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DEPARTMENT OF THE TREASURY
W ASHINGTON, D. C. 20220
OFFICE OF
INSPECTOR GENERAL
December 19, 2024
MEMORANDUM FOR JESSICA MILANO, CHIEF PROGRAM OFFICER, OFFICE OF
CAPITAL ACCESS, DEPARTMENT OF THE TREASURY
FROM: Deborah L. Harker /s/
Assistant Inspector General for Audit
SUBJECT: Desk Review of the Commonwealth of Massachusetts’
(Massachusetts) Use of Coronavirus Relief Fund
Proceeds (OIG-CA-25-019)
Please find the attached desk review memorandum 1 on the Commonwealth of
Massachusetts’ (Massachusetts) use of Coronavirus Relief Fund (CRF) proceeds.
The CRF is authorized under Title VI of the Social Security Act, as amended by
Title V, Division A of the Coronavirus Aid, Relief, and Economic Security Act
(CARES Act). Under a contract monitored by our office, Castro & Company, LLC
(Castro), a certified independent public accounting firm, performed the desk
review. Castro performed the desk review in accordance with the Council of the
Inspectors General on Integrity and Efficiency Quality Standards for Federal
Offices of Inspector General standards of independence, due professional care,
and quality assurance.
In its desk review, Castro personnel reviewed documentation for a non-statistical
selection of 25 transactions reported in the quarterly Financial Progress Reports
(FPR) and identified a combination of unsupported and ineligible questioned costs
of $129,166 and $163,971,859, respectively, with total questioned costs across all
payment types of $164,101,025 (see attached schedule of monetary benefits).
Additionally, Castro identified reporting misclassification issues within the
Contracts greater than or equal to $50,000 and Direct Payments greater than or
equal to $50,000 payment types that did not comply with Department of the
Treasury’s (Treasury) Guidance.
1
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) assigned the Department of
the Treasury Office of Inspector General with responsibility for compliance monitoring and
oversight of the receipt, disbursement, and use of Coronavirus Relief Fund (CRF) payments. The
purpose of the desk review is to perform monitoring procedures of the prime recipient’s receipt,
disbursement, and use of CRF proceeds as reported in the grant-reporting portal on a quarterly
basis.
Page 2
Castro determined that the expenditures related to the Grants greater than or
equal to $50,000 and Aggregate Reporting less than $50,000 2 payment types
complied with the CARES Act and Treasury’s Guidance. Castro also determined
that the expenditures related to Contracts greater than or equal to $50,000,
Transfers greater than or equal to $50,000,3 Direct Payments greater than or equal
to $50,000, and Aggregate Payments to Individuals4 payment types did not comply
with the CARES Act and Treasury’s Guidance. Castro determined that
Massachusetts’ risk of unallowable use of funds is high.
Castro recommends that Treasury Office of Inspector General (OIG) follow-up with
Massachusetts management to confirm if the $129,166 noted as unsupported
costs within the Contracts greater than or equal to $50,000 and Transfers greater
than or equal to $50,000 payment types can be supported. If support is not
provided, Treasury OIG should recoup the funds or request Massachusetts
management to provide support for replacement expenses, not previously
charged, that were eligible during the CRF period of performance.
In addition, Castro recommends that Treasury OIG request Massachusetts
management to provide support for replacement expenses, not previously
charged, that were eligible during the CRF period of performance for the
$163,971,859 of ineligible costs charged to the Contracts greater than or equal to
$50,000, Transfers greater than or equal to $50,000, Direct Payments greater than
or equal to $50,000, and Aggregate Payments to Individuals payment types. If
support is not provided, Treasury OIG should recoup the funds.
Further, based on Massachusetts management’s responsiveness to Treasury
OIG’s requests and management’s ability to provide sufficient documentation
and/or replace unsupported and ineligible transactions charged to CRF with valid
expenditures, Castro recommends Treasury OIG determine the feasibility of
conducting an audit for the Contracts greater than or equal to $50,000, Transfers
greater than or equal to $50,000, Direct Payments greater than or equal to $50,000,
and Aggregate Payments to Individuals payment types.
2 Recipients are required to report CRF transactions greater than or equal to $50,000 in detail in the
grant-reporting portal. Transactions less than $50,000 can be reported as an aggregate lump-sum
amount by type (contracts, grants, loans, direct payments, and transfers to other government
entities).
3 A transfer to another government entity is a disbursement or payment to a government entity
that is legally distinct from the prime recipient.
4
Obligations and expenditures for payments made to individuals, regardless of amount, are
required to be reported in the aggregate in the grant-reporting portal to prevent inappropriate
disclosure of personally identifiable information.
Page 3
Castro also identified other matters throughout the course of the desk review,
which warrant recommendations to Treasury OIG for additional action. Castro
recommends Treasury OIG follow-up on these issues:
1. Follow-up with Massachusetts management to determine if Massachusetts
and the City of Springfield implemented corrective actions related to
Treasury OIG’s findings previously reported under the report titled City of
Springfield, Massachusetts - Use of Coronavirus Relief Fund Proceeds (OIG-
CA-24-003).
2. Within the desk review testing procedures performed, Castro identified
instances of Massachusetts allowing sub-recipients to apply indirect cost
rates to recover administrative costs. Castro noted that this issue was the
same as the Treasury OIG’s finding that Massachusetts applied an indirect
cost rate to recover other administrative costs charged by the City of
Springfield. This suggests that this may be a systematic issue and there
may be other costs charged to the CRF that were similarly ineligible that
had not yet been identified by Massachusetts. Based on the sub-recipient’s
standard methodology of applying indirect cost rates, Castro recommends
Treasury OIG request that Massachusetts management perform an
assessment over whether there were any additional indirect costs or
negotiated rates claimed within its Grants greater than or equal to $50,000,
Direct Payments greater than or equal to $50,000, and Aggregate Payments
to Individuals payment types reported in the grant-reporting portal, and
identify those for repayment to Treasury, as applicable.
3. Request that Massachusetts management perform an assessment to
determine if there were any additional advertising and marketing costs
charged to the CRF within its Contracts greater than or equal to $50,000
payment type, other than those identified by Castro, and identify any
additional costs for repayment to Treasury, as applicable.
4. Request that Massachusetts management perform an assessment to
determine if there were any one-time bonus payments, not related to
hazardous duty, included within its Aggregate Payments to Individuals
claims and identify those for repayment to Treasury, as applicable.
Treasury OIG and Castro met with Massachusetts management to discuss the
report. Massachusetts management stated that they would provide additional
documentation to Treasury OIG to support the questioned costs or replace them
with other eligible expenditures.
Page 4
In connection with our contract with Castro, we reviewed Castro’s desk review
memorandum and related documentation and inquired of its representatives. Our
review, as differentiated from an audit performed in accordance with generally
accepted government auditing standards, was not intended to enable us to
express an opinion on Massachusetts’ use of CRF proceeds. Castro is responsible
for the attached desk review memorandum and the conclusions expressed
therein. Our review found no instances in which Castro did not comply in all
material respects with Quality Standards for Federal Offices of Inspectors General .
We appreciate the courtesies and cooperation provided to Castro and our staff
during the desk review. If you have any questions or require further information,
please contact me at (202) 486-1420, or a member of your staff may contact Lisa
DeAngelis, Audit Director, at (202) 487-8371.
cc: Michelle. A. Dickerman, Deputy Assistant General Counsel,
Department of the Treasury
Danielle Christensen, Deputy Chief Program Officer, Office of Capital
Access, Department of the Treasury
Wayne Ference, Partner, Castro & Company, LLC
Andra Deaconn, Assistant Budget Director, Federal Funds, Massachusetts
Executive Office for Administration and Finance
Dana Sullivan, Chief of Strategy and Operations, Massachusetts Executive
Office for Administration and Finance
Page 5
Attachment
Schedule of Monetary Benefits
According to the Code of Federal Regulations, 5 a questioned cost is a cost that is
questioned due to a finding:
(a) which resulted from a violation or possible violation of a statute,
regulation, or the terms and conditions of a Federal award, including for
funds used to match Federal funds;
(b) where the costs, at the time of the review, are not supported by
adequate documentation; or
(c) where the costs incurred appear unreasonable and do not reflect the
actions a prudent person would take in the circumstances.
Questioned costs are to be recorded in the Department of the Treasury’s
(Treasury) Joint Audit Management Enterprise System (JAMES). 6 The amount will
also be included in the Office of Inspector General (OIG) Semiannual Report to
Congress. It is Treasury management's responsibility to report to Congress on the
status of the agreed to recommendations with monetary benefits in accordance
with 5 USC Section 405.
Recommendation Questioned Costs
Recommendation No. 1 $164,101,025
The questioned costs represent amounts provided by Treasury under the
Coronavirus Relief Fund. As discussed in the attached desk review, $164,101,025
is Massachusetts’ expenditures reported in the grant-reporting portal that were
ineligible or lacked supporting documentation.
5
2 CFR § 200.84 – Questioned Cost
6
JAMES is Treasury’s audit recommendation tracking system.
1635 King Street
Alexandria, VA 22314
Phone: 703.229.4440
Fax: 703.859.7603
www.castroco.com
Desk Review of the Commonwealth of Massachusetts
December 19, 2024
OIG-CA-25-019
MEMORANDUM FOR DEBORAH L. HARKER,
ASSISTANT INSPECTOR GENERAL FOR AUDIT
FROM: Wayne Ference
Partner, Castro & Company, LLC
SUBJECT: Desk Review of the Commonwealth of Massachusetts
On January 22, 2024, we initiated a desk review of the Commonwealth of
Massachusetts’ (Massachusetts) use of the Coronavirus Relief Fund (CRF)
authorized under Title VI of the Social Security Act, as amended by Title V,
Division A of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). 1
The objective of our desk review was to evaluate Massachusetts’ documentation
supporting its uses of CRF proceeds as reported in the GrantSolutions 2 portal and
to assess the risk of unallowable use of funds. The scope of our desk review was
limited to obligation and expenditure data for the period of March 1, 2020 through
June 30, 2023,3 as reported in the GrantSolutions portal.
As part of our desk review, we performed the following:
1) reviewed Massachusetts’ quarterly Financial Progress Reports (FPRs)
submitted in the GrantSolutions portal through June 30, 2023;
2) reviewed the Department of the Treasury’s (Treasury) Coronavirus Relief
Fund Guidance as published in the Federal Register on January 15, 2021; 4
1
P.L. 116-136 (March 27, 2020).
2
GrantSolutions, a grant and program management Federal shared service provider under the
United States (U.S.) Department of Health and Human Services, developed a customized and user-
friendly reporting solution to capture the use of CRF payments from prime recipients.
3
Massachusetts fully expended their total CRF proceeds as of June 30, 2023. Castro set the scope
end date to June 30, 2023, which was the date of Massachusetts’ last reporting submission within
the GrantSolutions portal.
4
Coronavirus Relief Fund Guidance as published in the Federal Register (January 15, 2021).
https://home.treasury.gov/system/files/136/CRF-Guidance-Federal-Register_2021-00827.pdf
1
Desk Review of the Commonwealth of Massachusetts
3) reviewed Treasury’s Office of Inspector General (OIG) Coronavirus Relief
Fund Frequently Asked Questions Related to Reporting and
Recordkeeping;5
4) reviewed Treasury OIG’s monitoring checklists6 of Massachusetts’ quarterly
FPR submissions for reporting deficiencies;
5) reviewed other audit reports issued, such as Single Audit Act reports, 7 and
those issued by the Government Accountability Office and other applicable
Federal agency OIGs for internal control or other deficiencies that may
pose risk or impact Massachusetts’ uses of CRF proceeds;
6) reviewed Treasury OIG Office of Investigations, the Council of the
Inspectors General on Integrity and Efficiency Pandemic Response
Accountability Committee,8 and Treasury OIG Office of Counsel input on
issues that may pose risk or impact Massachusetts’ uses of CRF proceeds;
7) interviewed key personnel responsible for preparing and certifying
Massachusetts’ GrantSolutions portal quarterly FPR submissions, as well
as officials responsible for obligating and expending CRF proceeds;
5
Department of the Treasury Office of Inspector General Coronavirus Relief Fund Frequently Asked
Questions Related to Reporting and Recordkeeping OIG-20-028R; March 2, 2021.
6
The checklists were used by Treasury OIG personnel to monitor the progress of prime recipient
reporting in the GrantSolutions portal. GrantSolutions quarterly submission reviews were
designed to identify material omissions and significant errors, and where necessary, included
procedures for notifying prime recipients of misreported data for timely correction. Treasury OIG
followed the CRF Prime Recipient Quarterly GrantSolutions Submissions Monitoring and Review
Procedures Guide, OIG-CA-20-029R to monitor the prime recipients on a quarterly basis.
7
P. L. 104-156 (July 5, 1996) The Single Audit Act of 1984, as amended in 1996, requires entities
who receive federal funds in excess of $750,000 to undergo an annual audit of those Federal funds.
The act was enacted for the purpose of promoting sound financial management, including
effective internal controls, with respect to Federal awards administered by non-Federal entities and
to establish uniform requirements for audits. This prime recipient was subject to those audit
requirements, and Castro reviewed applicable prior year single audit reports as part of our desk
review risk assessment procedures.
8
Section 15010 of P.L. 116-136, the CARES Act, established the Pandemic Response Accountability
Committee within the Council of the Inspectors General on Integrity and Efficiency to promote
transparency and conduct and support oversight of covered funds (see Footnote 15 for a definition
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.
2
Desk Review of the Commonwealth of Massachusetts
8) made a non-statistical selection of Contracts, Grants, Transfers, 9 Direct
Payments, Aggregate Reporting, 10 and Aggregate Payments to Individuals11
data identified through GrantSolutions reporting; and
9) evaluated documentation and records used to support Massachusetts’
quarterly FPRs.
Based on our review of Massachusetts’ documentation supporting the uses of its
CRF proceeds as reported in the GrantSolutions portal, we determined that the
expenditures related to the Grants greater than or equal to $50,000 and Aggregate
Reporting less than $50,000 payment types complied with the CARES Act and
Treasury’s Guidance. Also, we determined that expenditures related to the
Contracts greater than or equal to $50,000, Transfers greater than or equal to
$50,000, Direct Payments greater than or equal to $50,000, and Aggregate
Payments to Individuals payment types did not comply with the CARES Act and
Treasury’s Guidance.
We identified unsupported and ineligible questioned costs of $129,166 and
$163,971,859, respectively, resulting in total questioned costs of $164,101,025. We
also determined Massachusetts’ risk of unallowable use of funds is high.
Castro recommends that Treasury OIG follow-up with Massachusetts’
management to confirm if the $129,166 noted as unsupported expenditures within
the Contracts greater than or equal to $50,000 and Transfers greater than or equal
to $50,000 payment types can be supported. If support is not provided, Treasury
OIG should recoup the funds or request Massachusetts management to provide
support for replacement expenses, not previously charged, that were eligible
during the CRF period of performance.
In addition, Castro recommends that Treasury OIG request Massachusetts
management to provide support for replacement expenses, not previously
charged, that were eligible during the CRF period of performance for the
$163,971,859 of ineligible costs charged to the Contracts greater than or equal to
$50,000, Transfers greater than or equal to $50,000, Direct Payments greater than
or equal to $50,000, and Aggregate Payments to Individuals payment types. If
support is not provided, Treasury OIG should recoup the funds.
9
A transfer to another government entity is a disbursement or payment to a government entity
that is legally distinct from the prime recipient.
10
Prime recipients were required to report CRF transactions greater than or equal to $50,000 in
detail in the GrantSolutions portal. Transactions less than $50,000 could be reported as an
aggregate lump-sum amount by type (contracts, grants, loans, direct payments, and transfers to
other government entities).
11
Obligations and expenditures for payments made to individuals, regardless of amount, were
required to be reported in the aggregate in the GrantSolutions portal to prevent inappropriate
disclosure of personally identifiable information.
3
Desk Review of the Commonwealth of Massachusetts
Non-Statistical Transaction Selection Methodology
Treasury issued a $2,460,842,294 CRF payment to Massachusetts. As of
June 30, 2023, Massachusetts expended all of its CRF funds. Massachusetts’
cumulative obligations and expenditures by payment type are summarized below.
Cumulative Cumulative
Payment Type Obligations Expenditures
Contracts >= $50,000 $ 783,961,699 $ 783,961,699
Grants >= $50,000 $ 36,628,960 $ 36,628,960
Loans >= $50,000 $ - $ -
Transfers >= $50,000 $ 747,104,580 $ 747,104,580
Direct Payments >= $50,000 $ 115,877,682 $ 115,877,682
Aggregate Reporting < $50,000 $ 20,328,766 $ 20,328,766
Aggregate Payments to
Individuals (in any amount) $ 756,940,607 $ 756,940,607
Totals $ 2,460,842,294 $ 2,460,842,294
Castro made a non-statistical selection of the Contracts greater than or equal
to $50,000, Grants greater than or equal to $50,000, Transfers greater than or
equal to $50,000, Direct Payments greater than or equal to $50,000, Aggregate
Reporting less than $50,000, and Aggregate Payment to Individuals payment
types. Selections were made using auditor judgment based on information and
risks identified in reviewing audit reports, the GrantSolutions portal reporting
anomalies12 identified by the Treasury OIG CRF monitoring team, and review of
Massachusetts’ FPR submissions. Massachusetts did not obligate or expend CRF
proceeds to the Loans greater than or equal to $50,000 payment type; therefore,
we did not make a selection of transactions from this payment type.
The number of transactions (25) we selected to test was based on Massachusetts’
total CRF award amount and our overall risk assessment of Massachusetts. To
allocate the number of transactions (25) by payment type (Contracts greater than
or equal to $50,000, Grants greater than or equal to $50,000, Transfers greater
than or equal to $50,000, Direct Payments greater than or equal to $50,000,
Aggregate Reporting less than $50,000, and Aggregate Payments to Individuals),
we compared the payment type dollar amounts as a percentage of cumulative
expenditures as of June 30, 2023. The transactions selected for testing were not
selected statistically, and therefore results could not be extrapolated to the total
universe of transactions.
12
Treasury OIG had a pre-defined list of risk indicators that were triggered based on data
submitted by prime recipients in the FPR submissions that met certain criteria. Castro reviewed
these results provided by Treasury OIG for the prime recipient.
4
Desk Review of the Commonwealth of Massachusetts
Background
The CARES Act appropriated $150 billion to establish the CRF. Under the CRF,
Treasury made payments for specified uses to States and certain local
governments; the District of Columbia and U.S. Territories, including the
Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa,
and the Commonwealth of the Northern Mariana Islands; and Tribal governments
(collectively referred to as “prime recipients”). Treasury issued a $2,460,842,294
CRF payment to Massachusetts. The CARES Act stipulates that a prime recipient
may only use the funds to cover costs that—
(1) were necessary expenditures incurred due to the public health
emergency with respect to the 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 during the covered period between March 1, 2020 and
December 31, 2021.13
Section 15011 of the CARES Act required each covered recipient 14 to submit to
Treasury and the Pandemic Response Accountability Committee, no later than 10
days after the end of each calendar quarter, a report that contained (1) the total
amount of large, covered funds15,16 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 sub-
contracts or sub-grants awarded by the covered recipient or its sub-recipients.
13
P.L. 116-260 (December 27, 2020). The covered period end date of the CRF was extended through
December 31, 2021 by the Consolidated Appropriations Act, 2021. The covered period end date for
tribal entities was further extended to December 31, 2022 by the State, Local, Tribal, and Territorial
Fiscal Recovery, Infrastructure, and Disaster Relief Flexibility Act, Division LL of the Consolidated
Appropriations Act, 2023, P.L. 117-328, December 29, 2022, 136 Stat. 4459.
14
Section 15011 of P.L. 116-136, the CARES Act, defined a covered recipient as any entity that
received large, covered funds and included any State, the District of Columbia, and any territory or
possession of the United States.
15
Section 15010 of P.L. 116-136, the CARES Act, defined covered funds as any funds, including
loans, that were 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 made
appropriations for Coronavirus response and related activities.
16
Section 15011 of P.L. 116-136 defined large, covered funds as covered funds that amounted to
more than $150,000.
5
Desk Review of the Commonwealth of Massachusetts
The CARES Act assigned Treasury OIG the responsibility for compliance
monitoring and oversight of the receipt, disbursement, and use of CRF proceeds.
Treasury OIG also has the authority to recoup funds in the event that it is
determined a recipient failed to comply with requirements of subsection 601(d) of
the Social Security Act, as amended, (42 U.S.C. 801(d)).
Desk Review Results
Financial Progress Reports
We reviewed Massachusetts’ quarterly FPRs through June 30, 2023, and found
that Massachusetts timely filed quarterly FPRs in the GrantSolutions portal in
compliance with Treasury OIG’s reporting requirements for the periods ending
June 30, 2020 through June 30, 2023.
Summary of Testing Results
We found that the Grants greater than or equal to $50,000 and Aggregate
Reporting less than $50,000 payment types complied with the CARES Act and
Treasury’s Guidance. Additionally, we found that the Contracts greater than or
equal to $50,000, Transfers greater than or equal to $50,000, Direct Payments
greater than or equal to $50,000, and Aggregate Payment to Individuals payment
types did not comply with the CARES Act and Treasury’s Guidance because we
were unable to determine if all tested expenditures were necessary due to the
COVID-19 public health emergency, were not accounted for in the budget most
recently approved as of March 27, 2020, and were incurred during the covered
period. The transactions selected for testing were not selected statistically, and
therefore results could not be extrapolated to the total universe of transactions.
Within Table 1 below, we have included a summary of $72,429,391 in
unsupported and ineligible expenditures identified as questioned costs through
our testing of detailed transactions, which did not comply with the CARES Act and
Treasury’s Guidance. Castro also identified other matters throughout the course
of our desk review procedures which we considered to be questioned costs that
were not part of our testing of detailed transactions. Table 2 below combines the
questioned costs identified in Table 1 with the other questioned costs of
$91,671,634 identified separately from our detailed transaction testing to account
for total questioned costs of $164,101,025. See the Desk Review Results section
below Table 2 for a detailed discussion of questioned costs and other issues
identified throughout the course of our desk review.
6
Desk Review of the Commonwealth of Massachusetts
Table 1 - Summary of Expenditures Testing and Recommended Results
As of June 30, 2023
Cumulative Unsupported Ineligible
Expenditure Cumulative Tested Tested Total Tested
Population Expenditure Questioned Questioned Questioned
Payment Type Amount Tested Amount Costs Costs Costs
Contracts >=
$50,000 $ 783,961,699 $ 5,561,347 $ 21,342 $ 1,500,000 $ 1,521,342
Grants >= $50,000
$ 36,628,960 $ 363,099 $ - $ - $ -
Loans >= $50,000
$ - $ - $ - $ - $ -
Transfers >=
$50,000 $ 747,104,580 $ 20,581,014 $ 107,824 $ 59,225 $ 167,049
Direct Payments
>= $50,000 $ 115,877,682 $ 114,940 $ - $ 114,940 $ 114,940
Aggregate
Reporting <
$50,000 $ 20,328,766 $ 42,000 $ - $ - $ -
Aggregate
Payments to
Individuals (in any
amount) $ 756,940,607 $ 518,974,087 $ - $ 70,626,060 $ 70,626,060
Totals $ 2,460,842,294 $ 545,636,487 $ 129,166 $ 72,300,225 $ 72,429,391
7
Desk Review of the Commonwealth of Massachusetts
Table 2 - Summary of Tested and Other Matters Identified Questioned Costs
As of June 30, 2023
Fringe Benefits
Ineligible and Bonus
Reconciliation Payments
Errors Ineligible
Unsupported Ineligible Questioned Questioned Total Questioned
Questioned Costs Questioned Costs Costs Total Ineligible Costs (Tested &
Payment Type (Tested) Costs (Tested) (Other Matter) (Other Matter) Questioned Costs Other Matters)
Contracts >= $50,000 $ 21,342 $ 1,500,000 $ 25,527 $ - $ 1,525,527 $ 1,546,869
Grants >= $50,000 $ - $ - $ - $ - $ - $ -
Loans >= $50,000 $ - $ - $ - $ - $ - $ -
Transfers >= $50,000 $ 107,824 $ 59,225 $ - $ - $ 59,225 $ 167,049
Direct Payments => $50,000 $ - $ 114,940 $ - $ - $ 114,940 $ 114,940
Aggregate Reporting < $50,000 $ - $ - $ - $ - $ - $ -
Aggregate Payments to
Individuals (in any amount) $ - $ 70,626,060 $ - $ 91,646,107 $ 162,272,167 $ 162,272,167
Totals $ 129,166 $ 72,300,225 $ 25,527 $ 91,646,107 $ 163,971,859 $ 164,101,025
8
Desk Review of the Commonwealth of Massachusetts
Contracts Greater Than or Equal to $50,000
We determined Massachusetts’ Contracts greater than or equal to $50,000 did not
comply with the CARES Act and Treasury’s Guidance. We tested a total of
$5,561,347 of transaction expenditures for eight contracts. The contracts tested
included expenditures related to small business assistance; housing support;
interest payments on funds borrowed for unemployment insurance benefits for
interest that accrued within the covered period; advertising expenses; and COVID-
19 administrative support assistance with processing COVID-19 related
applications. For the housing support payments, Castro confirmed Massachusetts
did not claim the expenses under Treasury’s Emergency Rental Assistance
Program, and confirmed there were no duplication of benefits.
We identified three exceptions, resulting in unsupported and ineligible questioned
costs of $21,342 and $1,500,000, respectively, for total questioned costs of
$1,521,342, as detailed below. Castro also identified as other matters a total of
$25,527 in ineligible questioned costs related to payments incurred prior to the
CRF covered period (e.g., September and October 2019, and January 2020), as
detailed below.
Additionally, we determined Massachusetts did not comply with Treasury’s
Guidance because Massachusetts misclassified certain expenditures as Contracts
greater than or equal to $50,000 that should have been classified as Grants greater
than or equal to $50,000.
Contracts Exception #1 - Residential Assistance for Families in Transition
Program
Massachusetts claimed $4,409,599 in expenditures related to a grant for the
Massachusetts Residential Assistance for Families in Transition (RAFT) program.
Castro identified reporting misclassification errors where the contract reported
within the GrantSolutions portal should have been classified as Grants greater
than or equal to $50,000. RAFT was a key program within the Massachusetts
Department of Housing and Community Development and provided rental
assistance for families in Massachusetts that were in arrears on their rent
payments during the pandemic. Castro selected two grantee transactions totaling
$14,000 for testing.
For one selection totaling $4,000 that Massachusetts claimed under the $14,000
tested, Castro reviewed various supporting documentation, however, we could
not agree the rent in arrears amount from the documentation of $3,300 to the
claimed expenditures of $4,000. Castro noted that Massachusetts provided all
requested documents, but Massachusetts redacted all unique identifying details
9
Desk Review of the Commonwealth of Massachusetts
pertaining to the selection amount. As a result, Castro was unable to determine if
the documentation provided related to our selection. Castro noted that
Massachusetts did not provide a sufficient response to enable us to verify these
expenses occurred due to the pandemic and that the rent in arrears was incurred
within the CRF covered period. Castro questions $4,000 as unsupported.
Contracts Exception #2 - Residential Assistance for Families in Transition
Program
In addition to the amounts discussed in exception #1, Massachusetts claimed
$4,060,850 in expenditures related to the Massachusetts RAFT grant program.
Castro identified reporting misclassification errors where the contract reported
within the GrantSolutions portal should have been classified as Grants greater
than or equal to $50,000. Castro selected two grantee awards totaling $17,342 for
testing.
For the first grant award tested totaling $8,942, Castro reviewed various
supporting documentation, however, we could not agree the rent in arrears
amount from the documentation of $4,240 to the claimed expenditures of $8,942.
Castro noted that Massachusetts provided all requested documents, but
Massachusetts had redacted all unique identifying details pertaining to the
selection amount. As a result, Castro was unable to determine if the
documentation provided related to our selection. Castro noted that Massachusetts
did not provide a sufficient response to enable us to verify these expenses
occurred due to the pandemic and that the rent in arrears was incurred within the
CRF covered period. Castro questions $8,942 as unsupported.
For the second grant award tested totaling $8,400, Castro only received a canceled
check and the sub-recipient RAFT review form. The check and the RAFT review
form were missing the applicant's and landlord's names, signatures, tenant
identification, and the check numbers were redacted so we could not verify that
this was related to our transaction selection. Additionally, we were unable to
agree the check amount of $8,800 to the tested amount of $8,400. Castro did not
receive any other supporting documentation that we had requested, which we
needed to verify these expenses occurred due to the pandemic and that the rent in
arrears was incurred within the CRF covered period. Castro did not consider the
information provided sufficient to satisfy this request and questions these costs of
$8,400 as unsupported.
10
Desk Review of the Commonwealth of Massachusetts
Contracts Exception #3 - Advertising Expenses for the “My Local MA” Media
Campaign
Massachusetts claimed and Castro tested $1,500,000 in contract expenditures
related to the “My Local MA” media campaign, which was administered by the
Massachusetts Office of Travel and Tourism. Massachusetts indicated that the
fiscal year 2020 General Appropriations Act, a Massachusetts Act that went into
effect in March 2020, did not include funding for local small business marketing in
any Massachusetts Office of Travel and Tourism accounts. This expense funded a
marketing campaign publicizing Massachusetts’ effort at reopening local
economies during the pandemic. The goal of the marketing plan was to blanket
the state of Massachusetts with messaging focused on driving economic activity
in Massachusetts. Residents were encouraged to purchase, travel, and stay locally
in Massachusetts.
Castro reviewed the eligibility justification, invoices, budget modifications, and
advertising and marketing campaign materials and was able to agree the amounts
from invoices to the transactions without exception. However, when reviewing the
advertising and marketing campaign materials, Castro determined the
advertisements were not related to COVID-19 and the promotion of safety. Castro
determined the expenditure amounts incurred were ineligible because they did
not relate to returning safely due to COVID-19 and the steps taken to promote a
safe experience needed due to the public health emergency, as required by
Treasury’s Guidance.17 We question $1,500,000 as ineligible.
Based on the above finding regarding funding for a marketing campaign
publicizing Massachusetts, Castro recommends Treasury OIG request
Massachusetts perform an assessment to determine whether there was any
additional advertising and marketing costs charged to the CRF within its Contracts
greater than or equal to $50,000 payment type and identify those for reversal and
repayment to Treasury, as applicable.
17
Coronavirus Relief Fund Guidance as published in the Federal Register (January 15, 2021).
https://home.treasury.gov/system/files/136/CRF-Guidance-Federal-Register_2021-00827.pdf
Treasury Frequently Asked Question (FAQ) #A.45 stated “May recipients use Fund payments to
remarket the recipient's convention facilities and tourism industry? Yes, if the costs of such
remarketing satisfy the requirements of the CARES Act. Expenses incurred to publicize the
resumption of activities and steps taken to ensure a safe experience may be needed due to the
public health emergency.”
11
Desk Review of the Commonwealth of Massachusetts
Additionally, while performing our contracts reconciliation procedures, Castro
noted multiple transactions were recorded with payment dates preceding
March 2020, which was the start of the pandemic and of the covered period of
March 1, 2020 through December 31, 2021. Castro followed up with
Massachusetts management to request a response for why these dates were
before March 2020. Massachusetts personnel did not fully and completely answer
our questions. Castro also asked for eligibility, expense, and disbursement
support to evidence that these expenses were related to past due rent assistance
for rent in arrears that occurred after the start of the pandemic, but Massachusetts
did not provide Castro with the requested support prior to the end of our
fieldwork. Castro considered these payments ineligible because they were
incurred prior to the covered period and questions $25,527 in other matter costs.
Grants Greater Than or Equal to $50,000
We determined Massachusetts’ Grants greater than or equal to $50,000 complied
with the CARES Act and Treasury’s Guidance. We selected one grant totaling
$363,099 and had no exceptions. The grant was awarded to the Massachusetts
Department of Elementary and Secondary Education to reimburse a non-profit
organization for the costs of running sports tournaments. Massachusetts
recognized the important role high school sports played in the educational
development of public-school students, and as such, provided a grant award to
this non-profit to continue operations, as it suffered negative economic impacts
due to fewer paying in-person attendees resulting from the pandemic.
Transfers Greater Than or Equal to $50,000
We determined Massachusetts’ Transfers greater than or equal to $50,000 did not
comply with the CARES Act and Treasury’s Guidance. We tested $20,581,014 of
transaction expenditures for seven transfers and identified two exceptions. The
transfers tested related to funds transferred by Massachusetts to cities and towns
for COVID-19 testing and contact tracing; computer purchases to facilitate distance
learning; software licensing needed to support remote work during the pandemic;
cleaning supplies needed to prevent the spread of COVID-19; sub-recipient
incurred unemployment insurance (UI) benefit premium costs that increased due
to the pandemic; school improvements related to social distancing efforts needed
due to the pandemic; and government payments to construction contractors for
business interruption delays due to the pandemic. We identified total questioned
costs of $167,049, which consisted of unsupported questioned costs of $107,824
and ineligible questioned costs of $59,225, respectively.
12
Desk Review of the Commonwealth of Massachusetts
Transfers Exception #1 - City of Everett Bond Issuance for Short-Term
Borrowing
Massachusetts made up to $502 million in CRF proceeds available to
municipalities to respond to the COVID-19 public health emergency through the
Massachusetts CRF Municipal Program. Massachusetts claimed expenses for a
transfer to the City of Everett in the amount of $5,013,579 related to its CRF
Municipal Program for financial advisor fees related to bond issuances for short-
term borrowing that Massachusetts indicated wouldn’t have been needed if it
were not for the COVID-19 pandemic, and for reimbursements for unemployment
compensation insurance premium payments (UI premiums). The City of Everett
claimed these UI premiums due to increases in costs caused by the pandemic.
Castro selected two invoice level transactions for testing totaling $633,464, which
consisted of one transaction for $23,992 and a second transaction for $609,472.
Castro tested the first transaction of $23,992 without exception; however, we
identified ineligible questioned costs of $59,225 within the second transaction.
For the second transaction tested totaling $609,472, Castro reviewed the City of
Everett's UI premium analysis and noted a significant increase in UI premiums
due to COVID-19; however, Castro determined that $59,225 out of the $609,472
CRF claim was in excess of this increase. As a result, Castro questioned the
$59,225 excess as ineligible questioned costs, which we have summarized in the
tables below.
City of Everett, Massachusetts UI Premium Analysis
Increase in UI Premiums due to COVID-19
Post-COVID Actual UI Premiums (July 2020 – March 2021) $ 751,572
Less 9-month pre-COVID-19 Baseline (2020 and 2019 UI premiums) $ 201,325
Increase in UI premiums due to COVID-19 $ 550,247
City of Everett, Massachusetts UI Premium Analysis
CRF Claim in Excess of Increase in UI Premiums due to COVID-19 (Questioned Costs)
City of Everett’s UI premium CRF claims $ 609,472
Less Increase in UI premiums due to COVID-19 $ 550,247
Ineligible Questioned Costs: CRF Claim in excess of increase in UI
premiums due to COVID-19 $ 59,225
The City of Everett claimed $609,472 in UI premiums as CRF expenditures. Castro
requested that Massachusetts and the City of Everett management perform an
assessment of pre-and-post-COVID-19 levels of actual UI premiums paid to
determine how much they increased as compared to pre-pandemic levels. Since
Massachusetts claimed nine months of UI premium expenditures for the City of
Everett, Massachusetts and the City of Everett management calculated the pre-
COVID-19 nine-month baseline of UI premiums as $201,325, but the actual UI
premiums expenses claimed for the nine-month period after the start of the
13
Desk Review of the Commonwealth of Massachusetts
COVID-19 pandemic were $751,572, resulting in an increase in UI premium costs
after the start of the COVID-19 pandemic of $550,247. Massachusetts claimed a
total of $609,472 in the City of Everett’s unemployment premiums CRF claims,
which was $59,225 more than the actual increase in UI premiums from the nine-
month baseline of pre-COVID-19 2020 and 2019 UI premiums. Castro determined
that claiming CRF expenditures up to the increase in the UI premiums due to
COVID-19 in the amount of $550,247 was reasonable, but that claiming UI
premiums in excess of the amount was not necessary due to COVID-19, as the
City of Everett would have had to pay a base amount of UI premiums regardless
of the pandemic. Castro questions $59,225 as ineligible.
Transfers Exception #2 - City of Lowell CRF Municipal Program
Massachusetts claimed expenses for a transfer to the City of Lowell in the amount
of $9,845,688 related to the Massachusetts CRF Municipal Program. Castro tested
two invoices totaling $243,451 that were drawn down against the total amount
provided to the City of Lowell.
For one of the invoices tested totaling $107,824, Castro obtained and reviewed
purchase orders and invoices totaling $197,809 and an invoice corresponding to a
payment of $89,985, but those amounts did not agree to our transaction amount
of $107,824. Castro followed up with Massachusetts management and requested
all the invoices that supported the claimed amounts or an explanation of how to
arrive at this amount via the invoices provided. Massachusetts management
provided a response stating that Massachusetts recently learned that there was a
reporting error by the City of Lowell and that the payments corresponding to the
selection amount of $107,824 were not paid out to the vendor because the multi-
year contract was canceled. As this transaction was a known reporting error with
no invoice or payment support, we consider the transaction unsupported. Castro
questions these costs of $107,824 as unsupported.
Direct Payments Greater Than or Equal to $50,000
We determined Massachusetts’ Direct Payments greater than or equal to $50,000
did not comply with the CARES Act and Treasury’s Guidance. We tested one
direct payment totaling $114,940, which we identified as an exception. The direct
payment tested included grant expenditures related to a residential care center.
Massachusetts stated these grant expenditures were to assist the residential care
center with the costs of providing medically necessary nursing-facility services to
its members. We identified total ineligible questioned costs for the entire amount
of the transaction tested of $114,940, as detailed below.
14
Desk Review of the Commonwealth of Massachusetts
Additionally, we identified a misclassification reporting error and determined the
Direct Payment greater than or equal to $50,000 expenditure tested should have
been classified as a Grant greater than or equal to $50,000. Therefore, we
determined that Massachusetts did not comply with Treasury’s Guidance.
Direct Payments Exception - Nursing Facility Services for Residential Care Center
The Massachusetts Executive Office of Health and Human Services Division of
Medical Assistance claimed, and Castro tested, $114,940 in grant expenditures to
assist a residential care center (rest home) with the costs of providing medically
necessary nursing-facility services to its members. Castro reviewed various
supporting documents and noted the transactions were for a grant payment to the
residential care center, and considered Massachusetts to have misclassified this
transaction as a direct payment when it should have been reported as a grant.
Castro followed up with Massachusetts to obtain additional supporting
documents (such as grant applications or other evidence of eligibility) to show
that the recipient needed these funds due to the pandemic, but Massachusetts did
not provide this requested support. Additionally, Massachusetts responded that
the Massachusetts Executive Office of Health and Human Services calculated the
payment amounts using a standard indirect cost rate application methodology
applied to all rest homes.
Massachusetts calculated these indirect payment amounts by utilizing a standard
indirect cost rate application methodology of applying rates of 10 percent, 15
percent and 25 percent to an estimated post-COVID-19 dollar amount. That dollar
amount was based on historical dollar amounts included in the grant applicant's
2018 submitted cost report. Massachusetts and its sub-recipient claimed indirect
cost rates by employing guidance from the Code of Federal Regulations (CFR), 2
CFR 200.414(f)), Grants and Agreements, Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for Federal Awards, Direct and Indirect
(F&A) Costs.18 This guidance defined indirect cost rates and sets forth the 10
percent de minimis19 indirect cost rate that could be used indefinitely instead of
charging the actual administrative costs. Treasury’s CRF guidance published in
18
Code of Federal Regulations (CFR), 2 CFR 200.414(f)), Grants and Agreements, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Direct
and Indirect (F&A) Costs states: “…any non-Federal entity that does not have a current negotiated
(including provisional) rate…may elect to charge a de minimis rate of 10% of modified total direct
costs (MTDC) which may be used indefinitely. No documentation is required to justify the 10% de
minimis indirect cost rate. As described in § 200.403, costs must be consistently charged as either
indirect or direct costs, but may not be double charged or inconsistently charged as both. If
chosen, this methodology once elected must be used consistently for all Federal awards until such
time as a non-Federal entity chooses to negotiate for a rate, which the non-Federal entity may
apply to do at any time.”
19
De minimis means lacking significance or importance: so minor as to merit disregard.
15
Desk Review of the Commonwealth of Massachusetts
the Federal Register20 stated that this provision did not apply to the use of CRF
funds and recipients could not apply their indirect costs rates to payments
received from the CRF. CRF program requirements for prime recipients also apply
to their sub-recipients. Therefore, by applying the indirect cost rate, the
expenditure for the residential care center did not comply with Treasury’s
Guidance, resulting in an ineligible use of CRF proceeds in the amount of $114,940
of questioned costs.
Additionally, Castro determined that this transaction should have been classified
as a Grant greater than or equal to $50,000 instead of as a Direct Payment greater
than or equal to $50,000 transaction. We considered this to be a reporting error
that did not comply with Treasury's Guidance.
Castro noted that within a Treasury OIG report issued in October 2023 titled City
of Springfield, Massachusetts - Use of Coronavirus Relief Fund Proceeds
(OIG-CA-24-003),21 the Treasury OIG found that Massachusetts applied an indirect
cost rate to recover other administrative costs charged by the City of Springfield.
Within our desk review testing procedures performed, Castro identified additional
instances of Massachusetts allowing other sub-recipients to apply indirect cost
rates to recover administrative costs. This suggests that this may be a systematic
issue and there may be other costs charged to the CRF that were similarly
ineligible that had not yet been identified by Massachusetts. Castro recommends
Treasury OIG request Massachusetts management perform an assessment over
whether there were any additional indirect costs or negotiated rates claimed
within its Direct Payments greater than or equal to $50,000 and Grants greater
than or equal to $50,000 payment types, and to identify those costs for repayment
to Treasury, as applicable.
Aggregate Reporting Less Than $50,000
We determined Massachusetts’ Aggregate Reporting less than $50,000 complied
with the CARES Act and Treasury’s Guidance. We tested one aggregate reporting
transaction totaling $42,000 and identified no exceptions. The aggregate reporting
transaction tested included expenditures for counsel fees associated with
Massachusetts acquiring a line of credit to maintain liquidity during the pandemic.
20
Coronavirus Relief Fund Guidance as published in the Federal Register (January 15, 2021).
https://home.treasury.gov/system/files/136/CRF-Guidance-Federal-Register_2021-
00827.pdf Section, Supplemental Guidance on Use of Funds To Cover Administrative Costs,
stated that “Payments from the Fund are not administered as part of a traditional grant program
and the provisions of the Uniform Guidance, 2 CFR part 200, that are applicable to indirect costs do
not apply. Recipients may not apply their indirect costs rates to payments received from the
Fund.”
21
City of Springfield, Massachusetts - Use of Coronavirus Relief Fund Proceeds (OIG-CA-24-003).
https://oig.treasury.gov/sites/oig/files/2023-11/OIG-CA-24-003%20%28LOCKED%29_0.pdf
16
Desk Review of the Commonwealth of Massachusetts
Aggregate Payments to Individuals
CRF payments made to individuals, regardless of amount, were required to be
reported in the aggregate in the GrantSolutions portal to prevent inappropriate
disclosure of personally identifiable information. Castro notes that Aggregate
Payments to Individuals consists of the following broad types of potential costs,
which we have defined from the Treasury’s Guidance as published in the Federal
Register.22 Prime recipients may or may not have claimed all of these types of
expenditures.
Public Safety/Health Payroll23 – consisted of payroll costs for public health
and safety department personnel.
Substantially Dedicated Payroll24 – consisted of payroll costs for non-public
health and safety personnel who were substantially dedicated to mitigating
or responding to the COVID-19 public health emergency.
Non-Substantially Dedicated Payroll25 – consisted of payroll costs for
personnel who performed COVID-19 related tasks on a part-time basis.
Non-Payroll Expenditures – consisted of financial assistance payments to
citizens due to hardship or loss of income, unemployment claims, and other
non-payroll related expenses made to individuals.
22
CRF Guidance as published in the Federal Register (January 15, 2021).
https://home.treasury.gov/system/files/136/CRF-Guidance-Federal-Register_2021-00827.pdf
23
Treasury’s Federal Register guidance provided the following examples of public health and
safety employees: “police officers (including state police officers), sheriffs and deputy sheriffs,
firefighters, emergency medical responders, correctional and detention officers, and those who
directly support such employees such as dispatchers and supervisory personnel… employees
involved in providing medical and other health services to patients and supervisory personnel,
including medical staff assigned to schools, prisons, and other such institutions, and other support
services essential for patient care (e.g., laboratory technicians) as well as employees of public
health departments directly engaged in matters related to public health and related supervisory
personnel.”
24
Substantially dedicated payroll costs meant that personnel must have dedicated over 50 percent
of their time to responding to or mitigating COVID-19. Treasury’s Federal Register guidance stated
that: “The full amount of payroll and benefits expenses of substantially dedicated employees may
be covered using payments from the Fund. Treasury has not developed a precise definition of
what "substantially dedicated" means given that there is not a precise way to define this term
across different employment types. The relevant unit of government should maintain
documentation of the "substantially dedicated" conclusion with respect to its employees.”
25
Payroll costs that were not substantially dedicated were payroll costs that were not public health
and safety, and which were not substantially dedicated to performing COVID-19 related tasks.
Treasury’s Federal Register guidance defined more stringent tracking requirements for these types
of payroll costs. Specifically, the Federal Register stated that agencies must: “track time spent by
employees related to COVID-19 and apply Fund payments on that basis but would need to do so
consistently within the relevant agency or department. This means, for example, that a
government could cover payroll expenses allocated on an hourly basis to employees' time
dedicated to mitigating or responding to the COVID-19 public health emergency.”
17
Desk Review of the Commonwealth of Massachusetts
Massachusetts’ Aggregate Payments to Individuals balance consisted of payroll
and other transactions from the following types of claimed costs.
Total Expenses
Aggregate Payments to Individuals Category Types
Claimed
Public Safety/Health Payroll $ 713,178,881
Substantially Dedicated Payroll $ 43,722,726
Non-Payroll Expenditures $ 39,000
Totals $ 756,940,607
Castro noted that public health and safety payroll transactions were subject to
Treasury’s administrative accommodation,26 and therefore, were subject to less
detailed documentation requirements. Castro tested public health and safety
payroll transactions by reviewing itemized payroll distribution reports to support
these balances. Substantially dedicated payroll balances were not subject to this
administrative accommodation, and therefore, Castro tested these transactions by
reviewing the prime recipient’s substantially dedicated conclusions with respect
to its employees and payroll distribution files, and also by performing tests over
specific employee timesheet submissions. Castro noted that Massachusetts did
not make any replenishment payments to its unemployment trust fund.
We determined Massachusetts’ Aggregate Payments to Individuals did not
comply with the CARES Act and Treasury’s Guidance. We tested a total of
$518,974,087 of expenditures for seven Aggregate Payments to Individuals
transactions. The transactions tested included five public health and safety payroll
transactions, one substantially dedicated payroll transaction, and one non-payroll
transaction.
Castro identified exceptions related to five public health and safety payroll
transactions tested, with ineligible tested questioned costs of $70,626,060.
Additionally, Castro identified two other matter questioned costs items, $5,756 in
one-time bonuses and $91,640,351 in indirect fringe benefit costs, respectively, for
a total of $91,646,107 in other matter questioned costs.
26
Treasury’s Federal Register guidance states that an administrative accommodation was, “In
recognition of the particular importance of public health and public safety workers to State, local,
and tribal government responses to the public health emergency, Treasury has provided, as an
administrative accommodation, that a State, local, or tribal government may presume that public
health and public safety employees meet the substantially dedicated test…This means that, if this
presumption applies, work performed by such employees is considered to be a substantially
different use than accounted for in the most recently approved budget as of March 27, 2020. All
costs of such employees may be covered using payments from the Fund for services provided
during the period that begins on March 1, 2020, and ends on December 31, 2021.”
18
Desk Review of the Commonwealth of Massachusetts
Aggregate Payments to Individuals Exception #1 - Ineligible Transactions,
Estimated Fringe Benefits using Negotiated Rate
For five public health and safety departments, Castro tested $70,625,069 of fringe
benefits related to public health and safety payroll expenses claimed. We
requested payroll distribution support to evidence the fringe benefits claimed as
CRF expenses. Massachusetts stated that they utilized the U.S. Department of
Health and Human Services’ (HHS) negotiated fringe benefit rates to calculate the
estimated fringe benefits.
Since Massachusetts calculated its fringe benefits costs utilizing the HHS
negotiated rate, Castro considered these fringe benefits expenditures charged to
the CRF to be calculated using an indirect cost estimate instead of charging direct
administrative costs as required by Treasury’s Guidance. Massachusetts claimed
indirect cost rates by employing guidance from the Code of Federal Regulations
(CFR), 2 CFR 200.414(f)), Grants and Agreements, Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards, Direct
and Indirect (F&A) Costs.27 This guidance defined indirect cost rates and sets forth
the 10 percent de minimis28 indirect cost rate (or other similar agreed upon rate)
that could be used indefinitely instead of charging the actual administrative
costs.
Treasury’s Guidance published in the Federal Register 29 stated that this provision
did not apply to the use of the CRF and recipients could not apply their indirect
costs rates to payments received from the CRF. Massachusetts, by applying the
indirect cost rate, did not comply with Treasury’s Guidance, resulting in an
ineligible use of CRF in the amount of $70,625,069 of questioned costs.
27
Code of Federal Regulations (CFR), 2 CFR 200.414(f)), Grants and Agreements, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Direct
and Indirect (F&A) Costs states: “…any non-Federal entity that does not have a current negotiated
(including provisional) rate…may elect to charge a de minimis rate of 10% of modified total direct
costs (MTDC) which may be used indefinitely. No documentation is required to justify the 10% de
minimis indirect cost rate. As described in § 200.403, costs must be consistently charged as either
indirect or direct costs, but may not be double charged or inconsistently charged as both. If
chosen, this methodology once elected must be used consistently for all Federal awards until such
time as a non-Federal entity chooses to negotiate for a rate, which the non-Federal entity may
apply to do at any time.”
28
De minimis means lacking significance or importance: so minor as to merit disregard.
29
Coronavirus Relief Fund Guidance as published in the Federal Register (January 15, 2021)
https://home.treasury.gov/system/files/136/CRF-Guidance-Federal-Register_2021-
00827.pdf Section, Supplemental Guidance on Use of Funds To Cover Administrative Costs,
stated that “Payments from the Fund are not administered as part of a traditional grant program
and the provisions of the Uniform Guidance, 2 CFR part 200, that are applicable to indirect costs do
not apply. Recipients may not apply their indirect costs rates to payments received from the
Fund.”
19
Desk Review of the Commonwealth of Massachusetts
Additionally, as part of our reconciliation procedures performed, Castro identified
a total amount of fringe benefits that were not part of our final tested amounts,
but that were claimed within our original six payroll transaction selections totaling
$162,265,420. After excluding the $70,625,069 already questioned, Castro
identified additional other matter questioned costs of $91,640,351 due to ineligible
estimated fringe benefits costs claimed. Based on the above finding regarding
Massachusetts’ use of an indirect cost rate, Castro recommends Treasury OIG
request Massachusetts management perform an assessment over whether there
were any additional indirect costs charged to CRF within its Aggregate Payments
to Individuals payment type and identify those for repayment to Treasury, as
applicable.
Aggregate Payments to Individuals Exception #2 - Ineligible Transactions,
Bonuses
Based on the results of our testing, we identified one transaction for a one-time
bonus totaling $991 in public health and safety costs that we considered to be
ineligible. Treasury’s Guidance in the Federal Register FAQ Number A.29 states,
that workforce bonuses are an example of ineligible expenses but provides that
hazard pay would be eligible if otherwise determined to be a necessary expense.
Castro considered the one-time bonus of $991 to be explicitly ineligible because it
was not related to payments made to employees performing hazardous duty and
questioned the costs accordingly.
Additionally, as part of our reconciliation procedures performed, Castro
questioned $5,756 in one-time bonuses. These transactions were not tested in our
final transaction selections but were included in the Massachusetts Executive
Office for Administration & Finance substantially dedicated payroll expenses
claimed populations we reviewed while selecting our substantially dedicated
payroll transaction selections. As stated above, Treasury’s Guidance in the Federal
Register FAQ Number A.29 states these costs are explicitly ineligible because they
were not one-time bonus payments made to employees performing hazardous
duty. Castro questions the one-time bonus in the amount of $5,756 as ineligible
costs. Castro recommends Treasury OIG request that Massachusetts management
perform an assessment to determine if there were any additional one-time bonus
payments not related to hazardous duty included within its Aggregate Payments
to Individuals claims and identify those for repayment to Treasury, as applicable.
20
Desk Review of the Commonwealth of Massachusetts
Conclusion
We determined the expenditures related to the Grants greater than or equal to
$50,000 and Aggregate Reporting less than $50,000 payment types complied with
the CARES Act and Treasury’s Guidance. We also found that the Contracts greater
than or equal to $50,000, Transfers greater than or equal to $50,000, Direct
Payments greater than or equal to $50,000, and Aggregate Payments to
Individuals payment types did not comply with the CARES Act and Treasury’s
Guidance.
We identified unsupported and ineligible questioned costs of $129,166 and
$163,971,859, respectively, with total questioned costs of $164,101,025. Also, we
identified GrantSolutions portal misclassification issues within the Contracts
greater than and equal to $50,000 and Direct Payments greater than equal to
$50,000 payment type that did not comply with Treasury’s Guidance.
Additionally, Massachusetts’ risk of unallowable use of funds is high.
Castro recommends that Treasury OIG follow-up with Massachusetts
management to confirm if the $129,166 noted as unsupported expenditures within
the Contracts greater than or equal to $50,000 and Transfers greater than or equal
to $50,000 payment types can be supported. If support is not provided, Treasury
OIG should recoup the funds or request Massachusetts’ management to provide
support for replacement expenses, not previously charged, that were eligible
during the CRF period of performance.
In addition, Castro recommends that Treasury OIG request Massachusetts
management to provide support for replacement expenses, not previously
charged, that were eligible during the CRF period of performance for the
$163,971,859 of ineligible costs charged to the Contracts greater than or equal to
$50,000, Transfers greater than or equal to $50,000, Direct Payments greater than
or equal to $50,000, and Aggregate Payments to Individuals payment types. If
support is not provided, Treasury OIG should recoup the funds.
Further, based on Massachusetts management’s responsiveness to Treasury
OIG’s requests and its ability to provide sufficient documentation and/or replace
unsupported and ineligible transactions charged to CRF with valid expenditures,
Castro recommends Treasury OIG determine the feasibility of conducting an audit
for the Contracts greater than or equal to $50,000, Transfers greater than or equal
to $50,000, Direct Payments greater than or equal to $50,000 and Aggregate
Payments to Individuals payment types.
21
Desk Review of the Commonwealth of Massachusetts
Castro also identified other matters throughout the course of our desk review,
which warrant recommendations to Treasury OIG for additional action. Castro
recommends Treasury OIG follow-up on these issues:
Follow-up with Massachusetts to determine if Massachusetts and the City
of Springfield implemented corrective actions related to Treasury OIG’s
findings previously reported under the report titled “City of Springfield,
Massachusetts - Use of Coronavirus Relief Fund Proceeds (OIG-CA-24-
003).”
Within our desk review testing procedures performed, Castro identified
instances of Massachusetts allowing sub-recipients to apply indirect cost
rates to recover administrative costs. Castro noted that this issue was the
same as the Treasury OIG’s finding that Massachusetts applied an
indirect cost rate to recover other administrative costs charged by the
City of Springfield. This suggests that this may be a systematic issue and
there may be other costs charged to the CRF that were similarly ineligible
that had not yet been identified by Massachusetts. Based on the sub-
recipient’s standard methodology of applying indirect cost rates, Castro
recommends Treasury OIG request that Massachusetts management
perform an assessment over whether there were any additional indirect
costs or negotiated rates claimed within its Grants greater than or equal
to $50,000, Direct Payments greater than or equal to $50,000, and
Aggregate Payments to Individuals payment types reported in the
GrantSolutions portal, and identify those for repayment to Treasury, as
applicable.
Request that Massachusetts management perform an assessment to
determine if there were any additional advertising and marketing costs
charged to the CRF within its Contracts greater than or equal to $50,000
payment type and identify those for repayment to Treasury, as
applicable.
Request that Massachusetts management perform an assessment to
determine if there were any one-time bonus payments, not related to
hazardous duty, included within its Aggregate Payments to Individuals
claims and identify those for repayment to Treasury, as applicable.
22
Desk Review of the Commonwealth of Massachusetts
*****
All work completed with this letter complies with the Council of the Inspectors
General on Integrity and Efficiency’s Quality Standards for Federal Offices of
Inspectors General, which require that the work adheres to the professional
standards of independence, due professional care, and quality assurance to
ensure the accuracy of the information presented.30 We appreciate the courtesies
and cooperation provided to our staff during the desk review.
Sincerely,
Wayne Ference
Partner, Castro & Company, LLC
30
https://www.ignet.gov/sites/default/files/files/Silver%20Book%20Revision%20-%208-20-12r.pdf
23