ment contracts as it has been upon many occasions expounded by the Supreme Court of the United States. Without going into legal or other technicalities the governing principle may be stated briefly that the Government is not bound by a contract or an act made by one of its agents if he acted beyond the scope of his authority. One of the most recent and fully considered decisions to this effect is that of Federal Insurance Corporation v. Merrill (92 Law Ed. 10; 332 U. S. 380). In exercising the authority placed upon the Administrator, and the tremendous responsibility thereby engendered, I am convinced that there has been taken into consideration every reasonable need of the institutions of higher learning maintained out of public funds and that the adjusted rates of compensation authorized by the Administrator in lieu of the customary rates have been and are fair and reasonable compensation for the education and training of veterans within the purposes and intent of the Readjustment Act, as amended. Thereunder such institutions have been afforded a much-needed means of readjustment during the readjustment period following the cessation of hostilities amounting to millions of dollars, as contrasted with which the amounts of Federal funds here involved, while not in any sense immaterial, are relatively small. It is, of course, within the power and jurisdiction of the Congress to prescribe a specific rate of compensation for such purposes, but it is my reasoned conclusion that the Veterans' Adminisration should not go further than it has in establishing fair and reasonable rates of compensation within the formula and limitations provided by existing law. Sincerely yours, CARL R. GRAY, Jr., EXHIBIT III Administrator. Hon. CARL R. GRAY, Jr., UNIVERSITY OF NEW HAMPSHIRE, Veterans' Administration, Washington, D. C. DEAR GENERAL GRAY: Thank you for your letter of December 12, in which you set forth the considerations you feel support your decision not to modify Veterans' Administration regulations requiring the deduction of Morrill-Nelson and Bankhead-Jones funds in determining the rate of tuition for veterans education in land-grant colleges. As I deeply regret that the persuasive reasons presented repeatedly by representatives of this association and others supporting the justice, equity, and propriety of modifying the regulations in question have not seemed compelling to you. you have already been informed, the membership of the association is greatly Concerned about this matter. We hold the firm conviction that this regulation strikes at the very integrity of the philosophy and policy on which the land-grantcollege system was established by the Congress and by which the land-grant rolieges, have been able to make their dramatic and impressive contribution to the welfare of the people of the United States. Our association and its member institutions are mindful of the many important objectives we hold in common with the Veterans' Administration. We are likewise sensitive to the complex problems with which the Veterans' Administration must deal in administering the veterans educational program. Because of these considerations, we had entertained the hope that an answer to the question of nondeductibility of Morrill-Nelson and Bankhead-Jones funds might be obtained by administrative action. We deplore the fact that apparently this possibility must now be rejected. As indicated in Mr. Thackrey's letter to you of November 4, 1949, the senate of the association voted unanimously at its convention in Kansas City on October 23 to 27 to approve the following resolution: "Whereas the entire history of Federal acts for assistance to the States in the establishment and maintenance of a national system of land-grant institutions shows clearly the endowment character of these grants; and Whereas the Veterans' Administration has followed the policy of requiring e grants in determining costs of instruction as a basis of comducation under the GI bill of rights; and Tion of Land-Grant Colleges and Universities, assembled convention, believes that this ruling of the Veterans' 30 sound practice and the intent of Congress in granting Therefore, be it. Congress that the Federal Government should pay the entire cost thereof, it being assumed that the States would continue to meet their normal obligations in this request. It was not the intent of the Congress either that the Administration must pay the actual cost of teaching personnel and supplies for instruction or even the entire amount of the estimated cost thereof; in fact, the language of the statute leaves it to the discretion of the Administrator first, whether he will establish any adjusted rate of compensation whatsoever, and if so, what rate within, of course, the limitations stated. This being a discretionary matter, it can be changed only by the Administrator and then only for most cogent reasons or by amendatory legislation. The regulation established by my predecessor and continued in effect by me is based upon this fundamental principle plus the consideration that funds paid the institutions affected by the Federal Government under other laws, which funds are used for paying the cost of teaching personnel and supplies for instruction, should be taken into consideration in establishing the adjusted rate of compensation so as not to pay such cost twice out of the Federal Treasury, and, of course, the regulation contemplated that this would be done on a pro rata basis calculated upon the ratio of the veteran student population to the entire student population of the institution. Aside from this principle of considering other Federal funds, to which it is understood your organization violently disagrees, it seems that no question is raised as to funds under statutes such as the Smith-Hughes and George-Dean Acts, but that the exception is taken to the consideration of appropriations under the so-called Morrill-Nelson and Bankhead-Jones Acts. It is argued that these acts, as did the original Morrill Act, provide endowment funds and that they should be excluded from the formula in establishing fair and reasonable tuition rates under the statutory authority cited herein before. But this overlooks the fact that these latter acts specifically authorize the use of such funds for maintenance and support, and that the regulation, properly applied, takes into consideration only such portions of said funds as are actually used for teaching costs and supplies for instruction, either one or both. It is also argued that these funds would be available for such purposes, notwithstanding the veterans education and training program, and therefore, should not be considered in connection with such program, but this argument ignores the fact that a large number of veterans enrolled in these institutions since the close of hostilities would have been the responsibility of the institutions, and therefore the States, during the war years under the normal program if it had not been for the fact that instead of enrolling in colleges the youth of those years were engaged in fighting a war. It was not the intent of the Congress, as expressed in the governing statutes, that this normal obligation of the States should be taken over by the Federal Government, but that the Federal Government should assume the additional expense or a large part thereof due to the additional enrollment occasioned by the Readjustment Act educational program. While complete data are not immediately available, it appears from known facts that of the 70 institutions involved, a number, perhaps a majority, entered into agreements properly applying the regulations with respect to consideration of Federal funds. Probably some of these institutions were not affected because they did not use Morrill-Nelson funds for paying costs of teaching personnel or supplies for instruction. A relatively small number, consisting ot several very large institutions entered into contracts which were approved by the Administration's field personnel, which contracts did not comply with the regulations in that the rates established did not take into consideration these Federal funds. This resulted in such institutions being paid over the past several years more tuition than they were entitled to under the regulations, and the Comptroller General has properly required that the Veterans' Administration recover such overpayments. This he is required to do under the statutes prescribing the duties of his office, and he is also authorized and empowered by said statutes to make final settlement in any case where there is a disagreement between the parties concerned, but in making such settlement, he is of course, bound by the governing law and regulations. It is urged strenuously by representatives of certain of these institutions in legal briefs submitted to the Veterans' Administration that the Government is bound by these contracts notwithstanding the fact that they were in violation of the governing regulations, and that under the law relating to reformation of contracts the Administration or the Government may not reopen such contracts without affording the institution an opportunity to show other costs which might offset these overpayments, but this argument ignores the law relative to Govern ment contracts as it has been upon many occasions expounded by the Supreme Court of the United States. Without going into legal or other technicalities the governing principle may be stated briefly that the Government is not bound by a contract or an act made by one of its agents if he acted beyond the scope of his authority. One of the most recent and fully considered decisions to this effect is that of Federal Insurance Corporation v. Merrill (92 Law Ed. 10; 332 U. S. 380). In exercising the authority placed upon the Administrator, and the tremendous responsibility thereby engendered, I am convinced that there has been taken into consideration every reasonable need of the institutions of higher learning maintained out of public funds and that the adjusted rates of compensation authorized by the Administrator in lieu of the customary rates have been and are fair and reasonable compensation for the education and training of veterans within the purposes and intent of the Readjustment Act, as amended. Thereunder such institutions have been afforded a much-needed means of readjustment during the readjustment period following the cessation of hostilities amounting to millions of dollars, as contrasted with which the amounts of Federal funds here involved, while not in any sense immaterial, are relatively small. It is, of course, within the power and jurisdiction of the Congress to prescribe a specific rate of compensation for such purposes, but it is my reasoned conclusion that the Veterans' Administration should not go further than it has in establishing fair and reasonable rates of compensation within the formula and limitations provided by existing law. Sincerely yours, CARL R. GRAY, Jr., EXHIBIT III Administrator. Hon. CARL R. GRAY, Jr., UNIVERSITY OF NEW HAMPSHIRE, Veterans' Administration, Washington, D. C. DEAR GENERAL GRAY: Thank you for your letter of December 12, in which you set forth the considerations you feel support your decision not to modify Veterans' Administration regulations requiring the deduction of Morrill-Nelson and Bankhead-Jones funds in determining the rate of tuition for veterans education in land-grant colleges. As I deeply regret that the persuasive reasons presented repeatedly by representatives of this association and others supporting the justice, equity, and propriety of modifying the regulations in question have not seemed compelling to you. you have already been informed, the membership of the association is greatly concerned about this matter. We hold the firm conviction that this regulation strikes at the very integrity of the philosophy and policy on which the land-grantcollege system was established by the Congress and by which the land-grant colleges, have been able to make their dramatic and impressive contribution to the welfare of the people of the United States. Our association and its member institutions are mindful of the many important objectives we hold in common with the Veterans' Administration. We are likewise sensitive to the complex problems with which the Veterans' Administration must deal in administering the veterans educational program. Because of these considerations, we had entertained the hope that an answer to the question of nondeductibility of Morrill-Nelson and Bankhead-Jones funds might be obtained by administrative action. We deplore the fact that apparently this possibility must now be rejected. As indicated in Mr. Thackrey's letter to you of November 4, 1949, the senate of the association voted unanimously at its convention in Kansas City on October 23 to 27 to approve the following resolution: "Whereas the entire history of Federal acts for assistance to the States in the establishment and maintenance of a national system of land-grant institutions shows clearly the endowment character of these grants; and "Whereas the Veterans' Administration has followed the policy of requiring the deduction of these grants in determining costs of instruction as a basis of compensation for veterans education under the GI bill of rights; and "Whereas the Association of Land-Grant Colleges and Universities, assembled at its sixty-third annual convention, believes that this ruling of the Veterans' Administration is contrary to sound practice and the intent of Congress in granting these endowment funds: Therefore, be it. "Resolved, That the association direct its executive committee respectfully to request the Eighty-first Congress to take legislative action to correct this situation if appropriate administrative action by the Veterans' Administration to correct it is not taken prior to the beginning of the second session of said Eighty-first Congress." Under the circumstances stated in your letter, it appears that it is not possible to carry on further negotiations looking toward an administrative solution of this problem. Therefore, the association now has no recourse other than to seek legislative action. Sincerely yours, ARTHUR S. ADAMS. EXHIBIT IV PERTINENT SECTION OF PUBLIC Law 346, Seventy-eighth CONGRESS, AS AMENDED BY SECTION 5 (D), PUBLIC LAW 268, SEVENTY-NINTH CONGRESS, DECEMBER 28, 1945; AND SECTION 2, PUBLIC LAW 377, EIGHTIETH CONGRESS, AUGUST 6, 1947 5. The Administrator shall pay to the educational or training institution (including the institution offering institutional on-farm training), for each person enrolled in full-time or part-time course of education or training, the customary cost of tuition, and such laboratory, library, health, infirmary, and other similar fees as are customarily charged, and may pay for books, supplies, equipment, and other necessary expenses, exclusive of board, lodging, other living expenses, and travel, as are generally required for the successful pursuit and completion of the course by other students in the institution: Provided, That in no event shall such payments, with respect to any person, exceed $500 for an ordinary school year unless the veteran elects to have such customary charges paid in excess of such limitation, in which event there shall be charged against his period of eligibility the proportion of an ordinary school year which such excess bears to $500: Provided further, That no payments shall be made to institutions, business or other establishments furnishing apprentice training on the job: And provided further, That any institution may apply to the Administrator for an adjustment of tuition and the Administrator, if he finds that the customary tuition charges are insufficient to permit the institution to furnish education or training to eligible veterans, or inadequate compensation therefor, may provide for the payment of such fair and reasonable compensation as will not exceed the estimated cost of teaching personnel and supplies for instruction; and may in like manner readjust such payments from time to time. EXHIBIT V VALIDITY OF REGULATIONS PROMULGATED IN CONNECTION WITH ADMINISTRATION OF PARTS VII AND VIII, VETERANS REGULATION No. 1 (A), AS AMENDED, FOR COMPUTATION OF CHARGES BY INSTITUTIONS RECEIVING FEDERAL FUNDS Question presented: Are provisions of paragraphs 49c and 75c (3), Veterans' Administration Manual M7-5, relating to the method of computing charges to the Veterans' Administration where an institution receives funds from the Federal Government, illegal and contrary to provisions of Public Law 16. Seventy-eighth Congress, as amended, and Public Law 346, Seventy-eighth Congress, as amended, respectively? Facts: The restriction regarding payments where Federal funds were involved was set forth in paragraph 3 (G), Veterans' Administration Instruction No. 6, title II, Public Law 346, Seventy-eighth Congress, viz, "When the total cost of instruction is paid from Federal funds, as in programs designed to train war workers, the Veterans' Administration will not approve any payments." These restrictions were more clearly set forth with the promulgation of Veterans' Administration Manual M7-5 on April 15, 1947. Paragraph 49c of the manual provides that "When the total cost of instruction is paid from Federal funds, or where a portion of the cost is covered by grants from the Federal Government (i. e., Smith-Hughes or other laws), due consideration to such subsidy will be given in determining the charge to the VA." Also, paragraph 75c (c) provides that "When the total cost of instruction is paid from Federal funds, the VA will not approve any payments for tuition. When a portion of the cost is covered by grants from the Federal Government (i. e., Smith-Hughes or other laws), due consideration to |