Overview
MGCC provided grants to businesses that were parts of chains or franchises, which were ineligible for COVID‑19 SBRGP grants. Specifically, we identified nine grants (totaling $660,000) that were given to businesses that were parts of chains or franchises.
As a result, MGCC and the Commonwealth expended money in impermissible ways, which may result in misuse of taxpayer funds and less funding for permissible state programs.
Authoritative Guidance
Section III of Amendment to Attachment A of the Small Business Relief Grant Program—Part II between MGCC and EOED lists certain types of businesses that were ineligible for grants, and among these businesses are chains. MGCC’s COVID-19 SBRGP program overviews and eligibility forms also specifically designated franchises as ineligible for grants.
Reasons for Issue
MGCC relied on self-attestation from COVID-19 SBRGP applicants, and MGCC employees did not review grant applications to ensure that applicants were not part of chains, or in the case of Sector Specific grants, franchises.
Recommendation
MGCC should ensure that it only provides grants to eligible applicants.
Auditee’s Response
MGCC agrees with the recommendation that it should provide grants only to eligible applicants. In this case, MGCC relied on applicant self-attestation to determine if the applicant met certain eligibility criteria, including whether the applicant was a part of a chain or franchise. During the pandemic, self-attestation was a common method for the federal government to ensure that assistance reached those in need as expediently as possible, especially for programs where federal guidelines did not require supporting documentation. Self-attestation was discussed with EOHED during program design, and federal guidelines provided administering agencies broad latitude to design programs as necessary to respond to the public health emergency. MGCC agrees that reliance on self-attestation would be less appropriate when administering a grant program not intended to respond quickly to a public health emergency.
Auditor’s Reply
As noted above, MGCC relied on self-attestation from program applicants when assessing an applicant’s eligibility. This led to at least nine ineligible applicants receiving grants totaling $660,000.
In its response, MGCC stated, “Self-attestation was a common method for the federal government to ensure that assistance reached those in need as expediently as possible, especially for programs where federal guidelines did not require supporting documentation.” We acknowledge that the COVID-19 pandemic created urgent economic hardships to Commonwealth residents. However, various procedures exist to check for program eligibility in a timely manner, including reviewing the applications that contained entries that were at a higher risk of noncompliance. For example, if MGCC performed an analysis of potential grantees with out-of-state legal business addresses before issuing grant payments, it could have potentially identified some ineligible applicants and asked follow-up questions to these higher-risk applicants to ensure that they met eligibility requirements before issuing the grant payments to them.
Based on its response, MGCC is taking measures to address our concerns.
| Date published: | August 28, 2024 |
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