Office of the Assistant General Counsel for Finance and Litigation

It’s The Law

Federal Assistance Law Division

Vol 12 March 31, 1999 The Restrictions On The Use Of Grant Funds For Lobbying And Other Political Activity by Edward Sharp

Overview

Not too surprisingly, Federal laws, A. Appropriations Acts Limitations regulations, and Office of Management and Budget (OMB) Circulars control the A series of statutes in which political use that can be made of Federal funds activity is addressed in a general way is for political activity. From time to time, in the appropriations acts of Federal questions have arisen within the departments, with a prohibition against Department of Commerce (DoC) about the use of funds for “publicity or what constitutes political activity – propaganda.” For example, the DoC’s especially lobbying – and how award FY 1999 appropriation statute contains funds may be used. This edition of It’s the following language: “No part of any The Law” discusses the laws, appropriation contained in this Act shall regulations, and administrative be used for publicity or propaganda guidelines that govern the use of Federal purposes not authorized by the funds for the purpose of lobbying, grass- Congress.”2 The terms “publicity” and roots organizing, or other political “propaganda” are not defined, but activity by financial assistance instead have typically been applied by recipients.1 administrative interpretation. For many years, it was unclear whether this provision was applicable to Federal 1 A general prohibition against using grantees. However, in November 1981, appropriated funds to lobby appears at 18 U.S.C. the Comptroller General concluded that §1913. It prevents Federal employees from “Federal agencies and departments are lobbying Congress on behalf of legislation. responsible for insuring that Federal However, it has typically been applied only to Federal agencies and their employees and is funds made available to grantees are not therefore outside the scope of this discussion. used contrary to [the publicity and See Grassley v. Legal Services Corp., 535 F.Supp. 818 (S.D. Iowa, 1982). 2 Pub.L. 105-227, §601. propaganda] restriction.” 3 The Federal awards. If non-appropriated Comptroller General has further funds are used to pay an employee’s interpreted the publicity and propaganda salary who isn’t a registered lobbyist, restrictions to be limited to lobbying the disclosure is not required even if that United States Congress, not to lobbying employee engages in actions that at the state level.4 constitute lobbying under the statute.5

B. Byrd Amendment (31 U.S.C. C. The Lobbying Disclosure Act of §1352). 1995 (2 U.S.C. §§1601-1607).

The “Byrd Amendment” is more The Lobbying Disclosure Act of 1995 specifically directed at the use of Federal (LDA) expanded on the definition of funds awarded through a financial “lobbying,” and created a new scheme assistance instrument than the statutes for disclosure of lobbying activity. The mentioned above. It was enacted in revisions still prohibit using Federal 1989, and OMB issued guidance on funds for lobbying activities, however, implementation of the law, requiring the LDA revised the Byrd Amendment each agency to adopt a common by reducing the amount of information regulation. The DoC’s adoption of the that must be disclosed. Organizations common rule appears at 15 C.F.R. §28. are no longer required to disclose the amount of money spent on lobbying The Byrd Amendment requires activities, or to describe the specific organizations requesting or receiving lobbying activities. For grants and Federally-appropriated funds to certify cooperative agreements, lobbying that they have not and will not use expenditures must be disclosed once Federally-appropriated funds for they reach $100,000. If an organization purposes of influencing or attempting to makes a prohibited expenditure or fails influence the Government’s decision to file the required certification and regarding a Federal contract, grant, loan disclosure, it is subject to a civil penalty or cooperative agreement. This of up to $100,000. legislation also requires organizations receiving funds over $100,000 to The LDA revisions were effective for disclose the names of registered awards made on or after January 1, lobbyists who, using non-appropriated 1996. The LDA also provides that tax- funds, have made contacts regarding exempt organizations with an Internal Revenue Code section 501(c)(4) status, 3 B-202975 (Nov. 3, 1981). This matter involved that engage in lobbying activities, are the Los Angeles Downtown People Mover ineligible to receive Federal awards Authority, which had received a grant from the (effective January 1, 1996). Those Department of Transportation. The grantee, fearing that it would lose its funding, distributed organizations that have 501(c)(4) status a letter urging readers to contact their repre- are generally referred to as “social sentative in Congress to support continued organizations,” i.e., civic organizations funding for the project. The Comptroller and volunteer fire departments. General found that the letter, to the extent that it was produced with grant funds, violated the publicity or propaganda restriction. 5 Helmets Limited, 71 Comp. Gen. 281 (Feb. 28, 4 B-214455 (Oct. 24, 1984); B-206466 (Sept. 13, 1992); Construcciones Aeronauticas, 71 Comp. 1982). Gen. 81 (Nov. 14, 1991).

2 of Congress; provided in response to a For purposes of the LDA, “lobbying written request by a covered executive activities” include: lobbying contacts branch official; required by a subpoena; and efforts in support of such contacts, in response to a notice in the Federal including preparation and planning Register soliciting communications; or activities, research and other background made in compliance with written agency work that is intended, at the time it is procedures regarding an adjudication performed, for use in contacts, and matter.8 coordination with the lobbying activities of others.6 D. Cost Principles-OMB Circulars A- 21, A-87 and A-122 A “lobbying contract” is virtually any substantive communication made to a The three OMB circulars setting out cost “covered executive (or legislative) principles9 each contain a section that branch official.” The LDA defines a pertains to the use of financial assistance “lobbying contact” as: any oral or funds for the purpose of lobbying. written communication (including an Under “Lobbying” in Circulars A-21 electronic communication) to a covered (Section J. 24) and A-122 (Attachment executive or legislative branch official B, Section 21), there are prohibitions made on behalf of a client regarding the against using award funds to influence formulation, modification or adoption of Federal elections and legislation, or Federal legislation, legislation proposals, urging others to do the same thing.10 rule regulation, executive order, ay other Circular A-87 (Attachment B, Section program, policy or position of the U.S. 8 2 USCS §1602(8)(B). Government; the administration or 9 OMB Circular A-21, “Cost Principles for execution of any Federal contract, grant, Educations Institutions”; OMB Circular A-87, loan, permit or license.7 “Cost Principles for State, Local and Indian Tribal Governments”; and OMB Circular A-122, “Lobbying contact” does not include a “Cost Principles for Nonprofit Organizations.” 10 The pertinent section of OMB Circular A-122, communication: made on a public Attachment B, Section 21, Lobbying, prohibits official acting in his/her official the use of funds (1) to influence or assist capacity; made by a representative of a campaigns for Federal, State or local election, media organization for the purpose of referendum, etc.; (2) to assist political parties, gathering and disseminating information political action committees, or other organization established to influence elections; (3) to attempt through mass communication mediums; to influence the introduction or enactment of made on behalf of a foreign government, Federal or state legislation through contact with or political party and disclosed under the legislators or their employees; (4) to attempt to Foreign Agents Registration Act; influence the introduction or enactment of requesting a meeting, status of an action, Federal or state legislation through contact with legislators or their employees though grass roots or other similar administrative request; “publicity or propaganda”; (5) to carry out made in the course of participation in a activities such as gathering information Federal Advisory Committee Act action; regarding legislation or analyzing the effects of involving testimony given before a legislation, when they are carried out in knowing committee, subcommittee or task force preparation for an effort to engage in unallowable lobbying.

6 2 USCS §1602(7). The provisions in A-21 are substantially the 7 2 USCS §1602(8)(A). same.

3 27) does not contain the restrictions Nevertheless, it is unclear how a state detailed in Circulars A-21 and A-122, agency recipient could justify using but instead notes the provisions of the award funds to lobby the executive Common Rule, “New Restrictions on branch of the state government. Lobbying,” which implements the Byrd Amendment.11 Circular A-21 also E. Examples contains a reference to the Byrd Amendment. There have been a number of questions that have arisen in DoC in the last With regard to lobbying at the state and several years pertaining to use of local governmental levels, Circulars A- financial assistance funds for lobbying 21 and A-122 contain a prohibition about which the Federal Assistance Law against trying to influence state and local Division has offered opinions. elections and state legislation. Circular A-87 does not contain such a Example 1. A DoC program funds a prohibition. It does, however, prohibit number of organizations throughout the membership in organizations country which carry out similar activities “substantially engaged in lobbying” in their geographic region. These (which would presumably include recipients agree to provide funding for lobbying at the state or local levels).12 an independent organization to organize Thus, non-governmental recipients may conferences and training and facilitate not use Federal funds to lobby state the transfer of information among the governments, However, State, local and members. If the membership dues the Indian tribal governments do not appear recipients pay are charged to the to be precluded from using Federal funds financial assistance awards they receive, to lobby at the state and local levels. can the organization engage in an effort to encourage Congress to provide more 11 OMB Circular A-87, Attachment B, Section money for the program? 27, Lobbying states: “The cost of certain influencing activities associated with obtaining grants, contracts, cooperative agreements, or Answer: The cost principles allow loans is an unallowable cost. Lobbying with Federal funds to be used to pay respect to certain grants contracts, cooperative membership fees.13 As discussed above, agreements and loans shall be governed by the in general they prohibit use of Federal Common Rule, “New Restrictions on Lobbying” funds for lobbying.14 The Byrd published at 55 FR 6736 (February 26, 1990) , including definitions, and the Office of Amendment restrictions are limited to Management and Budget “Government-wide using Federal funds to lobby Congress guidance for New Restrictions on Lobbying” and with regard to a particular award. notices published at 54 FR 52306 (December 20, However, the publicity and propaganda 1989), 55 FR 24540 (June 15, 1990), and 57 FR 1772 (January 15, 1992, respectively.” 12 The phrase is not defined in the Circular. The 13 The pertinent sections are Circulars A-21, Lobbying Disclosure Act of 1995 may provide a Section 28, Circular A-87, Section 30 and benchmark, however, with its provision that a circular A-122, Section 25. lobbyist is someone who spends 20% or more of 14 The prohibition in Circulars A-21 and A-122 is his or her time on lobbying for the employer. very broad, that in Circular A-87 is more Perhaps, analogously, an organization spending constrained in its reference to the Byrd 20% or more of its time or budget on lobbying is Amendment and with a prohibition against so “substantially engaged in lobbying” as to joining an organization “substantially engaged in trigger the A-87 provision. lobbying.”

4 restrictions in the DoC Appropriations involved in lobbying unless the lobbying Act provides additional constraints on organization itself could segment out its recipients covered by Circular A-87. lobbying costs and not include those in This would apply to both “grassroots” the membership fee. lobbying (encouraging the public to express their views to Congress) or Example 2. A citizen uses a computer direct lobbying of members of the workstation in a public library to send an legislative and executive branches. electronic message to express an opinion on a political issue to a member of Since it is known that one of the Congress or any elected official. activities of the organization is lobbying, Consider the case where the computer the portion of the membership dues that workstation and access to the electronic would go to lobbying would constitute a mail service are supported by grant violation of the Appropriations Act funds. prohibition against publicity and propaganda and result in the Answer: In this situation, where the unallowability of these costs under the grantee has done nothing to encourage costs principles. If the membership dues individuals to contact members of for an organization could be reduced by Congress, and has not set up a specific the amount spent on lobbying, that might bulletin board for the purpose of address the concern. However, this providing information on where a user might not dispose of the issue if the can write to express an opinion on a organization essentially receives all of piece of pending legislation, in our its funding from organizations which opinion the grantee is not using grant themselves receive Federal support. funds for lobbying activities. This is a Reducing the amount of dues in that case case where the grantee has no control would simply reduce the overall budget, over what users are disseminating over so that some percentage of the remaining the network. budget will still go to lobbying, which would, therefore, be supported by Example 3. The same citizen uses the Federal funds. In such a case, it may not same service to send electronic mail be possible to use Federal funds at all to messages to other individuals urging pay membership dues. them to contact their elected officials and express their opinions on a political The restrictions discussed above pertain issues. to use of funds from Federal awards. If the organization paid the membership Answer: Again, as with Example 2, in dues from non-Federal and non-cost our opinion the grantee cannot control share funds, the issue is avoided everything that is being disseminated by completely. Cost-sharing funds cannot individual users over the network. be used because they are subject to the Therefore, the grantee would not be same provisions under the Circulars as using grantee funds to lobby. are Federal funds. If the recipient has no other source of funds besides the Federal Example 4: A recipient uses grant award and the required cost share, then it funds to provide an information service would not be able to join an organization to non-profit organizations. Subscribers

5 use this service to post bulletins of pending legislation, or providing a chat interest to other users of the service. room for political activities, encouraging Some of these bulletins urge readers to people to contact their members of contact their elected officials and Congress, the grantee may appear to be express their opinions on political issues sanctioning or encouraging grassroots or pending legislation. lobbying, in violation of Circular A-122.

Example 6: A recipient uses grant Answer: Here the grantee may need to funds to provide an information service warn individuals that the network is not to non-profit organizations. The users of intended to be used to encourage users to this service exchange electronic mail contact their Federal and state elected communications about a particular officials to express their opinions on policy issue. The subscribers use this political issues or pending legislation. If service to edit a policy statement that, the grantee in any way gives approval once completed, is mailed by one of the before the bulletins are posted on the subscribers through the Postal Service to network, there may be an appearance of a member of Congress. sanctioning or promoting this type of activity. Otherwise, it would likely be Answer: Another gray area. Although difficult to show that the grantee had the stated intent is simply to provide an control of the bulletin board’s content exchange medium for policy issues and and the grantee could show it took steps the policy statement is not transmitted not to sanction or encourage such over the network, such an exchange activity. forum may have the appearance that the grantee was supporting the preparation Example 5. In the case of the service of an effort to engage in unallowable provided in Example 4, the service lobbying. provider (the grantee) designs its service to include a special section for bulletins Example 7: A recipient uses grant related to political activity. funds to develop a network that is used to collect data on the use of certain Answer: This is a gray area. To the social services. Without using grant extent the recipient is providing a funds, the grantee uses the data bulleting board announcing political generated by the network to support an events or activities, and there is no opinion expressed to a member of encouragement by the grantee or the Congress. individual who posted the bulletin to write a member of Congress about Answer: The answer to this example pending legislation or to attend the would depend on what the purpose was activity, such bulletin board should be an in gathering the data. As noted in allowable cost under the award. Example 6, if it was to gather the data to support unallowable lobbying, then However, if the grantee is providing a those costs would be unallowable. bulletin board where individuals will be However, if it was for some other encouraged to write members of informational purpose, and a user took Congress or state legislators regarding advantage of the information and used it

6 to support an opinion expressed to a allowable with regard to the use of member of Congress about proposed or Federal financial assistance in situations pending legislation, this would not result in which political activity is involved. in disallowed costs for the grantee. The Any questions on these types of issues grantee would not have control of the should be addressed to the Federal information if it was downloaded from Assistance Law Division at (202) 482- the network. 8035.

Conclusion

As the above discussion makes clear, it is not always easy to know what is