Federal contractors, grantees, borrowers, and others receiving federal funds face a variety of restrictions on their use of those funds for political purposes, including for lobbying. A new presidential memorandum issued last week by President Trump highlights one of those restrictions, 31 U.S.C. § 1352, also known as the Byrd Amendment, and singles out grantees for additional scrutiny and investigation by the Department of Justice. This is another example of the heightened legal risk environment for federal contractors and grantees (particularly nonprofit organizations) in the current Administration, especially related to activities that could be construed as political.
The memorandum states, “Federal funding reviews by my Administration have revealed that taxpayer funds are being spent on grants with highly political overtones” and raises “the possible use of Federal grants as slush funds for political and legislative advocacy.” It explains that Federal law restricts grantees from lobbying with appropriated funds or supporting candidates or parties with grant funds. It then directs the Attorney General to investigate whether grant funds are being used illegally for lobbying, citing the Byrd Amendment; take enforcement action as needed; and report back within 180 days on the progress of the investigation.
As the memorandum notes, and subject to certain exceptions, the Byrd Amendment prohibits any recipient of federal contracts, grants, loans, and cooperative agreements from using any appropriated funds for lobbying on those topics—attempting to influence officers and employees of an agency or a Member or employee of Congress in connection with a federal contract, grant, loan, or cooperative agreement, including the extension, continuation, renewal, amendment, or modification of the same. Though this prohibition is focused on lobbying related to such contracts, grants, loans, and agreements, the application of this provision can be highly fact-dependent, highlighting the need to carefully examine any planned lobbying activity supported by federal funds even if it does not directly relate to a specific contract. Where applicable, recipients of federal funds must file a disclosure, usually using Form SF-LLL (“Form LLL”), identifying any federal lobbyists registered on their behalf under the Lobbying Disclosure Act (“LDA”) with respect to the covered contract, grant, loan, or agreement and certifying compliance with the Byrd Amendment. The law also requires flowing this disclosure and certification requirement down to potential subcontractors and subgrantees, with primary recipients required to collect such certifications from their subrecipients.
This memorandum, along with the Byrd Amendment, the LDA, restrictions on lobbying by some nonprofits, state lobbying law, and a political environment hostile to some contractor and nonprofit activity, underscores the need for recipients of federal funds to have procedures in place to comply with these restrictions, including proper accounting methods and controls.
Covington’s top ranked Election and Political Law and Government Contracts practices routinely collaborate to provide contractors and grantees with advice on navigating these issues. If you have any questions concerning the material discussed in this client alert, please contact the following.
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