Full text
OFFICE OF
INSPECTOR GENERAL
DEPARTM ENT OF THE TREASURY
WASHINGTON, D.C. 20220
`
May 17, 2021
OIG-CA-21-020
MEMORANDUM FOR JACOB LEIBENLUFT
CHIEF RECOVERY OFFICER
FROM:
Deborah L. Harker /s/
Assistant Inspector General for Audit
SUBJECT:
American Rescue Plan- Application of Lessons Learned From
the Coronavirus Relief Fund
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) assigned the
Department of the Treasury (Treasury) Office of Inspector General (OIG) with
responsibility for monitoring and oversight of the receipt, disbursement, and use of
Coronavirus Relief Fund (CRF) monies.1
1 CRF was established under Title VI of the Social Security Act, as amended by Title V of Division A
of the CARES Act, P.L. 116-136 (March 27, 2020)
The CRF was appropriated $150 billion for
Treasury to make payments to States, Tribal governments, units of local
government, the District of Columbia, and U.S. Territories. Treasury OIG was given
authority to recoup funds in the event that it is determined a recipient of a CRF
payment failed to comply with the Uses of Funds requirements of subsection
601(d) of the Social Security Act, as amended, (42 U.S.C. 801(d)).
Through our CRF monitoring and oversight work to date, we have identified certain
lessons learned with respect to the implementation and administration of the CRF
program. We believe that these lessons learned are valuable for management’s
consideration in implementing the American Rescue Plan Act (ARP)2
2 P. L. 117-2 (March 11, 2021) established the Coronavirus State and Local Fiscal Recovery Fund,
the Emergency Rental Assistance Program, the Homeowner Assistance Program, and the State
Small Business Credit Initiative Program. Treasury OIG has oversight responsibility for these
programs.
programs.
Accordingly, we are sharing this report with recommendations for your awareness
and consideration.
Background
Treasury was required to make CRF payments no later than 30 days after the date
of enactment of the CARES Act and in accordance with the requirements outlined
in Title V, of which $3 billion was reserved for payments to the District of
Columbia and U.S. Territories and $8 billion was reserved for payments to Tribal
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governments. No State was to receive a payment of less than $1.25 billion. On
April 16, 2020, Treasury began making payments to eligible CRF recipients as
direct payments without agreements or terms and conditions established between
Treasury and the recipients.
The CARES Act stipulates that CRF recipients must use the funds to cover only
those costs 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. The Consolidated
Appropriations Act, 20213
3 P. L. 116-260 (December 27, 2020).
extended the covered period and allowed CRF recipients
to use proceeds to cover costs incurred between March 27, 2020 and
December 31, 2021.
Lessons Learned
The following lessons learned stem from our work in monitoring and overseeing the
$150 billion in CRF funding. We believe these are important lessons that can aid in
implementation of the ARP programs.
Need for Clear and Timely Guidance
The CARES Act required Treasury to provide financial assistance to eligible CRF
recipients no later than 30 days after the enactment of the CARES Act on
March 27, 2020. Recipients were able to use the funds to assist in their response
to the ongoing COVID-19 pandemic. While the funds were quickly disbursed,
guidance to recipients on eligible uses of CRF was iterative. The CARES Act did not
require Treasury to publish regulations on CRF. In lieu of regulations, Treasury
published Coronavirus Relief Fund Guidance for State, Territorial, Local, and Tribal
Governments (CRF Guidance) and Coronavirus Relief Fund Frequently Asked
Questions (CRF FAQs) during the period of April 2020 through October 2020. Prior
to the extension of CRF through December 31, 2021, recipients could only use
CRF payments to cover costs that were incurred between March 27, 2020 and
December 30, 2020. Given this short window of time for recipients to use their
CRF payments, recipients were looking for timely guidance on eligible costs and
definitions of key terms.
Treasury issued the first iteration of its CRF Guidance on April 22, 2020, with two
subsequent versions, before the last version issued on September 2, 2020.
Treasury issued its first iteration of the CRF FAQS on April 22, 2020, but issued
seven additional versions, with the last issued on October 19, 2020. Both the CRF
Guidance and CRF FAQs were updated to reflect the extension of CRF through
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December 31, 2021 and re-published together in the Federal Register on
January 15, 2021.4
4 https://home.treasury.gov/system/files/136/CRF-Guidance-Federal-Register_2021-00827.pdf.
Overall, CRF recipients faced challenges identifying eligible
uses of their CRF payments with frequent updates to guidance. Through
communication channels established by our office (CARES@oig.treas.gov email
address, CARES Call Center, and CARES online Helpdesk), our office received
approximately 500 questions concerning eligible uses of CRF proceeds.
The lack of comprehensive, timely guidance on eligible uses caused confusion
among recipients, and in some cases was a factor in ineligible uses of CRF
payments. For ARP programs, we recommend that Treasury management finalize
guidance concurrent with funds distribution in order to facilitate efficient
administration of programs and minimize recipient confusion and misuse of funds.
In addition, FAQs are an effective tool to clarify existing guidance, but should not
be used to establish new guidance.
Management’s Response
In its written response, Treasury management generally agreed with our
recommendation and listed actions being taken with the Coronavirus State and
Local Fiscal Recovery Fund (Fiscal Recovery Fund) established by ARP. Specifically,
Treasury will issue an interim final rule (IFR) to provide further guidance on eligible
uses and define key terms before Fiscal Recovery Fund payments are made and
expects to issue subsequent guidance that will elaborate on the IFR. Management’s
response is included, in its entirety, as attachment 1.
OIG Comment
Management’s response meets the intent of our recommendation. Management will
need to include its specific actions to address this recommendation with expected
implementation dates in the Joint Audit Management Enterprise System (JAMES),
Treasury’s audit recommendation tracking system.
Need for Agreements with Terms and Conditions
In its implementation of CRF, Treasury did not treat the CRF distributions as grants,
but instead issued CRF as direct payments to recipients without agreements and
terms and conditions in place. In addition, Treasury did not stand up a program
office for administering the CRF. On May 27, 2020, we issued an interim audit
report on Treasury’s implementation of the CRF highlighting our concerns over the
lack of agreements and requirements for accountability on the part of CRF
recipients. This report is discussed below in more detail in the section on Balancing
Data Reporting & Transparency and Recipient Burden.
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We believe that grant agreements, or other suitable agreements, including terms
and conditions, are important for the ARP programs to ensure compliance with
reporting requirements, among other things. This concept is stressed in Office of
Management and Budget’s (OMB) Memorandum M 21-20 (M-21-20), Promoting
Public Trust in the Federal Government through Effective Implementation of the
American Rescue Plan Act and Stewardship of the Taxpayer Resources
(March 19, 2021). The following excerpt is from OMB M-21-20.
“To provide the highest integrity in the management of financial assistance,
agencies must apply the requirements of title 2 of the Code of Federal
Regulations, Grants and Agreements (2 CFR) to Federal financial assistance
funded through the ARP to the maximum extent authorized by law. For any
new programs authorized and appropriated by the ARP, agencies must
submit their proposed implementation plan of 2 CFR to OMB for approval, by
emailing such plans to ARP.implementation@omb.eop.gov, prior to
submitting an Assistance Listing for review. Those plans should identify
whether there are any required exceptions to the application of the
requirements of 2 CFR, given the unique nature and goals of a given program
or because the application of requirements in 2 CFR would pose
insurmountable challenges to program implementation.”
Accordingly, we recommend that Treasury management (1) document its analysis
of the applicability of grant requirements under 2 CFR for each ARP program in its
implementation plan as required by OMB M-21-20, (2) apply the requirements of
2 CFR to Federal financial assistance funded through the ARP to the maximum
extent authorized by law, and (3) require signed agreements documenting standard
terms and conditions before disbursing ARP funds to recipients.
Management’s Response
In its written response, Treasury management generally agreed with our
recommendation. Management confirmed that before receiving payment, Fiscal
Recovery Fund recipients will be required to certify their agreement with payment
terms and conditions, including acceptance of the provisions of the IFR and
applicable requirements of Title 2 of the Code of Federal Regulations.
Management’s response is included, in its entirety, as attachment 1.
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OIG Comment
Management’s response meets the intent of our recommendation. Management will
need to include its specific actions to address this recommendation with expected
implementation dates in JAMES.
Balancing Data Reporting & Transparency and Recipient Burden
On May 27, 2020, we issued Interim Audit Update – Coronavirus Relief Fund
Recipient Reporting5
5 Interim Audit Update – Coronavirus Relief Fund Recipient Reporting (OIG-20-036; May 27, 2020).
as part of our audit of CRF implementation. In our report, we
noted that Treasury had not notified CRF recipients of reporting requirements
outlined in Sections 150106
6 Section 15011 of the CARES Act defines large covered funds as covered funds that amount to
more than $150,000.
and 150117
7 Section 15011 of the CARES Act 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. Large covered funds are defined as covered funds that amount to more than
$150,000.
,8
8 Section 15011 of the CARES Act requires each covered recipient to submit to Treasury and the
Pandemic Response Accountability Committee (PRAC), no later than 10 days after the end of each
calendar quarter, a report that contains (1) the total amount of large covered funds 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.
of Division B, Title V of the CARES Act
and had not provided a user-friendly means for recipients to meet reporting
requirements. In response, Treasury’s Office of General Counsel provided a legal
analysis stating that the reporting requirements outlined in Section 15011 of the
CARES Act applied to providers and recipients of “large covered funds,” which do
not include funds made available under provisions of Division A of the CARES Act,
where CRF appears. Treasury asserted that the only covered funds in the CARES
Act are provided under Division B.
While Treasury’s position on the applicability of these requirements to CRF was an
early Treasury OIG concern, we addressed it by assuming responsibility for
developing the GrantSolutions portal9
9 A grant management service provider under the U.S. Department of Health and Human Services.
for recipient reporting. The information
collected from recipients in the portal facilitates population of the Pandemic
Response Accountability Committee (PRAC) website, responses to stakeholder
reporting requests, and analyses needed for Treasury OIG oversight. To reduce
recipient reporting burden, OMB’s M-21-20 requires agencies to consult with the
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relevant Quality Services Management Offices (QSMO),10
10 The Office of Management and Budget’s (OMB) M-19-16, Centralized Mission Support
Capabilities for the Federal Government (April 26, 2019), describes the process and desired
outcomes for shared services and establishes a process for designating agencies as QSMOs. An
agency QSMO offers solutions that, over time, will standardize processes, reduce the technology
footprint, and reduce Government-wide operating costs. Once an opportunity for centralization or
sharing is identified, OMB will designate a lead agency as the QSMO to take responsibility for
establishing and/or managing such capabilities.
prior to developing new
or modernized technology to support execution of ARP. The Department of Health
and Human Services (HHS) is the designated agency for the Grants Management
QSMO, and GrantSolutions is HHS’ award management system that provides
end-to-end management capabilities for financial assistance awards. PRAC officials
have stated that they consider the CRF GrantSolutions information as a best
practice dataset for transparency and reporting. Treasury officials are considering
various software options for ARP recipient reporting and administration, including
GrantSolutions and Salesforce.11
11 Salesforce is a customer relationship management platform that Treasury used in its application
process for CRF recipients.
These officials have told us that a decision has
not been made on whether to use the existing CRF GrantSolutions reporting portal
or move forward with another software solution such as Salesforce for recipient
reporting under ARP programs. We believe that the best results for the ARP
programs will be achieved in the area of reporting and transparency if Treasury
works collaboratively with the PRAC and Treasury OIG to ensure that requirements
for recipient reporting systems, including stakeholder needs are defined and
understood before implementing a reporting system and approach.
According to OMB Circular No. A-130 (A-130), Managing Information as a
Strategic Resource (July 2016), with respect to information technology (IT)
investment management, agencies are required to: (1) conduct definitive technical,
cost, and risk analyses of alternative design, implementation, sustainment,
maintenance, re-competition, and retraining costs, scaled to the size and
complexity of individual requirements; (2) consider existing Federal contract
solutions or shared services when developing planned information systems,
available within the same agency, from other agencies, or from the private sector
to meet agency needs to avoid duplicative IT investments; and (3) ensure that
decisions to improve existing information systems with custom-developed solutions
or to develop new information systems are initiated only when no existing
alternative private sector or governmental source can efficiently meet the need,
taking into account long-term sustainment and maintenance. Furthermore, OMB
Circular No. A-11 (A-11), Preparation, Submission, and Execution of the Budget
(March 2021), states that each IT investment should demonstrate the enabling and
improvement of mission and program performance by providing meaningful data
and agencies must demonstrate how the investment supports a business line or
enterprise service performance goal as documented in the agency’s enterprise
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architecture or strategic plans. Documents used to manage the planning,
development, implementation, and operation of IT investments and documents that
demonstrate the outcomes of agency decisions should be maintained and readily
available.
Accordingly, we recommend that Treasury management conduct and document an
IT investment analysis as required by OMB’s M-21-20, A-130, and A-11 before
making the decision to implement the grants QSMO system, GrantSolutions,
Salesforce, or another solution for the execution of ARP programs.
Management’s Response
In its written response, Treasury management generally agreed with our
recommendation. Treasury is considering various options for a Fiscal Recovery
Fund reporting system and is undertaking a systems analysis in line with OMB
guidance and IT management best practices. Treasury will work with OIG to help
ensure that any transition in reporting requirements or systems leverages the
lessons learned by OIG from managing CRF reporting and provides a satisfactory
experience for recipients. Management’s response is included, in its entirety, as
attachment 1.
OIG Comment
Management’s response meets the intent of our recommendation. Management will
need to include its specific actions to address this recommendation with expected
implementation dates in JAMES.
Outreach
With monitoring responsibility over the receipt, disbursement, and uses of CRF
monies, our office conducted outreach sessions with CRF recipients as well as
State, Local, and Tribal budget, accounting, and auditing professional
organizations, reaching thousands of stakeholders. From the stakeholder outreach
sessions, we received approximately 400 questions on the eligibility of CRF costs
and questions on reporting requirements. To address recipient and stakeholder
questions, our office created communication channels through a
CARES@oig.treas.gov mailbox, a CARES Call Center, and an online CRF Helpdesk.
In addition, our office issued a number of guidance documents on reporting and
record retention requirements to include the Department of the Treasury Office of
Inspector General Coronavirus Relief Fund Frequently Asked Questions Related to
Reporting and Recordkeeping.12
12 Department of the Treasury Office of Inspector General Coronavirus Relief Fund Frequently Asked
Questions Related to Reporting and Recordkeeping (OIG-CA-20-028, November 25, 2020).
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We believe it is critical to take a proactive approach in conducting outreach and
technical assistance to stakeholders and recipients in order to avoid
misinterpretations of eligible uses of funds, reporting requirements, and record
retention requirements.
Need for Performance Measures
Treasury did not require recipient reporting of performance measures for the CRF.
As a result, there is no consistent way to assess the impact of CRF funding on
assisting with the pandemic. While Section 15011 of the CARES Act requires
quarterly reporting on the estimated number of jobs created or retained by a project
or activity, a majority of CRF recipients are not using the funds for job-related
purposes. Performance metrics are generally required under grant programs;
however, because CRF is not structured like a grant program, results are not being
measured. OMB M-21-20 stresses the importance of performance measures. It
states, “Performance planning, management, and agency reporting for ARP funding
should be incorporated into agencies’ existing organizational performance
management routines. Public reporting should also be integrated with required
performance planning and reporting to ensure alignment with the overarching
agency strategic goals and objectives.” We believe recipients’ reporting of
performance measures under the ARP will allow transparency around the results of
pandemic relief funding.
Accordingly, we recommend that Treasury management (1) develop performance
metrics to measure the effectiveness of ARP program funding in assisting with
pandemic relief goals and (2) include recipient reporting requirements in written
agreements to facilitate this process and ensure that needed information is
collected quarterly.
Management’s Response
In a written response, Treasury management generally agreed with our
recommendation. Treasury will require large Fiscal Recovery Fund recipients to
provide the public and Treasury with an annual performance report of the projects
they are undertaking with award funds and how they are planning to ensure
program outcomes are achieved in an effective, efficient, and equitable manner; the
report will include key performance indicators identified by recipients and Treasury.
Management’s response is included, in its entirety, as attachment 1.
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OIG Comment
Management’s response meets the intent of our recommendation. Management will
need to include its specific actions to address this recommendation with expected
implementation dates in JAMES.
In conclusion, we believe that Treasury should use these lessons learned over the
past year to mitigate operational and compliance risks when implementing ARP
programs. If you have any questions regarding this memorandum, please contact
me at (202) 486-1420.
cc: Treasury
Secretary
Deputy Secretary
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
United States Senate
Committee on Homeland Security and Governmental Affairs
Committee on Finance
Committee on Appropriations
Committee on the Budget
United States House of Representatives
Committee on Oversight and Reform
Committee on Financial Services
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Attachment 1: Management Response
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