How should cities prioritize and layer federal funding?

A municipality can engage in some general best practices to assist with the prioritization of funds. The following process is just one example of a way a municipality can approach this issue:

• Assess relative need.
• Determine the total assistance available for each need. Some funding sources can address a broad variety of needs, while others have a narrower field of allowable activities.  Aligning the funding with more specific use restrictions to projects addressing those eligible uses will allow the funding with a wider range of allowable uses to address other needs.    
• Compare expenditure deadlines with project timing requirements. If a project will run 18 months and requires 3 funding sources (all with different expenditure deadlines), the municipality may need to coordinate the use of each funding source (utilizing the sources with most restrictive timelines first) to maximize the funding and not put the project at risk.  
• Understand that Non-duplicative assistance is excluded from final benefit calculation. Examples of non-duplicative assistance include:funds used for a different purpose;
  • funds used for the same purpose, but a different eligible use;
  • funds not available to the applicant;
  • private loans; or
  • other assets or lines of credit.  
• Match unmet needs with allowable uses to secure funding.

Last Revised: April 14, 2021

How can a municipality avoid duplication of benefits?

Municipalities should consider conducting a duplication of benefits analysis from the earliest stages of the process.  This duplication of benefits analysis should be completed before receiving or providing federally funded assistance.

A municipality may complete a duplication of benefits analysis by developing an overall budget that demonstrates the funding needed for the activity and the funding reasonably anticipated (similar to a “sources and uses” analysis for a housing or economic development project). This budget should include all Federal and non-Federal funding, as well as in-kind donations, keeping in mind the specific requirements and restrictions of each funding source. If the budget shows that the need is equal to or greater than the funding sources, there is no duplication of benefits.

Municipalities can take other steps, including but not limited to requiring beneficiaries to disclose all other financial assistance they have applied for or received, provide a self-certification indicating that they have not received a duplicative benefit, or fill out a questionnaire listing potentially duplicative assistance that they have already received or reasonably anticipate receiving.   In addition, municipalities can consider requiring applicants to disclose any new grants approved or other applications for assistance submitted in the period between their application submission to your municipality and its ultimate approval.

Lastly, if your city has an overlapping jurisdiction with another municipality or county, both parties should consider coordinating efforts to avoid duplication of benefits before they start distributing benefits. For example, with rental assistance, a city, county or state might all have rental assistance programs that could potentially provide assistance to the same household for the same period of time.

Last Revised: April 14, 2021

What controls should a municipality have in place for receiving and distributing COVID funds?

I.  Guiding Resources on Internal Controls

A. The Green Book

Standards for internal controls in the Federal Government are collectively known as the “Green Book,” which is a US Government Accountability Office (“GAO”) publication that sets forth standards for an effective internal control system for federal agencies.^[1]

B. COSO Framework

The Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) has created a framework to help​​ organizations design and implement internal controls.^[2] COSO is a private sector organization and not part of the GAO.  COSO offers a framework that provides useful tools, advice and directions on how to create and apply internal controls in addressing operations and reporting objectives, and also clarifies the requirements for effective internal controls.  COSO has also issued Illustrative Tools for Assessing Effectiveness of a System of Internal Control and the Internal Control over External Financial Reporting (“ICEFR”): A Compendium of Approaches and Examples. The Illustrative Tools are intended to assist entities when assessing whether a system of internal control meets the requirements set forth in the framework.   

II.  The Uniform Administrative Guidance

A.  Generally

The Uniform Administrative Guidance (“UAG”), which is set forth in the Code of Federal Regulations at 2 CFR § 200 and issued by the Office of Management and Budget (“OMB”), includes provisions which lay out internal control requirements. 

The CARES Act and the CRF reference the UAG standards. The US Treasury sets out guidance and responses to FAQs, which include specific reference to internal controls and aspects of the UAG that apply to the CARES Act.  (A potentially useful resource may be found here: https://www.whitehouse.gov/wp-content/uploads/2020/12/2020-Compliance-Supplement-Addendum_Final.pdf ). 

The UAG provisions referenced above, which set forth guidance for internal controls over the use and distribution of CRF and CARES Act funds, may apply in a similar way to the ARP. However, explicit guidance on establishing and applying internal controls with respect to the ARP has not yet been decided or disseminated.

B. Potentially Relevant UAG Provisions^[3]

Below are potentially relevant UAG provisions relative to internal controls.  The following include definitions, processes overview, and regulatory considerations.

2 CFR § 200.61 Internal Controls 

“Internal Controls means a process, implemented by a non-Federal entity, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:  

(a) effectiveness and efficiency of operations;  

(b) reliability of reporting for internal and external use; and  

(c) compliance with applicable laws and regulations.” 

2 CFR § 200.62 Internal control over compliance requirements for Federal awards.  

“Internal control over compliance requirements for Federal awards means a process implemented by a non-Federal entity designed to provide reasonable assurance regarding the achievement of the following objectives for Federal awards:  

(a) Transactions are properly recorded and accounted for, in order to:  

     (1) permit the preparation of reliable financial statements and Federal reports;  

     (2) maintain accountability over assets; and  

     (3) demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.

(b) Transactions are executed in compliance with:  

     (1) federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program;  

     (2) any other Federal statutes and regulations that are identified in the Compliance Supplement; and  

(c) funds, property, and other assets are safeguarded against loss from unauthorized use or disposition.”  

According to the Federal Registrar^[4] issued by the U.S. Treasury dated January 15, 2021, fund payments are subject to the requirements in the Uniform Guidance 2 CFR 200.303 regarding internal controls.

2 CFR § 200.303 Internal Controls: 

“The non-Federal entity must:   

(a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  

(b) Comply with Federal statutes, regulations, and the terms and conditions of the Federal awards. 

(c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. 

(d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings.  

(e) Take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, state, local, and tribal laws regarding privacy and obligations of confidentiality.” 

[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75883, Dec. 19, 2014]  

III. Conclusion

In addition to the potentially applicable UAG 2 CFR § 200 provisions summarized above, it is important to follow local jurisdictional rules and guidelines for internal controls.  Consideration of the guidance contained in the “Green Book” or the “Internal Control Integrated Framework” (COSO) would be prudent, as well as any guidance which may be forthcoming relative to internal controls and the ARP.

What are some of my city’s obligations and responsibilities to prevent fraud related to ARP funds?

How can a municipality protect against fraud related to ARP funded programs?

Understanding the risks for potential fraud can be critical for municipalities that are developing and administering assistance programs. Commitment to and implementation of an anti-fraud strategy that includes a continuous cycle of preventing, detecting, and responding to fraud may be an effective solution to prevent fraud. 

Protecting Individual Citizens from Fraud:  During the COVID-19 pandemic, there has been a rise in consumer fraud complaints across the country. In October 2020, the Federal Trade Commission (“FTC”) revealed a surge in reports from individuals claiming losses as a result of scams perpetrated via social media, including an increase in complaints in the spring of 2020 as COVID-19 spiked. Data released by the FTC indicates that the number of complaints about scams initiated via social media more than tripled in the last year. Reported losses resulting from this type of fraud totaled more than $117 million during the first six months of 2020, as compared to $134 million in losses during all of 2019.

Scam artists will use varying methods to reach potential victims including, but not limited to, creating fraudulent websites purporting to be government agencies, phishing emails, text messages, and phone calls. The following steps can be effective in reducing this type of consumer fraud:

• Educating the public about potential schemes and the recommended responsive actions they can take if they believe they have been targeted; and
• Utilizing community groups and non-profits to assist with messaging.

Protecting Government Agencies from Fraud: Not unlike individual consumers, government agencies can stay up-to-date on the latest trends in consumer fraud schemes. This can be achieved in part through collaboration with local government agencies and prosecutors. Reviewing the guidance put forth by the FTC, the Department of Health and Human Services, the Department of Justice, and other federal agencies mentioned below might also be helpful.

Furthermore, within your municipal government, maintaining an organizational culture and structure that is dedicated to fraud risk management may decrease the incidence of fraud. Regular fraud risk assessments may help municipalities ascertain their fraud risk profiles. Municipalities can design and implement specific control activities to mitigate identified fraud risks and collaborate throughout the organization to ensure the strategy is effectively implemented.

In order to mitigate the risk of fraud and mismanagement of funds, and eliminate waste and abuse, grantees should consider pursuing the following measures: 

• Review and make suggestions for adequate management systems and policies and procedures (specifically those for prior federal grant awards); 
• Collect and analyze data;
• Conduct pre-award risk assessments and discuss monitoring plans to identify areas of weakness;
• Discuss subrecipient monitoring responsibilities; 
• Identify key personnel and discuss organizational structure to eliminate conflicts and support an environment that supports fraud risk management;
• Initiate financial controls; 
• Review existing internal controls for adequacy; 
• Develop waste, fraud, and abuse prevention guides specific to the program; 
• Evaluate outcomes of risk-based monitoring;
• Train staff and subrecipients on key fraud indicators and encourage them to speak up when they detect suspicious activity; 
• Establish e-mail accounts or other methods for reporting fraud, waste, and abuse of funds;
• Document internal process for reviewing cases and making final determinations;
• When awarding contracts to vendors or suppliers that have previously worked for your municipality, examine records of past purchases and evaluations to ensure the vendor or supplier has the capacity to deliver on the scale required.  If there is a significant discrepancy between past demonstrated capacity and the promised future capacity, municipalities may consider further due diligence to verify that the business has in fact increased capacity and capability to meet the current requirements;
• Despite the more urgent timelines which may be involved, municipalities should consider taking basic due diligence steps prior to the award of emergency contracts, including, for example, requiring the submission of business incorporation papers, tax statements, bank accounts, and insurance policies. When the emergency subsides, consider revisiting the vetting process, and putting the vendor or supplier through the full scope of normal contract vetting procedures; and
• Prior to the award of contracts, consider requesting that the awardee company certify that the company is legitimately operating as a business and that it has the capacity to perform the work required under the terms of the contract.

The following non-exhaustive resources may be helpful tools for municipalities to pursue in advance of specific guidance being issued regarding the ARP:

• Federal Trade Commission, Coronavirus Advice for Consumers;
• U.S. Department of Health and Human Services Office of the Inspector General, Fraud Alert COVID-19 Scams;
• U.S. Department of Justice, U.S. DOJ Fraud Awareness Resources;
• U.S. Small Business Administration, Scams and Fraud Alerts;
• Treasury Inspector General for Tax Administration, IRS-Related Coronavirus Scams;
• Social Security Administration Office of the Inspector General, Social Security Scams;
• U.S. Food & Drug Administration, Protecting Consumers Against COVID-19 Vaccine Scams;
• U.S. Department of Housing and Urban Development Office of Inspector General, Grantee Disaster Fraud Presentation (July 31, 2019);
• The National Association of State Procurement Officials, Best Practices Guide; and
• Thomson Reuters Legal, Government Vendor Fraud: is prevention the ultimate cure?

Last Revised: April 14, 2021

How can a municipality avoid fraud in the procurement process?

On January 6, 2022, the U.S. Department of the Treasury (“Treasury”) released the Final Rule implementing the Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”). The Final Rule explains that “recipients must comply with the applicable requirements of the Uniform Guidance regarding procurement, contracting, and conflicts of interest and must follow the applicable laws and regulations in their jurisdictions.”[1] This is also true of non-federal entities who may be subrecipients.[2]

Some steps that municipalities may consider taking to prevent fraud in the procurement process include, but are not limited to, the following:

• Performing a check to help ensure contractors and suppliers are not prohibited from working on federally funded contracts. A contract should not be granted to parties that are suspended, debarred, or otherwise excluded from or ineligible for participation in federal programs or activities.[3] The federal government maintains the System for Award Management (“SAM”), a public database used to identify companies and individuals who are excluded from working on federal projects.[4] In addition, many states and municipalities maintain their own debarment lists, and these should be checked as well. If awarding a new contract or competing for a renewal, this check should be included in the proposal or bid evaluation process prior to notification of award. Municipalities should keep a record of the checks they performed.
• Contracts should only be awarded to responsible contractors possessing the ability to perform successfully under the terms and conditions of a proposed procurement. Consideration will be given to such matters including but not limited to: (i) contractor integrity; (ii) compliance with public policy; (iii) record of past performance; (iv) financial and technical resources; and (v)  capacity to perform the proposed scope of services.[5] Even under federal emergency and exigency programs, basic due diligence steps can be taken, such as checking your state’s Secretary of State Business Registration Database to attempt to ensure the relevant company is duly registered to conduct business, performing an internet check to see if any red flags surface regarding the company and owner, and reviewing past performance evaluations if applicable.
• Maintain oversight to ensure that contractors perform in accordance with terms, conditions, and specifications of their contracts or purchase orders.[6] Examples of some oversight tools include: (i) conducting regular audits; (ii) ensuring sufficient supervision  and/or regular project spending and work completion reports from vendors; and (iii), having written standards of conduct in place covering conflicts of interest and governing the performance of employees engaged in the selection, award, and administration of contracts. Municipalities should keep records of all actions taken for audit and other purposes.
• Where time does not permit adequate acquisition planning and market research, a municipality can consider limiting the value and length of a contract to address only its immediate needs. This approach allows the municipality to plan strategically for ongoing requirements. Options may be included and exercised, if necessary, to allow continuous service.[7]
• If using pre-existing, competitively-bid contracts for emergency services, municipalities must ensure that the scope of work provided is consistent with the scope of work in the original contract. Change orders, any modification or change to works agreed to in the contract, submitted by contract administrators to substantially add new scope, services, or time not covered by the original contract and solicitation may be considered a “cardinal change,” making the contract non-competitive and non-compliant with federal procurement requirements.[8] Non-competitive and non-compliant contract activities could be flagged as potential fraud. Changes to the contract should always follow the processes outlined in the contract itself.
• If procuring new goods or services, municipalities should ensure that any solicitation is clear on the scope of services being sought, including any criteria used to evaluate a bidder’s responsiveness or responsibility. Awarded vendors will need to demonstrate: (i)  responsiveness; (ii) compliance with  the criteria outlined in the solicitation; and (iii) the reputational, technical, and financial capacity to perform the services proposed for the contract.[9] Awarding a contract to a vendor who did not comply with the terms of the solicitation, or where evaluation criteria for the award was not consistently or clearly applied or documented, will likely raise concern regarding the validity of the award.
• If sufficiently robust, municipalities must follow already established procurement processes, whether they are for emergency contracts or otherwise. They must also maintain records sufficient to detail the history of the procurement. These records should include, but are not necessarily limited to, the following: (i) rationale for the method of procurement; (ii) selection of contract type; (iii) contractor selection or rejection, and (iv) the basis for the contract price.[10] Failure to adequately document the history of the procurement could also lead to questions about the validity of the contract award. Documentation is key to transparency and for preparing for future audits.
• Immediately notify in writing the federal agency awarding the assistance of potential violations of federal law involving fraud, bribery, or gratuity violations potentially affecting the federal award.[11]
• Require contractors/vendors to include a signed certification attesting to the accuracy of submitted invoices. Establish processes to review invoices against a vendor’s progress reports to ensure that the project is completing the scope as outlined by the contract, change order, or your direction, and that the timelines are consistent with the terms of the contract.
• Establish and promote an anonymous COVID-19 Fraud whistleblower hotline for employees, the public, and contractors. Hotline posters should be posted at government facilities, distributed to contractors/vendors, and placed in public areas that are most likely to be observed by the members of the community. Creating posters in multiple languages can be helpful. Contractors and vendors must be reminded in their contracts of their absolute responsibility to report any suspicion of fraud to the hotline.
• When audits or reviews have identified mistakes made during the procurement process, document the issue(s) and note the corrective action planned or taken. Failure to correct conditions identified by audits or reviews which could cause improper payments, fraud, waste, or abuse is viewed by the federal government as unacceptable and could result in sanctions.[12]

Last Revised: January 27, 2022

What are some of the best practices for our municipality when receiving complaints regarding fraud and waste? What are some of the appropriate investigatory steps that we should be taking when we receive them?

Best practices that municipalities should consider include establishing oversight programs and conducting audits of the municipality’s disbursements.  Audits and oversight are necessary components of the federal grant life cycle to ensure accountability for publicly funded programs and to mitigate the risk of fraud, waste, and abuse. Oversight authorities, including Federal Agencies’ Inspectors General, are independent reviewers charged with developing a risk framework to assess factors such as:

• Was the funding used as intended?
• Were resources used in a prudent, responsible, and reasonable manner?
• Were the applicable laws and regulations followed, including local laws?
• Is the use of funding clearly reported and documented?

When an audit or oversight inquiry happens, some things municipalities can consider include:

• Identifying an Inquiry Response team. Clearly designate roles and responsibilities, including a team lead to respond to inquiries. Such an Inquiry Response Team could establish a clear process, direct action internally, collect and review documentation or responses, and communicate both internally and externally regarding the inquiry. A best practice would be to ensure that this team has the resources they need, including adequate time and bandwidth, to dedicate sufficient time to coordinate your municipality’s response. 
• Understanding the scope and the breadth of the inquiry. Auditors, oversight bodies, or Freedom of Information Act requests are expected to communicate the goals, intent, subject, or framework they are using to perform their oversight role. Municipalities can consider whether the Inquiry Response Team clearly understands the questions being asked and responds directly to the questions. As a best practice, the Inquiry Response Team would also be able to identify and respond when a question is beyond the scope of the inquiry or inconsistent with the rules and requirements of the award.
• Ensuring clear expectations for inquiry response. Municipalities can consider ways to communicate and work closely with the auditor or oversight body to establish clear expectations on timelines, methods of communication, and the format and content of responses.
• Reviewing policy, guidance, and FAQs of the funding program. As a best practice, the Inquiry Response Team would be comfortable with the details of the guidance provided and be able to cite or reference that guidance in their response to the inquiry. For example, presenting a cost incurred in response to a question would also clearly identify how that cost was an eligible use of funding and cite the policy or guidance that permits it.
• Ensuring response answers the question in a clear, concise, focused, and straightforward way. As a general best practice, municipalities can strive to present information as simply and as clearly as possible, and make sure it answers the question being asked. Auditors and oversight authorities may not understand the local context, and they will not assume how to connect information if it is not provided to them. For example, if presenting financial information to an auditor for costs that may have been proportionally allocated to a federal fund, municipalities can consider ways to make sure that the auditor understands the math and methodology behind the allocation and that the reasoning behind the response is spelled out for the auditor.

For municipalities managing disaster response and recovery funding, one of the ways to respond to an audit is to prepare for one before it arrives. Because auditors and oversight authorities often utilize a risk framework to assess when audit or inquiries should take place, documenting steps to mitigate risk are often times helpful in reducing the burden if and when an audit arrives. Some considerations municipalities can take into account include:

• Documenting internal policies and procedures for the management of federal funding. Providing internal policies and procedures on how critical actions are taken, such as purchasing, spending, review and approval processes, will be helpful in demonstrating to an auditor that internal controls were in place. For most municipalities, those policies and procedures already exist, and may only need to be slightly expanded to account for additional processes specific to the federal funding. If your municipality developed a new process specific to the management of the fund, consider documenting that as well.
  • For example, auditors are often concerned with how goods or services funded by federal dollars are procured. An auditor may review a municipality’s existing procurement policy and process, conflict of interest policy, and contract management processes to ensure they were followed and are also compliant with the federal requirements or terms and conditions of the funding. To help prepare for an audit, collecting existing policies and adding in any specific additional processes put in place for the use of federal funds may help demonstrate the oversight and internal controls an auditor is looking for.
  • Example Case: A mid-size county used COVID-19 relief funding to establish a rental assistance and relief program for households that were severely financially impacted by COVID-19. The county documented how the program would be communicated and accessible to the public, application and documentation requirements, evaluation processes to determine compliance with program criteria and ensure no duplication of benefits, and the notification process to award or deny assistance. As the program was rolled out, the County identified that the process on approving release of funds to awardees, including who was responsible for the final approval and issuance of checks, was not captured in the existing process.  Updating their written policy with how that process actually occurred, including changes made to increase oversight of funding disbursement, will help an auditor understand how the program worked and the controls in place from the County to ensure it met the funding requirements.
• Assessing and documenting if existing policies and processes were not followed. Often in the immediate aftermath of a disaster, or navigating the uncertainties of COVID-19, municipalities have had to make decisions and act quickly in order to protect public health and safety. In some cases, existing processes may have been amended to respond to immediate threats. Completing an after-action report, or mid-action report, could help to determine potential gaps or issues that an auditor may flag. Documenting what happened, including decision-making and processes, could be helpful in explaining these instances if questioned, as well as provide a framework to correct an issue.
  • For example, a municipality may have bypassed normal purchasing processes to requisition PPE for frontline workers responding to COVID-19 because the timeline to complete a full, competitive procurement may have put frontline workers in danger. Documenting  the context and justification for that decision in an internal memo, demonstrating that it was necessary, reasonable, and prudent, may help an auditor understand the process. It will also help if an audit or oversight inquiry happens months or years after the fact, where the individuals “in the room” may no longer be with the municipality, or able to support the audit or oversight response.
• Keeping financial information and supporting documentation clear and organized. Maintaining financial information and supporting documentation is the baseline requirement of all federally funded programs. Keeping documentation organized, up to date, and centrally accessible will help your team quickly and effectively respond to an auditor or oversight authority. This will be especially helpful if audits come months or years later, when the original team managing the funding may not be available to search for documentation or support audit response. As part of your internal policies and procedures, it is helpful to clarify where documentation should be stored.
• Consider ways to correct identified issues. Mistakes occur in disaster response and recovery, often without the direct intent of fraud, waste, or abuse. Entities that identify critical issues regarding use or management of funds, but do not take efforts to correct them, may face additional issues when audit or oversight arrives. Periodic internal assessment, updating policies and processes as needed to better meet the terms and conditions of your municipality’s allotted federal funds, and documenting efforts to resolve identified issues will likely help to demonstrate effective stewardship to an auditor or oversight authority.

Below are some resources that municipalities may find useful in understanding and preparing for federal audits of disaster recovery funding, including reviewing recent audits:

• DHS OIG Audit Tips for Managing Disaster-Related Project Costs, OIG-17-120-D
• HUD Handbook for CDBG Subrecipients – Chapter 7.0 Audits
• Treasury OIG Audits of CARES Act Funding

Additional steps that municipalities can consider taking include:

• Having a database in place to document and track fraud complaints received.
• Making it easier for workers, contractors and the public to report COVID-19 related fraud in your municipality by considering establishing a COVID-19 fraud hotline that allows individual to report matters anonymously.
• If your municipality does not have resources in place to investigate fraud complaints, consider coordinating with your local, state and/or Federal prosecutors. Most prosecutors will have units in place to investigate allegations of fraud.
• Municipalities can leverage Federal resources already in place to assist with handling COVID-19 related fraud complaints. Below are some Federal entities that have hotlines in place to receive fraud complaints:
  • The Pandemic Response Accountability Committee (“PRAC”) - https://www.pandemicoversight.gov/contact/about-hotline
  • The DOJ of Justice National Center for Disaster Fraud Hotline - https://www.justice.gov/disaster-fraud 
  • FEMA – https://www.fema.gov/about/offices/security/disaster-fraud
  • U.S. Department of Homeland Security Office of the Inspector General - https://www.oig.dhs.gov/hotline 
  • U.S. Department of Health and Health and Human Services Office of the Inspector General- https://oig.hhs.gov/fraud/report-fraud/index.asp 
  • U.S. Small Business Administration Office of the Inspector General - https://www.sba.gov/partners/contracting-officials/contract-administration/report-fraud-waste-abuse#section-header-0 
  • U.S. Department of Treasury Office of the Inspector General - https://oig.treasury.gov/ 
• If you do conduct an investigation and find violations of Federal law involving fraud, bribery, or gratuity violations you must notify the Federal agency that awarded the money to your municipality. 
• When a municipality conducts an investigation regarding fraud it is generally a good practice to coordinate your efforts with your internal audit department if one exists.

Last Revised: April 14, 2021

How can my municipality efficiently utilize the funding provided by the U.S. Department of Health and Human Services’ Office of Minority Health in the new program Advancing Health Literacy to Enhance Equitable Community Responses to COVID-19?

The Office of the Assistant Secretary for Health (OASH) and the Office of Minority Health (OMH) announced the availability of funds for Fiscal Year 2021 under the authority of 42 U.S.C. § 300u-6 (Section 1707 of the Public Health Service Act) and the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (P.L. 116-260).^[1]

Eligibility for these funds is limited to legally recognized local municipalities (excluding States, Territories, Tribes, Tribal organizations, and non-profit urban Indian health organizations), such as cities, townships, boroughs, parish governments, as well as county governments across States and commonwealths of the United States. Other eligible applicants can also include water use cooperatives and even school districts.^[2] Furthermore, there is no threshold or quota that determines eligibility; however, all eligible entities must submit applications which will go through a screening process to determine the communities with the greatest needs.^[3]

More information may be found in the Department of Health and Human Services Office of the Assistant Secretary for Health Notice of Funding Opportunity: Advancing Health Literacy to Enhance Equitable Community Responses to COVID-19 Opportunity Number: MP-CPI-21-006 (“Notice of Funding Opportunity”).^[4] Beginning on page 14 of the Notice of Funding Opportunity, applicants should prepare a Project Narrative, including the following topics: Statement of Need, Proposed Approach, and Organizational Capacity.

Furthermore, applicants should prepare the Narrative and implement their proposed health literacy program using the details below:

• Demonstrate how health literacy strategies will be implemented to advance Healthy People 2030 objectives HC/HIT-01, HC/HIT-02 and HC/HIT-03, and improve adherence to COVID-19 public health practices with high-risk and underserved racial and ethnic minority populations in the geographic area of focus.
• Provide a list, as an appendix, that identifies the types of partners and their role in developing and implementing the health literacy and sustainability plans.
• Describe the quality improvement approach that will be used to refine health literacy strategies that support the access, use and outcomes of COVID-19 health information and services for the populations in the geographic area of focus.
• Describe the evaluation approach that will be used to determine whether the health literacy intervention was implemented in adherence with the National CLAS Standards, whether it reached its target population described in the Disparity Impact Statement, and whether there were any changes in access, use and outcomes of program activities, especially COVID-19 testing, contact tracing, vaccination. Include a description of how data stratified by demographic characteristics will be used to advance Healthy People 2030 objectives HC/HIT-01, HC/HIT02, HC/HIT-03 and IID-D02.^[5]

Once a municipality has determined whether it is indeed eligible, and has completed all the necessary actions related to funding utilization, it may follow the additional application steps found in the Notice of Funding Opportunity.

Last Revised: April 21, 2021

Do COVID-19-related tax credits for paid leave align or correlate with Stafford Act/FEMA funding or the American Rescue Plan Act?

The American Rescue Plan Act of 2021 (“ARP”) extends several tax benefits to small businesses that are intended to help businesses stay open, recover, make payroll, and take steps to protect health outcomes for employees. 

ARP extends the availability of the Employee Retention Credit for small businesses through December 2021 and allows businesses to offset their current payroll tax liabilities by up to $7,000 per employee per quarter. This credit of up to $28,000 per employee for 2021 is available to small businesses who have seen their revenues decline or who have been temporarily shuttered due to COVID-19.^[1]

The American Rescue Plan Act also extends the availability of Paid Leave Credits for small and midsize businesses that offer paid leave to employees who may take leave due to illness, quarantine, or caregiving.^[2] This is extended through September 2021.^[3] Businesses can take dollar-for-dollar tax credits equal to wages of up to $5,000 if they offer paid leave to employees who are sick or quarantining.^[4] Paid Leave Credits are a powerful incentive to encourage the offer of paid sick and family leave to ensure sick employees are able to stay home.

The Emergency Paid Leave and Paid Leave Tax Credit extends the Families First Coronavirus Response Act (“FFCRA”) emergency paid leave program through September 30, 2021 and provides up to 12 weeks of paid sick and family medical leave related to the COVID-19 pandemic.^[5] Notably, generally public sector employers, including counties, are now eligible to receive the FFCRA tax credit for wages or compensation paid to an employee who is unable to work due to the pandemic.^[6] Under previous law, counties were not eligible to receive this credit, impacting already-strained county budgets.

Additionally, as previously authorized under the FFCRA, generally a local government employer that provides paid leave wages under the Emergency Paid Sick Leave Act (“EPSLA”) or Expanded Family Medical Leave Act (“EFMLA”) will not be required to pay the employer's share of social security tax on the paid leave wages. Counties employ 3.6 million individuals, and without this tax credit, the high costs of funding the enhanced paid leave benefits could harm counties’ ability to provide critical services that are necessary for a successful pandemic response.^[7]

Under the EPSLA, eligible employers provide employees with paid sick leave if the employee is unable to work (including telework) due to any of the following:^[8]

• The employee is under a Federal, State, or local quarantine or isolation order related to COVID-19;
• The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
• The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
• The employee is caring for an individual who is subject to a Federal, State, or local quarantine or isolation order related to COVID-19, or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
• The employee is caring for the child of such employee if the school or place of care of the child has been closed, or the childcare provider of such child is unavailable, due to COVID–19 precautions; and
• The employee is experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services.^[9]

In addition, Section 3131 of the ARP has expanded the criteria for EPSLA to include the following:

• A covered employee is absent from work because the employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19, provided that the employee has been exposed to COVID-19 or the employer has requested that the employee obtain such test or diagnosis;
• An employee is obtaining immunization related to COVID-19; and
• An employee is recovering from any injury, disability, illness, or condition related to an immunization for COVID-19.

Last Revised: April 14, 2021

What are the new eligibility rules of FEMA’s reimbursement for medical care expenses (Medical Care Eligible for Public Assistance, March 22, 2021)?

The Federal Emergency Management Agency (“FEMA”) issued a new version of the COVID-19 Interim Medical Care Policy, Coronavirus (COVID-19) Pandemic: Medical Care Eligible for Public Assistance (Interim) (Version 2) FEMA Policy #104-21-0004, on March 16, 2021.[1] This update supersedes the previous version of this policy, which was issued on May 9, 2020. General eligibility remains the same, as the policy applies to the COVID-19 pandemic incident periods beginning January 20, 2020. Eligible Public Assistance (“PA”) applicants include state, local, tribal, and territorial government entities and private non-profit organizations that own or operate medical facilities. The following are some of the noteworthy changes and considerations in the policy:

• The revised policy includes the update of the federal cost-share to 100 percent for eligible COVID-19 emergency protective measures, consistent with the President’s January 21, 2021, Memorandum to Extend Federal Support to Governors’ Use of the National Guard to Respond to COVID-19 and to Increase Reimbursement and Other Assistance Provided to States.[2]
• The revised policy includes a detailed list of eligible vaccination scope; policy Section C.3 provides a list of scope items. The vaccination scope list included elaborates on FEMA’s earlier vaccination scope list in its November 19, 2020, Vaccination Planning FAQ. Newly identified scope items include but are not limited to resources to support mobile COVID-19 vaccination in remote areas and/or transportation support for individuals with limited mobility or lack of access to transportation, Federally Qualified Health Center vaccine-related costs, information technology costs “when reasonable and necessary,” and training related to COVID-19 vaccinations.
• The revised policy includes a focus on equity, consistent with the President’s January 21, 2021, Executive Order on Ensuring an Equitable Pandemic Response and Recovery[3]; refer to policy Section B.3. The policy states that applicants “must focus the use of FEMA funding on the highest-risk communities and underserved populations as determined by established measures of social and economic disadvantage (e.g., the CDC Social Vulnerability Index). Failure to adhere to this policy could result in funding reductions and/or delays.”[4] 
• In relation to equitable response, the revised policy includes requirements for vaccination sites to collect data on race, ethnicity, disability status, and other person-level information. The policy also includes requirements to demonstrate equitability in vaccination site locations and processes, which must be reported to FEMA every 30 days following project obligation. Refer to Section C.3.k for detailed reporting requirements. One step municipalities can take is to prioritize the review of these documentation requirements and move quickly to establish and initiate processes for collecting data, if not already in place.[5]
• The revised policy includes new language regarding expectations for applicants in medical care billing practices and fee collection. The revised policy notes that it will not require applicants to create a new billing process at certain temporary medical facilities; however, the policy also states that all work conducted and costs incurred in Primary Medical Care Facilities should follow a facility’s standard billing practice. Suppose a Primary Medical Care Facility did not follow its standard billing practice; in that case, the applicant must demonstrate why following such practices would have contributed to an immediate threat to life and demonstrate that all costs not reimbursed by FEMA followed the same procedures. Refer to Section D.1.c for further language. As one method to protect municipalities in case of a future audit, municipalities should consider taking the time now to prepare and retain robust documentation and justification of billing procedures taken. [6]
• The revised policy incorporates language regarding procurement requirements for COVID-19 declarations; refer to Section D.3. The language is consistent with FEMA’s previously released March 17, 2020, Procurement Under Grants Conducted Under Exigent or Emergency Circumstances for COVID-19 Memorandum and subsequent Fact Sheet.[7]

In addition, FEMA published the Coronavirus (COVID-19) Pandemic: Safe Opening and Operation Work Eligible for Public Assistance (Interim) FEMA Policy 104-21-0003, Version 2 on September 9, 2021.[8] It retroactively extended the period of work eligibility to the beginning of the incident period. It also specified that work conducted from the beginning of the incident period through December 31, 2021, will be reimbursed at a federal cost share of 100 percent. Work conducted after December 31, 2021, will be reimbursed at the federal cost-share established at that time, which continues to be 100 percent through July 1, 2022.[9] The Safe Opening and Operation work available to eligible PA applicants includes the following:

• Purchase and distribution of face masks, including cloth face coverings and personal protective equipment (PPE).
• Cleaning and disinfection, including the purchase and provision of necessary supplies and equipment in excess of the applicant’s regularly budgeted costs.
• COVID-19 diagnostic testing.
• Screening and temperature scanning, including, but not limited to, the purchase and distribution of hand-held temperature measuring devices or temperature screening equipment.
• Acquisition and installation of temporary physical barriers, such as plexiglass barriers and screens/dividers, and signage to support social distancing, such as floor decals.
• Purchase and storage of PPE and other supplies listed here should be based on projected needs for the safe opening and operation of the facility.[10]

Last Revised: March 31, 2022

How can a municipality maximize its recovery across multiple federal funding sources?

Municipalities may be able to improve their chances to maximize multiple funding sources by prioritizing more restrictive funding to be used first, before tapping into more flexible funding sources. For example, utilizing Federal Emergency Management Agency Public Assistance (“FEMA PA”) program funding for all eligible activities first, and then using Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) funding for the expenditures that are ineligible for FEMA reimbursement, may result in a more efficient and effective use of federal funding. Additionally, FEMA PA funding should not be capped or competitive, as it is based on actual project costs incurred.[1] Therefore, prioritizing FEMA PA funding may help maximize overall federal funding by saving the finite funding programs for use after FEMA PA.

Many subrecipients across the country have experience with reallocating funding across various programs in the wake of the extended timeline of the Coronavirus Relief Fund (“CRF”) from March 1, 2020, through December 31, 2021,[2] the period of performance permitting obligations through December 31, 2024, for CSLFRF,[3] and the retroactive increase of FEMA’s federal cost share from 75% to 100% for eligible work performed from January 20, 2020 through July 1, 2022.[4]

For example, a municipality may have decided to use CRF funding to cover its 25% non-federal FEMA PA cost share. Now that the federal cost share has been increased to 100%, the remaining 25% of CRF funding can be re-allocated to address other challenges caused or exacerbated by the COVID-19 public health emergency. Pursuant to the U.S. Department of the Treasury’s (“Treasury”) Final Rule, a municipality could also consider the use of CSLFRF funds to satisfy the non-federal match or cost-share requirements for a federal grant program.[5] For example, CSLFRF funds may be used to meet the non-federal match requirements of a broadband infrastructure program authorized under the Infrastructure Investment and Jobs Act of 2021.[6]

It is also important to understand the specific documentation and eligibility requirements of every program being used, as they may differ. Each program will likely require municipalities to demonstrate compliance and validate that they meet its rules and requirements, which is often one of the most challenging aspects of disaster cost recovery. Failure to meet documentation requirements, or documentation that does not adequately support a municipality’s claim under any given funding source, could result in having to forgo eligible funding. Municipalities may be able to improve their ability to meet program requirements by recording and saving all documentation, invoices, proofs of payment, procurement methodologies, etc. Below are some procedures municipalities can follow which may help to minimize duplication of benefits and maximize additional funding:

• Maintain detailed documentation;
• Store documentation centrally and electronically; and
• Organize documentation logically.

Leveraging federal funding programs can be complex. Detailed tracking of costs may improve a municipality’s chances of avoiding duplication of benefits, where two funding sources are misallocated to provide funding for the same item or service.[7] In some cases, multiple funding sources can provide funding for the same item, and municipalities will have to identify which funding source will best meet their needs. For example, many COVID-19 specific funding sources may cover the cost of purchasing Personal Protective Equipment (“PPE”), such as masks, gloves, and face shields, but municipalities will have to ensure that they will not have two or more funding sources reimbursing the purchase of the same PPE, including donations.

Municipalities may wish to establish dedicated codes in their financial management or reporting systems to track different COVID-19 related costs. For example, a municipality could track vaccination-related costs separately from other COVID-19 response and planning costs.

Last Revised: April 1, 2022

Which funding source(s) should a municipality consider for use regarding vaccine-related expenses?

The American Rescue Plan Act (“ARP”) authorizes $350 billion for the “Coronavirus State Fiscal Recovery Fund” (“CSFRF”), and $130.2 billion of these funds is allocated specifically for local governments as a separate appropriation known as “Coronavirus Local Fiscal Recovery Fund” (“CLFRF”).^[1]

In addition to the above, the ARP separately authorizes $7.5 billion as “Funding for COVID-19 Vaccine Activities at the [Centers for Disease Control and Prevention]” (“CDC”).^[2] The ARP authorizes funds to the CDC for such purposes as (1) enhancing and improving nationwide vaccine distribution, and (2) providing technical support to state, local and tribal governments. “Technical support” is defined under this authority to include the following: distribution and administration of vaccines; expansion of community vaccination centers; deployment of mobile vaccination areas; enhancement of data sharing and systems that increase vaccine safety, effectiveness and uptake; facilities enhancements; communication with the public; and transportation of individuals to facilitate vaccinations.^[3]

Local governments may consider coordinating closely with their respective state public health agency, which will serve as the pass-through entity for the bulk of the CDC funding. As stated in its April 6, 2021 news release, 60% of the most recently announced vaccine funding from the CDC must be distributed to local health departments, community-based organizations, and community health centers.^[4] By working closely with the relevant state public health agency, local municipalities will be able to tap into the direct state and federal funding available specifically for vaccination purposes and thus will not need to resort in the first instance to the more flexible funding under its control such as the CLFRF.

Separate from both sets of funds above, President Biden’s Memorandum dated January 21, 2021, also authorizes FEMA to “fund 100 percent of the cost of activities associated with all mission assignments for the use of the National Guard under 32 U.S.C. 502(f) to respond to COVID-19.” ^[5] This includes federal funding for COVID-related activities such as vaccine administration that were previously determined eligible from the beginning of the COVID-19 pandemic in January 2020 and through September 30, 2021.

As stated in previous FAQs, the needs of every municipality are different, including the vaccination resource needs.  For example, a community might host a predominantly rural population that may need multiple small distribution sites or a largely homebound population, in which mobile sites would be the most appropriate measure. In order to ensure that the appropriate resources are being utilized, the municipality should develop a comprehensive plan for the use of all of the ARP funds.  The following are a few steps that a municipality could take in developing this plan:

• Conduct a comprehensive capacity assessment and unmet needs analysis;
• Form a cross-sector recovery oversight committee;
• Engage the served community;
• Assess and catalog available funding to prioritize needs; and
• Develop a short and long-term recovery strategy.

These community engagement and planning efforts will help to provide municipalities with the information needed to allocate enough financial resources necessary to address local vaccination needs and to strategically use available funding sources.

Last Revised: May 4, 2021