UNITED STATES DEPARTMENT OF AGRICULTURE

OFFICE OF THE SECRETARY

NATIONAL APPEALS DIVISION

In the Matter of XXXXX Appellant and NATURAL RESOURCES CONSERVATION SERVICE Agency and XXXXX Third Party

Case Number 2025W000437

APPEAL DETERMINATION

The Natural Resources Conservation Service (NRCS, or Agency) offered grant funding through the Partnerships for Climate Smart Commodities (PCSC) program.  During 2023, XXXXX (Appellant) received a PCSC grant totaling nearly $5 million and subsequently enrolled 25 producers to promote climate-smart agriculture and forestry practices over a five-year period.  However, during 2025, the Agency terminated the grant, citing a new priority requiring at least 65% of federal funds to go directly to producers, which the Agency states the grant did not fulfill.

The Appellant contends that the Agency lacked the authority to terminate its PCSC grant based solely on a change in Agency policy, asserting that termination should be limited to instances where a grantee fails to fulfill the original priorities established at the time of award execution. Additionally, the Appellant argues that the Agency did not provide a reasoned explanation or properly consider reliance interests as required by law, rendering the termination arbitrary and capricious.  Finally, the Appellant asserts that it acted in good faith throughout both the application and grant performance periods to fully comply with program requirements and intends to seek equitable relief should the Agency ultimately be found not to have erred.

I held a video-teleconference conference (VTC) on January 7-8, 2026, and closed the record on March 2, 2026, at the request of the parties.  The NAD Western Region Director subsequently extended the publication date of this determination to May 1, 2026.  Based on the evidence and arguments submitted by the parties, and the applicable program regulations, I conclude that the Agency erred when it terminated Appellant’s PCSC grant.  In so concluding, I have considered and largely adopted the legal reasoning, analysis, and conclusions articulated in NAD Cases 2025W000432 (A.J. Det., December 3, 2025) and 2025W000434 (A.J. Det., December 31, 2025) which addressed the Agency’s termination of a PCSC grant solely due to not meeting the 65% federal-funding-to-producer threshold—which is the issue in the present case before me.  I have also created a record from which the NAD Director can decide whether equitable relief is appropriate, if sought in response to an NRCS request for Director Review.    

PROGRAM BACKGROUND

According to the Partnerships for Climate-Smart Commodities National Funding Opportunity (NFO) the purpose of PCSC was to support the production and marketing of climate-smart commodities through a set of pilot projects that provide voluntary incentives through partners to producers and landowners, including early adopters, to:

a.       implement climate-smart production practices, activities, and systems on working

lands,

b.      measure/quantify, monitor and verify the carbon and greenhouse gas (GHG) benefits

      associated with those practices, and

c.   develop markets and promote the resulting climate-smart commodities.

All projects were required to be tied to the development of markets and promotion of climate-smart commodities.  For the purposes of PCSC, a “climate-smart commodity” is an

agricultural commodity that is produced using agricultural (farming, ranching, or forestry)

practices that reduce greenhouse gas emissions or sequester carbon.  (NFO, page 2; Agency Record (AR), page 166).  Project evaluation criteria included sufficient incentives to encourage producer participation, as well as generation of verifiable greenhouse gas reductions and carbon sequestration.  (NFO, page 3; AR, page 167)

The authority for PCSC is the Commodity Credit Corporation Charter Act (Title 15 of the United States Code (15 U.S.C.) Section (§) 714 et seq.) which includes that the “CCC is authorized to use its powers to increase the domestic consumption of agricultural commodities (other than tobacco) by expanding or aiding in the expansion of domestic markets or by developing or aiding in the development of new and additional markets, marketing facilities, and uses for such commodities.”  (NFO, page 6; AR, page 170)

PCSC terms and conditions include the requirements in Part 200 of Title Two of the Code of Federal Regulations (2 C.F.R. Part 200).  Two C.F.R. § 200.340 specifies that the Federal award may be terminated in part or in its entirety as follows:

(1) By the Federal agency or pass-through entity if the recipient or subrecipient fails to comply with the terms and conditions of the Federal award;

(2) By the Federal agency or pass-through entity with the consent of the recipient or subrecipient, in which case the two parties must agree upon the termination conditions. These conditions include the effective date and, in the case of partial termination, the portion to be terminated;

(3) By the recipient or subrecipient upon sending the Federal agency or pass-through entity a written notification of the reasons for such termination, the effective date, and, in the case of partial termination, the portion to be terminated. However, if the Federal agency or pass-through entity determines that the remaining portion of the Federal award will not accomplish the purposes for which the Federal award was made, the Federal agency or pass-through entity may terminate the Federal award in its entirety; or

(4) By the Federal agency or pass-through entity pursuant to the terms and conditions of the Federal award, including, to the extent authorized by law, if an award no longer effectuates the program goals or agency priorities.^[1]

Two C.F.R. § 200.340 further states that, “[t]he Federal agency or pass-through entity must clearly and unambiguously specify all termination provisions in the terms and conditions of the Federal award.”  USDA’s General Terms and Conditions for Grant and Cooperative Agreements states that “Allowable project costs will be determined in accordance with the authorizing statute, the purpose of the award, and, to the extent applicable, to the type of organizations receiving the award, regardless of tier.”  See U.S. Department of Agriculture Farm Production and Conservation, General Terms and Conditions for Grants and Cooperative Agreements, page

1; AR, page 229.  The General Terms and Conditions specifically list the termination provisions of 2 C.F.R. § 200.340.  See U.S. Department of Agriculture Farm Production and Conservation, General Terms and Conditions for Grants and Cooperative Agreements, page 18: AR, page 246.  

STATEMENT OF THE ISSUES

The issue in this appeal is whether the Agency, on April 22, 2025, correctly applied the applicable rules and regulations when it terminated Appellant’s PCSC grant.  The specific questions I must address are:

1. Did the Agency err when it terminated Appellant’s PCSC grant?

2. What evidence and arguments does the Appellant present for possible equitable relief consideration from the NAD Director?

FINDINGS OF FACT (FOF)

1. The Appellant is a “nonprofit auxiliary organization dedicated to advancing the mission of [XXXXX (University)].  Established to serve the evolving needs of the campus and surrounding community, [Appellant] is a fully integrated partner in the university’s academic, operational, and strategic efforts.  Though legally separate as a 501(c)(3) nonprofit, [Appellant] operates in full alignment with [University] policies.  It plays a key role in supporting student success, faculty research, and institutional growth while maintaining a culture rooted in openness, trust, and integrity.  [Appellant] is self-supporting and does not receive direct state funding.” (https:// XXXXX.edu/departments/corporation)

2.                  In 2022, the Agency published a National Funding Opportunity (NFO) for PCSC.  In the NFO the Agency announced that approximately $1 billion in funding would be made available to support the production and marketing of climate-smart commodities through a set of pilot projects that provide voluntary incentives through partners to producers and landowners to:

·         Implement climate-smart production practices, activities, and systems on working lands,

·         Measure/quantify, monitor and verify the carbon and greenhouse gas (GHG) benefits associated with those practices, and

·         Develop markets and promote the resulting climate-smart commodities

The NFO required that all projects be tied to the development of markets and promotion of climate-smart commodities and defined “climate-smart commodity” as “an agricultural commodity that is produced using agricultural (farming, ranching, or forestry) practices that reduce greenhouse gas emissions or sequester carbon.”  Applicants requesting funding over $5 million were required to submit funding proposals via Grant.gov by May 6, 2022, and applicants requesting funding under $5 million were required to submit funding proposals by June 10, 2022.  (AR, pages 165-228)

3.                  The NFO included a statement that all project funds were required to be used in accordance with 2 C.F.R. Part 200 and the General Terms and Conditions available at: https://www.fpacbc.usda.gov/about/grants-and-agreements/award-terms-and-conditions/index.html.  The NFO also stated that reporting guidelines were available at the General Terms and Conditions website.  The General Terms and Conditions as of August 2021 include a section titled “Termination” which stated, in part:

In accordance with 2 CFR 200.340, the recipient understands this agreement may be terminated in whole or in part as follows:

a. By the Federal awarding agency or pass-through entity, if a recipient fails to comply with the terms and conditions of a Federal award;

b. By the Federal awarding agency or pass-through entity, to the greatest extent authorized by law, if an award no longer effectuates the program goals or agency priorities;

c. By the Federal awarding agency or pass-through entity with the consent of the recipient, in which case the two parties must agree upon the termination conditions, including the effective date and, in the case of partial termination, the portion to be terminated; or

d. By the recipient upon sending to the Federal awarding agency or pass-through entity written notification setting forth the reasons for such termination, the effective date, and, in the case of partial termination, the portion to be terminated. However, if the Federal awarding agency or pass-through entity determines in the case of partial termination that the reduced or modified portion of the Federal award or subaward will not accomplish the purposes for which the Federal award was made, the Federal awarding agency or pass-through entity may terminate the Federal award in its entirety.

e. If the Federal award is terminated for the recipient's material failure to comply with the U.S. Constitution, Federal statutes, regulations, or terms and conditions of the Federal award, the termination decision will be reported to the OMB-designated integrity and performance system accessible through SAM (currently FAPIIS) in accordance with 2 CFR § 200.341.

(AR, pages 195, 229, 246)

4. The Appellant timely applied for a PCSC grant under $5 million.  The application stated that the objective of the project was “to support the production and marketing of climate-smart commodities by providing voluntary incentives to producers and landowners, including early adopters, to implement climate-smart agricultural production practices, activities, and systems on working lands; measure/quantify, monitor and verify the carbon and greenhouse gas (GHG) benefits associated with those practices; and develop markets and promote the resulting climate-smart commodities.”  The application explained that the project was of high importance given “recent legislation in the region, namely the [State] Regional Water Quality Control Board General Waste Discharge Requirements for Discharges from Irrigated Lands (Ag Order 4.0) will restrict applications of nitrogen fertilizer, and producers need technical assistance to provide guidance on nitrogen management to achieve the nitrogen application limits required by the Water Board.”  The application identified two proposed sub-awardee organizations with which the Appellant would perform the grant work, XXXXX (Sub-Awardee 1) and the XXXXX (Sub-Awardee 2).  The application stated that it would validate its performance outcomes using three NRCS Conservation Practice Standards (CPS): (1) CPS 340 (Cover Crop; (2) CPS 590 (Nutrient Management); and (3) CPS 336 (Soil Carbon Amendment).  The application further stated that the Appellant was a “federally recognized Hispanic Serving Institution (HSI) and [Sub-Awardee 1] is an emerging HSI.  Beyond this partnership, [Sub-Awardee 2] serves primarily underserved/minority-focused producers, including specialty crop farmers, with technical competencies in written and spoken English and Spanish.”  The application specifically stated that the USDA defines specialty crop growers as an “underserved group.” 

The application explained that it would accomplish the project’s work by:

1)      Facilitate monitoring, measuring, reporting and verification (MMRV) of the benefits of climate smart practices in [State] cool-season specialty crops for the purpose of transmitting economic benefits up the supply chain for these commodities: lettuce, strawberries, broccoli, broccoli rabe, brussels sprouts, kale, broccolini, cauliflower, celery, and chard.

2)      Generate a calibration dataset for the DayCent model, the primary analytical engine of the COMET-Farm tool, for three NRCS Conservation Practice Standards (NRCS CPS 336, 590, 340) implemented within [State] cool-season specialty crop systems; and simulate crop, soil and greenhouse gas (GHG) carbon (C) and nitrogen (N) balances for purposes of supply chain climate smart practice validation. The project team will collaborate with the Partnerships for Climate Smart Commodities channels to communicate COMET results.

3)      Establish an incentive and technical support program with up to a total of 88 underserved [State] specialty crop producers over 5 project years to implement the climate smart practices mentioned in Objective 2. Through our partnership with [Sub-Awardee 2], deliver technical assistance to small and/or underserved producers in both English and Spanish. The incentive and technical support program will begin in year 1 and continue into year 5.

4)      Facilitate climate smart commodities (CSC) market development through activities such as: networking across WG member CSC projects to align efforts for the development of a potential certification scheme and a future data collection/management tool for assessments and reporting; increase CSCs awareness through social media campaigns; and provide producers outreach and education concerning climate smart commodities.

The application further explained that “eligible producers can receive up to $20,000 annually (across the crop production year, e.g., spring-fall-winter, fall-winter-spring, etc.) if they implement all three CSAF practices at the maximum rate supported by the incentive program, but we expect most producers will not implement all three practices in the same crop production year and/or at the maximum acreage supported by the incentives. and extend through the beginning of year 5, encompassing all five project years.”  Eligible producers could receive a maximum payment each year of: (1) $5,000 for performing CPS 336 (Soil Carbon Amendment); (2) $5,000 for performing CPS 590 (Nutrient Management); and (3) $10,000 for performing CPS 340 (Cover Crop).  The application also explained that award funds would be used to provide technical assistance, outreach, and training to eligible producers, “including but not limited to two educational workshops offered in-person and virtually.  This will include but not be limited to guidance on CSAF practice implementation, MMRV data curation, soil sampling and nutrient testing, CSAF MMRV report generation and findings updates.”   (AR, pages 10-66)

5.                  The Appellant and the Agency digitally signed and executed the PCSC grant agreement award on September 27, 2023.  The award was for $4,999,976 in Federal funds and an additional $14,300 of funds from non-federal sources.  The funding earmarked for “Producer Incentives” over the course of the five-year project was $1,000,000, an amount equal to 20% of the Federal funding.  From the end of 2023 until early 2025, 25 producers had enrolled in Appellant’s PCSC project and received $240,000 in incentive payments.  (AR, pages 10-12) (Appellant & Third Party Pre-Hearing Brief (App Pre-HB), Attachment A, pages A-9-10)

6.                  On January 20, 2025, President Trump issued Executive Order 14151 Ending Radical and Wasteful Government DEI Programs and Preferencing which instructed the Director of the Office of Management and Budget (OMB) to coordinate the termination of “all purported discriminatory programs, including alleged illegal DEI and ‘diversity, equity, inclusion, and accessibility’ mandates, policies, programs, preferences, and activities in the Federal Government, under whatever name they appear.”  Executive Order (EO) 14151 also targeted Federal funding for “environmental justice programs, services, and positions.”  Shortly afterwards, the Agency began an internal review of its programs, contracts, and grants to implement EO 14151’s mandate.  (Appellant Exhibit (App Ex) A, J)

7.                  On February 14, 2025, the USDA Secretary issued a press statement announcing that the USDA was reviewing thousands of contracts and grants per the President’s directives.  As part of this review, the Agency was instructed to identify certain climate-related awards for termination, including “climate smart agriculture and land use that does not directly benefit farmers.”  (App Ex C, K)

8.                  On February 26, 2025, President Trump issued Executive Order 14222 Implementing the President’s “Department of Government Efficiency” Cost Efficiency Initiative which instructed heads of agencies to review all existing grants and terminate or modify such grants to reduce overall Federal spending or reallocate spending to promote efficiency and advance the policies of the administration.  (App Ex B) 

9.                  On March 13, 2025, the Secretary of Agriculture issued press release 0049.25 announcing that the USDA had cut wasteful spending and saved American taxpayers millions of dollars.  (App Ex D)

10.              That same day, the Secretary of Agriculture also issued two Secretary Memorandums.  The first Memorandum, titled “Directive on Conservation and Natural Resource Priorities 1078-003,” stated, “[i]t is the policy of the U.S. Department of Agriculture to establish a return to American principles and realign the Department’s focus towards its original objectives of maximizing and promoting American agriculture, ensuring a safe, nutritious, and secure food supply; enhancing rural prosperity; and managing our National Forests.”  Under the heading of “purpose,” Memorandum 1078-003 stated that “[t]he Department’s priorities include ensuring its grants, cooperative agreements, and other similar arrangements, including mutual interest agreements (collectively “awards”), do not support programs or organizations that promote or take part in climate change or environmental justice initiatives.  It is vital that the Department assess both whether all award payments are free from fraud, abuse, and duplication, and whether they are in the best interests of the United States.”  Memorandum 1078-003 also directed all USDA agencies and staff offices that issue awards to conduct an internal review of all active awards.  The memo directed that “[s]uch review shall be limited to ensuring that the Department does not fund programs or organizations that promote or take part in climate change or environmental justice initiatives that are either contrary to law or the to the Department’s policy objectives, as well as ensuring that all awards are free from fraud, abuse, and duplication.”  (App Ex E).

11.              The second Secretary Memorandum issued on March 13, 2025, numbered 1078-004, was titled “Directive on Departmental Grant and Cooperative Agreement Priorities.”   Memorandum 1078-004 provided priorities, including ensuring that USDA grants do not support programs or organizations that promote or take part in DEI initiatives or any initiatives that purportedly discriminate on the basis of race, color, religion, sex, national origin, or another protected characteristic.  Grant awards deemed inconsistent with that priority were to be terminated in whole or in part to the extent permitted by applicable law.  (App Ex F)

12.              Although not verifiable, given the timeline of events it is reasonable to assume that it was around this timeframe that an undated document titled “Decision Memorandum for the Deputy Under Secretary for Farm Production and Conservation (DUS, FPAC)” was created and routed through the Office of the Chief, NRCS.  The subject of this undated Decision Memorandum was “The Evaluation of Partnerships for Climate-Smart Commodities Agreements.”  The undated Decision Memorandum stated the issue for the Deputy Secretary’s decision as being:

USDA leadership will need to consider options regarding the evaluation of USDA’s PCSC projects.  This effort could be terminated or realigned with the Trump Administration’s priorities.  Over 30,000 farms are currently involved in 136 projects, which are supported by over 800 organizations with matching external funds of over $1 billion.  However, of the 136 projects only 37 projects provide 60% or more of funding for total producer incentives, and only 47 provide 50% or more.  89 of the 136 projects provide less than 50% of the funding for total producer incentives. 

The undated Decision Memorandum provided two options for action:

Option 1: Pay out everything due, terminate all Partnerships grant agreements, and instruct grant recipients to terminate producer contracts

Option 2: Pay out everything due, terminate all Partnerships grant agreements that provide less than 60% or more of funding for total producer incentives, and any agreements that exceed 60% of funding for total producer incentives but do not align with Farmer First agenda.

On the undated Decision Memorandum, all instances where the figure 60% was typed were crossed out and the figure 65% was handwritten over it.  This included the factual reference to 37 projects providing 60% or more of funding for total producer incentives.  The origin and drafter of the undated Decision Memorandum remain unknown.  However, the initials on the undated Decision Memorandum, which correspond with crossing out 60% and replacing it with 65%, were from a Senior Policy Advisor for the Secretary of Agriculture.  There is no evidence to determine whether the Secretary of Agriculture reviewed the undated Decision Memorandum.  (AR, pages 290-291) (HA, Track 5, 14:00-14:15)

13.              On April 14, 2025, the Secretary of Agriculture issued press release 0071.25 that was titled “USDA Cancels Biden Era Climate Slush Fund, Reprioritizes Existing Funding to Farmers.”  In this press release the Secretary announced cancellation of the PCSC following a “line by line review” which showed that the “majority of these projects had sky-high administration fees which in many instances provided less than half of the federal funding directly to farmers.”  The press release stated that PCSC would be reformed and overhauled into the Advanced Markets for Producer (AMP) initiative and new agreements would be based on three Farmer First policy priorities of:

-          A minimum of 65% of federal funds must go to producers;

-          Grant recipients must have enrolled at least one producer as of 12/31/2024; and

-          Grant recipients must have made a payment to at least one producer as of 12/31/2024.

Press release 0071.25 quoted the Secretary of Agriculture as stating that PCSC “was largely built to advance the green new scam at the benefit of NGOs, not American Farmers.”  (AR, pages 292-294)

14.              Also on April 14, 2025, the Agency’s Chief sent Appellant a letter informing it that PCSC grants were being reformed and overhauled as the AMP initiative using the three Farmer First priorities announced in its recent press release (see FOF 13).  The Chief’s letter further informed the Appellant that based on NRCS’ review, Appellant’s grant failed to meet the first priority and would be terminated pursuant to 2 C.F.R. § 200.340(a)(4).  Lastly, the Chief’s letter indicated that Appellant would be provided the opportunity to resubmit a proposal that would be evaluated using the Farmer First policy priorities.  (AR, page 5).

15.              On April 22, 2025, the Agency’s Associate Chief sent a letter to the Appellant informing it that the PCSC grant was being terminated and that final reports and final payment requests were due within 120 days.  The Associate Chief’s letter also indicated that the Appellant would be provided with further instructions if it wished to submit a proposal under AMP.  (Adverse Decision Letter) (AR, page 9)

16.              On May 15, 2025, the Agency’s Associate Chief sent Appellant another letter inviting it to schedule a one-on-one virtual meeting with an AMP point of contact to discuss submission of a new proposal.  The letter stated that Appellant would be required to submit a new proposal prior to June 20, 2025, to qualify for an AMP grant.  (Agency Post-Hearing Exhibit 1). 

17.              On May 19, 2025, the Secretary of Agriculture issued press release 0112.25 stating that she had released “the first set of policy proposals under the newly launched Make Agriculture Great Again Initiative” which were “a comprehensive set of policy solutions aimed at improving the viability and longevity of smaller-scale family farms for generations to come.”  The release further stated that the “Small Family Farms Policy Agenda provides actionable solutions to a variety of challenges faced by small family farmers” and listed 10 “actionable solutions.”  (App Ex M)

18.              Also on May 19, 2025, the USDA published the “Farmers First Small Family Farms Policy Agenda,” which was a 14-page document titled “Farmers First” that described in more detail the 10 “actionable solutions” listed in press release 0112.25.  The “Farmers First” document stated that “[t]he first policy pillar of the Make Agriculture Great Again Agenda focuses on the prosperity of the small family farms, which are the heart of our communities and nations.”  The “Farmer’s First” document then discusses the 10 main “actionable solutions” identified in press release 0112.25.  Each of the main points in turn had “actions” that USDA was to take to implement the “Farmers First Small Family Farms Policy Agenda.”  The fifth point was titled “Providing Small Family Farms With Greater Access to Markets and Infrastructure,” and underneath this point it stated:

It can be difficult for small farmers to establish and maintain markets, particularly for lower-volume producers.  Limited access to infrastructure—such as cold storage, processing facilities, and reliable transportation—further complicates marketing of products.

Existing USDA Programs:  Federal Programs like the Farm Storage and Facility Loan program (FSFL) and the Local Agriculture Market Program (LAMP) provide grants and resources aimed at improving infrastructure and market access for small producers. USDA’s Rural Development mission area has multiple grant and loan opportunities like the Rural Energy for America Program (REAP) and the Value-Added Producer Grant (VAPG) which allow small family farmers to make their operations more energy efficient and add value to their products.

Actions:  USDA has reformed and overhauled the Biden-era Partnerships for Climate Smart Commodities initiative into the Advancing Markets for Producers (AMP) initiative, ensuring that a minimum of 65% of federal funds must go to producers instead of special interests. Under President Trump, USDA will ensure that all funded programs dedicated to farmers are actually received by farmers.

USDA will work to improve and strengthen the state and federal food inspection agreements to expand access to processing capacity. By strengthening these state-federal partnerships, we will bolster the U.S. food system’s resilience and security.

USDA will also prioritize local farmers in institutional and public food procurement policies, coupled with an effort to educate small farmers on the policies, with an emphasis on USDA nutrition programs such as Section 32, The Emergency Food Assistance Program, SNAP Healthy Incentives, Senior Farmers’ Market Nutrition Program, WIC Farmers’ Market Nutrition Program, and the Patrick Leahy Farm to School Program. 

(Bolding in original) (App Ex H)

19.              The Appellant subsequently submitted a proposal for the AMP initiative but eventually opted instead to withdraw the proposal and appeal the April 22, 2025, PCSC grant termination to NAD.  In its NAD appeal request, Appellant seeks to have the termination reversed and have the $3,692,113 in undisbursed PCSC grant funds be paid, or in the alternative, be allowed to modify the project’s objectives to more closely align with USDA’s new priorities and/or performance criteria.  (Agency Closing Argument (Agency Closing) (Appeal Request) (Appellant Post Hearing Brief (App Post-HB), page 25) (HA, Track 3, 32:10-34:15)

20.              PCSC implementation included periodic reporting requirements that are captured in a Data Dictionary prepared by the Agency.  The Data Dictionary is 87 pages and includes reporting requirements and data descriptions.  Among the items to be reported are “Cost of on farm TA” which is described as the “total cost of any field- or practice-specific technical assistance provided by the project (by recipient or partners) to any producers.”  The Data Dictionary also required the Appellant to report the products or supplies provided to enrolled producers, and the types of incentive provided to producers which could include cash payment, equipment loan, inputs and supplies, land rental, and tuition or fees for training.  (AR, pages 67-154)

21.              The termination of Appellant’s PCSC grant had a direct and devastating impact on Appellant’s lab, staff and students:  

The loss of funding lead to the elimination of one staff position and several student assistant roles, dismantling the team responsible for critical measurement, monitoring, reporting, and verification (MMRV) components.  These positions supported field monitoring, data collection, analysis equipment maintenance, personnel training, scheduling, and communication with growers and field partners.  Their loss crippled Appellant’s lab operational capacity and severely disrupted not only the PCSC project but also several other active research efforts that were scaffolded from USDA funding. … [Appellant] invested a significant amount of unpaid time and effort to write the proposal, negotiate the terms before execution and to submit amendments that were offered after execution. … We estimate that an excess of 750 person hours total was spent working on these documents…. The termination placed an extraordinary burden on lab staff and management who either volunteered their time or worked significantly reduced paid hours. … The toll has been immense—financially, professionally, and emotionally. The [Appellant’s] lab, once a vibrant training hub for applied agricultural research, was left stretched to its limits.  Faculty, staff and students endured months of stress and uncertainty as the fought to preserve their work and uphold commitments to grower partners and the scientific community,  The loss of this grant funding did not simply halt a project—it fractured a functioning research ecosystem that was building [State’s] agricultural workforce and delivering tangible sustainability solutions.

(App Pre-HB, Attachment A, pages A-1-5) (HA, Track 1, 33:10-57:45) (HA Track 2, 2:15-44:35) (HA, Track 3, 10:25-35:25)

22.              The termination of Appellant’s PCSC grant also had a direct and substantial impact on Sub-Awardee 1’s personnel and its lab:

It resulted in the elimination of one full-time academic research position [KS], the reassignment of staff [CS], and the elimination of the undergraduate assistant position at [Sub-Awardee 1]. We received notice of termination at the beginning of the field research season, which compromised critical measurements necessary for the completion of the project. The eliminated positions carried out essential tasks within the [H] Lab, including coordination of Central Coast field monitoring and verification plots, execution of core laboratory task including the analysis of soil and plant samples, maintenance of scientific instruments, implementation of data QA/QC and training of undergraduates. The loss of this capacity substantially lowered the lab’s overall capabilities and directly diminished its reputation with its clientele and the broader scientific community. In agricultural research, trust-based relationships between university labs and producers are indispensable. At [Sub-Awardee 1], the grant’s termination, and the abrupt dismissal or reassignment of staff who interface directly with growers, has materially eroded that trust, disrupted ongoing collaborations, and hindered the ability to execute future fieldwork and project commitments. … Alongside [Appellant], [Sub-Awardee 1] expended substantial, mostly uncompensated effort to secure and negotiate the award, including drafting the proposal, constructing the budget, and negotiating several post-submission revisions. This work was principally performed by [WH] PI/Co-Project Director, [CS] Project Manager and staff from the [Sub-Awardee 1] Sponsored Programs Office. [Sub-Awardee 1] agrees with [Appellant] that this award far exceeded typical administrative burdens for comparable awards granted to the university. We estimate 726 total person hours [for this project]. …  Following the termination, [CS] was reassigned to other projects, directly impacting his professional development as a scientific project manager, while [KS] was laid off, eliminating a main position responsible for operation of the lab. Without dedicated staff and student support, [CS] assumed not only field and laboratory research activities, partner communications, data entry and analysis, but also core laboratory functions, diverting time from his professional development as a project leader while reducing overall lab capacity. The lay off directly hampered [KS’s] professional advancement as a research scientist and removed a skilled position responsible for lab operations, instrument maintenance, and sample intake and processing. This position will take a considerable time investment to recruit and retrain.

Overall, [Sub-Awardee 1] faced broad repercussions related to the termination of this grant including financial, operational, and personal. The [H] Lab, a globally recognized scientific leader in applied soil biogeochemistry and agricultural research, was forced to operate under severe limitations.

(App Pre-HB, Attachment A, pages A-5-8) (HA, Track 3, 40:15-47:35) (HA, Track 4, 2:05-32:45)

23.              The termination of Appellant’s PCSC grant also negatively impacted Sub-Awardee 2:

A total of $1,585,979 in funding was allocated to [Sub-Awardee 2]. Of this amount, $585,979 was intended to support the Executive Director, Finance Manager, Technical Specialist, Soil Scientist, Field Technician and Grower Engagement Assistants. [Sub-Awardee 2] was responsible for leading the recruitment and coordination of small producer partners. This included designing and implementing the incentive program, carrying out field visits to arrange producer contracts, provide in person support for practice implementation and at the point of termination, the [Sub-Awardee 2] had 25 producers enrolled and contractually obligated to implement USDA NRCS practices. These producers were all located in [County 1], [County 2], or [County 3] and considered an underserved producer according to the USDA definition. Data collection tasks that [Sub-Awardee 2] undertook include collection of IRS Individual taxpayer identification numbers, Farm Service Agency farm and tract records, and confirmation each enrolled producer was compliant with HELC and WC provisions of the Food Security Act of 1985. [Sub-Awardee 2] solicited producer participation through an application shared with existing networks, partner organizations and in producer meetings. As a result of the termination, [Sub-Awardee 2] was required to reassign multiple staff members to alternate projects. Beyond the staffing disruptions experienced by [Sub-Awardee 2], the termination caused significant reputational harm. The relationship between [Sub-Awardee 2] TA providers and the agricultural community is paramount to the success of the organization. This termination has forced [Sub-Awardee 2] to back out of their contractual obligations to serve the enrolled producers. Without this support, producers of the scale that were enrolled would not be able to implement the practices in an economically viable manner. Small-scale producers rely on the type of services provided by [Sub-Awardee 2] to farm in a profitable and environmentally responsible way.

(App Pre-HB, Attachment A, page A-9) (HA, Track 6, 2:05-26:10)

DISCUSSION

NAD regulations at 7 C.F.R. Part 11 govern this appeal.  Fifteen U.S.C. § 714 and 2 C.F.R. Part 200, Subpart D govern the issues on appeal.  Additional guidance is provided in The Notice of Funding Opportunity (NFO) Partnerships for Climate-Smart Commodities – Building Markets and Investing in America’s Climate-Smart Farmers, Ranchers & Forest Owners to Strengthen U.S. Rural and Agricultural Communities.  The laws governing equitable relief are found at 7 U.S.C. §§ 6998(d), 7996(b)-(c).

When appealing an adverse decision to NAD, an appellant has the burden of proving by a preponderance of the evidence that an agency’s adverse decision was erroneous.  See 7 C.F.R. § 11.8.  The preponderance of the evidence “standard requires Appellants to offer evidence leading the Administrative Judge to believe that the facts they allege are more probable than not in order to decide in their favor.”  See NAD Case No. 2016W000229 (Dir. Rev. April 11, 2017).  An agency’s adverse decision is erroneous when it is inconsistent with the laws and regulations of the agency or the generally applicable interpretations of those laws and regulations.  See 7 C.F.R. § 11.10(b).

1. Did the Agency Err When it Terminated Appellant’s PCSC grant?

Yes, the Agency erred when it terminated Appellant’s PCSC grant because I find that the termination decision was arbitrary and capricious and also did not advance a “program goal” or “Agency priority” which permitted it to invoke the termination provisions found at 2 C.F.R. § 200.340(a)(4).

A Federal agency is permitted to terminate a Federal award pursuant to the terms and conditions of the Federal award, including, to the extent authorized by law, if an award no longer effectuates the program goals or agency priorities.  See 2 C.F.R. § 200.340(a)(4).  The Federal agency or pass through entity must clearly and unambiguously specify all termination provisions in the terms and conditions of the Federal award.  See 2 C.F.R. § 200.340(b). 

“The APA's [Administrative Procedure Act] arbitrary-and-capricious standard requires that agency action be reasonable and reasonably explained.”  California v. U.S. Department of Education 132 F.4^th 92 (2025) quoting FCC v. Prometheus Radio Project, 592 U.S. 414, 423, 141 S.Ct. 1150, 209 L.Ed.2d 287 (2021). This means that the agency's reasons “must be set forth with such clarity as to be understandable.”  California v. U.S. Department of Education, 132 F.4^th 92 (2025), quoting SEC v. Chenery Corp.  (Chenery II), 332 U.S. 194, 196, 67 S.Ct. 1760, 91 L.Ed. 1995 (1947). When an agency changes course, “... it must be cognizant that longstanding policies may have engendered serious reliance interests that must be taken into account.”  Metropolitan Transportation Authority v. Duffy, 2025 WL 1513369, -- F.Supp.3d-- (2025), quoting Regents of the Univ. of Cal., 591 U.S. at 30, 140 S.Ct. 1891.  It would be arbitrary or capricious to ignore such matters.”  Metropolitan Transportation Authority v. Duffy, 2025 WL 1513369, F.Supp.3d (2025), quoting F.C.C. v. Fox Television Stations, Inc., 556 U.S. 502, 515, 129 S.Ct. 1800, 173 L.Ed.2d 738 (2009).

The Administrative Procedure Act (APA) is Applicable

As a preliminary matter, review of the Agency’s decision to terminate the Appellant’s grant is available under the APA.  As stated in Urban Sustainability Directors Network v. United States Department of Agriculture^[2], “regardless of whether ‘grant funding’ decisions may be committed to agency discretion, grant termination decisions are not fully discretionary but are subject to the limits set in applicable regulations, so the grant terminations at issue are reviewable under the APA.”  Urban Sustainability Directors Network v. United States Department of Agriculture, 2025 WL 2374528, at 21.  The Agency invoked 2 C.F.R. § 200.340 in its decision to terminate Appellant’s grant and the Agency’s General Terms and Conditions for Grants and Cooperative Agreements specifically incorporate 2 C.F.R. Part 200.  (FOF 3)  Therefore, I find that the Agency’ termination decision is subject to applicable regulations. 

However, as for the scope of my review, the Agency posits that it should be limited to whether the Appellant met the 65% threshold set by the Agency and that NAD review of the Agency’s 65% threshold is not available because it is a matter of general applicability.  (Agency Closing, page 6).

The Appellant points out in its closing argument that the Agency for the first time raised the issue of general applicability in its closing statement and therefore the Agency waived any jurisdictional challenge.  (App Post-HB, page 23) (Appellant Reply Brief (App Reply), pages 2-3) The Appellant further asserts that its arguments about the terms and conditions of the grant involve factual disputes specific to the Appellant.  (App Post-HB, page 23) (App Reply, pages 2-3) I agree with the Appellant.  As discussed below, there is a factual dispute whether the Agency created a program goal or agency priority; there is a factual dispute whether 2 C.F.R. § 200.340 authorizes an agency to use a program goal or agency priority not in the original terms of the grant to terminate a grant; and there is a factual (and legal) dispute about what manner the Agency must use to publicize a new program goal or priority when invoking the termination authority in 2 C.F.R. § 200.340.  Nothing in the APA nor in NAD’s jurisdictional limitations prohibits me from reviewing whether the Agency’s termination decision was arbitrary and capricious in addition to whether it was contrary to regulation.  While I must refrain from substituting my own judgement for that of the Agency, I must nonetheless determine whether the Agency considered the relevant factors in making its decision.  See NAD Case 2017E000763 (Dir. Rev., August 2, 2018), citing Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 30-31, 43 (1983).^[3]

2 C.F.R. § 200.340 Background

Prior to 2020, the termination provisions for Federal grants were contained in 2 C.F.R. § 200.339.  See Federal Register, Vol. 78, No. 248, 78590-78691, December 26, 2013. The Office of Management and Budget (OMB) published updated guidance in 2020.  See Federal Register, Vol. 85, No 157, 49506-49582, August 13, 2020.  This guidance moved termination provisions to Section 200.340 and updated the language of 2 C.F.R. § 200.340 to “strengthen the ability of the Federal awarding agency to terminate Federal awards, to the greatest extent authorized by law, when the Federal award no longer effectuates the program goals or Federal awarding priorities.”  See Federal Register, Vol. 85, No 157, 49507, August 13, 2020. OMB specifically addressed comments about the revision of Section 200.340 in 2020 regarding concern over arbitrary Federal award termination, and OMB provided the following response: “The largest number of commenters expressed a concern that the proposed language will provide Federal agencies too much leverage to arbitrarily terminate awards without sufficient cause. Several commenters requested OMB reinstate the language, for cause, to address this issue. Some commenters requested additional clarity and examples. OMB deliberated upon these requests and decided as written agencies are not able to terminate grants arbitrarily and that it was not appropriate to include examples in 2 CFR for this section.”  See Federal Register, Vol. 85, No 157, 49506-49582, August 13, 2020. In 2024, OMB proposed removing Section 200.340(a)(2) permitting the termination of an award “if the award no longer effectuates the program goals or agency priorities, but after receiving comments instead decided to modify the language.”  See Federal Register Vol. 89, No. 78, 30089, April 22, 2024.  In explaining the revision to Section 200.340(a)(2), OMB stated:

Provided that the language is included in the terms and condition of the award, the revised termination provision at section 200.340 continues to allow Federal agencies and

pass-through entities with authority to terminate an award in the circumstances described in paragraph (a)(2) in the prior version of the guidance. The prior version of section 200.340(b) and the proposed version both directed Federal agencies and pass-through entities to clearly and unambiguously specify all termination provisions in the terms and

conditions of the award. As such, OMB finds the final version of the guidance provides greater clarity on the policy for termination of awards by the Federal agency or pass-through entity by underscoring the need for agencies and pass-through entities to clearly and unambiguously communicate termination conditions in the terms and conditions of the award.

See Federal Register Vol. 89, No. 78, 30089, April 22, 2024.

The following table summarizes the changes to termination provisions from 2013-2024:

	2013	2020	2024
200.340 (a) The Federal award may be terminated in whole or in part as follows:	By the Federal awarding agency or pass-through entity for cause	By the Federal awarding agency or pass-through entity, to the greatest extent authorized by law, if an award no longer effectuates program goals or agency priorities	By the Federal agency or pass-through entity pursuant to the terms and conditions of the Federal award, including, to the extent authorized by law, if an award no longer effectuates the program goals or agency priorities.^[4]
200.340 (b)	N/A	A Federal awarding agency should clearly and unambiguously specify termination provisions applicable to each Federal award, in applicable regulations or in the award, consistent with this section.	The Federal agency or pass-through entity must clearly and unambiguously specify all termination provisions in the terms and conditions of the Federal award.

The Agency’s Decision to Terminate Appellant’s Grant was Arbitrary and Capricious under the APA

The Appellant argued that the Agency’s decision was arbitrary and capricious because the Agency failed to offer a reasoned explanation when the Agency offered no explanation at all.  (App Post-HB, pages 11-18) (App Reply, pages 5-6). The Agency argued that the decision to terminate Appellant’s grant was based on general policy priorities and not subject to review by NAD and also that the funding for PCSC comes from CCC funds, which the Secretary of Agriculture has discretion to spend, therefore, such discretion to spend those funds may be suspended at any time.  (Agency Closing, pages 7-9)   

As noted above, the Agency’s contention that its decision to terminate Appellant’s grant was based on general policy priorities and comes from CCC funds does not preclude me from reviewing whether the decision was arbitrary and capricious. 

In California v. U.S. Department of Education (132 F.4^th 92,98 (2025)), the First Circuit, U.S. Court of Appeals, when reviewing the termination of grants by the Department of Education, set out the standard for a review of an arbitrary and capricious claim:  

The APA's arbitrary-and-capricious standard requires that agency action be reasonable and reasonably explained.” FCC v. Prometheus Radio Project, 592 U.S. 414, 423, 141 S.Ct. 1150, 209 L.Ed.2d 287 (2021). This means that the agency's reasons “must be set forth with such clarity as to be understandable.” SEC v. Chenery Corp. (Chenery II), 332 U.S. 194, 196, 67 S.Ct. 1760, 91 L.Ed. 1995 (1947). And although judicial review of agency action is “narrow” in scope, we must still determine if the agency “examine[d] the relevant data and articulate[d] a satisfactory explanation for its action including a ‘rational connection between the facts found and the choice made.’ ”  Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983)(quotation marks and citation omitted).

In State of Maryland v. Corporation for National and Community Service (2025 WL 1585051), the U.S. District Court for the District of Maryland when reviewing terminations of grants by AmeriCorps further explained that:

Generally, an agency decision is arbitrary and capricious if ‘the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.’ ” Sierra Club, 899 F.3d at 293 (quoting Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983)). Of course, “agencies are free to change their existing policies as long as they provide a reasoned explanation for the change,’ ‘display awareness that they are changing position,’ and consider ‘serious reliance interests.” FDA v. Wages & White Lion Invs., L.L.C., 145 S. Ct. 898, 917, (2025), quoting Encino Motorcars, LLC v. Navarro, 579 U.S. 211, 221–22, 136 S.Ct. 2117, 195 L.Ed.2d 382 (2016).

The U.S. District Court for the Southern District of New York further explained the standard for reliance interests, when it reviewed the termination of a cooperative agreement by Department of Transportation in Metropolitan Transportation Authority v. Duffy (2025 WL 1533369). 

When an agency changes course, ... it must be cognizant that longstanding policies may have engendered serious reliance interests that must be taken into account.”  Regents of the Univ. of Cal., 591 U.S. at 30, 140 S.Ct. 1891 (quotation omitted). “It would be arbitrary or capricious to ignore such matters.” F.C.C. v. Fox Television Stations, Inc., 556 U.S. 502, 515, 129 S.Ct. 1800, 173 L.Ed.2d 738 (2009). The Supreme Court has stated that the agency is “required to assess whether there were reliance interests, determine whether they were significant, and weigh any such interests against competing policy concerns.” Regents of the Univ. of Cal., 591 U.S. at 33, 140 S.Ct. 1891. Therefore, the agency must “provide a more detailed justification than what would suffice for a new policy created on a blank slate” in circumstances where “its prior policy has engendered serious reliance interests.” Fox Television, 556 U.S. at 515, 129 S.Ct. 1800. The agency need not, however, “demonstrate to a court's satisfaction that the reasons for the new policy are better than the reasons for the old one; it suffices that the new policy is permissible under the statute, that there are good reasons for it, and that the agency believes it to be better.” Id. (emphases omitted).

In this case, the Agency argues that pursuant to 2 C.F.R. § 240.340(a)(4), the mere existence of a new Agency “priority” which aligns more closely with the priorities of a new administration justifies the termination of Appellant’s PCSC grant.  (Agency Closing, pages 3, 7-8)  However, the record does not contain any analysis that supports the Agency’s contention that the Secretary of Agriculture created a new “priority” that 65% or more of PCSC Federal grant funds must go directly to producers.  (FOF 12)  The undated Decision Memorandum provided by the Agency lacks any analysis to show how 65% was developed as a “priority.”  (FOF 12) The “issue” identified in the undated Decision Memorandum was whether the effort “could be terminated or realigned with the Trump Administration’s priorities,” but it does not mention what those priorities are or how terminating grants accomplishes those priorities.  (FOF 12) Prior to the termination, the only “priorities” announced by the Secretary of Agriculture were those promulgated on March 13, 2025, in Memorandums 1078-003 and 1078-004 which addressed eliminating programs or organizations that promote or take part in DEI, climate change, or environmental justice initiatives.  (FOF 10, 11)  The record shows that the Agency didn’t explain how the 65% funding requirement connected to any policy or priority it was attempting to accomplish by terminating the PCSC grants until approximately a month after it terminated Appellant’s grant when it published a news release and the Farmer First publication on May 19, 2025.  (FOF 17-18)  Further, when the Agency did announce these “priorities” in the Farmer’s First publication it characterized “ensuring a minimum of 65% of federal funds going to producers” as an “action” under the bullet point of “providing small family farms with greater access to markets and infrastructure.”  (FOF 18)  Nothing in the Agency’s undated Decision Memorandum, policy documents, or arguments in this appeal explains or supports how “ensuring 65% of federal funds going to producers” supports the “goal” of greater access to markets and infrastructure.  (FOF 18)  The Agency’s undated Decision Memorandum had two options, either: (1) terminate 100% of the PCSC grants; or (2) terminate 60% of the PCSC grants. (FOF 12)  There is no explanation at all what “priority” these two choices support.  (FOF 12)  Changing all the instances of the number “60” to “65” in the undated Decision Memorandum, including changing a calculation of 60% without changing the underlying data, shows that the Agency arbitrarily chose 65% over either 60%, 100%, or any other percent without any analysis.  (FOF 12)  Further, the only statement by the Secretary specifically addressing PCSC was a very general quote provided in press release 0071.25 on April 14, 2025, which did not refer to the implementation of the Farmers First action plan, but instead announced the reformation of PCSC into AMP.  The record shows that the Secretary did not subsequently sign any document or promulgate a Secretary Memorandum stating that the three Farmer First action plan items for PCSC-turned-into-AMP were a USDA priority or policy—unlike she previously did with Memorandums 1078-003 and 1078-004.  (FOF 10-13) As the court in Urban Sustainability stated regarding the termination of another PCSC grant, the NRCS Associate Chief’s termination letter failed to provide an explanation for which such a priority was adopted.  Nothing the Agency has provided in this case either before or after the termination provides such an explanation; therefore, the Agency’s termination of Appellant’s PCSC was arbitrary and capricious and in error. 

Reliance Interests Not Considered

Nothing in the NRCS adverse decision of April 22, 2025, refers to the “priorities” expressed in the Farmers First document released by the USDA a month later, May 19, 2025.  (FOF 15, 19), and I am not permitted to insert a rationale even if one otherwise exists.  See NAD Case 2017S000439 (Dir. Rev., May 14, 2018) (citing SEC v. Chenery Corp., 332 U.S. 194).  Further, even if I were to accept that the Farmers First “policy” adequately explained the Agency’s rationale for the termination, I find that the Agency did not consider reliance interests in making its adverse decision.  In Pacito v. Trump, the United States District Court for the Western District of Washington, found that the Department of State made no factual findings before terminating cooperative agreements which the court found “marks the Funding Termination as arbitrary and capricious because it constitutes a shift in agency policy without any reasoned explanation.”  See 772 F. Supp 3d 1204 (2025).  The court further explained in Pacito v. Trump that “the Agency Defendants may change their ‘view of what is in the public interest,’ but they ‘must supply a reasoned analysis indicating that prior policies and standards are being deliberately changed, not casually ignored[.]’” (Quoting Nw. Envtl. Def. Ctr., 477 F.3d at 687, and Greater Boston Television Corp. v. FCC, 444 F.2d 841, 852 (D.C. Cir. 1970)).

Concerning any potential reliance interests in the terminated PCSC grant, the Agency argues that, “[t]hough not expressly documented [in the record], NRCS offered Appellant a chance to receive payment for all actions completed by April 22, 2025, and offered Appellant a chance to retain their agreement, through a modification to the AMP provisions, demonstrating a level of understanding and respect for the work invested.  NRCS is not required under any law to require an opportunity for a modification when new policy priorities are established but did offer Appellant the opportunity which Appellant elected not to pursue.”  (Agency Closing, page 10)

I am not persuaded by the Agency’s argument.  After reviewing the record, I find that it contains ample evidence that the Appellant and the Sub-Awardees had significant individual vested reliance interests in this multi-year, multi-million-dollar project which was terminated part way through the grant period. (FOF 21-23)  On this point, the Agency appears not to have performed an examination and consideration of how termination would affect those individual reliance interests but instead looked at the PCSC and its grantees at-large.  Specifically, I find that on this issue the only factual finding made by the Agency concerning vested interests in PCSC was contained in the Agency’s undated Decision Memorandum which stated that “of the 136 projects, only 37 projects provided 60% or more of funding for total producer incentives.”  (FOF 12)  The Agency, however, without explanation or justification subsequently changed 60% to 65% as the minimum funding threshold required for Federal funds to go to producers.  (FOF 12) As a result, I find that the Agency’s termination of Appellant’s PCSC grant was arbitrary and capricious because it provided neither a reasoned explanation for the termination nor demonstrated that the Agency considered the individual vested reliance interests of the Appellant and the Sub-Awardees before termination.  Accordingly, I find the Agency’s adverse decision erroneous.

Although I could end my analysis at this point, I believe it is prudent to explain my finding of Agency error in relying on 2 C.F.R. § 200.340(a)(4) as the authority for terminating Appellant’s PCSC grant.

The Agency did not Establish a “Program Goal” or “Agency Priority” Which Permits it to Invoke 2 C.F.R. § 200.340(a)(4).

The Agency argued that it properly terminated Appellant’s PCSC grant because 2 C.F.R. § 200.340 specifically permits the Secretary to terminate an award if the award no longer effectuates the program goals or agency priorities.  (Agency Closing, pages 3, 7-8)  The Appellant argued that the terms and conditions of its PCSC grant do not allow the Agency to invent post hoc priorities and terminate grants on that basis.  (App Post-HB, pages 20-23)  The Appellant also argued that the Agency’s 65% threshold is not an Agency “priority” such that the termination provisions at 2 C.F.R § 200.340 are authorized.  (App Post-HB, pages 20-23)

More specifically, the Appellant argues that in order to establish a program goal or Agency priority, the Agency was required to properly promulgate such new program goal or priority and failed to do so with press release 0071.25 on April 14, 2025; therefore, the Agency never replaced PCSC’s grant’s original goals and priorities.  (App Post-HB, page 10)  As a result, the Appellant asserts that the Agency’s new threshold of 65% was in fact a performance measure or specific condition, and that the Agency was required to list these performance measures and specific conditions in the original agreement in accordance with 2 C.F.R. §§ 200.202, 200.208 and 200.301.^[5]  (App Post-HB, page 10)

I agree with the Appellant that the Agency’s 65% threshold is neither a “program goal” nor an “Agency priority” and is instead a “performance measure.”  Although neither “program goals” nor agency “priorities” are defined in 2 C.F.R. Part 200, Section 200.301 of 2 C.F.R. Part 200 states the following regarding “performance measurement:” 

The Federal agency must measure the recipient's performance to show achievement of program goals and objectives, share lessons learned, improve program outcomes, and foster the adoption of promising practices. The Federal agency should establish program goals and objectives during program planning and design (see § 200.202). The Federal agency should clearly communicate the specific program goals and objectives in the Federal award, including how the Federal agency will measure the achievement of the goals and objectives, the expected timeline, and information on how the recipient must report the achievement of program goals and objectives. The Federal agency should also clearly communicate in the Federal award any expected outcomes (such as outputs, service performance, or public impacts of any of these), indicators, targets, baseline data, or data collections that the recipient is responsible for measuring and reporting. The Federal agency must ensure all requirements for measuring performance align with the Federal agency's strategic goals, strategic objectives, or performance goals relevant to a program (see OMB Circular A-11, Preparation, Submission, and Execution of the Budget Part 6).  See 2 C.F.R. § 200.301 (emphasis added). 

Further, 2 C.F.R. Part 200 defines “cost objective” and “performance goal” as follows:

Cost objective means a program, function, activity, award, organizational subdivision, contract, or work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, and capital projects. A cost objective may be a major function of the recipient or subrecipient, a particular service or project, a Federal award, or an indirect cost activity, as described in subpart E.  See 2 C.F.R. 200.1 (definition of “cost objective”).

Performance goal means a measurable target level of performance expressed as a tangible, measurable objective, against which actual achievement can be compared, including a goal expressed as a quantitative standard, value, or rate. In some instances (for example, discretionary research awards), this may be limited to the requirement to submit technical performance reports (to be evaluated in accordance with agency policy).  See 2 C.F.R. 200.1 (definition of performance goal).

The PCSC data dictionary included reporting requirements which required the Appellant to report all costs for technical assistance provided to producers and products or supplies provided to producers which included equipment loan, inputs and supplies, land rental, and tuition for fees for training.  (FOF 20)

The record does not contain the definitions for “program goal or Agency priorities.” and in the absence of such definitions NAD applies the ordinary meaning of such words.^[6]  “Goal” is defined in the dictionary as “the end toward which effort is directed.”^[7]  “Program goals” appears not to be further defined other than in the academic setting where it stands for “broad statements that extend and operationalize the mission statement” or “statements that clearly define what the organization wants to achieve.”^[8]  Taken altogether, the definitions in 2 C.F.R. Part 200 along with the ordinary meaning of goals and program goals indicate that program goals, as opposed to “performance goals” are an end state aim and not simply a measurement or level of performance.  I therefore find that the “Farmer First policy priority” that a minimum of 65% of funds must go to producers is not a program goal and is instead a performance measurement.  This finding is reinforced by the fact that the Appellant was required by the PCSC Data Dictionary to regularly report all types of assistance provided to producers, not just incentive funds directly provided.  (FOF 20)  In other words, the amount of support provided to producers was initially conceived as a performance measure, which was to be reported by the Appellant to the Agency on a regular basis.  (FOF 20)  Therefore, because the requirement that 65% of funds must go to producers is not a “program goal,” the Agency’s decision to terminate Appellant’s PCSC grant is not authorized by 2 C.F.R. § 200.340 unless the 65% requirement is an “Agency priority.”

After reviewing the evidence, argument and testimony, I find the requirement that a minimum of 65% of funds must go to producers was not an “Agency priority” when Appellant’s PCSC grant was terminated on April 22, 2025.  The record shows that at the time of termination, the only related policies or priorities promulgated by the USDA were contained in Secretary Memorandums 1078-003 and 1078-004 which directed review of awards related to climate change or environmental justice, and DEI.  (FOF 10-11)  Nothing in either of those Secretary Memorandums or the Agency’s subsequent adverse decision mentions climate change or environmental justice, or DEI, and the Agency has not argued that these “priorities” led to termination of Appellant’s PCSC grant.  (FOF 14, 15) (Agency Closing, page 3)  As for the Agency’s undated Decision Memorandum, I find that it lacks any analysis or connection to any Agency “priorities.”  (FOF 12) Rather, the only “issue” stated in the Agency’s undated decision memorandum was whether the effort “could be terminated or realigned with the Trump Administration’s priorities,” but it does not mention what those priorities are or how terminating grants accomplishes those priorities.  (FOF 12) USDA announced the requirement that a minimum of 65% of funds go to producers in press release 0071.25 on April 14, 2024, which stated this requirement was part of “Farmer First policy priorities” but did not publish any document which further indicated what “Farmer First” policies or priorities meant. (FOF 13)  Therefore, I find that the only published policies in existence at the time of termination on April 22, 2025, were those promulgated in Secretary Memorandums 1078-003 and 1078-004 on March 13, 2025, which specifically limited the review of grants to “ensuring the Department does not fund programs or organizations that promote” or take part in climate change or environmental justice, and DEI.  (FOF 10, 11)

To summarize, “priority” is defined as “something given or meriting attention before competing alternatives.”^[9]  In this case the evidence shows that in the Agency’s undated Decision Memorandum it chose, without explanation, a random minimum percentage of federal PCSC funds that had to go directly to producers, to effectuate a USDA “priority” which had not yet been promulgated, and in contravention of the purpose of the reviews required by Secretary Memorandums 1078-003 and 1078-004.  (FOF 10-12)  The random selection of a percent of funds to go directly to producers does not meet the definition of “priority” and therefore is not an “Agency priority.”  Instead, as indicated above, the selection of 65% of funds to go directly to producers is a performance measurement.  Therefore, I find the evidence shows that the Agency neither established a “program goal” nor an “Agency priority” prior to terminating Appellant’s PCSC grant, and that the Agency’s reliance on 2 C.F.R. § 200.340(a)(4) as justification is in error.

Although I have found the Agency erred when it terminated Appellant’s PCSC grant, I believe it is also prudent for me to address the issue of equitable relief in case my findings of error are reversed on Director Review.

2. What evidence and argument does the Appellant present for possible equitable relief consideration from the NAD Director?

The NAD Director may grant equitable relief in cases involving covered programs administered by the Secretary of Agriculture.  See 7 U.S.C. § 6998(d) and 7 C.F.R. § 11.9(e).  A covered program includes a conservation program administered by the Secretary of Agriculture.  See 7 U.S.C. § 7996(a)(2)(A)(ii). I have found no instances where NAD has determined that grant programs similar to PCSC were conservation programs for the purpose of equitable relief, but programs like the Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP), which provide funds directly to producers for similar practices have regularly been determined to be covered programs.  See NAD Cases 2025W000361 (Dir. Rev., November 19, 2025) 2025S000123 (Dir. Rev., August 13, 2025). As noted above, the purpose of PCSC was to support the production and marketing of commodities that are produced using agricultural (farming, ranching, or forestry) practices that reduce greenhouse gas emissions or sequester carbon.  See NFO, page 2; AR page 166.  Equitable relief may be appropriate if the participant, despite failing to fully comply with the requirements of the program, either relied to its detriment on the action or advice of an authorized Agency representative (commonly referred to as the Agency misaction or misinformation provision) or made a good faith effort to fully comply with the requirements of the program (commonly referred to as the good faith effort provision).  See 7 U.S.C. § 7996(b)(1) and (2).

The Appellant argues that PCSC is a covered program for purposes of equitable relief because it “has explicit conservation goals and that this is the reason that NRCS is the USDA agency implementing PCSC.  (AR, page 170)  PCSC’s primary goal is to fund projects that play an important role in USDA’s Climate-Smart Agricultural and Forestry strategy and will contribute to meeting the U.S. commitments to address climate change.  (AR, page 170)  Thus, PCSC is a conservation program.”  (App Post-HB, pages 24-25)

The Appellant subsequently asserts that it and Sub-Awardees 1 and 2 acted in good faith and relied on the action and advice of USDA employees to its detriment because NRCS made clear the original goals and priorities of PCSC in its Assistance Listing, NFO, and other programmatic PCSC documents and Appellant relied on those actions and advice in preparing and submitting its grant proposal which NRCS approved. (App Post-HB, pages 24-25)  Appellant further argued that since the approval of its grant, it has timely implemented its project in reliance on the Agency’s approval, and that it is “undisputed that [the Appellant and Sub-Awardees 1 and 2] had not violated any terms if the grant agreement, the NFO, or related performance criteria.”  (FOF 2-5, 14, 19, 21-23) (App Post-HB, pages 24-25)

Appellant further asserts that as a result of the PCSC grant’s termination, it, Sub-Awardees 1 and 2, and the 25 previously enrolled producers have suffered significant harm.  Specifically, Appellant argues that it and Sub-Awardees 1 and 2:

[…] incurred personnel impacts visa staff layoffs, a reduction in staff hours, reassignment of key team members and [Appellant’s AH] had to work for free due to termination of the grant. (App Ex N)  [Appellant and Sub-Awardees 1 and 2] also suffered research related impacts, reputational harm and the loss of trust with growers.  (App Ex N and HA, Track 2, 12:13-13:31).  [Sub-Awardee 1’s SK] spent approximately 75 hours to secure around $25K in other funding to keep a barebones version of the grant alive and this mitigation damages that should be compensated.  (App Ex N and HA, Track 2, 18:51-22:07)  The important and vital grant project work continues at a barebones level due to heroic efforts if [Appellant and Sub-Awardees 1 and 2] but termination of the grant means the 25 producers wil no longer receive the money in direct benefits promised.  [Appellant and Sub-Awardees 1 and 2] calculate the total loss unpaid grant funding as $3,692,113 and it seeks all of it via equitable relief to be put back in the same position [Appellant and Sub-Awardees 1 and 2] were in before said grant execution. 

(App Post-HB, pages 24-25) (FOF 2-5, 14, 19, 21-23) (Appeal Request) (App Pre-HB, page 12)

The Agency argues that equitable relief does not apply in this case, and asserts:

With respect to any claim for equitable relief from the NAD Director, Appellant cannot offer sufficient evidence to demonstrate that PCSC is a Farm Bill program or is a covered program. Furthermore, there was no determination of non-compliance with the PCSC NOFO provisions and a subsequent denial of benefits. Therefore, Appellant cannot demonstrate its good faith efforts to comply with requirements and/or detrimental reliance on Agency actions or advice. Appellant failed to provide any justification for equitable relief and testified concerning personal and professional losses, losses of data from its reduced capacity to complete its research, and “lost trust.” However, Appellant did not provide any evidence that there were any earned payments which went unpaid. Appellant submitted and was paid for expenses incurred up until the April 22, 2025, termination. Moreover, regarding any potential claim for lost opportunity, based on the information presented and the uniform guidance established by 2 CFR Part 200, the recovery of anticipatory or lost opportunity costs for this grant are not permitted AND any lost opportunity costs related to grant termination should be pursued by filing a claim under the Tucker Act ( 28 U.S.C. §§ 1346(a) and 1491).

Outlined in its April 22, 2025, termination letter, NRCS afforded Appellant an opportunity to submit all final payment requests to ensure that the agreement termination was equitable and reasonable. Notwithstanding NRCS’s position that equitable relief does not apply to this case, consistent with the closeout guidance that NRCS provided to all PCSC-AMP participants, the grant of such relief, if any, should be limited to any unreimbursed previously incurred expenses, for which Appellant was already afforded an opportunity to submit, and not to future expected costs occurring after the date of contract termination.

(Agency Closing, page 10)

Whether the PCSC is a covered program for purposes of equitable relief, and if so, whether the facts of this case warrant a grant of equitable relief is beyond my authority as an Administrative Judge to decide.  In accordance with 7 U.S.C. §§ 6998(d) and 7996(a)(2) the NAD Director has the authority to grant equitable relief to the same extent such authority is provided the Secretary of Agriculture.  I will not determine the matter, but I have developed a record to enable the Director to make a determination as to whether equitable relief should be granted.  If Appellant wishes to be considered for equitable relief, the Appellant can ask for relief as part of a response to NRCS’s request for Director review of this Appeal Determination, if NRCS requests Director review.  However, if NRCS does not request Director review of this Appeal Determination, then the Appellant does not need to request relief, because the Appellant has prevailed, and NRCS is required to adhere to this decision.

Potential Allegation of Civil Rights Violation

To the extent that the Appellant may have made a potential or veiled allegation of a civil rights violation by the Agency in terminating the Appellant’s PCSC grant because the program served, and its enrolled producers may have been, an underserved or socially disadvantaged population due to ethnicity (HA, Track 3, 12:20-25:30), I state the following:  The U.S. Department of Agriculture (USDA) prohibits discrimination against its customers on the bases of race, color, national origin, religion, sex, disability, age, marital status, family/parental status, income derived from a public assistance program, political beliefs, or reprisal or retaliation for prior civil rights activity, in any program or activity conducted or funded by USDA (not all bases apply to all programs).  Remedies and complaint filing deadlines vary by program or incident.  

That being said, NAD is not the proper forum in which to pursue a civil rights program complaint.  See 7 C.F.R. § 11.1 (definition of participant).  If the Appellant believes it experienced discrimination when obtaining services from USDA, participating in a USDA program, or a program that receives financial assistance from USDA, it may file a complaint with USDA. OASCR, through the Center for Civil Rights Enforcement, will investigate and resolve complaints of discrimination in programs operated or assisted by USDA.

If the Appellant wants to file a civil rights complaint for program discrimination, it has the following submission options:

• Online: via the Program Discrimination Complaint Portal.
• By Form: complete the USDA Program Discrimination Complaint Form (English) or USDA Program Discrimination Complaint Form (Spanish) and send as directed on the form. 
• By Email or Letter: Draft a letter, signed by you or your authorized representative, containing all the details required for the complaint and send to Program.Intake@usda.gov. The Appellant may also mail this letter to the U.S. Department of Agriculture, Office of the Assistant Secretary for Civil Rights, 1400 Independence, Ave, SW, Mail Stop 9410, Washington, DC 20250-9410.
  
  

Ø  Please include the additional language below only when relevant. Do not assume a discrimination allegation means someone is disabled (i.e., do not automatically include the disability language below every time someone alleges discrimination.). If disability unknown, please include.

Individuals who have hearing or speech-related disabilities, please contact the USDA through the Telecommunications Relay Service by dialing 711 (voice and TTY).  Persons with disabilities who require alternative means of communication for program information — e.g., Braille, large print, audiotape, American Sign Language, etc.— should contact the State or local Agency that administers the program or the USDA.  If the Appellant requires alternative means of communication for program information (e.g., Braille, large print, audiotape, etc.), please contact USDA’s TARGET Center at (202) 720-2600 (voice and TTY).

DETERMINATION

Seven C.F.R. § 11.8(e) provides that the appellant bears the burden of proving that the Agency’s adverse decision was erroneous by a preponderance of the evidence.  In this case, the Appellant met this burden to show the Agency erred when it terminated the Appellant’s PCSC grant. 

This is a final determination of the Department of Agriculture unless a party timely files a request for review.

Dated and distributed this 28th day of April 2026.

                /S/

STEVEN A. FOLSOM

Administrative Judge

National Appeals Division

NOTICE OF RIGHT TO REQUEST DIRECTOR REVIEW AND/OR COPY OF AUDIO RECORD

DIRECTOR REVIEW REQUEST GUIDANCE

Any party that believes the determination is wrong may request that the Director of the National Appeals Division (NAD) review the determination. A suggested format is attached, but any request is acceptable if it has all the information in the “Instructions for Request for Review” listed below.

An appellant or third party who believes that this determination is wrong must file a request for Director review within 30 calendar days after receipt of this determination. An appellant or third party may seek equitable relief as part of a Director review request or response. A request must be in writing and be signed by the appellant or third party. A request must also follow the “Instructions for Request for Review” listed below.

The agency may also file a request for Director review if it believes this determination is wrong. The agency must file its request within 15 business days after receipt of this determination. The head of the agency or someone acting in that capacity must sign the request. The agency must also follow the “Instructions for Request for Review” listed below.

Parties may file written responses to a request for Director review within 5 business days of receipt of a copy of the request for review.

IMPORTANT INFORMATION AND DEFINITIONS

Determinations are transmitted multiple ways: email, secure electronic platform such as Box, and/or hard copy U.S. mail.

“Receipt” occurs at the time sent by email; when accessed by a party in a secure electronic platform such as Box; or when received via U.S. mail, whichever is earlier.

A request or response is considered “filed” on the date and time NAD actually receives the document if sent electronically via Box upload or fax, or on the postmark date if sent by U.S. mail or commercial delivery service. The time for filing a Director review expires at 5:00 p.m., using the local time of the applicable regional office, on the last day of which such filing may be made.

Requests Filed by Appellant/Third Party More Than 30 Days After Email Date

NAD presumes that a party receives the determination when emailed. NAD will also send a copy of the determination to Appellants, Third Parties, and Interested Parties via U.S. mail. For parties who do not provide an email address, NAD presumes that it usually takes seven days for a determination to reach a party by U.S. mail. NAD may accept Director review requests filed more than 30 days after the presumed receipt date if the party shows good cause or receipt of the determination was delayed for reasons beyond the party’s control.

INSTRUCTIONS FOR REQUESTS FOR REVIEW

A request for review must:

• be personally signed and dated by Appellant, Third Party or head of the Agency;
• specifically request a review;
• give the case number for the Appeal Determination (the case number is on the top right-hand side of the first page of the Determination);
• note the date the requester received the Appeal Determination and if the receipt date is different from the date NAD emailed the Appeal Determination, an explanation for the different receipt date;
• say why the determination is wrong;
• confirm that the requester has also sent a copy of the request and additional information, if any, to the other party at the same time that the request was sent to NAD; and

·         NAD prefers and strongly encourages electronic request filing via Box upload.

§  To request a Director Review using Box, you must use your NAD case specific upload link provided to you at the start of your appeal and which is available inside your Case Record folder in Box.  Such upload link looks like this:

§  You cannot drag and drop your Director Review request or simply save it in Box as that will make your request only viewable to you; you must use the upload link.

§  If you file a Director Review request via Box upload, you may email the NAD regional office at SM.OHA.WRO@usda.gov to confirm receipt.

Alternatively, if necessary, requests may be filed via Fax: 1-855-438-8035 or U.S. mail or commercial delivery service to:

National Appeals Division, Western Regional Office

13922 Denver West Parkway, Suite 100-NAD

Lakewood, CO 80401

Phone: 1-800-541-0483 or 303-236-2862

COPY OF AUDIO RECORD REQUEST

Audio recordings of any pre-hearing/hearing proceedings are available for free download on Box by all parties who participate in the case. If a party cannot access Box, a party may obtain a free copy of the audio record by making a written request to the appropriate NAD Regional Office.

REQUEST FOR DIRECTOR REVIEW

I/We, _{(print name(s))}  , am/are the Appellant(s)/Third Party/Agency head in the above-referenced appeal and I/we request a Director Review of the appeal determination in this case. 

The case number is:    .

I/We received the appeal determination on    .

NOTE: If the receipt date is not the same date as the date NAD emailed you the appeal determination, please explain the reason you are asserting a different receipt date.

The specific reasons why I/we believe the appeal determination is wrong are:  (The requester may attach additional sheets and documents, if desired.)

A copy of this request, along with any attachments, was mailed to the other parties on

.

I swear that all statements in this filing are true to the best of my knowledge and belief.

Appellant(s)/Third Party/Agency head signature(s)               Date

---

[1] This reflects the current version of 2 C.F.R. § 200.340.  At the time that the Appellant signed its PCSC grant the Agency’s General Terms and Conditions were from August 2021 and included the version of 2 C.F.R. § 200.340 from 2020.  (AR, pages 229-249)

[2] One of the Appellant’s in Urban Sustainability was appealing the termination of a PCSC grant.  This Appellant also requested a NAD appeal which was assigned as NAD Case 2025W000428.  NAD Case 2025W000428 was dismissed on November 20, 2025. 

[3] In NAD Case 2017E000763 the NAD Director also stated the review standard as “I review the agency’s decision to determine whether it was arbitrary, capricious, or an abuse of discretion.  5 U.S.C. § 706(2)(A).  In making such a determination, I assess ‘whether the decision was based on a consideration of relevant factors and whether there has been a clear error of judgement.”  (citing Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971)).  The NAD Director issued an additional determination after remand from a federal court which did not change the NAD standard of review for Agency decisions.  See NAD Case 2017E000763 (Dir. Rev., June 30, 2022).

[4] This provision was moved from 2 C.F.R. 200.340(a)(2) to 2 C.F.R. 200.340(a)(4).

[5] Section 200.301 of 2 C.F.R. states that “[t]he Federal agency should establish program goals and objectives during program planning and design.” (emphasis added).  However, Section 200.211 states the “Federal award must include . . . performance goals, indicators, targets, and baseline data . . . The Federal agency must also specify in the terms and conditions of the Federal award how performance will be assessed, including the time and scope of expected performance. 

[6] Words that are not terms of art and that are not statutorily defined are customarily given their ordinary meanings, often derived from the dictionary. Thus, in the absence of a statutory definition, “we construe a statutory term in accordance with its ordinary or natural meaning.” FDIC v. Meyer, 510 U.S. 471, 476 (1994). 

[7] See https://www.merriam-webster.com/dictionary/goal

[8] See https://uoeee.asu.edu/program-goals and https://cere.olemiss.edu/lets-get-s-m-a-r-t-steps-to-create-program-objectives/.

[9] See https://www.merriam-webster.com/dictionary/priority.