Grants -- Breach of Conditions
An increasingly large portion of federal disbursements are
through grants rather than contractual arrangements. The
between grants, contracts, and hybrids generally known as
agreements are not always clear. The Federal Grant and Cooperative
Agreement Act of 1977, 41 U.S.C. § 501 et seq., addresses
distinctions between funding arrangements. |
The United States is entitled to recover for breaches of grant
conditions much as it would recover for breaches of contractual
provisions. Grant-in-aid arrangements are much like contracts. See
Pennhurst State School & Hospital v. Halderman, 451 U.S. 1 (1981).
statutory schemes explicitly provide for recoveries of grant
overpayments, and some further provide for administrative
of grant overpayments that are reviewable only on a substantial
basis. See Bell v. New Jersey, 461 U.S. 773 (1983). Even in the
of such statutory schemes, a right to recover damages or
awards exists as a matter of common law, on the theory that the
government possesses a right to recover funds illegally or
paid out. See United States v. Wurts, supra; United States v. Bank
Metropolis, 40 U.S. 377, 401 (1841).
Payments made by mistake--e.g., under a misapprehension that
conditions are being observed--are recoverable. See United States
Mead, 426 F.2d 118 (9th Cir. 1970). A failure to observe
requirements can support a recovery of unsupportable disbursements.
United States v. Independent School District No. 1, supra. In
determining contractual or grant obligations, the terms of existing
statutes and regulations are read into the agreement. See Thorpe v.
Housing Authority, 393 U.S. 268, 279 (1969); Maryland-National
Park & Planning Commission v. Lynn, 514 F.2d 829, 833 (D.C. Cir.
Rehart v. Clark, 448 F.2d 170, 173 (9th Cir. 1970). The continuing
interest of the United States in grant funds can create an
lien on funds or property purchased with them. See Henry v. First
National Bank of Clarksdale, 595 F.2d 291, 309 (5th Cir. 1979),
denied, 444 U.S. 1074 (1980). See also In re Joliet-Will County
Community Action Agency, 847 F.2d 430 (7th Cir. 1988); In re
Citizens' Organization for Poverty Elimination, 91 B.R. 278 (Bankr.
D.N.J. 1988) ("HHS' rights in the motor vehicles and equipment
with grant funds and within 25 C.F.R. 74.136(a) are paramount to
of the Trustee"); In re Madison County Economic Opportunity
53 B.R. 541 (Bankr. S.D. Ill. 1985) (government had an equitable
property purchased with grant funds.)
Government funds from a federal grant cannot be attached or
subject to garnishment action, until they have paid for the
which they were appropriated. Buchanan v. Alexander, 45 U.S. (4
(1846); Palmiter v. Action, Inc., 733 F.2d 1244 (7th Cir. 1984).
[cited in USAM 4-4.460]