Unallowable Expenditure of Federal Funds for Lobbying Activities Under OMB Circular A-122

B-274787: Oct 1, 1996

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The attached legal memorandum responds to the request for our assistance in determining whether funds disbursed to The Nature Conservancy (TNC) by the National Oceanic and Atmospheric Administration (NOAA) under cooperative agreement award number NA370M0122 and by the National Fish and Wildlife Foundation (NFWF) under grant number 94-013 have been used appropriately. These awards provided funds to TNC to promote public awareness and support for the Florida Keys National Marine Sanctuary. In conjunction with this review, as agreed with congressional staff, we have also examined TNC's compliance with recordkeeping requirements under these awards, and the monitoring of TNC's compliance with the terms of the awards by NOAA and NFWF. In responding to this request, we analyzed documents relating to the NOAA and NFWF awards provided to us by the Committee, by TNC, and by NOAA and NFWF. We also interviewed a number of individuals who we believed could provide relevant information, including employees and former employees of TNC, NOAA, and NFWF, and obtained the official views of TNC, NOAA and NFWF on the issues raised.

The costs associated with certain activities engaged in during the course of the NOAA award by a TNC Public Affairs Manager whose salary was paid in part by the award constitute lobbying costs that are not allowed to be charged to federal awards under Office of Management and Budget (ONIB) Circular A-122. These activities included an attempt to prevent a local referendum on the Florida Keys National Marine Sanctuary Act and attempts to influence federal and state legislation. The only contemporaneous report on the work done by the employee under the NOAA award indicates that costs associated with certain of these unallowable activities were being charged to the federal award. However, as long as TNC can now establish that it had allowable costs under the award totaling the full amount of the awarded funds, it is not required to reimburse NOAA for the unallowable costs. With respect to the NFWF award, we found that a TNC employee whose salary was funded by the award and who was supervised by the Public Affairs Manager, engaged in grassroots lobbying, the costs of which are not allowable under OMB Circular A-122. While we cannot determine the specific amount expended on the unallowable lobbying activity, it does appear to have been small and commingled with proper expenditures so as to make the recovery of these funds impractical. We also found, with respect to the NOAA award, that TNC did not comply with certain relevant record-keeping requirements. Further, we found that NOAA did not adequately monitor TNC's activities or its compliance with the terms of the award during the award period. Finally, with respect to NFWF's monitoring of the TNC grant, we conclude that incomplete reporting by TNC made detailed monitoring by NFWF very difficult.