45 CFR §1303.33

1. (a)If a grant recipient shows cause why termination is appropriate or demonstrates cost effectiveness, the grant recipient may terminate a delegate agency's contract.
2. (b)The grant recipient's decision to terminate must not be arbitrary or capricious.
3. (c)The grant recipient must establish a process for defunding a delegate agency, including an appeal of a defunding decision and must ensure the process is fair and timely.
4. (d)The grant recipient must notify the responsible HHS official about the appeal and its decision.