Summary: Testimony was given concerning Government-wide regulations recently proposed by the administration to control political advocacy or lobbying with appropriated funds by Government contractors and Federally funded non-profit organizations. Four agencies have simultaneously proposed the adoption of identical regulations to prohibit the reimbursement of political advocacy expenses charged to Federal grants or contracts. These proposed regulations are in part the result of GAO recommendations. However, GAO is concerned with the the way the regulations treat the allocation of costs between allowable and unallowable activities, and it is also concerned about the scope of prohibited activities included within the definition of political advocacy. Under the proposed cost principles, costs representing political advocacy are not merely disallowed but may cause otherwise legitimate costs to be disallowed as well. The full salary costs of individuals are unallowable if part of their work constitutes political advocacy or if their organization has induced them to contribute to a political organization during nonworking hours and the allowable portions of other expenses are also unallowable if any portion of the items involved are used for political advocacy. GAO has serious reservations concerning both the desirability and the legal enforceability of these penalty provisions. GAO foresees major difficulties in establishing whether particular contacts between contractors or grantees and agencies are permissible or whether they constitute impermissible political advocacy. GAO feels that the issue should be subject to full debate by all interested parties and is prepared to work with the agencies to develop revised cost principles which will protect the taxpayer's dollar and the Federal grantee's or contractor's right to compensation for legitimate work performed.
