Manage Your Federal Grant Costs During COVID-19

08/03/2020

By Rebecca Field Principal CliftonLarsonAllen Email T. 612.397.3053

Key insights

  • In response to the pandemic, the OMB has issued a series of memorandums that could affect your grant compliance program.
  • OMB memos give fund recipients the flexibility to charge salaries, benefits, and other eligible costs to the federal award.
  • CLA can help you navigate the complexities of COVID-19 funding opportunities.

Federal financial assistance can help keep your organization up and running during COVID-19. Whether it’s a loan, grant, or other assistance, these funds allow you to continue working toward your mission and serve your clients. However, understanding the impact that COVID-19 has on managing federal grants is essential for proper compliance during this time. Develop an effective grant compliance program per the latest guidance issued by the Office of Management and Budget (OMB) for proper management and use of federal funds.

OMB memorandums

In response to the pandemic, the OMB issued a series of memorandums regarding federal financial assistance flexibilities.

These memorandums provide short-term flexibilities for administrative, financial, and audit requirements under the Uniform Guidance. However, the OMB recognizes that there is still uncertainty surrounding the reopening and recovery process of the country and the ability to enhance federally funded projects during this time.

These memorandums also provide fund recipients affected by the pandemic a “reasonable” transition to normal operations. The memorandums should be read in their entirety to gain a full understanding.

We understand there are still questions regarding the allowability of payroll costs for recipients’ operations affected by COVID-19. The following discussion provides additional clarity on the impact the OMB memorandums have on allowable use of funds.

Allowability of salaries and other project activities

M-20-17 provides awarding agencies the flexibility to allow recipients to charge salaries, benefits, and other costs necessary to resume activities to the federal award. M-20-26 extends that flexibility through September 30, 2020.

Substantiate costs charged to federal awards

Salaries and benefits charged to active federal awards must be consistent with your salary payment policy (under unexpected or extraordinary circumstances) from all funding sources, federal and non-federal. Additionally, 2 CFR §200.302 Financial management and 2 CFR §200.333 Retention requirement of records require appropriate records and cost documentation to substantiate the salary charges and other project activities costs related to interruption of operations or services.

Don’t double-dip

Do not charge costs paid with Paycheck Protection Program (PPP) loans or other federal CARES Act programs to current federal awards, as that would be considered double-dipping — in other words, the federal government would pay for the same expenses twice. Instead, consider these options:

  1. Charge payroll costs after the period covered by the PPP loan.
  2. Ask for a budget revision to transfer payroll costs to other direct costs allowable for the federal program.

Exhaust other funding sources

Each federal award has limited funding resources available to achieve its specific public program goals. To preserve federal funds for the ramp-up effort, awarding agencies must inform recipients to use all other available funding sources to sustain your workforce and take steps to save overall operational costs (such as rent renegotiations) during the pandemic. Maintain documentation as you exhaust other funding sources and reduce overall operational costs.

Review SEFA identification requirements

In order to provide adequate oversight of the COVID-19 Emergency Acts funding and programs, recipients and subrecipients must separately identify the COVID-19 Emergency Acts expenditures on the Schedules of Expenditures of Federal Awards and audit report findings. Documentation of COVID-19 funding and program expenditures will be necessary for proper reporting.