With some areas of the United States starting to reopen, recipients are beginning to ramp up for performance on federal grant projects. But many aspects of the reopening phase and recipients' ability to timely ramp-up remain uncertain, and the U.S. Office of Management and Budget (OMB) has decided to extend two flexibilities from M-20-17 to recipients affected by the loss of operational capacity and increased costs due to the COVID-19 crisis.
On June 18, 2020, the OMB released M-20-26, Extension of Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19) due to Loss of Operations — the fourth in a series of OMB memoranda1 regarding federal financial assistance flexibilities related to the COVID-19 crisis. The memorandum extends two of the short-term administrative relief flexibilities previously provided under M-20-17, the second OMB memorandum related to federal financial assistance, and also imposes a requirement for recipients and subrecipients with regard to the Schedules of Expenditures.
M-20-26 is notable in that it rescinds two prior guidance documents: M-20-17 and M-20-20, and states that the expiration date for the flexibilities provided in these memorandums was June 16, 2020. A third prior guidance document, M-20-11, is applicable only to those grant recipients receiving federal funds for "the continued research and services necessary to carry out the emergency response related to COVID-19" during the 90-day Public Health Emergency Period declared by the U.S. Department of Health and Human Services (HHS). M-20-11 is set to expire on July 26, 2020. Read a complete summary of the flexibilities provided in M-20-11, M-20-17 and M-20-20.
OMB's most recent guidance, M-20-26, extends the flexibilities with regard to the allowability of salaries and other project activities, and the Single Audit submission. These flexibilities, described below, are limited in time and set to expire on Sept. 30, 2020. It is important to note that OMB's guidance may not be immediately applicable to any particular assistance agreement. Rather, each agency is afforded discretion in if and how the agency implements OMB's guidance. As such, grantees should be careful to monitor policy statements and other directives published by their federal awarding agencies implementing M-20-26.
Allowability of Salaries and Other Project Activities2
Originally included in M-20-17, this flexibility permits awarding agencies to allow grant recipients to continue to charge salaries and benefits to currently active federal awards consistent with the recipients' policy of paying salaries from all sources (federal and non-federal). Awarding agencies are also permitted to allow recipients to charge other costs to federal awards if they are "necessary to resume activities supported by the award[.]"
The guidance includes two important, explicit conditions on this flexibility. First, payroll costs paid with proceeds from a Paycheck Protection Program (PPP) loan, or funding from any other federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act) program, cannot also be charged to current federal awards — thus preventing "double-dipping." Second, recipients are required to "exhaust other available funding sources," for purposes of maintaining the workforce, and "implement necessary steps to save overall operational costs," including, for example, "rent renegotiations." As stated in the memorandum, the purpose behind this second condition is "to preserve federal funds for the ramp-up effort." But it remains to be seen how federal awarding agencies will interpret this requirement — namely, what constitutes an "exhaustion" of other "funding sources" and what amounts to "necessary steps" to save costs.
The M-26-20 Memorandum notes that awarding agencies must require grant recipients to "maintain appropriate records and cost documentation" in order to "substantiate the charging of any salaries and other project activities costs related to interruption of operations or services." It is worth noting that maintaining appropriate records and cost documentation is required by 2 C.F.R. §§ 200.302 and 200.333 notwithstanding the COVID-19 crisis and that grant recipients should continue to abide by these requirements regardless of whether COVID-19 has impacted its operational capacity or costs.
Grantees should be on the lookout for further guidance documents, policy statements or directives from their federal awarding agencies.
Extension of the Single Audit Submission3
First set forth in M-20-17, this flexibility permits awarding agencies to allow recipients and subrecipients that have not yet filed their audits with the Single Audit Act Federal Audit Clearinghouse (FAC) as of March 19, 2020 (the date OMB issued M-20-17), and that have normal audit due dates from March 30, 2020, through June 30, 2020, to delay the completion and submission of the reporting package by up to six months beyond the normal due date. M-20-26 provides recipients and subrecipients with normal audit due dates from July 31, 2020, through Sept. 30, 2020, a three-month extension beyond the normal due date.
The guidance notes that recipients and subrecipients are not required to take further action to enact the extension — meaning there is no need for recipients and subrecipients to seek approval for the extension. The guidance does, however, note that recipients and subrecipients "should maintain documentation of the reason for the delayed filing." Thus, grantees planning to take advantage of the extension should begin documenting their justifications for doing so and consider drafting a supporting narrative. Additionally, the FAC, through an announcement on its website, is requesting that recipients and subrecipients include a reference to M-20-26 in their audit reporting packages.
COVID-19 Emergency Acts Fund Reporting
Finally, "in order to provide adequate oversight of the COVID-19 Emergency Acts funding and programs," M-20-26 directs recipients and subrecipients to "separately identify the COVID-19 Emergency Acts expenditures on the Schedules of Expenditures of Federal Awards and audit report findings." While the memorandum does not explicitly define "COVID-19 Emergency Acts," presumably this was intended to include the grantee's expenditures from CARES Act and other government relief programs.
It is worth emphasizing that while M-20-26 extends two of the flexibilities provided in M-20-17, it does not extend the other flexibilities. These flexibilities not extended, including the no-cost extension on expiring awards (which allowed federal awarding agencies to extend awards active as of March 31, 2020, and scheduled to expire prior to Dec. 31, 2020, automatically at no cost for up to one year), expired on June 16, 2020.
1 OMB previously released M-20-11, Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19), on March 9, 2020; M-20-17, Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19) due to Loss of Operations, on March 19, 2020; and M-20-20, Repurposing Existing Federal Financial Assistance Programs and Awards to Support the Emergency Response to the Novel Coronavirus (COVID-19) on April 9, 2020.
2 2 C.F.R. §§ 200.403–405.
3 2 C.F.R. § 200.512.