Shiprock Associated Sch., Inc. v. United States

Citation934 F.Supp.2d 1311
Decision Date28 March 2013
Docket NumberCivil No. 11–cv–983 MV/WDS.
PartiesSHIPROCK ASSOCIATED SCHOOLS, INC., Plaintiff, v. UNITED STATES of America, et al., Defendants.
CourtUnited States District Courts. 10th Circuit. District of New Mexico


C. Bryant Rogers, Van Amberg, Rogers, Yepa, Abeita & Gomez, LLP, Santa Fe, NM, for Plaintiff.

Hector G. Bladuell, United States Department of Justice, Washington, DC, Jan Elizabeth Mitchell, United States Attorneys Office, Albuquerque, NM, for Defendants.


MARTHA VÁZQUEZ, District Judge.

THIS MATTER comes before the Court on Defendants' Motion to Dismiss [Doc. 23]. The Court, having considered the motion, briefs, relevant law and being otherwise fully informed, finds that the Motion is not well-taken and will be denied.

I. The Tribally Controlled Schools Act

The Tribally Controlled Schools Act (“TCSA”), enacted in 1988, authorizes and requires the Secretary of the Interior to award grants to Indian tribes or tribal organizations to operate schools on their reservations if requested by a tribe. See25 U.S.C. § 2501 et seq. In the TCSA's “Declaration of policy,” Congress noted its recognition that:

The Indian Self–Determination and Education Assistance Act, which was a product of the legitimate aspirations and a recognition of the inherent authority of Indian nations, was and is a crucial positive step toward tribal and community control and that the United States has an obligation to assure maximum Indian participation in the direction of educational services so as to render the persons administering such services and the services themselves more responsive to the needs and desires of Indian communities.

25 U.S.C. § 2501(a). Further, Congress specifically:

declare[d] its commitment to the maintenance of the Federal Government's unique and continuing trust relationship with and responsibility to the Indian people for the education of Indian children through the establishment of a meaningful Indian self-determination policy for education that will deter further perpetuation of Federal Bureaucratic domination of programs.

25 U.S.C. § 2501(b). Finally, Congress affirmed that “Indian people have special and unique educational needs” that “may be best met through a grant process.” 25 U.S.C. § 2501(d).

A. Grants Authorized Under the TCSA

25 U.S.C. Section 2502 describes the “Grants authorized” under the TCSA. With regard to the “Use of funds,” Section 2502(a)(3)(A) provides that, “In general”:

Except as otherwise provided in this paragraph, grants provided under this chapter shall be used to defray, at the discretion of the school board of the tribally controlled school with respect to which the grant is provided, any expenditures for education related activities for which any funds that compose the grant may be used ... including expenditures for—

(i) school operations, academic, educational, residential, guidance and counseling, and administrative purposes; and

(ii) support services for the school, including transportation.

25 U.S.C. § 2502(a)(3)(A). Section 2502(a)(3)(B) provides the only stated “Exception” to this general rule, as follows:

Grants provided under this chapter may, at the discretion of the school board of the tribally controlled school with respect to which such grant is provided, be used to defray operations and maintenance expenditures for the school if any funds for the operation and maintenance of the school are allocated to this school under the provisions of any of the laws described in section 5205(a).

25 U.S.C. § 2502(a)(3)(B).

Section 2502(b) sets forth “Limitations” on the grants authorized under the TCSA. Those limitations include an “Administrative costs limitation,” as follows: “Funds provided under any grant under this chapter may not be expended for administrative costs (as defined in section 2008(h)(1) of this title) in excess of the amount generated for such costs under section 2008 of this title.” 25 U.S.C. § 2502(b)(3).

B. Composition of Grants Provided Under the TCSA

The grants provided to an Indian tribe or tribal organization under the TCSA consist of Indian School Equalization Program (“ISEP”) funds, allocated under 25 U.S.C. Section 2007, and funds for administrative costs, allocated under 25 U.S.C. Section 2008. See25 U.S.C. § 2503(a). Section 2007 provides for the establishment of a formula for determining the minimum annual amount of funds necessary to sustain each Bureau-funded school. 25 U.S.C. § 2007(a)(1).

Section 2008 provides for grants for “the cost of necessary administrative functions.” 25 U.S.C. § 2008(a)(1)(A). Specifically, Section 2008(b)(1) provides:

Subject to the availability of funds, the Secretary shall provide grants to each tribe or tribal organization operating a contract school or grant school in the amount determined under this section with respect to the tribe or tribal organization for the purpose of paying the administrative and indirect costs incurred in operating contract or grant schools.

25 U.S.C. § 2008(b)(1). The stated purpose of these grants is to “enable tribes and tribal organizations operating such schools, without reducing direct program services to the beneficiaries of the program, to provide all related [necessary] administrative overhead services and operations,” and to “carry out other necessary support functions which would otherwise be provided by the Secretary or other Federal officers or employees, from resources other than direct program funds, in support of comparable Bureau-operated programs.” 25 U.S.C. §§ 2008(b)(1)(A)-(B).

Section 2008(c), entitled “Determination of grant amount,” sets forth the formula that “shall” be used to determine [t]he amount of the grant provided to each tribe or tribal organization under this section for each fiscal year.” 25 U.S.C. § 2008(c)(1). That formula applies the “administrative cost percentage rate” set forth in Section 2008(d). 25 U.S.C. § 2008(d). The amount of the administrative cost grant as determined pursuant to Section 2008(c) is herein referred to as the “Calculated Need Amount.”

Section 2008(j), entitled “Authorization of appropriations,” provides that [t]here are authorized to be appropriated to carry out this section such sums as may be necessary.” 25 U.S.C. § 2008(j)(1). This subsection, however, also provides for pro rata “Reductions” in the event that “the amount of funds appropriated to carry out this section for [any] fiscal year” are insufficient to meet “the total amount of funds necessary to provide grants to tribes and tribal organizations in the amounts determined under subsection (c) of this section.” 25 U.S.C. § 2008(j)(2). Specifically, if the appropriated funds are insufficient, “the Secretary shall reduce the amount of each grant determined under subsection (c) of this section for such fiscal year by an amount that bears the same relationship to such excess as the amount of such grants determined under subsection (c) of this section bears to the total of all grants determined under subsection (c) for all tribes and tribal organizations for such fiscal year.” Id. The amount of the administrative cost grant actually paid, after reductions pursuant to Section 2008(j)(2), is herein referred to as the “Prorated Need Amount.”

II. The Facts

Plaintiff Shiprock Associated Schools, Inc. (the School) is a tribal organization of the Navajo Nation. Doc. 1 (Complaint) ¶ 3. Pursuant to a TCSA grant agreement, the School operates a pre-K through twelfth grade school program on the Navajo Reservation. Id. ¶ 4. For the period ending June 30, 2009, the School's Calculated Need Amount, as determined pursuant to Section 2008(c), was $1,113,800. Id. ¶ 26. The School's Prorated Need Amount, or the amount of the administrativecost grant actually paid to the School after reductions pursuant to Section 2008(j), was $694,700. Id.

For that same period, however, the School incurred $713,104 to support its Bureau of Indian Education (“BIE”) funded school operations. Id. ¶ 27. This amount was below the $1,113,800 Calculated Need Amount determined by the government, but $72,790 more than the Prorated Need Amount paid through its administrative cost grant. Id. The School made up the difference between its actual administrative costs and its administrative cost grant with ISEP funds received pursuant to Section 2007. Id.

In accordance with the Single Audit Act, made applicable to TCSA schools pursuant to 25 U.S.C. Section 2507(a)(1), the School retained Keystone Accounting, LLC (the “Auditor”), to perform an audit for the grant period ending June 30, 2009. Id. ¶¶ 29–30. The Auditor issued a finding questioning the School's $72,790 expenditures on administrative costs, because such expenditures exceeded the $694,700 actually paid to the School in the form of an administrative cost grant. Id. ¶ 32. Based on the audit report and additional information submitted by the School, BIE's New Mexico Navajo North Education Line Office (“ELO”), through Defendant Joel Longie, issued Findings and Determinations (“F & D”) disallowing the $72,790 in administrative cost expenditures paid with ISEP funds. Id. ¶ 34. The ELO determined that the School would need to repay the federal government the disallowed costs of $72,790, and arranged for a bill of collection to be sent to the School. Id. ¶¶ 36, 37.

Thereafter, on May 23, 2011, the School requested that the ELO revise the disallowed cost determination, and “allow [the School] to use [ISEP] funds to pay for the School's over expenditure of its Administrative Cost grant.” Id. Ex. 5. In a letter dated October 27, 2011, the ELO rejected this request on the basis that, [p]ursuant to the administrative cost limitation in the [TCSA] (25 U.S.C. 2502(b)(3)), grant funds ‘may not be expended for administrative costs in excess of the amount generated for such costs under’ the administrative cost grant.” Id. (emphasis added).

The ELO's letter reflects the federal government's interpretation of the phrase “amount...

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