award when it commits to funding a specified number of 

participants and ignores the constraint imposed on the Corporation by 

section 12581(f).



The Corporation, by its own admission, may modify the number of 

approved participants only if it amends the grant agreement to reduce 

the number of enrolled positions prior to enrollment. While the 

Corporation may unilaterally reduce the number of authorized positions 

awarded to a grantee prior to participant enrollment, from the time of 

grant award until the Corporation acts to reduce the approved number of 

positions, the grantee and its subgrantee, not the Corporation, 

controls the number of participants who may enroll, up to the maximum 

number of participants the Corporation has approved in the grant 

agreement. The fact that the government may have the power to amend 

unilaterally a contract or agreement does not change the nature or 

scope of the obligation incurred at time of award. Were it otherwise,

every government contract that permits the government to terminate the 

contract for the convenience of the government (48 C.F.R. § 49.502), or 

to modify the terms of the contract at will (48 C.F.R. §§ 52.243-1, 

243-2, 243-3), would not be an obligation of the government at time of 

award. Long-standing practice and logic both of the Congress (31 U.S.C. 

§ 1501, 41 U.S.C. § 5) and the accounting officers of the government 

(B-234957, July 10, 1989, B-112131, Feb. 1, 1956) have rejected such a 

view. As we explained earlier, at the time of grant award, the 

Corporation’s approval of a specified number of new participants 

establishes a legal duty that can mature into a legal liability for 

education benefits by virtue of actions of the grantee that are beyond 

the control of the Corporation unless the Corporation takes affirmative 

action to modify the grant.



Amount of the Obligation:



For purposes of identifying the amount of the Corporation’s obligation 

at grant award, it is also significant that the grantee and subgrantee, 

by their actions in enrolling participants, ultimately control the 

amount of the Corporation’s liability. If the amount of liability of 

the government is under the control of the grantee, not the 

Corporation, the government should obligate funds to cover the maximum 

amount of the liability. See e.g., B-238581, Oct. 31, 1990; B-197274, 

Sept. 23, 1983. As more information is known, the Corporation may 

adjust the obligation, i.e., deobligate funds or increase the 

obligational level, as needed.



The General Counsel stated that at the time a member enrolls and the 

Corporation records an obligation for the member’s education benefits, 

the Corporation will record its “best estimate of the Government’s 

ultimate liability for education awards provided to members enrolled in 

the National Service Trust.” Letter from Frank R. Trinity, General 

Counsel, Corporation for National and Conununity Service, to Susan A. 

Poling, Associate General Counsel, GAO, Mar. 21, 2003. According to the 

General Counsel, the model the Corporation will use to make estimates 

of what enrolled members will draw down in the future, i.e., the amount 

the Corporation will obligate, uses historical information, such as 

attrition rate and actual usage by members who complete a term of 

service and earn an education award.



It appears to us that the Corporation is confusing its accounting 

liability, projections booked in its proprietary accounting systems for 

financial statement purposes, with its legal liability, amounts to be 

recorded in its obligational accounting systems and tracked in order to 

ensure compliance with fiscal laws. For proprietary accounting purposes 

a liability is a probable and measurable future outflow or other 

sacrifice of resources as a result of past transactions or events. 

FASAB Statement of Federal Financial Accounting Standards Number 1. 

Some types of projections of accounting liability consider the same 

factors, such as historical trends, that are considered in the 

Corporation’s model. For purposes of tracking its obligations, the 

Corporation should be recording its unmatured legal liability for the 

education benefits, which is the value of an educational award 

multiplied by all approved positions. At the time of grant award, the 

Corporation should record an obligation incurred for the education

benefits against the National Service Trust and the obligation incurred 

for the related program costs awarded for each of the approved 

positions against the appropriate account in the VA HUD Appropriations 

Act. As the grantees’ authority under the grant agreement to enroll 

participants in the AmeriCorps program expires or if the Corporation 

modifies the grantees’ authority, under the grant agreement the 

Corporation should deobligate previously obligated amounts to reflect 

the change in the Corporation and the Trust’s legal exposure.



We trust this is responsive to your request. If you have any questions, 

please contact Susan A. Poling, Associate General Counsel, at 202-512-

5644.



Anthony H. Gamboa 

General Counsel:



Signed by Anthony H. Gamboa:



APPENDIX NOTES:



[1] The Corporation provided us with a copy of this grant agreement.



[2] We have not examined and accordingly express no opinion on whether 

the Corporation is appropriately obligating these costs in the 

applicable appropriation account.



[End of section]



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FOOTNOTES



[1] The National and Community Service Act of 1990 created the 

Corporation.



[2] The Corporation oversees the Senior Corps, AmeriCorps, and Learn 

and Serve America. AmeriCorps consists of three programs: 

AmeriCorps*State and National, AmeriCorps*VISTA, and 

AmeriCorps*National Civilian Community Corps. 



[3] We have not examined and accordingly express no opinion on whether 

the Corporation is appropriately obligating program costs in the 

applicable appropriation account. 



[4] The Corporation’s 2003 grant review cycle began in the spring of 

2003.