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Criminal Resource Manual

Criminal Resource Manual
CRM 1500-1999

1645. State And Local Programs Financed By The Federal Government

The Federal government disburses funds to state and local organizations in a variety of ways. In some cases federal funding takes the form of an unconditional grant of aid. In other cases funding is received through grants conditioned on compliance with certain federal regulations. In still other instances federal assistance is provided through cost reimbursement contracts. These variations can create problems for the prosecutor in determining when funds lose their "federal character."

In some instances the funding program itself defines when title to the funds passes from federal to local authorities. For example, in many unconditional grants, a letter of credit upon which the program may draw is issued to a bank. When the letter of credit is issued, title to the funds passes to the program, Kings County v. Seattle School District, 263 U.S. 361 (1923), and 18 U.S.C. § 641 would not be applicable. In some cost reimbursement contracts the agreement itself will specifically provide for the passing of title. See United States v. Echevaria, 262 F. Supp. 373 (D.P.R. 1967).

In other cases jurisdiction under 18 U.S.C. § 641 will depend upon the degree of control which the Federal government retains over the funds:

In determining if stolen funds are things of value of the United States, the key factor is whether the Federal government still maintained supervision and control over the funds at the point when the funds were stolen. See United States v. Bailey, 734 F.2d 296, 300-01 (7th Cir.), cert. denied, 469 U.S. 931, 105 S.Ct. 327, 83 L.Ed.2d 263 (1984). Evidence that the Federal government monitors and audits programs, regulates expenditures, and has the right to demand repayment of funds is adequate evidence that stolen funds or property were a thing of value of the United States under Sec. 641. See id.; Brown, 742 F.2d at 362; United States v. Mitchell, 625 F. 2d 158, 161 (7th Cir.), cert. denied, 449 U.S. 984, 101 S.Ct. 402, 66 L.Ed.2d 247 (1980); United States v. Maxwell, 588 F.2d 568, 572 (7th Cir. 1978), cert. denied, 444 U.S. 877, 100 S.Ct. 163, 62 L.Ed.2d 106 (1979); United States v. Smith, 596 F.2d 662, 664 (5th Cir. 1979); see also United States v. Harris, 729 F.2d 441, 446 (7th Cir. 1984) (analogous crime under 18 U.S.C. § 657); United States v. Scott, 784 F.2d 787, 791 (7th Cir), cert. denied, 476 U.S. 1145 (1986).

Finally, it must be remembered that many federal programs have specific statutory provisions relating to theft or embezzlement of funds or property. A listing of these more specific statutes can be found in this Manual at 1662.

[cited in JM 9-66.200]