That question has come up often since the OMB memorandum issued last week that directed federal agencies to suspend funding for a host of federal programs while the programs are reviewed in the light of recent Executive Orders. Federal courts will now grapple with broad constitutional and administrative law issues about the respective powers of the President and Congress to control federal spending in the lawsuits that have been filed challenging the “pause” outlined in the OMB Memorandum.
Regardless of the outcomes in those cases, it is possible that federal grantees, including those that receive grant funds from HHS, may down the road still face a potential termination of their grants on the ground that a grant is out of synch with an Administration’s priorities. Federal regulations applicable to grants generally provide for termination of a grant, “to the extent authorized by law, if an award no longer effectuates the program goals or agency priorities.” 2 C.F.R. section 200.340. Whether an agency can rely on this provision successfully will depend on several factors, including there being objective criteria for applying it.
In the event a grantee receives a notice of termination, what should they do? Here are some pointers:
Grant agreements are viewed as contracts, and a grantee’s rights and obligations under a grant are determined by the documents that evidence the grant (such as the grant agreement or notice of award), the OMB regulations and guidance that apply to grants generally, and regulations of other federal agencies that may have responsibility for that particular grant, if any. (For example, regulations at 45 C.F.R. Part 75 govern the Department of Health & Human Services’ grants). Having the full set of grant documents on hand is critical.
Grantees should pay particular attention to any instructions in a notice of termination, including any requirements to suspend or terminate grant activities. They should document the actions taken to comply with those instructions timely and keep track of any costs associated with doing so, while at the same time making reasonable effort to mitigate loss.
Grantees receiving termination notices should also adhere to deadlines for objecting to the termination and to provide documents or other information that may show the agency’s decision was not legally valid. Missing deadlines may impair your ability to challenge the termination later.
Receiving a termination notice creates uncertainty for sure. Planning ahead may help a grantee to successfully defend against the decision and mitigate the effects of that decision.