Many states have started to reduce restrictions that have been put in place to combat the COVID-19 outbreak. In addition to managing this next phase of the pandemic, states and local governments are also trying to administer new relief fund programs created by the crisis. This process already lends itself to be somewhat tricky in a non-pandemic environment, but with the additional challenges created by COVID-19, it has now become monumental for some governments.

Meeting Relief Funding Requirements

Although the Coronavirus Relief Fund authorized by the CARES Act is not the only source of relief funding, it will serve as the primary source of funds for many governments. One of the most significant challenges of administering relief fund programming is understanding approved spending and what records must be maintained.

Guidance issued by the Treasury states that CARES Act funding can be used on expenditures that:

  1. Are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19);
  2. were not accounted for in the budget most recently approved as of March 27, 2020, (the date of enactment of the CARES Act) for the State or government; and
  3. were incurred during the period that begins on March 1, 2020, and ends on December 30, 2020.

The Treasury has also stated that governments should maintain sufficient records to demonstrate the amount of CARES Act funds spent. As of May 11, 2020, we have not found any further guidance relating to what qualifies as “sufficient records,” but we would advise clients to maintain the same documentation they would for grant funding that could be subject to a single audit. These documents would typically consist of all related invoices and timesheets, detailed records for any cost allocations, documentation to show the review and approval of all transactions, and observation of purchasing policies. In addition, documentation supporting all budget adjustments accounting for the CARES Act funding should be available and should be associated with the funding. The maintenance of this documentation assists with substantiating the allowability of the budgeted expenditures under item 2 above.

For relief fund sources other than the CARES Act, such as grants from federal agencies, it is essential to review any grant agreements, correspondence, and regulations associated with the applicable CFDA number or program. Performing these reviews will enable governments to identify the requirements they must follow and approved expenditures for funding. If the rules are not clear, then the awarding agency can be consulted to provide clarity over the allowability of specific items.

Doing More with Less

During this time, some governments are finding that they have to provide more services than ever before due to the additional burden on public safety and healthcare services. This addition of services also includes the increased need to reevaluate budgets, obtaining new funding, monitoring the latest guidance, maintaining compliance with the funding requirements, and a variety of other new tasks that need to be addressed but, in many cases, with less staff availability than before. Staff availability may have reduced due to sickness, absence due to furloughs, or limited ability to function due to remote working.

If the number of tasks outweighs the government’s capacity, jobs must be prioritized, and essential matters addressed first. The use of outside assistance can alleviate some of the burden and, if the outside assistance is deemed to be a necessary expenditure that was not previously budgeted and falls within the timeframe of March 1, 2020, and December 30, 2020, then it would be an acceptable use of any CARES Act funding received by the government.

Maintaining Controls

Due to the potential staff limitations and disruption to standard working practices, governments need to reevaluate the effectiveness of their internal controls and potentially revise the processes. Sudden process changes and significant disruption increases the risk of errors and the potential for fraud or misappropriation occurring.

Increased monitoring at a higher precision level and additional back-end detective controls are likely to be beneficial to governments that feel the disruption of their standard control processes and, therefore, may be vulnerable. Additional spot-checks of new processes are a recommended way to ensure new procedures are operating as designed. One essential action would be to document the specific details of all control and process changes made.

Documenting this will assist in facilitating future spot-checks and during the initial audit, as auditors are very likely to ask for details of the critical processes and controls in place during the year.

Keeping Up-To-Date

Another major challenge of administering a relief fund is staying informed of new funding that becomes available and the latest guidance on funding expenses. A consistent theme of this pandemic has been how rapidly information has come out, and quickly situations have changed. Massive amounts of funding have already been announced and have started flowing to some governments. There is constant chatter about additional stimulus being in the works, but there has not yet been any confirmed information.

There are a variety of online sources, but sticking to the websites for the Treasury, IRS, Grants.gov, and the League of Cities has proven to be particularly informative. The more research, the better. Informed and up-to-date governments will be better able to take advantage of all new funding sources. By staying connected, you can stay on top of the latest information as much as possible.

There are a number of challenges associated with optimally administering relief funding way and seeking help to effectively manage your process may be the best solution for your governmental entity. Be sure to reach out to CRI’s government experts so they can serve as a resource to you and provide guidance or can be engaged in a consulting capacity for more hands-on assistance.