Full text
OFFICE OF
INSPECTOR GENERAL
DEPARTM ENT OF THE TREASURY
WASHINGTON, D.C. 20220
`
May 27, 2020
OIG-20-036
MEMORANDUM FOR DANIEL J. KOWALSKI
COUNSELOR TO THE SECRETARY
FROM:
Deborah L. Harker /s/
Assistant Inspector General for Audit
SUBJECT:
Interim Audit Update – Coronavirus Relief Fund Recipient
Reporting
On March 30, 2020, we initiated an audit of the Department of the Treasury’s
(Treasury) implementation of the Coronavirus Relief Fund under Title VI of the
Social Security Act, as amended by Title V of the Coronavirus Aid, Relief, and
Economic Security Act (CARES Act), hereinafter referred to as Title V of the
CARES Act.1
1 P.L. 116-136 - The Coronavirus Aid, Relief, and Economic Security Act
The objective of our audit is to assess Treasury’s implementation
activities to include the establishment of policies, procedures, and other terms and
conditions for making payments to States and Tribal governments and to units of
local governments that are required to certify proposed use of funds. The scope of
our audit includes, but is not limited to, Treasury’s implementation activities from
March 27, 2020, date of enactment, through April 27, 2020, the date mandated
for making Coronavirus Relief Fund payments.
As part of our audit work to date, we (1) reviewed Title V provisions of the CARES
Act related to administering payments from the Coronavirus Relief Fund;
(2) reviewed an example of a state and a local government electronic payment form
submitted for Coronavirus Relief Fund payments; (3) reviewed Treasury’s
Coronavirus Relief Fund Guidance for State, Territorial, Local, and Tribal
Governments; (4) reviewed Treasury’s Coronavirus Relief Fund Frequently Asked
Questions; (5) reviewed Treasury’s certification form for units of local government
recipients; and (6) interviewed as well as corresponded with Treasury officials
responsible for implementing the Coronavirus Relief Fund payments.
Based on our audit work to date, and due to the importance of transparency and
accountability surrounding the use of relief funds, we are sharing our initial finding
and recommendation prior to completion of all audit work. We believe this interim
reporting is important for your consideration prior to making additional payments to
Coronavirus Relief Fund recipients.
OIG-20-036
Page 2
Background
Title V of the CARES Act establishes the Coronavirus Relief Fund and appropriates
$150 billion for making payments to States, Tribal governments and qualifying
units of local government. It also requires the Secretary of the Treasury to make
payments no later than 30 days after the date of enactment. Payments are to be
made in accordance with requirements outlined in Title V, of which $3 billion is
reserved for payments to the District of Columbia and U.S. territories and $8 billion
is reserved for payments to Tribal governments. No State will receive a payment of
less than $1.25 billion.
The CARES Act stipulates that a State, Tribal government, and unit of local
government shall use the funds provided under a payment made under Title V to
cover only those costs of the State, Tribal government, or unit of local government
that (1) are necessary expenditures incurred due to the public health emergency
with respect to Coronavirus Disease 2019 (COVID-19); (2) were not accounted for
in the budget most recently approved as of March 27, 2020; and (3) were incurred
between March 1, 2020 and December 30, 2020.
Treasury Office of Inspector General (OIG) Finding
To meet the requirement in the CARES Act that payments be made to recipients of
the Coronavirus Relief Fund within 30 days of enactment, Treasury provided an
electronic form on its website for recipients to submit payment information and
supporting documentation. Treasury required governments to submit completed
payment materials before April 18, 2020. Qualifying units of local government
were also required to complete a certification stating among other things, that the
funds provided will only be used for eligible purposes in accordance with the
CARES Act. Treasury requested qualifying units of local government to submit their
certifications between April 13, 2020 and April 18, 2020. State recipients were
not required to complete a certification prior to receiving funds. After receiving
recipient payment information and supporting documentation, Treasury disbursed
initial payments from the Coronavirus Relief Fund. Treasury disbursed funds in the
form of direct payments rather than financial assistance (i.e., grants). Other than
the certifications made by qualifying units of local government, there were no other
agreements or terms and conditions established between Treasury and the
Coronavirus Relief Fund recipients. Without any terms and conditions in place for
receipt of Coronavirus Relief Funds, Treasury has not notified recipients of the
reporting requirements outlined in Section 15011 of the CARES Act, Reporting on
OIG-20-036
Page 3
the Use of Funds. Furthermore, as required by the CARES Act, Treasury has not
provided user-friendly means for recipients to meet reporting requirements.
Section 15011 of the CARES Act, requires each covered recipient2
2 Section 15011 of P.L. 116-136 defines a covered recipient as any entity that receives large
covered funds and includes any State, the District of Columbia, and any territory or possession of
the United States.
to submit to
Treasury and the Pandemic Response Accountability Committee (PRAC),3
3 Section 15010 of P.L. 116-136 established the Pandemic Response Accountability Committee
within the Council of Inspectors General on Integrity and Efficiency to promote transparency and
conduct and support oversight of covered funds and the coronavirus response to (1) prevent and
detect fraud, waste, abuse, and mismanagement; and (2) mitigate major risks that cut across
program and agency boundaries.
no later
than 10 days after the end of each calendar quarter, a report that contains (1) the
total amount of large covered funds4,5
4 Section 15010 of P.L. 116-136 defines covered funds as any funds, including loans, that are
made available in any form to any non-Federal entity, not including an individual, under Public
Laws 116-123, 127, and 136, as well as any other law which primarily makes appropriations for
Coronavirus response and related activities.
5 Section 15011 of P.L. 116-136 defines large covered funds as covered funds that amount to more
than $150,000.
received from Treasury; (2) the amount of
large covered funds received that were expended or obligated for each project or
activity; (3) a detailed list of all projects or activities for which large covered funds
were expended or obligated; and (4) detailed information on any level of
subcontracts or subgrants awarded by the covered recipient or its subcontractors
or subgrantees. Section 15011 further requires Treasury, in coordination with the
PRAC and the Office of Management and Budget (OMB), to provide user-friendly
means for covered recipients to meet Section 15011 reporting requirements.
On April 10, 2020, OMB issued M-20-21, Implementation Guidance for
Supplemental Funding Provided in Response to the Coronavirus Disease 2019
(COVID-19). Appendix A of this guidance, Agency Reporting Instructions for
COVID-19-Related Funding describes steps agencies should take to implement the
requirements of Sections 15010 and 15011 of the CARES Act including the
requirements that Federal agencies and recipients report on the use of covered
funds, and agencies, in coordination with OMB and the PRAC, must provide
user-friendly means for recipients to meet these requirements.
As covered recipients, the recipients of the Coronavirus Relief Fund are required to
follow the reporting requirements outlined above. Treasury’s decision to disburse
funds from the Coronavirus Relief Fund in the form of direct payments instead of
grants limits the ability of recipients to report under existing mechanisms as
outlined in OMB’s M-20-21. In addition, without the use of agreements with terms
OIG-20-036
Page 4
and conditions requiring recipient reporting, as well as the prescribed means for
recipients to report, there is the risk that reporting will not be done as required by
the CARES Act resulting in a lack of transparency surrounding recipients’ use of
funds. As Treasury has already disbursed Coronavirus Relief Fund payments to
certain covered recipients, unless mechanisms are immediately established to
require and receive recipient reporting, there will be a loss of transparency and
accountability over the use of Coronavirus Relief Fund payments.
Treasury Office of General Counsel Response to Finding
We shared our concerns over the lack of transparency and accountability on the
part of recipients with Treasury officials. In a response dated May 7, 2020,
(included as attachment 1), the Office of General Counsel provided a legal analysis
of the applicability of the reporting requirements outlined in Section 15011 of the
CARES Act, as they relate to the Coronavirus Relief Fund. In the legal analysis, it is
noted that the CARES Act, which does not require grant or other agreements with
recipient governments, makes the reporting requirements in Section 15011
applicable only to providers and recipients of “large covered funds,” which do not
include funds made available under provisions of Division A6
6 The CARES Act is organized in two Divisions. Division A, Keeping Workers Paid and Employed,
Health Care System Enhancements, and Economic Stabilization, contains six titles, including Title
V, Coronavirus Relief Funds. Division B, Emergency Appropriations for Coronavirus Health
Response and Agency Operations provides supplemental appropriations. Section 15011 of the
CARES Act is in Division B.
of the CARES Act,
where Title V appears. The analysis also asserted that, while Section 15011’s
reporting requirements do not apply beyond Division B of the CARES Act, the
programs established under Division A are nevertheless subject to substantial
oversight and transparency measures tailored to the individual programs involved.
Agency Counsel asserts that the structure of the CARES Act thus reinforces what
the definition of covered funds plainly says: the only covered funds in the CARES
Act are provided under Division B. Nevertheless, Treasury officials expressed
commitment to facilitating our office’s oversight role over Title V, including working
with our office on developing recipient reporting needs.
Treasury OIG Recommendation
Reasonable minds could differ on Agency Counsel’s legal analysis, including the
distinctions between CARES Act Divisions A and B. The Coronavirus Relief Fund
program at issue here, while contained in Division A, clearly involves an
appropriation of funds, as do programs funded in Division B. The impact of Agency
OIG-20-036
Page 5
Counsel’s position on this parsing of Division A and B of the CARES Act is that it
negates Coronavirus Relief Fund recipient reporting requirements outlined in Section
15010 and 15011 of Division B. This position negatively impacts our office’s
ability to efficiently and effectively carry out oversight responsibilities.7
7 Title V of the CARES Act subsection (f) assigned Treasury OIG with responsibility for monitoring
and oversight of the receipt, disbursement, and use of funds and recoupment authority if the
Treasury OIG determines that a State, Tribal government, or unit of local government has failed to
comply with subsection (d) of the Act. This unique authority gives Treasury OIG the ability to
monitor recipients and establish reporting and record keeping requirements.
Notwithstanding this, we choose to focus on the Office of General Counsel’s
analysis and stated commitment to facilitate OIG’s important oversight and
monitoring role for Coronavirus Relief Funds and to work with OIG on our reporting
needs.
Accordingly, we recommend that Treasury management support our office in
accomplishing our monitoring and oversight responsibilities in the following ways:
(1) assist in communications with Coronavirus Relief Fund recipients on matters
that include, but are not limited to, communications of reporting and record keeping
requirements and other audit inquiries, as needed; (2) ensure that Treasury
maintains communication channels with recipients to obtain and address
post-payment inquiries regarding specific payments; and (3) continue to update
Coronavirus Relief Fund guidance and disseminate to recipients as needed.
Management’s Response
In a written response, management expressed its commitment, among other things,
to ensuring transparency, accountability, and adherence to all statutory
requirements in connection with the CARES Act and stated that it has taken steps
to effectuate reporting and oversight measures. Management also stated that
Treasury personnel involved in CARES Act implementation will continue to work
with OIG in furtherance of our shared commitment to these ends. Management
acknowledged that the inapplicability of section 15011 will affect the OIG‘s
oversight role and noted strong support in OIG’s ability to request and access any
necessary CRF recipient information to perform critical Title V responsibilities. With
respect to the report’s recommendation, management stated appreciation of the
productive discussions with OIG on implementation issues and welcomes the
opportunity to consider a more specific proposal from OIG concerning its recipient
reporting needs and is confident that both Treasury and OIG can develop an
approach that meets shared objectives and responsibilities. Management’s response
is included, in its entirety, as attachment 2.
OIG-20-036
Page 6
OIG Comment
Management’s response meets the intent of our recommendation. Management will
need to include specific actions to address the audit recommendation in the Joint
Audit Management Enterprise System (JAMES), Treasury’s audit recommendation
tracking system.
*****
We conducted this performance audit in accordance with generally accepted
government auditing standards. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objective. We believe the evidence
obtained provides a reasonable basis for our findings and conclusions based on our
audit objective.
We assessed internal controls and compliance with laws and regulations necessary
to satisfy the audit objective. In particular, we assessed the internal control
component Control Activities and its underlying principles “Design Control
Activities” and “Implement Control Activities.” We noted no deficiencies in internal
control as a result of our review. However, because our review was limited to this
internal control component and underlying principles, it may not have disclosed all
internal control deficiencies that may have existed at the time of this audit.
We appreciate the courtesies and assistance provided by your staff. Should you
have any questions regarding this memorandum, please contact me at
(202) 486-1420 or Eileen Kao, Audit Director, at (202) 607-9519.
cc: Secretary of the Treasury
Deputy Secretary of the Treasury
Treasury Audit Liaison
Office of Strategic Planning and Performance Improvement
Office of the Deputy Chief Financial Officer, Risk and Control Group
Office of Management and Budget, OIG Budget Examiner
OIG-20-036
Page 7
Attachment 1: Treasury Office of General Counsel Legal Analysis
OIG-20-036
Page 8
OIG-20-036
Page 9
OIG-20-036
Page 10
OIG-20-036
Page 11
OIG-20-036
Page 12
OIG-20-036
Page 13
Attachment 2: Management Response
OIG-20-036
Page 14