ProgramCOVID-19 Federal Assistance e311
TopicsCompliance & Reporting
What are some good practices municipalities can follow to ensure that subrecipients meet all compliance requirements?
Subrecipients that are not prepared to manage large sums of money and meet reporting requirements may put their subawards at a higher risk for excessive or ineligible costs. A reoccurring theme found in audits is that grant recipients frequently fail to properly manage subrecipients to ensure grant fund expenditures comply with Federal requirements.
Municipalities should include the following language in subrecipient agreements:
- right-to-audit clause where the subrecipient acknowledges that they will provide Federal, state, and local government agencies future access to books and records. It was noted in a United States Department of Justice (“DOJ”) National Procurement Fraud Task Force (“NPFTF”) report titled “Best Practices for Combatting Grant Fraud” that “grant awarding agencies are often focused on awarding the grant money and do not devote sufficient resources to the oversight of how those funds are spent.” Regular audits are a key component to proper oversight;
- cooperation clause that obligates the subrecipient to cooperate with any future government review, audit, or investigation;
- language detailing the mechanism for the recovery of misspent grant money. The agreement should inform the subrecipient that whoever wrongfully misapplies funds or provides false statements can be held civilly and/or criminally liable; and
- certification that all information contained in the grant application and the subrecipient agreement is true and accurate and that any false statements made as part of the certification process can result in criminal prosecution.
- obligation to regularly submit reports to the direct grant recipient detailing all expenditures and how they meet eligibility requirements;
- ensure that goods or services provided fall within the permissible time-period established by the Federal program;
- maintain records to include receipts, expenditures, price quotes, funding justifications, and oversight measures of funds;
- read and agree to follow all terms and conditions outlined in the contract between the Federal government and the direct grant recipient;
- provide oversight and follow Federal procurement requirements under grant and subaward regulations, specifically 2 CFR Part 200.300-332, as well as all applicable local, state, tribal and territorial requirements;
- perform sufficient levels of due diligence to ensure contracts for goods, services, and supplies are entered into with responsible parties. At a minimum, a check of the Federal government’s System for Award Management must be done to make sure that any company or individual receiving funds is not suspended or debarred. (Note: Many States and municipalities also have their own debarment lists and these can be checked as well. The Office of the Inspector General for the U.S. General Services provides a helpful search tool that identifies debarment lists by state – https://www.gsaig.gov/content/suspension-and-debarment-sites-state);
- establish oversight measures to ensure that contractors, vendors, and suppliers perform in accordance with terms, conditions, and specifications of their contracts or purchase orders. For example, conducting regular audits, ensuring sufficient supervision and 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;
- identify personnel responsible for verifying all project costs;
- establish a COVID-19 fraud whistleblower hotline for employees, the public and contractors. Hotline information can 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;
- return unused funds to the Federal government;
- disclose in the application process all COVID-19 Federal funds applied for through government and private entities;
- acknowledge that program funds will not be used to cover expenses already covered by other government or private entities. Using a grants management software system can help delineate costs by attributing a funding source to a specific cost that can be reviewed for eligibility at the transactional level. Such a system will also make it easier to ensure that a cost is not unintentionally claimed under multiple funding sources; and
- ensure that all information contained in the grant application and the subrecipient agreement is true and accurate and that any false statements made as part of the certifications can be prosecuted.
The U.S. Department of Housing and Urban Development has published a Guidebook for Grantees on Subrecipient Oversight, which includes a template for subrecipient agreements. This template, along with the sample subrecipient agreements prepared by the State of Oregon and New York (linked below), may provide helpful information as municipalities prepare their own subrecipient agreements.
- Emergency Solutions Grant Subrecipient Agreement
- Community Development Block Grant Disaster Recovery Subrecipient Agreement
NOTE: The Federal Emergency Management Agency (“FEMA”) produced a Fact Sheet on April 6, 2021, that provided the below recommendations on documenting and accounting disasters costs. Municipalities and subrecipients can use these recommendations to assist them in implementing good practices regarding documentation, and ultimately make it easier to meet the Federal government’s reporting requirements and/or other reporting requirements imposed by municipalities or states:
- designate a person to coordinate the accumulation of records (i.e., receipts, invoices, etc.);
- establish a separate and distinct account for recording revenue and expenditures and a separate identifier for each distinct FEMA project. (This same thought process can be used for separating CARES and ARP funds and the individual projects within each.);
- ensure that the final expenditures for each project are supported by the dollar amounts recorded within your accounting system of record;
- ensure that each expenditure is recorded and linked to supporting documentation (i.e., checks, invoices, etc.) that can be easily retrieved; and
- ensure that expenditures claimed are necessary to respond to the COVID-19 pandemic, reasonable pursuant to federal regulations and federal cost principles, and conform to standard program eligibility and other federal requirements.
Last Revised: August 11, 2021
 FEMA Disaster Financial Management Guide: “Guidance for State, Local, Tribal and Territorial Partners,” April 2020 available at https://www.fema.gov/sites/default/files/2020-07/disaster-financial-management-guide.pdf.
 National Procurement Fraud Task Force (NPFTF): “A Guide to Grant Oversight and Best Practices for Combatting Fraud,” February 2009, at 13, available at https://www.oig.dot.gov/sites/default/files/files/Grant_Fraud.pdf.
 2 CFR 200.302(a) available at https://www.ecfr.gov/cgi-bin/text-idx?SID=80e692b5c5517b7f75d25a49463c0f77&mc=true&node=se2.1.200_1302&rgn=div8.
 2 CFR 200.214 available at https://www.ecfr.gov/cgi-bin/text-idx?SID=abef1de2f30fa0e7a9121552f40ef78c&mc=true&node=se2.1.200_1214&rgn=div8.
 2 CFR 200.318(b) available at https://www.ecfr.gov/cgi-bin/text-idx?SID=abef1de2f30fa0e7a9121552f40ef78c&mc=true&node=se2.1.200_1318&rgn=div8.
 FEMA Fact Sheet: Federal Emergency Management Agency, Fact Sheet, Audit-Related Guidance for Entities Receiving FEMA Public Assistance Funds,” April 6, 2021, available at: https://www.fema.gov/sites/default/files/documents/fema_audit-related-guidance-entities-receiving_public-assistance_4-6-2021.pdf.