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Authored by Sheanne Hediger

With the COVID-19 pandemic, there have been rapid changes happening at the federal and state government levels. While the specific nature and amount of federal and state funds are still being determined, it is recommended that local governments, not-for-profits and institutes of higher education carefully track all expenses, including salaries and wages, for possible reimbursement. Several federal agencies already have, and likely will continue to, come out with emergency funding programs to assist with the impacts of this outbreak. It’s important to understand the compliance requirements as a recipient of federal funds, even in crisis situations such as this.

Your organization may need to rapidly make changes to internal control procedures or continue to operate processes with fewer people than normal while maintaining adequate internal control. All expenditures reimbursed with federal funding are required to be accounted for in accordance with the respective federal agency requirements, even in these uncertain times. If your organization is or may be receiving federal aid, appropriate supporting documentation is required for the following:

  • Expenditures incurred and reimbursed
  • Expenditures incurred for any required local match
  • Reports and reimbursement requests filed with the federal agency or pass-through entity
  • Procurement activities and contracts awarded
  • Sub grants awarded to other organizations

Due to the unprecedented nature of the impact of COVID-19, the specific terms and conditions of each award are still evolving, but it can be presumed that detailed documentation of costs will be necessary in order to qualify for assistance. Federal regulations require retention of records for three years from the date of submission of the final expenditure report; however, record retention of seven years may be used as a best practice. The following types of documentation should be retained:

  • Invoices and/or purchase orders supporting direct costs
  • Payroll records, including detailed time sheets, job descriptions, approved wages and support of payroll relate benefits
  • Procurement records and evidence of compliance with your procurement policy
  • Indirect cost rates

Federal funding cumulatively in excess of $750,000 per recipient entity is subject to the federal single audit requirements under Uniform Guidance. Additionally, several states also impose single audit requirements on funding provided at the state level. Funding accepted by your organization today may need to be audited as major programs in the future.

OMB issued memorandum M-20-17 on March 19, 2020 addressing administrative relief for recipients and applicants of federal assistance impacted by COVID-19. As of the date of the memo, any organizations with fiscal years ending through June 30, 2020, who have not yet filed their single audits with the Federal Audit Clearinghouse, a six-month extension has been granted. Documentation for the reason for delayed filing should be maintained. Also within the memo, the eligibility of certain costs is discussed. Most notably as is relates those costs, federal agencies are authorized to do the following:

  • Extend awards active as of March 31, 2020, and scheduled to expire on or before Dec. 31, 2020, an extension up to 12 months at no-cost
  • Allow award recipients to continue charging salaries and benefits to active federal awards which may have experienced disruptions due to the extraordinary circumstances; additional costs may be considered allowable if necessary to resume activities supported by the award; appropriate records and cost documentation must be maintained by the award recipient.
  • Allow costs not normally chargeable to awards to be charged to the awards; examples include cancellations of events, travel or other activities; appropriate records and cost documentation must be maintained by the award recipient.

Federal agencies will need to take action to modify terms and conditions of existing federal awards to implement these changes.

Available resources

We continue to follow this ever-changing situation and will strive to keep you informed. Visit Baker Tilly’s Uniform Guidance Resource Center for additional information to help your organization navigate administration of federal awards. Our specialists routinely work with governments and not-for-profits receiving federal funding and can help position your organization for compliance success.

The full OMB Memo M-20-17 is available and contains additional useful information for federal agencies and recipients of federal awards. 

Visit our Coronavirus Resource Center for more information to support your organization and employees.

Visit FEMA's website to view helpful information related to COVID-19.

View additional guidance regarding what local governments should do.

For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.

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