When a NC council of governments dissolves and gives up federally funded equipment bought with Older Americans Act subgrants, who decides what happens to the equipment: the state Division of Aging or the COG?
Plain-English summary
The Pee Dee Council of Governments was dissolving. While it had operated, it had received subgrants from the NC Division of Aging that included money to buy equipment for aging-services programs in its region. The federal funds had originally come to the State under the Older Americans Act. The Division was a federal grantee; the COG was a subgrantee. Now that the COG was shutting down and had no more use for the equipment, who got the equipment? The Division said the state surplus rules applied. The COG's Executive Director argued the COG should be allowed to buy the equipment from the Division.
Representative Wayne Goodwin asked the AG to resolve the dispute. Senior Deputy AG Reginald Watkins and a panel including Special Deputies Roy Giles Jr. and Richard Slipsky, plus Assistant AG Teresa White, concluded the state rules applied.
The AG's analysis worked through the relevant federal regulation, 45 C.F.R. § 92.32, which set uniform property disposition rules for grants from the U.S. Department of Health and Human Services to state and local governments. The regulation drew an explicit distinction based on who received the grant directly.
For grants to states. Section 92.32(b) said a state "will use, manage, and dispose of equipment acquired under a grant by the State in accordance with State law and procedures." States were treated as full owners for disposition purposes; the federal rules deferred to state procedures.
For grants to non-state recipients. Subsections (c) through (e) set federal disposition procedures for grants to non-state grantees and subgrantees. Section 92.32(e)(1) was the relevant alternative: when equipment "is no longer needed for the original project or program or for other activities currently or previously supported by a Federal agency," items with a current per-unit fair market value of less than $5,000 could be retained, sold, or otherwise disposed of "with no further obligation to the awarding agency."
The Division of Aging argued for § 92.32(b); the Pee Dee COG argued for § 92.32(e)(1). The AG sided with the Division. The federal grant ran from HHS to the State of North Carolina, not to the COG directly. The State then subgranted to the COG. The subgrant did not change the underlying nature of the federal grant. Under § 92.32(b), the State retained ownership-style authority over the equipment, and the COG, as a subgrantee, held the equipment subject to state surplus rules.
The AG then added a second, alternative ground. Even if § 92.32(e)(1) had applied, its predicate condition was not met. The predicate was that the equipment "is no longer needed for the original project or program or for other activities currently or previously supported by a Federal agency." In this case, the Division of Aging had affirmatively said it needed the property. As long as the Division needed the equipment, the disposition trigger in § 92.32(e)(1) did not fire. The AG even noted that, if the Division did not need the equipment, a further determination would be required as to whether any other state or local programs currently or previously federally supported could use the equipment.
The opinion ended with two careful disclaimers. The AG did not opine on whether the equipment was actually needed for any other federal program. The AG also did not opine on the value of the equipment in question. Those were fact questions for the Division of Aging and any potential other recipients to work out.
For other councils of governments and other federal-grant-funded equipment scenarios, the practical takeaway was clear: when the federal grant runs to the State, state surplus rules apply on dissolution of a subgrantee. The subgrantee did not get a property-retention right by virtue of having held the equipment day-to-day.
Currency note
This opinion was issued in 2001. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. 45 C.F.R. Part 92 was superseded by the federal Uniform Administrative Requirements (45 C.F.R. Part 75 for HHS) under the 2014 OMB Uniform Guidance (2 C.F.R. Part 200). The substantive treatment of state-acquired equipment under federal grants in the new framework should be checked against the current rules before applying this opinion's framework.
Background and statutory framework
The Older Americans Act framework. Title III of the Older Americans Act (42 U.S.C. §§ 3021 et seq.) was the principal federal funding stream for community-based aging services: meals, transportation, in-home care, senior centers, and information and referral. Money flowed from the federal Administration on Aging (within HHS) to State Units on Aging, which in North Carolina was the Division of Aging. The State Units then subgranted to Area Agencies on Aging and other regional entities, which in turn subcontracted to direct-service providers.
Councils of governments as regional planning bodies. A council of governments was a voluntary association of local governments serving multi-county regions. The Pee Dee COG covered counties in the southeastern part of North Carolina and had been authorized by the Division of Aging to operate aging programs as an Area Agency on Aging or similar regional entity. When the COG dissolved, its programs and equipment had to go somewhere.
Federal property rules: 45 C.F.R. Part 92. Part 92 was the HHS counterpart to the uniform OMB grant management framework. Section 92.32 governed equipment, which was defined more or less as tangible personal property with a useful life of more than one year and a per-unit acquisition cost above a threshold ($5,000 or the state's own capitalization level, whichever was lower). The regulation distinguished sharply between state and non-state grantees, with the state-grantee path being significantly more permissive.
Why states got more deference. The federal regulations reflected a federalism principle: when federal money flowed to a state, the state's procurement and surplus rules ordinarily controlled the resulting equipment. Federal rules supervened only where necessary. For non-state grantees (private nonprofits, local governments not acting as state agencies, councils of governments), the federal rules were more prescriptive because there was no state-level fiduciary framework deemed adequate.
The predicate condition in § 92.32(e)(1). Even if the COG's reading of the regulation had been correct, the COG would have had to satisfy the threshold question: was the equipment no longer needed for the original project or any other federally supported activity? The Division's affirmative statement that it needed the equipment knocked out the COG's claim at this preliminary step. The AG flagged that even if the Division had not needed it, another federally supported NC program might have, and that secondary check would have had to be run before the COG could keep the property.
Common questions
Q: Could the Pee Dee COG have bought the equipment at fair market value from the Division?
A: The opinion did not foreclose a sale at fair value. State surplus rules typically allow for such transactions. But the COG could not claim the equipment as of right under § 92.32(e)(1).
Q: Did the COG's Executive Director have any recourse?
A: The Executive Director's argument was procedural: that § 92.32(e)(1) governed and entitled the COG to buy the equipment. The AG rejected that. The COG could still negotiate with the Division as a willing buyer of surplus state property, subject to state surplus rules.
Q: What about equipment under $5,000 in value, the threshold mentioned in § 92.32(e)(1)?
A: That threshold was relevant only if § 92.32(e)(1) had applied. The AG concluded it did not. The threshold was about which retention rules applied to non-state grantees, not about state-grantee property generally.
Q: Did the AG say what specific state surplus rules applied?
A: No. The opinion incorporated by reference whatever NC state surplus property rules were in force in 2001. Those would have included statutes and rules administered by the Department of Administration's State Surplus Property Office.
Citations from the opinion
- 42 U.S.C. § 3000 et seq.
- 42 U.S.C. § 3021 et seq.
- 45 C.F.R. Part 92
- 45 C.F.R. § 92.32
- 45 C.F.R. § 92.32(b)
- 45 C.F.R. § 92.32(e)(1)
Source
- Landing page: https://ncdoj.gov/opinions/disposition-of-surplus-state-property-by-a-council-of-government/
Original opinion text
Re: Advisory Opinion: Disposition of surplus state property by a Council of Government (COG); 42 USC 3000 et seq, 45 CFR Part 92
Dear Representative Goodwin:
Pursuant to the Older Americans Act (42 U.S.C. 3000, et seq.), the State of North Carolina has named the Division of Aging as the state's sole agency for aging programs. The Division has established regional programs, among them the Pee Dee COG, to serve aging persons across the state. The Division made a subgrant to the Pee Dee COG, which was used in part, to buy equipment for use in the aging program. The funds used to purchase the equipment in question were awarded to the Division of Aging pursuant to Subchapter III of the Older Americans Act (42 USC 3021, et seq.). You have requested our opinion concerning the disposition of surplus state property in the possession of the Pee Dee COG now that the Pee Dee COG is being dissolved and no longer has need for the property.
We have reviewed both the federal and state statutes and regulations which apply to the property at the Pee Dee COG.
45 CFR Part 92 is the federal regulation which ensures uniform administration of grants and cooperative agreements entered into by state governments and the U.S. Department of Health and Human Services (USDHHS). 45 CFR 92.32 controls the use, management, and disposition of equipment purchased with grant money awarded to the Division by USDHHS. With regard to equipment acquired under a grant to a State, 45 CFR 92.32(b) provides in relevant part:
States. A state will use, manage, and dispose of equipment acquired under a grant by the State in accordance with State law and procedures. Other grantees and subgrantees will follow paragraphs (c) through (e) of this section.
45 CFR 92.32(b) (Emphasis added.)
45 CFR 92.32(e)(1) provides as follows:
Disposition. When original or replacement equipment acquired under a grant or subgrant is no longer needed for the original project or program or for other activities currently or previously supported by a Federal agency, disposition of the property will be made as follows: . . . (1) Items of equipment with a current per-unit fair market value of less than $5,000 may be retained, sold or otherwise disposed of with no further obligation to the awarding agency. (Emphasis added.)
The Division of Aging contends that the disposition instructions of 45 CFR 92.32(b) apply and that the property should be disposed of in accordance with state law and procedure. The Executive Director of Pee Dee contends that the disposition instructions of 45 CFR 92.32(e)(1) apply, and therefore the Pee Dee COG should be allowed to buy the equipment from the Division of Aging. In the instant situation, a grant was made by the USDHHS to the State (the Division of Aging). Because the federal grant was made to the State and the State made its own award to Pee Dee, we are of the opinion that the state surplus property rules apply pursuant to 45 CFR 92.32(b).
Even if 45 CFR 92.32(e)(1) did apply to this equipment, it appears the predicate for disposition of property under this regulation is missing. This disposition instruction only applies when the equipment is "no longer needed for the original project or program or for other activities currently or previously supported by a Federal agency." In other words, the disposition instruction applies only where there is no eligible agency with a need for the equipment.
In this case, the Division of Aging has indicated a need for the property. Assuming the Division does need the property, the predicate for Pee Dee COG retaining the property would not exist. It is noted that even if the aging program did not need the equipment, a determination would have to be made as to whether or not there are other state or local programs currently or previously supported by federal money that could make use of the equipment.
We express no opinion as to whether the equipment is needed for any other Federal programs or as to the value of the equipment in question.
Very truly yours,
Reginald L. Watkins, Senior Deputy Attorney General
Roy A. Giles, Jr., Special Deputy Attorney General
Richard Slipsky, Special Deputy Attorney General
Teresa L. White, Assistant Attorney General