Let America Speak

9/24/99

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Analysis of Lobbying and Litigation Restrictions on Senate VA-HUD Appropriations Bill

Revised September 24, 1999

On September 24, the Senate passed a VA-HUD appropriations bill (S. 1596) that contains three troubling provisions proposed by Sen. Christopher Bond (R-MO) that would add new restrictions on lobbying and litigation by nonprofits. This appropriations bill covers spending through HUD, EPA, Veterans Affairs, NASA, FEMA, and several other agencies. While the three provisions only affect spending under this appropriations bill, they, nonetheless, set a bad precedent for charities across the country.

In the hours leading up to passage of the bill there was considerable confusion about compromises Bond was willing to make. It appeared that Bond was willing to modify one of the provisions to make it consistent with current practices. However, when the dust settled it became clear that the provision is still a major problem.

Summary

The following is a summary of major concerns about the Administrative Provision under Title III and Sections 425 and 430 of Title IV of the VA-HUD appropriations bill. All three provisions create restrictions on nonprofit lobbying and litigation. More specifically, they:

Impose onerous new administrative requirements on federal grantees. The Bond provisions require a nonprofit to establish separate bank accounts for funds used for lobbying and litigation activities and those to carry out grant activities, a requirement that is costly, burdensome and not required by current procedures. Current procedures require that generally acceptable accounting procedures be used to assure the segregation of funds so that auditors can verify that federal funds were not used for unallowable expenses. Additionally, EPA grantees would have to meet a new bureaucratic certification process to qualify for grants.
Create new, extreme penalties. Nonprofit grantees cannot use federal funds to lobby Congress or sue the federal government. There are already penalties imposed for any violations. In most cases, nonprofits are required to reimburse the federal government for the unallowable expenses and correct any errors in accounting practices. In rare cases, fines can be levied. And in extreme cases, the grant can be suspended. The Bond provision creates draconian penalties for the grantee even for slight accounting errors or for errors created by the agency. Any violations of using federal funds for lobbying Congress or litigating against the U.S. government would result in a new 5-year blacklist prohibiting nonprofits from receiving federal funds appropriated through the appropriations bill. The provision provides no due process or appeals provisions.
Creates a new catch-all restriction on grantee and agency activities. The Bond provisions would create a new restriction on grantee and agency activity that is "designed to promote" public support or opposition to "any legislative proposal on which congressional action is not complete." The vagueness of this provision would limit many legitimate and important grantee activities. The open ended nature of legislative proposals on which action is not complete could a create major problem. For example, would grantees be restricted from activities if a bill was introduced on a subject that was not being debated on the floor. These same restrictions would apply to agency actions. Moreover, there is a concern that if this provision were defined as lobbying -- as it most likely would -- it would force the charity on to the newly created 5-year blacklist.
Limit certain charities from receiving EPA funds. Currently, federal funds cannot be used to initiate litigation against the U.S. government unless expressly authorized by statute. The Bond provisions prevent charities (i.e., 501(c)(3) organizations) that receive EPA grants from suing the federal government -- even when other federal laws explicitly permit such a suit. Violators of this new standard would be debarment from receiving EPA funds. Additionally, it is striking that this provision only applies to charities; it does not apply to trade associations or for-profit organizations.

Detailed Commentary on Bond Provisions

Section 425

Section 425 of the bill contains language that adds severe penalties for lobbying and litigation activities beyond current procedures and applies to all agencies funded under the bill. The first sentence is generally consistent with current regulations to prohibit the use of federal funds for lobbying and litigation against the US. The second sentence, however, seems to imply that funds used for litigating or lobbying would have to be put in a separate bank account from the funds granted by agencies covered by this appropriations bill, an unprecedented requirement which seems rather extreme. This would be a new requirement imposed on grantees.

The third sentence of Section 425 would bar any organization that violates the restrictions against using federal funds to litigate or lobby, as well as the separate account requirement, from receiving funds from agencies covered by this appropriations bill for a period of five years. Once again, this far overreaches OMB Circular A-122. The circular imposes penalties but does not debar or suspend an organization. This type of blacklisting is unprecedented. Moreover, there are no requirements to give the grantee due process or appeal rights. Even an inadvertent violation could prevent an organization from receiving a federal grant for years.

Administrative Provision that Applies to EPA

The administrative provision governing the Environmental Protection Agency would require that a charity (i.e., a 501(c)(3) organization) receiving federal funds from the EPA certify that it has not used federal funds to engage in litigation against the United States. There are four major concerns about this provision. First, the provision is inconsistent with OMB Circular A-122. Although the use of federal funds to engage in litigation against the United States is generally prohibited by Circular A-122, there are exceptions. There are statutes, such as under the Developmental Disabilities Act or legal services, which specifically authorize the use of federal funds to bring suit against the U.S. If passed, this provision would prohibit any nonprofit that had brought suit against the U.S. with federal funds - even with express statutory authority - from receiving any EPA funds.

Second, this provision goes far beyond Circular A-122. Under Circular A-122, nonprofits who use federal funds for litigation against the U.S. would be responsible for repayment of the grant monies and may be assessed a fine. (In extreme situations, the grant may be suspended.) This provision would bar them from receiving any money from EPA. Third, the provision calls for a certification of compliance, a requirement that could be onerous on nonprofits receiving money under the bill and could discourage them from accepting EPA monies or from bringing suits against the U.S. with their own private funds.

Finally, under Circular A-122 it may be allowable to use grant funds to defend against litigation initiated by the U.S. government if the government loses or there is a settlement. It is unclear how this provision would affect the rules in the Circular.

Section 430

Section 430 prohibits the use of funds provided for under the bill "for any activity or the publication or distribution of literature that in any way is designed to promote public support or opposition to any legislative proposal on which congressional action is not complete." This provision, which applies to federal agency and grantee activities, seems so broad as to be applicable to almost any publication or literature that an organization or agency might make available with use of federal funds. For instance, a federally funded documentary which discusses U.S. pollution and the environment could conceivably be construed to fall under this provision if it happened to be released when Congress was considering a clean air bill.

The scope of this is very broad. A federally funded report that a nonprofit research firm produces describing the cost-effectiveness of government disaster relief efforts could violate the provision because it might encourage the public to support federal funds for the victims of Hurricane Floyd. A HUD grant to provide research on a particular subject, such as community reinvestment issues when a bill has been introduced in Congress dealing with the subject and for which Congress has not completed its actions. This list could go on and on.

EPA Administrator Carol Browner stated on September 24 that this provision is "the equivalent of a gag order that could effectively silence EPA's efforts on behalf of public health and the environment." For grantees, the penalty for violating this vague provision is likely to be the new 5 year debarment that is created under Section 425.

Conclusion

Organizations receiving federal funds should comply with existing grant and contract requirements that already place significant restrictions on lobbying and litigation activities. Those current restrictions are sufficient to prevent any abuse of federal funds, and make the proposals contained in S. 1596 unnecessary and burdensome.

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