Federal Funds Office's Role in Compliance
The Commonwealth of Massachusetts Executive Office for Administration and Finance (A&F) Federal Funds Office (FFO) has been charged by the Governor with overseeing COVID-related federal funding in a manner that optimizes federal funding, targets the administration’s priorities, and minimizes compliance risk.
Since its inception in late spring 2020, FFO has developed a multi-faceted compliance strategy for COVID-related federal funding. FFO recognizes the impact of COVID-19, including tightened budgets, new responsibilities driven by the pandemic, and a shift to working in a virtual environment. These impacts bring various challenges, such as:
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Management of a virtual team;
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New fraud and compliance risks;
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New review of cybersecurity infrastructure;
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New methods and procedures to conduct compliance monitoring;
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New digital structures to document compliance and maintain records for audit and meet record retention requirements; and
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Evolving federal guidance related to COVID fund reporting and compliance.
FFO also recognizes the Commonwealth and subrecipients have common goals, including:
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Providing necessary services to residents that meet their needs during this emergency;
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Maximizing those services while minimizing fraud, waste, and abuse;
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Preventing misuse of funds through heightened scrutiny and clear communication of rules and regulations related to federal funds; and
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Ensuring funds are recorded and documented accurately and transparently.
To meet these common goals and address shared challenges, FFO’s compliance strategy has centered on:
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Ensuring compliance with the Coronavirus Relief Fund (CvRF); and the Coronavirus State and Local Fiscal Recovery Fund (CSLFRF).
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Providing best practices on federal grants management to ensure that Commonwealth agencies and subrecipients are well-positioned for all future audits.
Compliance with the Coronavirus Relief Fund (CvRF) Rules and Regulations
The Commonwealth of Massachusetts received approximately $2.5 B in aid from the federal Coronavirus Relief Fund (CvRF), which is being administered by the US Department of the Treasury. The Department of the Treasury Office of Inspector General (OIG) is responsible for monitoring and oversight of the receipt, disbursement, and use of CvRF payments as authorized by the CARES Act. Treasury OIG was also assigned authority to recover funds if it is determined a recipient of a CvRF payment failed to comply with requirements of the CARES Act.
Coronavirus Relief Fund Guidance: CvRF is designed to provide ready funding to address unforeseen financial needs and risks created by the COVID-19 public health emergency. Treasury has provided detailed guidance and FAQs on eligible uses of CvRF which have been revised multiple times since the onset of the public health emergency. Broadly, governments may use Fund payments for eligible expenses subject to the restrictions set forth in section 601(d) of the Social Security Act. Payments must be used to cover costs that are:
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Necessary expenditures incurred due to the public health emergency with respect to COVID-19;
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Not accounted for in the governments’ most recently approved budgets as of March 27, 2020; and
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Incurred during the period that begins on March 1, 2020 and ends on December 31, 2021.
Documentation: Treasury OIG has provided guidance on oversight and reporting of CvRF. Recipients of CvRF payments are required to maintain and make available to the Treasury OIG upon request all documents and financial records sufficient to establish compliance with the CARES Act. To facilitate this process, the Federal Funds Office is requiring state agencies and their subrecipients to supply documentation upon request that demonstrates CvRF funds have been used in an eligible manner. Records to support compliance with the CARES Act may include, but are not limited to, copies of the following:
- General ledger and subsidiary ledgers used to account for (a) the receipt of Coronavirus Relief Fund payments and (b) the disbursements from such payments to meet eligible expenses related to the public health emergency due to COVID-19;
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Budget records for 2019 and 2020;
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Payroll, time records, and human resource records to support costs incurred for payroll expenses related to addressing the public health emergency due to COVID-19;
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Receipts of purchases made related to addressing the public health emergency due to COVID-19;
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Contracts and subcontracts entered into using Coronavirus Relief Fund payments and all documents related to such contracts;
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Grant agreements and grant subaward agreements entered into using Coronavirus Relief Fund payments and all documents related to such awards;
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All documentation of reports, audits, and other monitoring of contractors, including subcontractors, and grant recipient and subrecipients;
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All documentation supporting the performance outcomes of contracts, subcontracts, grant awards, and grant recipient subawards;
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All internal and external email/electronic communications related to use of Coronavirus Relief Fund payments; and
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All investigative files and inquiry reports involving Coronavirus Relief Fund payments.
Compliance with Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) Rules and Regulations
The American Rescue Plan Act of 2021, Pub. L. 117-2 (March 11, 2021) (ARPA) included $350 billion in direct aid to state and local governments for COVID-19 response and recovery through the Coronavirus State and Local Fiscal Recovery Fund (CSLFRF). The Commonwealth of Massachusetts received approximately $5.3 B in aid from the CSLFRF. The program is administered by the US Department of the Treasury and the Department of the Treasury Office of Inspector General (OIG) is responsible for monitoring and oversight of the receipt, disbursement, and use of CSLFRF payments as authorized by the American Rescue Plan Act (ARPA). Treasury OIG was also assigned authority to recover funds if it is determined a recipient of a CSLFRF payment failed to comply with requirements of the ARPA or other applicable federal rules.
Coronavirus State and Local Fiscal Recovery Fund Guidance: The Coronavirus State and Local Fiscal Recovery Fund is designed to provide a substantial infusion of resources to help turn the tide on the pandemic, address its economic fallout, and lay the foundation for a strong and equitable recovery. Treasury has provided a detailed Interim Final Rule (31 CFR Part 35) and FAQs on eligible uses of CSLFRF. Treasury is in the process of reviewing public comments and will release final guidance once it completes this review. Broadly, governments may use Fund payments for eligible expenses outlined in Sections 602(c)(1) and 603(c)(1) of the American Rescue Plan Act. Programs must be designed within the four eligible use categories and recipients should design and apply a framework for determining whether a program is eligible under these categories.
The seven eligible use categories for State and Local aid include:
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Respond to the public health emergency with respect to COVID-19 or its negative economic impacts;
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Provide premium pay to employees providing essential work during the COVID-19 public health emergency;
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Provide government services to the extent of the reduction in revenue due to COVID-19;
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Invest in water, sewer, or broadband infrastructure; and
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Provide emergency relief from natural disasters or the negative economic impacts of natural disasters, including temporary emergency housing, food assistance, financial assistance for lost wages, or other immediate needs.
- Surface transportation projects, utilizing funds for eligible projects through three pathways.
- Title I projects, investing in eligible activities under the CDBG and ICDBG programs, as listed in section 105(a) of the Housing and Community Development Act of 1974.
Expenses must be obligated by December 31, 2024, but actual payments must be made before December 31, 2026.
Compliance: Treasury OIG has provided guidance on compliance and reporting for CSLFRF. Eligible state, territorial, metropolitan city, county, Tribal governments, and non-entitlement units are required to meet compliance and reporting responsibilities, as defined in the Final Rule. Recipients’ reporting requirements vary by the type and amount of funds received.
The following is a non-exhaustive list of compliance requirements set forth by U.S. Treasury:
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Recipients must implement internal controls and monitoring to ensure recipients are adhering to eligible uses and the Cost Principles which ensure sound administration and management of Federal funds.
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Recipients must develop, implement, and retain documentation on policies and procedures for making and monitoring eligibility determinations of subrecipients and beneficiaries.
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All procurement transactions must allow for full and open competition as well as meet all applicable local, State, and federal procurement laws and regulations. The Uniform Guidance also requires contractor oversight, including maintaining written standards of conduct and prohibitions on dealing with suspended or debarred parties.
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Recipients are required to manage and monitor their subrecipients. Organizations must clearly identify to the subrecipient that the award is a subaward of CSLFRF funds; compliance requirements for use of the CSLFRF funds; and reporting requirements. Organizations need to evaluate each subrecipient’s risk of noncompliance and should develop and maintain policies and procedures for award agreements, risk assessments, and subrecipient monitoring.
Documentation: There are three reports required by the U.S. Treasury, depending on recipient type, including the interim report, quarterly spending report, and annual performance report. The three reports are explained below:
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Interim report due August 31, 2021 required the state and metropolitan cities and counties to report total expenditures through July 31, 2021, describe the revenue replacement calculation and amount, and update on the status of CLFRF distributions to nonentitlement units (NEUs)
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Project and expenditure report due January 31, 2022, and thereafter until at least March 2027, must include program statistics and performance metrics (number of individuals served, demographic data, serving disadvantaged communities, etc.), and a narrative section describing compliance with the Civil Rights Act of 1964.
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Report due quarterly for states; metropolitan cities and counties with a population exceeding 250,000 residents; and metro cities and counties with a population below 250,000 which received more than $5 M in funding
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Report due quarterly for metropolitan cities and counties with populations below 250,000 residents which received less than $5 M in funding
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Annual performance report due August 31, 2021, and annually thereafter, must describe efforts to deploy the funds in an equitable manner, community engagement efforts undertaken to make spending decisions, labor practices for infrastructure projects, use of evidence-based interventions, and demonstration that recipients are not violating the prohibition on using funds for tax cuts.
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Required for states and metropolitan cities and counties with a population exceeding 250,000 residents
To facilitate the compliance and reporting processes, the Federal Funds Office will provide explanatory and sample materials on the FFO website.
Additional Resources
General Federal Funds Compliance Resources
Office of the Comptroller COVID-19 Revenue and Grants
Office of the Comptroller Cyber Security Tips
Office of the Comptroller Subrecipient Monitoring Policy
AGA’s Subrecipient Monitoring Guide
Coronavirus Relief Fund (CvRF) Compliance Materials
US Treasury CvRF Reporting Guidance
Municipal Compliance Webinar Deck
A&F FFO Compliance Preparation
A&F FFO Internal controls best practices
A&F FFO Risk management best practices
Coronavirus State & Local Fiscal Recovery Fund (CSLFRF) Materials
US Treasury CSLFRF 2023 "Interim Final Rule"
US Treasury Recipient Compliance and Reporting Guidance
A&F FFO Comprehensive Guidance
A&F FFO Subrecipient Determinations and Monitoring
A&F FFO Eligible Uses & Revenue Replacement
A&F FFO Reporting Guidance presentation: Counties, Metropolitan Cities
A&F FFO Reporting Guidance Presentation: Non-Entitlement Units