Pennsylvania Department of Community Affairs, CR No. 269 (1993)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: Administration for Children and Families
- v. -
Pennsylvania Department of Community Affairs, Respondent, and Pennsylvania Directors' Association for Community Action, Intervenor.

DATE: June 1, 1993

Docket No. C-92-040
Decision No. CR269

DECISION

This case is before me on the request of the Pennsylvania Department of Community Affairs (DCA) for a
hearing to determine whether the State of Pennsylvania's determi-nation that the Pennsylvania Directors'
Association for Community Action (PDACA) is an eligible entity under section 673(1) of the Community
Services Block Grant (CSBG) Act is clearly erroneous. 1/ At issue is the propriety of Pennsylvania's
funding of PDACA from the 90 percent share of CSBG funds that are to be set aside for "eligible entities"
as defined in section 673 of the CSBG Act, 42 U.S.C. 9902. For the reasons that follow in this Decision, I
find clearly erroneous the Pennsylvania Attorney General's determination that PDACA is an eligible entity
within the meaning of section 673(1) of the CSBG Act.

APPLICABLE STATUTORY AND REGULATORY PROVISIONS

The CSBG Act

Section 672(a) of the CSBG Act, 42 U.S.C. 9901(a), authorizes the Secretary of the United States
Department of Health and Human Services (Secretary) to make grants to States to ameliorate the causes of
poverty in communities within the State.

As a requirement for receiving CSBG funds, a State must annually submit an application to the Secretary
which contains assurances by the chief executive officer of the State that the State will meet the conditions
enumerated in section 675(c) of the CSBG Act. Section 675(a) of the CSBG Act, 42 U.S.C. 9904(a).

Specifically, section 675(a)(2)(A) of the CSBG requires the chief executive officer of each State to certify
that the State agrees to

use . . . for fiscal year 1985 and for each subsequent fiscal year, not less than 90 percent of the
funds allotted to the State under section [674] of this title to make grants to use for the purposes described
in clause (1) to eligible entities (as defined in section [673(1)] of this title) or to organizations serving
seasonal or migrant farmworkers, except that no more than 7 percent of the funds available for this
subclause shall be granted to organizations which were not eligible entities during the previous fiscal year .
. .

Definition of "Eligible Entity"

The definition of the term "eligible entity" has been amended several times since 1981. As originally
enacted on August 13, 1981, section 673 of the CSBG Act (42 U.S.C. 9902 (1981)) provided in relevant
part:

(1) the term "eligible entity" means any organization which was officially designated as a
community action agency or a community action program under the provisions of section 210 of the
Economic Opportunity Act of 1964 [42 U.S.C. 2790] for fiscal year 1981. . . .

On December 29, 1981, section 673(1) of the CSBG Act (Pub. Law 97 - 115, 96 Stat. 1609) was amended
to add a second sentence as follows:

The term eligible entity includes any limited purpose agency designated under Title II of the
Economic Opportunity Act of 1964 for fiscal year 1981 which served the general purposes of a community
action agency under title II of such Act . . . and any grantee which received financial assistance under
section 221 or section 222(a)(4) of the Economic Opportunity Act of 1964 [42 U.S.C. 2208 or 2209(a)]
in fiscal year 1981. 2/

The 1981 amendment to section 673(1) of the CSBG Act thus expanded the definition of an eligible entity
to include those limited purpose agencies (LPAs) that perform the functions of community action agencies
(CAAs), but which are not technically CAAs. House Conference Report No. 386, 97th Cong., 1st Sess. 38,
reprinted in 1981 U.S.C.C.A.N. 2574.

On October 30, 1984, the second sentence of section 673(1) was amended, in relevant part, by Public Law
98-558 (98 Stat. 2884), to delete the reference to grantees under section 221 of the Economic Opportunity
Act (EOA). Subsequent to the October 30, 1984 amendment to section 673(1) of the CSBG, in order to
retain status as an eligible entity, a grantee must have been either an LPA designated under Title II of the
EOA of 1964 for FY 1981 which served the general purposes of a CAA under Title II of the EOA of 1964
or a grantee which received financial assistance under section 222(a)(4) of the EOA of 1964.

Section 210 of the EOA, 42 U.S.C. 2790, as referenced in the CSBG Act, defined a CAA as a:

(1) State, (2) political subdivision, (3) combination of political subdivisions, (4) public or private
nonprofit agency or organization designated by a State, political subdivision or combination of political
subdivisions, or (5) an Indian tribal government which:

(1) has the power and authority and will perform the functions set forth in section 2795
of this title, including the power to enter into contracts with public and private nonprofit agencies and
organizations to assist in fulfilling the purposes of this subchapter, and

(2) is determined to be capable of planning, conducting, administering and evaluating a
community action program and is currently designated as a community action agency by the Director.

The concept that a CAA serves a specific geographic area and controls the delivery of services to that area
is addressed by section 221(b) of the EOA:

If the Director [of OCS] determines that a limited purpose project or program involving activities
otherwise eligible under this section is needed to serve needs of low-income families and individuals in a
community and no community action agency has been designated for that community pursuant to section
210, or where a community action agency gives its approval for such a program to be funded directly
through a public or private nonprofit agency or organization, he may extend financial assistance for that
project or program to a public or private nonprofit agency which he finds is capable of carrying out the
project in an efficient and effective manner consistent with the purposes of this title.

Purposes of Title II of the EOA

The basic purposes which Congress had in funding programs under Title II were outlined in section 201(a)
of the EOA, 42 U.S.C. 2781(a) (1967) as follows:

. . . [T]o stimulate a better focusing of all available local, State, private, and Federal resources
upon the goal of enabling low-income families, and low-income individuals of all ages, in rural and urban
areas to attain the skills, knowledge, and motivations and secure the opportunities needed for them to
become fully self-sufficient. Its specific purposes are to promote, as methods of achieving a better
focusing of resources on the goal of individual and family self-sufficiency --

(1) the strengthening of community capabilities for planning and coordinating federal,
State, and other assistance related to the elimination of poverty, so that this assistance, through the efforts
of local officials, organizations, and interested and affected citizens can be made more responsive to local
needs and conditions;

(2) the better organization of a range of services related to the needs of the poor, so that
these services may be made more effective and efficient in helping families and individuals to overcome
particular problems in a way that takes account of, and supports their progress in overcoming related
problems;

(3) the greater use, subject to adequate evaluation, of new types of services and
innovative approaches in attacking the causes of poverty, so as to develop increasingly effective methods
of employing available resources;

(4) the development and implementation of all programs and projects designed to serve
the poor or low-income areas with the maximum feasible participation of residents of the areas and
members of the groups served, so as to best stimulate and take full advantage of capabilities for self-
advancement and assure that those programs and projects are otherwise meaningful to and widely utilized
by their intended beneficiaries; and

(5) the broadening of the resource base programs directed to the elimination of poverty,
so as to secure, in addition to the services and assistance of public officials, private religious, charitable,
and neighborhood organizations, and individual citizens, a more active role for business, labor, and
professional groups able to provide employment opportunities or otherwise influence the quantity and
quality of services of concern to the poor.

Regulatory provisions in effect during FY 1981 3/

45 C.F.R. 1060.1-2(a)(1) declared as follows: "[a]n essential objective of community action is extensive
and intensive participation by the poor and residents of poverty areas in the planning, conduct, and
evaluation of programs which affect their lives."

45 C.F.R. 1060.1-2(b)(1)(iv) described the fundamental responsibilities of a CAA to include "providing
employment for poor persons in all phases of the community action program."

45 C.F.R. 1062.200-4 provided as follows:

LPAs are not required to have broad community representation on their policy making boards, but
they must have either a board of directors which is composed of at least one-third representatives of the
poor or an advisory committee at least a majority of which are democratically selected representatives of
the poor.

45 C.F.R. 1063.130-6(a) provided:

The operation of programs meeting high priority needs is an effective vehicle through which the
CAA can stimulate increased responsiveness to the needs of the poor. Programs produce immediate,
tangible benefits to the poor in terms understandable to the poor and non-poor alike. By operating
programs and delivering services, either directly or through delegate agencies, the CAA establishes a base
from which it can inform the community of the needs and aspirations of the poor, gain practical experience
in dealing with poverty problems, and strengthen its stature as a community resource.

45 C.F.R. 1063.130-3(b) provided an elaboration upon the statutory statement of the basic purpose of a
CAA under the EOA:

The key phrase in this [statutory] statement is "to stimulate a better focusing of all available . . .
resources." The Act thus gives the CAA a primarily catalytic mission: To make the entire community
more responsive to the needs and interests of the poor by mobilizing resources and bringing about greater
institutional sensitivity. A CAA's effectiveness, therefore, is measured not only by the services which it
directly provides but, more importantly, by the improvements and changes it achieves in the community's
attitudes and practices toward the poor and in the allocation and focusing of public and private resources
for antipoverty purposes . . . .

The mission of a CAA is stated in 45 C.F.R. 1063.130-6(b) as follows:

While the operation of programs is the CAA's principal activity, it is not the CAA's primary
objective. CAA programs must serve the larger purpose of mobilizing resources and bringing about
greater institutional sensitivity. This critical link between service delivery and improved community
response distinguishes the CAA from other agencies. . .

The geographic exclusivity of CAAs is addressed by 45 C.F.R. 1062.71(d) and (e), which state as
follows:

(d) When a political subdivision makes a designation for a community extending beyond its
boundaries, any political subdivision within that larger community may, of course, exercise its right to opt
out. However, where, for example, a county opts out from a county-wide designation made by a
municipality, the opt-out applies only to that portion of the county outside the designating municipality. If
the latter (together with any other municipalities which may wish to join it) has a population of 100,000 or
more, its designation may still be recognized.

(e) When two or more political jurisdictions make simultaneous designations for all or part of the
same community, the designation of the smallest jurisdiction shall take precedence, since its designation
shall be considered as equivalent to an opt-out from the designation of the larger jurisdiction(s). For
example, if a State designates itself as the CAA and one or more counties make their own designations, the
county designations shall be recognized by OEO and the State CAA will serve only that portion of the
State outside those counties.

BACKGROUND

Between December 5 and December 9, 1988, pursuant to section 679(b)(1) of the CSBG Act, the Office of
Community Services (OCS) (which is a component of the Administration for Children and Families
(ACF)) conducted a program implementation assessment (PIA) in Pennsylvania. According to ACF, the
PIA revealed that the State of Pennsylvania was impermissibly funding PDACA from the 90 percent share
of its CSBG funds that are to be set aside for "eligible entities" as defined in section 673(1) of the CSBG
Act, 42 U.S.C. 9902. As originally enacted and subsequently amended, section 673(1) of the CSBG Act
defined the types of organizations that may be considered "eligible entities." In order to qualify as an
eligible entity and receive 90 percent set aside funding, PDACA must have been in fiscal year (FY) 1981
(October 1, 1980 - September 30, 1981) an LPA which served the general purposes of a CAA under Title
II of the EOA of 1964, a grantee which received financial assistance under section 222(a)(4) of the EOA of
1964, or an organization officially designated as a CAA or a community action program.

On March 31, 1989, OCS sent a letter to DCA which raised questions about the propriety of funding
PDACA as an "eligible entity" under the CSBG Act. DCA responded to OCS on May 23, 1989, setting
forth DCA's position that PDACA was an eligible entity within the meaning of the CSBG Act. On July 21,
1989, DCA advised PDACA that its funding was being terminated. On August 1, 1989, PDACA asked the
Secretary to review DCA's action. In a letter to DCA dated August 21, 1989, the Director of OCS stated
that DCA's submissions did not furnish sufficient documentation that PDACA was an eligible entity as
defined by section 673(1) of the CSBG Act. The August 21 letter further requested that DCA obtain from
the Pennsylvania Attorney General rulings on: 1) whether PDACA was eligible to receive funding from the
90 percent set aside funds allotted to the State under the CSBG Act; and 2) whether PDACA's board of
directors was in compliance with section 675(c)(3) of the CSBG Act. The letter indicated also that the
State was to continue funding PDACA until the Attorney General had provided these rulings and OCS had
had the opportunity to review them. This direction to continue funding was further clarified and
emphasized in a subsequent letter dated October 30, 1989.

By letter dated September 22, 1989, DCA requested assistance from OCS in the form of clarification as to
what program activities constituted compliance with the requirement of serving the general purposes of a
CAA. Apparently OCS did not respond, but on February 28, 1990, DCA requested the Pennsylvania
Attorney General to make a determination on behalf of the State concerning the eligibility of PDACA to
receive funding under the CSBG Act.

In a decision dated June 12, 1990, the Pennsylvania Attorney General determined that PDACA was an
eligible entity under the applicable statutes and that Pennsylvania was not violating its assurances under the
CSBG Act by funding PDACA.

In a letter dated February 28, 1991, OCS informed DCA that it had determined that the June 12, 1990
decision of the Pennsylvania Attorney General was clearly erroneous and that PDACA should not receive
funding as an "eligible entity" under the CSBG Act. On October 31, 1991, OCS notified DCA of its intent
to withhold CSBG funds from the State if PDACA continued to be funded as an eligible entity under the
CSBG Act. OCS's position was that, by funding PDACA, the State was violating its assurances under
section 679(a)(1) of the CSBG Act.

In a letter dated November 19, 1991, the Chief Counsel for DCA requested that OCS provide a hearing
regarding PDACA's eligibility status. In a letter dated December 19, 1991, ACF requested the appointment
of a presiding officer, and I was appointed by the Chair, Departmental Appeals Board (DAB).

On January 29, 1992, I conducted a prehearing conference. At that conference, DCA and ACF agreed to a
schedule through which this case was to proceed to hearing on April 14, 1992, in Harrisburg, Pennsylvania.
However, on March 12, 1992, after receiving and considering a motion to intervene from PDACA and an
opposition from ACF, I ruled that PDACA would not be allowed to intervene as a party in this proceeding,
although I would have permitted PDACA to participate in the proceeding as an amicus curiae.

On March 31, 1992, the DAB Chair convened a telephone conference to respond to DCA's and PDACA's
attempt to take an interlocutory appeal from my ruling denying PDACA participation in this case as a
party. On April 7, 1992, the Chair remanded to me for reconsideration PDACA's motion to intervene in
light of DCA's and PDACA's contention that their interests in this case were no longer identical. On June
7, 1992, I issued a Ruling granting PDACA's petition to intervene as a party in this case.

On July 8, 1992, I conducted a second prehearing conference. At the second prehearing conference, the
parties agreed that the issue to be decided in this case was whether the Pennsylvania Attorney General's
determination that PDACA is an eligible entity under section 673(1) of the CSBG Act is clearly erroneous.
Subsumed in that issue is whether PDACA served the general purposes of a CAA in FY 1981, within the
meaning of Title II of the EOA of 1964, as amended.

I conducted an in-person hearing in this case in Carlisle, Pennsylvania, on November 23, 1992, and in
Harrisburg, Pennsylvania, on November 30 and December 1, 1992. 4/ I have considered all of the
arguments, testimony, and exhibits in this case, and find that the determination of the Pennsylvania
Attorney General, that PDACA is an eligible entity within the meaning of section 673(1) of the CSBG Act,
is clearly erroneous. I find also that PDACA did not fulfill all of the purposes of a
CAA as set out in section 201(a) of the EOA.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. Pennsylvania's CSBG program is administered by DCA.

2. As a recipient of CSBG Act funding, Pennsylvania is required to comply with the assurances set forth in
section 675 of the CSBG Act (42 U.S.C. 9904(c)).

3. In submitting its annual applications for CSBG funding, DCA has certified its compliance with the
assurances that are required of States under section 675 of the CSBG Act.

4. The CSBG Act assurances require, among other things, that Pennsylvania distribute at least 90 percent
of its CSBG Act funding to "eligible entities," as defined in section 673(1) of the CSBG Act (42 U.S.C.
9904(c)(2)(a)).

5. Pursuant to the Human Services Amendments of 1984 (Pub. L. 96-558), DCA has funded PDACA as an
"eligible entity" under the CSBG Act. ACF Ex. 9, 27. 5/

6. As originally enacted on August 13, 1981, section 673(1) of the CSBG Act defined "eligible entity" to
include any organization which was officially designated as a CAA or a community action program under
section 210 of the EOA of 1964 for FY 1981. Section 673(1) of the CSBG Act.

7. In order for an entity to be eligible to receive 90 percent set aside funding, the grantee must be an LPA
designated under Title II of the EOA of 1964 for FY 1981 which served the general purposes of a CAA
under Title II of the EOA. Section 673(1) of the CSBG Act, as amended October 30, 1984.

8. Section 673(1) of the CBSG Act also permits a grantee which received financial assistance under
section 222(a)(4) of the EOA of 1964 to receive 90 percent set aside funding. Section 673(1) of the CSBG
Act, as amended October 30, 1984.

9. PDACA does not contend that it was a grantee which received financial assistance under section
222(a)(4) of the EOA of 1964.
10. PDACA does not contend that it was ever designated as a CAA or a community action program under
any version of the EOA.

11. In FY 1981, PDACA was an LPA designated under Title II of the EOA. ACF Trial Memorandum at
1.

12. To qualify as an eligible entity, PDACA must be an LPA which, in FY 1981, served the general
purposes of a CAA under Title II of the EOA. CSBG Act, Section 673(1), as amended October 30, 1984;
FFCL 7 - 9.

13. ACF is obligated to defer to the State's interpretation of its assurances and of the provisions of the
CSBG Act unless that interpretation is clearly erroneous. 45 C.F.R. 96.50(e).

14. Clearly erroneous means that a determination will be upheld unless the reviewing authority finds that
the original determination is unsupported by substantial evidence, contrary to the clear weight of the
evidence, or induced by an erroneous view of the law. Gasifier Mfg. Co. v. General Motors Corporation,
138 F.2d 197, 199 (8th Cir. 1943).

15. In making his determination that PDACA was an eligible entity, the Pennsylvania Attorney General
considered activities conducted by PDACA outside of FY 1981. DCA Ex. 18.

16. In making his determination that PDACA was an eligible entity, the Pennsylvania Attorney General
relied on a statutory provision that was not applicable and had been repealed. DCA Ex. 18; EOA of 1964,
as amended in 1967 (Pub. L. 90-222 (1967)); Section 673(1) of the CSBG, as amended.

17. In making his determination that PDACA was an eligible entity in accordance with section 673(1) of
the CSBG Act, the Pennsylvania Attorney General relied on PDACA's 1989 bylaws. DCA Ex. 18.

18. The Pennsylvania Attorney General's Opinion did not address whether PDACA, in FY 1981, had the
"maximum feasible participation by residents of the areas and members of the groups served . . .", within
the meaning of section 201(a)(4) of the EOA. DCA Ex. 18.

19. The Pennsylvania Attorney General's Opinion did not address whether PDACA, in FY 1981,
undertook activities with the regular participation of the poor, within the meaning of section 211(f)(3) of
the EOA. DCA Ex. 18.

20. The Pennsylvania Attorney General's Opinion did not address whether PDACA, in FY 1981,
undertook activities with the "extensive and intensive participation by the poor and residents of poverty
areas in the planning, conduct, and evaluation of programs which affect their lives," within the meaning of
45 C.F.R. 1060.1-2(a)(1). DCA Ex. 18.

21. Under the EOA, an entity that is serving the general purposes of a CAA is required to undertake
activities with the regular participation of the poor. Section 211(f)(3) of the EOA.

22. Under the EOA, an entity that is serving the general purposes of a CAA is required to have the
maximum feasible participation of residents of the areas and members of the groups served, so as to best
stimulate and take full advantage of capabilities for self-advancement and assure that those programs and
projects are otherwise meaningful to and widely utilized by their intended beneficiaries. Section 201(a)(4),
42 U.S.C. 2781(a)(4); 45 C.F.R. 1062.1-2, 1060.1-3(a)(2)(i)(a), 1061.50-6(a)(6), 1063-130.3, and
1063.130-4; ACF Ex. 56A at 15 and 26; ACF Ex. 60 at 43 - 44; Tr. 162, 251-252, 289-290.

23. An essential objective of community action is "extensive and intensive participation by the poor and
residents of poverty areas in the planning, conduct, and evaluation of programs which affect their lives."
45 C.F.R. 1060.1-2(a)(1).

24. PDACA's articles of incorporation and bylaws, through and including FY 1981, made no provision for
the participation or representation of poor persons on its board of directors. ACF Ex. 10, 32; Tr. 389.

25. In FY 1981, PDACA did not have a board of directors with at least one-third membership from poor
persons in the community served by PDACA. Tr. 332 - 474; DCA Ex. 18.

26. PDACA's articles of incorporation and bylaws, through and including FY 1981, made no provision for
input from or participation by poor persons in decisions about its activities or in carrying out its activities.
ACF Ex. 10, 32; Tr. 389.

27. In FY 1981, PDACA did not have an advisory committee composed of at least a majority of
democratically selected members of the poor. Tr. 332 - 374, 384 - 89, 413 - 14; DCA Ex. 18

28. PDACA undertook several activities that were carried out statewide in Pennsylvania in FY 1981 such
as 1) the development of rural housing capacity; 2) an energy program which included funding to counties
which did not have CAAs; and 3) a domestic violence project, where PDACA contracted to provide
training and to attempt to organize groups to assist them in setting up women's shelters and contracted to
advocate for State funding or for an ongoing resource that could be developed to support expansion of
women's shelters across Pennsylvania. DCA Ex. 18; Tr. 348 - 55.

29. There is insufficient evidence in the record from which I can conclude that PDACA, in conducting
statewide activities across Pennsylvania in FY 1981, provided for extensive and intensive participation of
the poor, within the meaning of the EOA and 45 C.F.R. 1060.1-2(a)(1). DCA Ex. 18; section 2201(a)(4)
of the EOA, 42 U.S.C. 2781 (1981); 45 C.F.R. 1060.1-3(a)(2)(i)(a), 1061.50-6(a)(6), and 1063.130-4
(1980); FFCL 20, 23 - 28.

In FY 1981, PDACA did not provide for the maximum feasible participation of residents of the areas
and members of the groups served, so as to best stimulate and take full advantage of capabilities for self-
advancement and assure that those programs and projects are otherwise meaningful to and widely utilized
by their intended beneficiaries. Section 201(a)(4), 42 U.S.C. 2781(a)(4); 45 C.F.R. 1062.1-2, 1060.1-
3(a)(2)(i)(a), 1061.50-6(a)(6), 1063-130.3, and 1063.130-4; ACF Ex. 56A at 15 and 26; ACF Ex. 60; Tr.
162, 251-252, 289-290, 413. FFCL 18, 24 - 28.

31. The determination of the Pennsylvania Attorney General that PDACA is an eligible entity under
section 673(1) of the CSBG Act is clearly erroneous. FFCL 12 - 30.

32. ACF did not establish that a requirement of control over a specific geographic area is mandated by the
statute or regulations for all CAAs or LPAs serving the general purposes of CAAs. Section 221(b) of the
EOA; ACF Ex. 2 at 25; 45 C.F.R. 1062.71(d) and (e); ACF Ex. 60 at 55 - 56; Tr. 178, 378, 450.

33. There is insufficient evidence in the record from which I can conclude that, in FY 1981, PDACA
conducted a comprehensive needs assessment.

34. ACF did not establish that an LPA serving the general purposes of a CAA in FY 1981 was required to
conduct a comprehensive needs assessment in order to qualify as an eligible entity under section 673(1) of
the CSBG.

35. ACF did not establish that an LPA serving the general purposes of a CAA in FY 1981 was required to
provide services to poor persons directly. 45 C.F.R. 1063.130-6(b) - 132.3(d).

36. LPAs serving the general purposes of a CAA in FY 1981 were required to provide "a sufficient
number of projects or components to provide, in sum, a range of services and activities having a
measurable and potentially major impact on the causes of poverty in the community." Section 210(a) of
the EOA; 42 U.S.C. 2790(a).

37. ACF did not establish that PDACA did not provide for "a sufficient number of projects or components
to provide, in sum, a range of services and activities having a measurable and potentially major impact on
the causes of poverty in the community" in accordance with section 210(a) of the EOA. FFCL 28, 36;
DCA Ex. 18.

38. One requirement for LPAs serving the general purposes of a CAA in FY 1981 is that the organization
conduct activities that are "responsive to the needs of the poor which are not otherwise being met." 42
U.S.C. 2795(b)(3).

39. ACF did not establish that PDACA did not conduct activities in FY 1981 that were "responsive to the
needs of the poor which are not otherwise being met," in accordance with 42 U.S.C. 2795(b)(3). FFCL
28, 38; DCA Ex. 18.

40. There is insufficient evidence in the record from which I can conclude that, in FY 1981, PDACA did
not provide services to poor persons directly, within the meaning of the EOA.

41. In FY 1981, local initiative funding (also termed 01 account funding) was available to CAAs to plan,
conduct, administer and evaluate their community action programs. Tr. 253; 45 C.F.R. 1067.41-3
(Appendix B) (1980); ACF Ex. 28, 31, 48, 49.

42. In FY 1981, PDACA did not receive local initiative (01 account) funding. ACF Ex. 28, 31, 48, 49.

43. ACF did not establish that a requirement for being an eligible entity under section 673(1) of the CSBG
in FY 1981 was the receipt of local initiative (01 account) funding. Section 673(1) of the CSBG; Section
201(a) of the EOA of 1964, as amended in 1967.

44. PDACA was incorporated in 1975 under the name "Pennsylvania Delaware Association for
Community Action" and retained that name until October 23, 1981, when it amended its bylaws to
substitute "Directors'" for "Delaware" in its name. ACF Ex. 10, 32.

45. PDACA's members are and always have been, including during FY 1981, CAAs. ACF Ex. 12, 32.

46. ACF did not establish that PDACA could not have been an eligible entity in FY 1981 within the
meaning of section 673 of the CSBG Act by virtue of its name or corporate title.

47. DCA has not been denied proper notice by ACF. ACF Ex. 9, 19, 22.

48. PDACA has not been denied proper notice by ACF. ACF Ex. 9, 19, 22; FFCL 47.

49. PDACA cannot meet the definition of an "eligible entity" under section 673(1) of the CSBG Act
unless it served the general purposes of a community action agency under Title II of the EOA in FY 1981.
FFCL 6 - 12.

50. In FY 1981, PDACA did not serve the general purposes of a CAA under Title II of the EOA. Section
201(a) of the EOA (42 U.S.C. 2781(a)); section 210(a) of the EOA (42 U.S.C. 2790(a)); section 212 of
the EOA (42 U.S.C. 2795); section 221(a) of the EOA (42 U.S.C. 2808(a)); 45 C.F.R. Parts 1060 through
1067 (1980). FFCL 28 - 30.

51. PDACA is not an "eligible entity" under the CSBG Act. Section 673(1) of the CSBG (42 U.S.C.
9902(1)); Title II, Economic Opportunity Act of 1964, as amended, section 201 et seq. (42 U.S.C 2781 et
seq.); 45 C.F.R. Parts 1060 through 1067 (1980). FFCL 21 - 30.

52. The State of Pennsylvania was clearly erroneous in finding PDACA to be an "eligible entity" under the
CSBG Act. FFCL 31

53. In funding PDACA from its 90 percent set-aside funds, Pennsylvania violated the required assurances
prescribed by section 675(c) of the CSBG Act. FFCL 1 - 5, 31, 52.

ISSUE

The issue in this case is whether the June 12, 1990 decision of the Pennsylvania Attorney General
(Opinion) that PDACA is an eligible entity within the meaning of section 673(1) of the CSBG Act is
clearly erroneous.

DISCUSSION

ACF, of which OCS is a component, contends that the June 12, 1990 Opinion that PDACA is an eligible
entity within the meaning of section 673(1) of the CSBG Act is clearly erroneous. Subsumed within the
issue of whether the Pennsylvania Attorney General's determination is clearly erroneous is whether
PDACA served the general purposes of a CAA during FY 1981.

There is no dispute that PDACA was not designated as a CAA in FY 1981. The parties also do not dispute
that in FY 1981 PDACA was an LPA. ACF Trial Memorandum at 1. The dispute in this case centers
around whether PDACA was an LPA which served the general purposes of a CAA in FY 1981.

I. To qualify as an eligible entity under the CSBG Act, PDACA had to have served the general
purposes of a community action agency in FY 1981.

As enacted on August 13, 1981, section 673(1) of the CSBG Act defined an eligible entity as "any
organization which was officially designated as a community action agency or a community action
program under the provisions of section 210 of the Economic Opportunity Act of 1964 [42 U.S.C. 2790]
for fiscal year 1981 . . ." 42 U.S.C. 9902 (1981).

On December 29, 1981, the definition of the term "eligible entity" as it appeared in section 673(1) of the
CSBG Act was expanded to include any limited purpose agency designated under Title II of the Economic
Opportunity Act of 1964 for FY 1981 which served the general purposes of a community action agency
under Title II of such Act and any grantee which received financial assistance under section 221 or section
222(a)(4) of the EOA of 1964 (42 U.S.C. 2208 or 2209(a)) for FY 1981. After the enactment of this
provision, any organization which had been receiving section 221 or 222(a)(4) funding as well as any LPA
designated under Title II of the EOA for FY 1981 which served the general purposes of a CAA qualified as
an eligible entity.

However, on October 30, 1984, section 673(1) of the CSBG Act was amended by Public Law 98-558 to
delete the reference to grantees under section 221 of the EOA. It is precisely because of this amendment
that FY 1981 is the relevant time period to be looked at here, because it is only by complying with this
provision that PDACA could qualify as an eligible entity under the CSBG Act. PDACA does not contend
that it was officially designated as a CAA or a community action program under section 210 of the EOA of
1964, nor does PDACA contend that it was, at any time, a grantee which received financial assistance
under section 222(a)(4) of the EOA. As of October 30, 1984, PDACA could qualify as an eligible entity
only if it was an LPA which served the general purposes of a CAA under Title II of the EOA in FY 1981,
or a grantee which received financial assistance under section 222(a)(4) of the EOA of 1964. Section 202
of Pub. L. 98-558, Human Services Reauthorization of 1984. Accordingly, in order to qualify as an
eligible entity to receive 90 percent set aside funds, PDACA must have qualified as a ". . . limited purpose
agency designated under title II of the Economic Opportunity Act of 1964 for fiscal year 1981 which
served the general purposes of a community action agency under title II of such Act . . . ."

II. The Pennsylvania Attorney General found PDACA to be an eligible entity on the record before
him.

On June 12, 1990, as a result of OCS' August 21, 1989 letter questioning PDACA's eligibility to receive
CSBG funding out of the 90 percent set aside, the Pennsylvania Attorney General issued an Opinion. The
Opinion stated, in relevant part:

. . . we have examined the relevant federal statutes and regulations, the Joint Stipulation prepared
by DCA and PDACA, the PDACA Memorandum of Law, the correspondence among the parties, and the
other exhibits and documents submitted with your request. As a result of our review, I have determined
that PDACA is an eligible entity under the applicable statutes.

As framed by Ms. Thomas' letter, the question to be addressed is whether PDACA "serves the
general purposes of a community action agency" as required by the CSBG Act.

Section 202(a) of the Original Act, Title II of the Economic Opportunity Act of 1964, P.L. No.
88-452, defines a community action program to be a program:

(1) which mobilizes and utilizes resources, public or private, of any urban, rural, or
combined urban and rural, geographical area (referred to in this part as a "community"), including but not
limited to a State, metropolitan area, county, city, town, multi-city unit, or multi-county unit in an attack on
poverty;

(2) which provides services, assistance, and other activities of sufficient scope and size to
give promise of progress toward elimination of poverty or a cause or causes of poverty through developing
employment opportunities, improving human performance, motivation, and productivity, or bettering the
conditions under which people live, learn, and work;

(3) which is developed, conducted, and administered with the maximum feasible
participation of residents of the areas and member of the groups served; and

(4) which is conducted, administered, or coordinated by a public or private nonprofit
agency (other than a political party), or a combination thereof.

A review of PDACA's articles of incorporation and by-laws shows that PDACA is a private
nonprofit agency and its purposes are, inter alia, to promote programs for relief of the poor and to support a
range of services and activities having an impact on the causes of poverty in Pennsylvania both directly and
through the activities of its member agencies, including activities designed to assist low income
participants:

(1) to secure and retain meaningful employment;

(2) to attain an adequate education;

(3) to make better use of available income;

(4) to obtain and maintain adequate housing and a suitable living environment;

(5) to obtain emergency assistance through loans or grants to meet immediate and urgent
individual and family needs, including the need for health related services, nutritious foods, housing, and
employment-related assistance;

(6) to remove obstacles and solve problems which block the achievement of self-
sufficiency;

(7) to achieve greater participation in the affairs of the community; and

(8) to make more effective use of other programs related to the purposes of this
Association.

These corporate purposes are consistent with the statutory purposes of a community action
agency.

In addition, PDACA and DCA have provided a description of various programs and activities
carried out by PDACA in fulfilling the above corporate purposes. These programs are listed on the
attached report and include initiatives in education, housing, family services, employment training, energy
assistance, and public protection. PDACA planning and administration of programs includes consultation
with and participation by residents and members of the various groups to be served.

On the basis of the information submitted for my review, I have determined that PDACA is an
eligible entity under the applicable statutes and continues to meet the general purposes of a community
action agency.

DCA Ex. 18 at 1 - 3.

III. The State's interpretation is entitled to deference unless it is shown to be clearly erroneous.

OCS is obligated to defer to a State's interpretation of its assurances and of the provisions of the block
grant statutes unless the interpretation is clearly erroneous. 45 C.F.R. 96.50(e).

The "clearly erroneous" standard has been interpreted as follows:
A finding is "clearly erroneous" when although there is evidence to support it, the reviewing court
on the entire evidence is left with the definite and firm conviction that a mistake has been committed.

United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948).

Findings have been held to be "clearly erroneous" when they are unsupported by substantial evidence,
contrary to the clear weight of the evidence, or induced by an erroneous view of the law. Gasifier Mfg. Co.
v. General Motors Corporation, 138 F.2d 197, 199 (8th Cir. 1943).

IV. The Opinion is clearly erroneous because it relied on inappropriate factual and legal bases to
support its conclusion.

ACF contends that the Opinion is clearly erroneous because it did not address the central issue of whether
PDACA is a limited purpose agency designated under Title II of the EOA of 1964 for FY 1981 which
served the general purposes of a community action agency under Title II of the EOA. ACF notes that
instead the Opinion simply cited to PDACA's articles and bylaws, as amended several years after 1981, in
concluding that PDACA's corporate purposes are consistent with the statutory purposes of a community
action agency. ACF contends further that the Opinion is clearly erroneous because it includes no
discussion or analysis of PDACA's activities during the relevant time period.

ACF contends that a list of PDACA programs appended to the Opinions contains many that should not
have been considered, because those programs were not operated during FY 1981 and thus were not
relevant to the determination as to whether PDACA was an eligible entity. According to ACF, two of the
programs listed in the attachment to the Opinion predate FY 1981. Furthermore, ACF contends that there
was no documentation provided as to the source of funding for those programs.

I have reviewed all of the evidence with respect to the basis for the Opinion. For the three reasons that
follow, I find that the Opinion is clearly erroneous because it incorrectly relied on legal and factual
materials which were not appropriate or relevant to the determination of whether PDACA was an eligible
entity in FY 1981.

A. The Opinion erroneously considered programs conducted by PDACA outside of FY
1981, the relevant timeframe.

One of the bases for the Attorney General's determination was the "description of various programs and
activities carried out by PDACA in fulfilling the above corporate purposes." DCA Ex. 18 at 3. However,
the list of programs considered by the Attorney General reveals that at most only four could have been
funded in FY 1981 -- a Statewide Rural Housing Coalition program funded between 1981 and 1984; a
Coalition on Domestic Violence program funded between 1979 and 1980; an Energy Assistance Grants
program funded between 1979 and 1982; and a Rural Housing Project program funded between 1981 and
1983. 6/ DCA Ex. 18. The other 15 programs on which the Attorney General relied were funded outside
the relevant timeframe of FY 1981. DCA Ex. 18 at 3 - 8.

The Opinion therefore does not limit its consideration to FY 1981 as the crucial year involved in making
the determination as to whether PDACA was an eligible entity. Accordingly, I find that the Opinion is
clearly erroneous because, in considering programs carried out by PDACA outside of FY 1981, it does not
appropriately consider whether PDACA qualified as a "limited purpose agency designated under title II of
the Economic Opportunity Act of 1964 for fiscal year 1981 which served the general purposes of a
community action agency under title II of such Act . . . ."

B. The Opinion erroneously relied on a statutory provision that was not applicable and had
been repealed.

Although the Opinion purports to have taken into account the relevant federal statutes and regulations, it
relied on section 202(a) of the original enactment, Title II of the EOA of 1964, P.L. No. 88-452 (1964), as
the relevant statute for defining a community action program. However, such reliance is misplaced.

The EOA of 1964 (Public Law 88-452 (1964)) as amended by the Green Amendments of 1967 (Public
Law 90-222) was repealed in 1981 by 42 U.S.C. 2790, 2791. However, the definition of eligible entity
contained in section 673(1) of the CSBG Act (42 U.S.C. 9902 (1981) specifically contains reference to an
eligible entity under the EOA of 1964. Section 673(1) of the CSBG was enacted in August 1981,
simultaneous with the repeal of the EOA. Thus, the reference in the CSBG Act necessarily means the EOA
of 1964 as amended in 1967. Therefore, to determine what Congress meant by the general purposes of a
CAA, one must look to the EOA of 1964 as amended in 1967.

The definition of a community action program contained in section 201(a) of the EOA of 1964 as amended
in 1967 by the Green Amendments is admittedly somewhat similar to the statement of the purposes of
CAAs contained in section 202(a) of the EOA, which also was repealed in 1967. However, my
examination of these two provisions reveals that section 201(a) contains a more stringent, specific, and
elaborate statement as to the general purposes of Title II organizations (CAAs). Section 202(a) is merely a
definition for a community action program, not a statement of the general purposes of CAAs. As such,
section 202(a) does not provide guidance to the critical determination of whether PDACA served the
general purposes of a CAA, within the meaning of section 673(1) of the CSBG Act. Because section
201(a) provides a focused and specific statement of the general purposes of a CAA, the Pennsylvania
Attorney General should have looked to this section, rather than section 202(a), to define an eligible entity.

In relying on section 202(a), the Opinion therefore relies on an incorrect statement of the law as a basis for
its conclusion that PDACA was an eligible entity. I find this misplaced reliance on a repealed statutory
provision sufficient basis to conclude that the Opinion is clearly erroneous.

C. The Opinion erroneously relied on PDACA's 1989 bylaws.

The Opinion cited PDACA's articles of incorporation and bylaws to support its determination that PDACA
is an eligible entity. However, the bylaws cited are not those that were in effect in FY 1981. While the
bylaws cited in the Opinion are those of PDACA, they contain changes made by amendments dated August
14, 1989. ACF Ex. 12. The bylaws cited in the Opinion are therefore not relevant to the determination as
to whether PDACA served the general purposes of a CAA in FY 1981. Accordingly, the Opinion is clearly
erroneous because its determination that PDACA was an eligible entity relies on PDACA bylaws that were
not in effect in FY 1981.

The Opinion is therefore clearly erroneous because it considered programs conducted by PDACA outside
of the relevant timeframe of FY 1981, it relied on a section of the EOA that was inappropriate and had
been repealed, and it relied on PDACA bylaws that were not in effect in FY 1981.

V. The Opinion is clearly erroneous because PDACA did not serve the general purposes of a CAA in
FY 1981.

ACF contends that the Opinion is clearly erroneous not only for the reasons cited above, but because
PDACA did not "carry out the general purposes of a community action agency", within the meaning of
section 673(1) of the CSBG Act in FY 1981. PDACA and DCA contend that PDACA did serve the
general purposes of a CAA in FY 1981. I conclude that the analysis that has preceded this section contains
a more than sufficient basis for my conclusion that the Opinion is clearly erroneous. However, PDACA
has requested that, if I conclude that the Opinion is clearly erroneous, I remand it to the Pennsylvania
Attorney General for a redetermination of the case in light of the applicable evidence. I do not have
express authority to remand the case to the Pennsylvania Attorney General to make such a redetermination.
However, it is not necessary for me to consider such a move, because I find that, independent of my
determination that the Opinion was clearly erroneous, PDACA did not serve the general purposes of a
CAA in FY 1981 and thus is not an eligible entity.

ACF contends that PDACA did not undertake the planning and implementation of programs in accordance
with section 211(f)(3) of the EOA, which requires the "regular participation" of the poor. ACF alleges that
PDACA, in FY 1981, did not provide for "extensive and intensive participation of the poor and residents of
poverty areas in the planning, conduct, and evaluation of programs which affect their lives." 45 C.F.R.
1060.1-2(a)(1). To this end, ACF contends that CAAs were obligated to "ensure that the views of the poor
- especially those without organized representation - are adequately expressed." ACF Ex. 51 at 10.

ACF contends also that in order to comply with the statutory and regulatory requirements of participation
of poor persons in their operations, CAAs had to establish mechanisms for actively involving the poor in
all phases of program planning, development, operations, and evaluation. ACF Ex. 56A at 15.
Accordingly, ACF posits that to the extent PDACA in FY 1981 did not have in place mechanisms to ensure
regular, extensive and intensive participation of the poor, PDACA was not an LPA serving the general
purposes of a CAA.

Section 201(a)(4) of the EOA provides explicitly that one of the purposes of CAAs is the requirement to
promote

the development and implementation of all programs and projects designed to serve the poor or
low-income areas with the maximum feasible participation of residents of the areas and members of the
groups served, so as to best stimulate and take full advantage of capabilities for self-advancement and
assure that those programs and projects are otherwise meaningful to and widely utilized by their intended
beneficiaries. . .

ACF argues that PDACA did not provide for the "maximum feasible participation" by the poor persons
served by PDACA's programs because PDACA did not develop and implement its programs and projects
with the maximum feasible participation of residents of the areas and members of the groups served.
Section 204(a)(4) of the EOA.

At the hearing, John Wilson, PDACA's president during FY 1981, testified as to the purposes and activities
of PDACA during the relevant time period. Mr. Wilson testified that the purposes of PDACA were to

advance the mission of community action, to increase the opportunities for low-income
individuals and families within Pennsylvania, to have the opportunities to become self-sufficient and move
out of poverty, to do that in concert with community action agencies where they didn't have in their own
area sufficient resources to focus on the problem, but where there was a statewide or nearly statewide issue.

Tr. 359.

Mr. Wilson testified also that PDACA planned and coordinated its activities with input from low income
persons in the areas served and with input from representatives of the poor. He stated that this was
accomplished by means of an advisory council which was established some time between the between the
beginning of his term as PDACA's president in 1980 and the end of his term in 1982. Tr. 342 - 48.
However, he was unable to recall more precisely the date when the advisory council was constituted and
whether the advisory council was drawn from all of the communities served by PDACA. Tr. 342 - 43,
385. 7/

PDACA was unable to locate the bylaws in effect during FY 1981. However, PDACA did produce copies
of its bylaws as amended on October 23, 1981. ACF Ex. 32. Mr. Wilson acknowledged at the hearing that
the October 23, 1981 bylaws did not make any reference to representation of the poor, participation of the
poor in programs, or establishment of an advisory council. Tr. 389.

I conclude that PDACA, during FY 1981, did not meet the
requirement of maximum feasible participation of the poor. It is undisputed that, during FY 1981, PDACA
conducted its activities in an area encompassing at least the entire state of Pennsylvania. PDACA Ex. 14.
However, despite the many communities served, PDACA was able to point to only "eight or ten" poor
persons who participated in advisory council meetings, and not necessarily during FY 1981. This is simply
not sufficient to meet the statutory test where that requirement includes "the maximum feasible
participation of residents of the areas and members of the groups served." Section 201(a)(4) of the EOA
(1967).

Despite admittedly serving communities throughout the entire State of Pennsylvania, PDACA offered no
evidence that, in a significant number of the communities where PDACA served or conducted activities,
poor residents participated in any meaningful or relevant fashion. There is insufficient evidence in the
record from which I can conclude that PDACA undertook the planning and implementation of programs in
accordance with section 211(f)(3) of the EOA, which requires the "regular participation" of the poor.
Furthermore, there is insufficient evidence in the record from which I can conclude that during FY 1981
PDACA, in serving the State of Pennsylvania, obtained any type of participation from poor residents in the
communities which it served.

Moreover, the record is totally devoid of any evidence that PDACA ever provided for "extensive and
intensive participation by the poor and residents of poverty areas in the planning, conduct, and evaluation
of programs which affect their lives." 45 C.F.R. 1060.1-2(a)(1). According to Mr. Wilson's testimony,
PDACA had only eight or ten poor persons on its advisory council. There is no evidence in the record
from which I can conclude that these eight or ten advisory council members were so geographically diverse
that they could participate in the planning, conduct, and evaluation of PDACA programs on a statewide
basis. Nor was there any evidence introduced from which I could conclude that PDACA's advisory council
assisted the planning, conduct and evaluation of any of PDACA's programs, in accordance with the
regulatory requirements.

Even if I were to conclude that the advisory council members were geographically diverse, such a small
number of persons would not constitute the type of intense, local participation that is contemplated by the
EOA and the regulations. While PDACA may have had some input from poor persons, it fell far short of
the statutory requirement of maximum feasible participation. Thus, the Pennsylvania Attorney General's
Opinion is clearly erroneous for this reason also.

VI. ACF did not establish that PDACA was not an eligible entity in FY 1981 because: 1) it did not
serve a specific and limited geographic area not served by a CAA; 2) it did not conduct a comprehensive
needs assessment and provide directservices to the poor; 3) it did not receive local initiativefunding; and
4)it is an association of community action directors.

ACF advanced several other reasons why it contended the Pennsylvania Attorney General's Opinion is
clearly erroneous. As discussed below, I reject these reasons. Unlike the statutory basis discussed in Part
V of my Decision, ACF's other contentions were based chiefly on regulatory provisions applicable to
CAAs. The record is devoid of any regulatory provision specifically applicable to LPAs serving the
general purposes of a CAA. If I used as my criteria the requirements for a CAA, then there would seem to
be no distinction between a CAA and an LPA serving the general purposes of a CAA. On the other hand,
it seemed appropriate to use as a criterion the purposes of a CAA as set out in the statute. ACF relied also
on the testimony of various federal officials who related anecdotal experiences with other LPAs serving the
general purposes of a CAA. As discussed in more detail below, I was not persuaded that the regulations
and testimony relied on by ACF constituted a preponderance of the evidence on whether the Opinion of the
Pennsylvania Attorney General was clearly erroneous.

A. ACF did not establish that PDACA was not an eligible entity in FY 1981 because of the
nature of the community which it served.

ACF takes the position that PDACA's statewide activities in FY 1981 show that PDACA could not have
been serving the general purposes of a CAA within the meaning of section 673(1) of the CSBG. ACF
avers that while a CAA can serve an entire State, it can do so only when there are no other CAAs
designated within that State. ACF contends that it has established that there were other CAAs serving in
Pennsylvania in geographic areas overlapping PDACA's service area during the same time PDACA was
performing activities in those areas. ACF Ex. 35. According to ACF, PDACA had to obtain consent of
other CAAs within the State to perform its functions. Thus, PDACA did not have exclusive control over a
specific geographic area, as is mandated by section 221(b) of the EOA. Under ACF's analysis, this is
support for its position that PDACA was not performing the functions of a CAA and so therefore was not
an eligible entity in FY 1981. Section 221(b) of the EOA; ACF Ex. 2; 45 C.F.R. 1062.71(d) and (e).

PDACA and DCA argue that an LPA serving the purposes of a CAA could serve a statewide community,
even if another CAA served part of the State. 45 C.F.R. 1062.1(a) and 1062.50(a)(1). PDACA and DCA
contend that there was conflicting testimony from ACF's witnesses on this issue of geographic constraint.
ACF Ex. 60 at 55 - 56; Tr. 178. PDACA contends further that it is irrelevant whether or not CAAs can
serve the same geographic area since PDACA is not asserting that it is a CAA, but is asserting instead that
it is an LPA serving the general purposes of a CAA. PDACA contends it is not bound to comply with the
regulatory provisions to the extent they specify what a CAA can or cannot do.

It is undisputed that PDACA was not a CAA in FY 1981. This is illustrated by ACF Ex. 35, which is a
map showing the areas controlled by various CAAs within the State of Pennsylvania. It is also undisputed
that, in FY 1981, PDACA undertook statewide activities and programs such as: 1) the development of rural
housing capacity through education and stimulation of collective organizing efforts; 2) an energy program
which included funding to counties which did not have CAA's; and 3) a domestic violence project in which
PDACA contracted to provide training and to attempt to organize groups to assist them in setting up
women's shelters, and contracted to advocate for State funding or for an ongoing resource that could be
developed to support expansion of women's shelters across Pennsylvania. Tr. 348 - 55.

John Wilson (PDACA's president during FY 1981) is the current director of a CAA encompassing a two-
county area in Pennsylvania. Mr. Wilson described himself as a person with approximately 21 years of
experience in community action programs and someone who is very familiar with the statutes that govern
CAAs and LPAs. Tr. 334 - 38. Mr. Wilson testified that PDACA provided services in counties that were
served by other CAAs only to the extent that those CAAs gave their permission. Tr. 424. Mr. Wilson
testified also that, with regard to providing services to an area that is already being served by a CAA, "I
don't think that ever under the legislation or regulations could you go into an area without the permission
of a community action agency." Tr. 450.

While I find general support for ACF's contention that the EOA mandates that CAAs must serve a specific
geographic area, I do not find ACF's analysis on this issue to be persuasive as to PDACA's status as an
LPA which served the general purposes of a CAA in FY 1981. ACF cites 45 C.F.R. 1062.71(d) and (e)
as support for its contention that, to be an eligible entity, PDACA was required to serve a specific and
limited geographic area. However, the regulations cited by ACF refer to a CAA only, and are silent with
regard to an LPA serving the general purposes of a CAA. Arguably, one of the ways that such an LPA
differs from a CAA is this requirement. However, since PDACA is not contending that it is a CAA, and
the regulations cited by ACF do not mention LPAs, ACF's analysis is not germane. Thus, ACF has not
persuaded me that on this issue PDACA did not meet the standard for an LPA serving the general purposes
of a CAA. Accordingly, I am unable to conclude that because PDACA did not serve a specific defined
geographic area PDACA was not an eligible entity in FY 1981.

B. ACF did not establish that an LPA serving the general purposes of a CAA must conduct
a comprehensive needs assessment and provide direct services to the poor.

ACF argues that PDACA could not have served the general purposes of a CAA because it did not provide
services directly to the poor. In support of its contention, ACF cites 45 C.F.R. 1063.130-6(b), which
declares that the operation of programs is the principal activity of a CAA. According to ACF, any program
serving the general purposes of a CAA must address poverty or one of its underlying causes by
"developing employment opportuni-ties, improving human performance, motivation and productivity, or
bettering the conditions under which people live, learn, and work." 45 C.F.R. 1063.132-3(d).

According to ACF, a CAA, or any organization serving the general purposes of a CAA in FY 1981, was
required also to perform a comprehensive needs assessment, with input from community residents. ACF
Ex. 51, 52, 56A. ACF states that the purpose of that planning process was to assess the causes of poverty
in the community and provide a program of services designed to attack those causes. ACF contends that
since PDACA has claimed that it was an LPA which served the general purposes of a CAA for the entire
State of Pennsylvania, it was required to have assessed the causes of poverty on a statewide basis and to
have developed a plan for a statewide provision of services. According to ACF, inasmuch as there is no
evidence in the record that PDACA did any of these things, particularly on a statewide basis, PDACA
could not have been serving the general purposes of a CAA.

ACF contends further that any organization that was serving the general purposes of a CAA had to
perform, at a minimum, certain functions. Section 212(b)(3) of the EOA (42 U.S.C. 2795(b)(3)) specified
that CAA functions were to include, at a minimum, "initiating and sponsoring projects responsive to the
needs of the poor which are not otherwise being met, with particular emphasis on providing central or
common services that can be incorporated into other programs." 42 U.S.C. 2795(b)(3). Also, ACF
contends that, as an organization serving the general purposes of a CAA, PDACA was required to conduct
a community action program (CAP) to include "a sufficient number of projects or components to provide,
in sum, a range of services and activities having a measurable and potentially major impact on causes of
poverty in the community." Section 210(a) of the EOA; 42 U.S.C. 2790(a).

The December 1981 amendments to the CSBG permitted LPAs serving the general purposes of CAAs in
FY 1981 to be funded as eligible entities. Pursuant to the amendments, and as guidance to the States as to
what organizations constituted eligible entities, OCS served general public notice and provided a copy to
each State of the following:

Since Congressional intent in funding organizations in fiscal year 1982 under the CSBG and its
transition provisions appears to have been to provide bridge funding to those organizations which had been
operating community based projects within a State and had been dependent upon funding under the
Economic Opportunity Act, OCS has included in its criteria for evaluating any application the
determination that a grantee has established service capabilities, has provided services directly to the poor,
and that its fiscal year 1981 grant did not indicate it was a one-time-only funding.

47 Fed. Reg. 6998 - 99 (1982).

Mr. Wilson testified regarding the programs carried out by PDACA in FY 1981. He described various
projects, many of which seemed very worthwhile, but none of which provided direct services to the poor.
For example, with regard to the rural housing project, Mr. Wilson stated that PDACA "did not provide
direct housing to clients nor did that project build houses." Tr. 415. He further stated, with regard to
PDACA's rural housing project, "this is a non-service project." Tr. 417.

With regard to projects funded in FY 1981, Mr. Wilson stated that PDACA undertook a long term energy
program, but that PDACA subcontracted it to other organizations. Tr. 350. He also testified that PDACA
undertook, in FY 1981:

a grant to subcontract to the Pennsylvania Coalition Against Domestic Violence . . . to provide
training and to attempt to organize groups to assist them in setting up women's shelters, and to advocate for
state funding or for an ongoing resource that could be developed to support expansion of women's shelters
across Pennsylvania, and to look at the laws that might support women and children that are in family
disruptions that need shelter as the result of the domestic violence.

Tr. 351.

Mr. Wilson stated PDACA's role in this project was "primarily in training and technical assistance to
community groups." Tr. 354.

Mr. Wilson stated also that PDACA undertook a "transition planning grant" in FY 1981. ACF Ex. 14.
According to Mr. Wilson, this transition planning grant encompassed activities such as presenting
suggestions to the legislature and meeting with the State Department of Welfare and Bureaus of Human
Resources and Weatheriza-tion. Tr. 458. Mr. Wilson remarked that, "we were really rather busy . . . as a
state association fulfilling these requirements." Tr. 459.

ACF's argument on this issue boils down to their contention that PDACA, in FY 1981, did not provide
direct services and conduct activities with a direct impact on the low-income people served. Under ACF's
analysis, PDACA could not perform these functions because they were providing services to organizations
rather than people. According to ACF, the functions or projects undertaken by PDACA in FY 1981 did not
provide services directly to the poor, and, therefore, PDACA could not have been serving the general
purposes of a CAA in FY 1981.

PDACA and DCA contend that ACF's interpretation of the statutory language is unduly narrow. PDACA
and DCA state that a CAA and an LPA serving the general purposes of a CAA could differ in many
respects. PDACA and DCA contend that the basic purpose of the EOA can be found in regulations that
state:

The key phrase in this [statutory] statement is "to stimulate a better focusing of all available
resources." The Act thus gives the CAA a primarily catalytic mission: To make the entire community
more responsive to the needs and interests of the poor by mobilizing resources and bringing about greater
institutional sensitivity. A CAA's effectiveness, therefore, is measured not only by the services which it
directly provides, but more importantly, by the improvements and changes it achieves in the community's
attitudes and practices toward the poor and in the allocation and focusing of public and private resources
for antipoverty purposes.

45 C.F.R. 1063.130-3(b).

PDACA further states that:

while the operation of programs is the CAA's principal activity, it is not the CAA's primary
objective. CAA programs must serve the larger purpose of mobilizing resources and bringing about
greater institutional sensitivity. This critical link between service delivery and improved community
response distinguishes the CAA from other agencies . . .

45 C.F.R. 1063.130-6(b).

PDACA's and DCA's analyses on this issue thus differ from ACF's. PDACA and DCA assert that it is not
a necessary requirement for an entity to provide direct services to the poor to be serving the general
purposes of a CAA. Instead, PDACA contends that since it fulfilled the broader purposes of mobilizing
resources and bringing about institutional sensitivity in accordance with 45 C.F.R. 1063(b), it qualified as
an eligible entity because, in performing these functions, it served the general purposes of a CAA.
PDACA disputes the relevancy of the Federal Register reference mentioned by ACF (47 Fed. Reg. 6998 -
99 (1982)), contending that it was an announcement for solicitation of grants under the CSBG and did not
purport to present interpretative language of the CSBG.

I find that ACF did not establish that providing direct services to the poor was a requirement for an entity
to "serve the general purposes of a CAA" in FY 1981. ACF has cited many statutory and regulatory
provisions in support of its contention on this issue. However, these are ambiguous at best. While
PDACA's activities in FY 1981 did not provide direct services to the poor, the regulations cited by ACF,
taken as a whole, do not support ACF's contention that, to be an eligible entity, PDACA had to provide
services directly to the poor. For example, the requirements of 45 C.F.R. 1063.130-6(b), which
acknowledge that the operation of programs is the principal activity of a CAA, is at odds with the
requirements of 45 C.F.R. 1063.132-3(d), which provide for "developing employment opportunities,
improving human performance, motivation and productivity, or bettering the conditions under which
people live, learn, and work."

Moreover, ACF's contention that any organization serving the general purposes of a CAA in FY 1981 was
required also to perform a comprehensive needs assessment, with input from community residents, is
supported by exhibits that apply only to CAAs. ACF has not established that this requirement must
necessarily bind LPAs that are serving the general purposes of a CAA. ACF Ex. 51, 52, 56A. Arguably,
this is one of the ways that an LPA serving the general purposes of a CAA differs from a CAA.

Additionally, ACF has not shown that the activities conducted by PDACA in FY 1981 were not in
accordance with either section 212(b)(3) of the EOA, 42 U.S.C. 2795(b)(3) or section 210(a) of the EOA;
42 U.S.C. 2790. For example, PDACA's sponsorship in FY 1981 of a program to combat domestic
violence appears to have been a project that was "responsive to the needs of the poor which are not
otherwise being met," in accordance with 42 U.S.C. 2795(b)(3).

Likewise, it is arguable that PDACA's projects, as a whole, did not provide for a "a sufficient number of
projects or components to provide, in sum, a range of services and activities having a measurable and
potentially major impact on causes of poverty in the community," in accordance with Section 210(a) of the
EOA (42 U.S.C. 2790(a)). ACF did not establish what a "sufficient number of projects" was under the
EOA.

ACF has cited 47 Fed. Reg. 6998 - 99 (1982) (set out previously) in support of its position. However,
PDACA appears to be correct in its assertion that this section was not intended to provide an interpretive or
comprehensive statement as to what constitutes an eligible entity under the CSBG. Accordingly, ACF has
not provided an adequate basis from which I can conclude that PDACA did not constitute an eligible entity
in FY 1981 because it did not provide direct services to the poor.

Likewise, ACF's contentions that PDACA did not conduct planning to assess the causes of poverty in the
community and, therefore, could not have served the general purposes of a CAA is based on the premise
that PDACA was bound by the CAA manual, without any assessment or focus by ACF as to what specific
activities PDACA undertook in FY 1981 and why they were out of line for an LPA serving the general
purposes of a CAA.

Accordingly, ACF has not shown either that PDACA failed to undertake comprehensive needs assessment
and provision of direct services to the poor in FY 1981. More importantly, ACF has failed to show that
such requirements were even binding upon PDACA, as an LPA serving the general purposes of a CAA in
FY 1981.

C. ACF has not established that an LPA serving the general purposes of a CAA must have
received local initiative funding to qualify as an eligible entity under the CSBG Act.

ACF contends that PDACA was not an eligible entity in FY 1981 because it did not receive certain types of
funding. According to ACF, CAAs received what was called local initiative (01 account) funding to plan,
conduct, administer and evaluate their community action programs. Tr. 253; 45 C.F.R. 1067.41-3 (1980).
ACF contends that since PDACA did not receive account 01 funds, PDACA could not have been an
eligible entity. ACF contends further that grant awards to PDACA reflect termination dates, in accordance
with those of an LPA under the EOA. CAAs were presumed to be re-funded every year, whereas LPAs
received funding with a specified termination date.

However, while ACF has again spelled out the requirements for a CAA, it has failed to state how this
requirement is binding on PDACA. As I noted previously, regulatory provisions which apply to CAAs do
not necessarily apply to LPAs serving the general purposes of CAAs. Thus, ACF has failed to persuade me
that PDACA could serve the purposes of a CAA only if it received grant awards with no specified
termination date.

D. ACF has not established that an organization which is an association of community
action directors could not be an LPA serving the general purposes of a CAA.

ACF has asserted that, by its very name, PDACA cannot be an eligible entity, because it is an association
composed of "directors." ACF avers that this type of organization does not and cannot qualify as an
eligible entity because it serves organizations and not poor persons. As proof of this, ACF offered the
testimony of Mr. Buckstead, who stated that associations of community action directors exist to meet the
needs of their member organizations. Tr. 70. Mr. Penland testified that associations of community action
directors could not qualify as eligible entities because they have no representatives of the poor. Tr. 259.
As further proof of this proposition, ACF states that under PDACA's bylaws of October 23, 1981, PDACA
limited its membership to "Community Action Agencies qualified to receive funds under the EOA of 1964,
as amended." ACF Ex. 32.

PDACA contends that ACF's analysis falls short on this issue because ACF has presented no evidence or
testimony that PDACA's activities were not similar to those of other LPAs serving the general purposes of
a CAA under the CSBG Act. Additionally, PDACA points out that none of the witnesses proffered by
ACF were familiar with the activities of PDACA. PDACA also avers that the fact that other associations
of community action directors with which ACF's witnesses had contact were not CAAs should not serve as
a basis to disqualify PDACA.

I conclude that PDACA's name alone cannot be a basis for determining that it is an eligible entity. The
relevant inquiry is whether PDACA was an LPA which served the general purposes of a community action
agency in FY 1981. Accordingly, I find ACF's argument and analysis on this issue to be irrelevant.

VII. DCA and PDACA were not denied proper notice.

Notwithstanding my determination that the Opinion was clearly erroneous, DCA and PDACA contend that
they were denied due process in this case because they did not have advance notice of the facts and law
relied upon by OCS, in accordance with the requirements set forth in the Administrative Procedure Act
(APA), 5 U.S.C. 554(b). Specifically, DCA and PDACA contend further that they did not receive proper
notice of the basis for OCS's determination that the Opinion was clearly erroneous. DCA and PDACA
aver that OCS and ACF have been inconsistent in their reasoning and in articulating the underlying basis of
why PDACA is not an eligible entity within the meaning of section 673(1) of the CSBG. DCA and
PDACA take the position that they were hampered in their preparation of the case because they were not
provided with a clear statement of the issues until ACF filed its pretrial memorandum on November 25,
1992.

PDACA and DCA contend that ACF changed its theory of the case in midstream, so that they could not
prepare for the issues confronting them. PDACA and DCA contend that ACF inappropriately asserted and
then later equivocated on the issue of whether an entity serving a statewide community could qualify as an
eligible entity under the CSBG Act. PDACA and DCA contend also that ACF initially asserted that
PDACA was required to have a tripartite board of directors in FY 1981, as defined by section 675(c)(3) of
the CSBG, then dropped this assertion.

ACF contends that it provided more than adequate notice to DCA and PDACA. ACF points to several
letters of correspondence in which it advised DCA that PDACA was not an eligible entity under section
673(1) of the CSBG Act. ACF cites a March 31, 1989 letter from OCS to DCA which asserted:

the purpose and structure of PDACA are those of an association of community action agencies
and not those of an agency serving the general purposes of a community action agency. PDACA serves
organizations but not poor people. There has been no evidence submitted that it does or ever did serve the
general purposes of a community action agency.

ACF Ex. 9.

ACF states that DCA responded to the March 31, 1989 letter on May 23, 1989, and disputed OCS's
position but did not indicate a lack of understanding of its meaning. ACF contends further that OCS
reiterated its position that PDACA was not an eligible entity by letter dated August 21, 1989. ACF Ex. 19.
8/

I find that OCS and ACF have provided sufficient notice to DCA and PDACA. DCA was entitled to notice
at the outset of these proceedings. PDACA is an intervenor and thus not entitled to notice, at least not in
the same way or to the extent DCA was. Also, PDACA was not even a party to these proceedings until my
Ruling of June 7, 1992. Any right which PDACA has to notice would therefore apply, if at all, only after
June 7, 1992, the date on which it became a party to these proceedings. 9/ However, there is ample
evidence in the record from which I can conclude that OCS provided sufficient notice to both DCA and
PDACA.

Notice was provided by OCS in letters sent to DCA on March 31, 1989, and August 21, 1989. ACF Ex. 9,
19. Both of these letters allege that PDACA did not serve the general purposes of a CAA. Moreover, on
February 28, 1991, OCS provided DCA with detailed information with respect to the basis for OCS's
conclusion that PDACA was not an eligible entity. ACF Ex. 22. That letter provided several reasons to
explain why OCS was taking this position. 10/

ACF subsequently stipulated that PDACA did not have to meet the tripartite board requirement of section
675(c)(3). However, neither PDACA nor DCA have been able to show that this has caused them any
harm. Indeed, PDACA and DCA benefitted from ACF's decision not to pursue this issue. Moreover,
although the tripartite board requirement was cited in the earlier correspondence, it is one of several
reasons given for OCS's determination. 11/ Of particular significance, OCS cited also PDACA's alleged
failure to be directly responsible for planning, coordinating, evaluating, and administering local anti-
poverty projects providing direct services to low-income people in a manner which provides for "the
maximum feasible participation of residents of the areas and members of the groups served." ACF Ex. 22.
In addition to the OCS correspondence prior to the commencement of this action, further clarification was
provided by ACF at the October 27, 1992 and November 10, 1992 prehearing conference calls.

Most importantly, ACF has stated that it does not take the position that PDACA or DCA has to refund any
of the monies received by PDACA, even if it is determined that PDACA is not an eligible entity. Tr. 325 -
27. ACF's position is that this proceeding is to have no retroactive effect on any monies given in the past
to PDACA as an eligible entity. Fairness concerns might arise where PDACA, unsure of what was
expected of it, tried in good faith to comply with the statute and then was subjected to the whimsy of ACF
and required to return funding from past years. But such is not the case here. ACF has explicitly stated
that the effect of any determination here would be prospective, i.e., if ACF prevails, it would mean only
that PDACA could no longer obtain 90 percent set aside funding in the future. Tr. 325 - 27. As a result,
this decision itself will serve as notice as to whether DCA can continue to fund PDACA as an eligible
entity out of 90 percent set aside monies. Accordingly, I find no merit in DCA's and PDACA's contentions
that they were not provided with sufficient notice and that they were somehow victimized by the shifting
theories of ACF.

CONCLUSION

I conclude that the June 12, 1990 Opinion of the Pennsylvania Attorney General that PDACA is an eligible
entity under the CSBG Act is clearly erroneous. I further conclude that, based on the evidence and
arguments presented, PDACA, in FY 1981, did not comport with the statutory requirements for maximum
feasible participation and regular participation of poor persons under sections 201(a)(4) and 211(f)(3) of
the EOA, respectively. Additionally, I conclude that PDACA, in FY 1981, did not comport with an
essential objective for community action, namely that of extensive and intensive participation of the poor
and residents of poverty areas, in accordance with 45 C.F.R. 1060.1-2(a)(1).
Accordingly, I conclude that PDACA was not, in FY 1981, an entity that served the general purposes of a
CAA within the meaning of section 673(1) of the CSBG Act. PDACA was therefore not eligible to receive
90 percent set aside funding in FY 1981. I further conclude that because PDACA was not an eligible entity
in FY 1981 and did receive 90 percent set aside funding, the State of Pennsylvania violated its assurances
under section 675 of the CSBG Act.

____________________________
Gerald P. Choppin
Presiding Officer

1. PDACA was incorporated on June 23, 1975 as the Pennsylvania Delaware Association for Community
Action. On October 23, 1981, the Pennsylvania Delaware Association for Community Action changed its
name to the Pennsylvania Directors' Association for Community Action. For the purposes of this decision,
I will refer to both the Pennsylvania Directors' Association for Community Action and its predecessor, the
Pennsylvania Delaware Association for Community Action, as PDACA.

2. Section 221(a) of the EOA of 1964 empowered the Director of the Office of Community Services
(OCS) to provide financial assistance to community action agencies for the "planning, conduct,
administration and evaluation of community action programs and components." Section 221(b)
empowered the Director to provide financial assistance for certain limited activities or projects. Section
222(a)(4) allowed development of special programs for "Rural Housing Development and Rehabilitation."

3. Sections 1062 and 1063 of these regulations were repealed at 46 Fed. Reg. 43690 (1981). However,
since they were in effect during FY 1981, they are the ones that I considered in this Decision.

4. The imminent retirement and relocation of one of ACF's witnesses necessitated the taking of that
witness' testimony in Carlisle prior to the dates on which the hearing had been scheduled.

5. I refer to the PDACA's exhibits as "PDACA Ex. (exhibit number at page)." I refer to DCA's exhibits
as "DCA Ex. (exhibit number at page)." I refer to ACF's exhibits as "ACF Ex. (exhibit number at page)." I
refer to the transcript of the testimony taken in Harrisburg, Pennsylvania on November 30 - December 1,
1992 as "Tr. (page)."

The exhibits I have marked as Presiding Officer Exhibits (PO Ex.) 1 - 3 contain the lists of received
exhibits from DCA, PDACA and ACF, respectively. At the November 30, 1992 hearing, I received into
evidence ACF Ex. 1 - 55, 56A, 57 - 59, 61 and 62; DCA Ex. 1 - 33; and PDACA Ex. 1 - 4. On January 5,
1993, I received into evidence ACF Ex. 60, which is a transcript of the testimony given by witness John
Finley on November 22, 1992 in Carlisle, Pennsylvania. ACF Ex. 56 was withdrawn at the November 30,
1992 hearing in Harrisburg.

6. Because the Opinion does not specify whether the "Year Funded" column appearing in the attachments
references the fiscal year or the calendar year, I have considered the dates in the broadest possible terms,
i.e., I considered any date within the period from October 1, 1980 through December 31, 1981, as if it did
fall during FY 1981.

7. ACF stipulated that PDACA was an LPA in FY 1981. See ACF's Trial Memorandum at 1. As an
LPA, PDACA was required to involve the poor by having at least one-third of the membership of its board
of directors be representatives of the poor or by having an advisory committee composed of at least a
majority of democratically selected representatives of the poor. 45 C.F.R. 1062.200 - 4 (1980).
However, by stipulating that PDACA was an LPA, ACF did not concede that PDACA met all of the
requirements of an LPA, such as an advisory committee. Mr. Wilson's testimony does not establish that
PDACA met this requirement.

8. Subsequently, by letter dated September 22, 1989, DCA asked OCS to clarify what programs,
activities, or agency mission constitute compliance with the requirement to serve the general purposes of a
community action agency. DCA Ex. 14. OCS apparently did not respond to this letter, at least not prior to
the June 12, 1990 Opinion of the Pennsylvania Attorney General.

9. The CSBG Act does not provide for any direct relationship between OCS and entities which are
funded by the States with Block Grant funds. The CSBG Act and its regulations provide only that the State
is required to provide certain assurances and that OCS may terminate its funding if those assurances are
violated.

10. OCS's letter of February 28, 1991 stated, in relevant part:

While PDACA received Local Initiative funding under Title II of the Economic Opportunity Act
(EOA) in FY 1981, PDACA did not serve the general purposes of a community action agency under Title
II of such Act, namely, having direct responsibility for planning, coordinating, evaluating and
administering local anti-poverty projects providing direct services to low-income people in a manner which
provides for `the maximum feasible participation of residents of the areas and members of the groups
served.' . . .

PDACA's articles of incorporation indicated that it was intended to carry out a coordinating
function among community action agencies and not to have direct contact with community programs and
residents. In addition, PDACA has failed to demonstrate compliance with the tripartite board requirements
of Section 675(c)(3) of the Act. The foregoing information leads us to conclude that PDACA did not itself
function as a community action agency.

ACF Ex. 22.

11. DCA and PDACA contend that they were provided with inadequate notice because ACF asserted,
then abandoned, its theory that an entity serving a statewide community could not qualify as an eligible
entity under the CSBG Act. According to PDACA, the testimony of ACF witness John Finley (ACF Ex.
60) contradicted earlier assertions made by ACF's counsel prior to the hearing regarding the eligibility of
statewide CAAs.

However, my review of the record reveals that this is not the case. ACF's position on this issue, as stated in
its brief, has been that 1) a CAA serves a specific geographic area that cannot be served by any other CAA
without obtaining consent from the CAA already present in that area and 2) a CAA may serve a statewide
community only when no other CAA serves a part of that State.
Mr. Finley testified that it was possible for an LPA to serve a statewide area under the regulations. ACF
Ex. 60 at 57. Mr. Finley testified also that an LPA could operate within a CAA's jurisdiction, but qualified
that with the statement that they could do so only for the purpose of performing limited jobs that the CAA
was not performing. Id. Mr. Finley's testimony, therefore, is in line with ACF's arguments. Therefore,
ACF's position with regard to the eligibility of statewide CAAs has been reasonably consistent, and neither
DCA nor PDACA has suffered harm from a change in position from ACF on this issue.