Who CARES: The Importance of Transparency & Oversight of Federal Relief Funds

With the recent signing of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the federal government has committed an unprecedented $2.2 trillion to support efforts to reduce the economic effect of the SARS-CoV-2 virus and incidence of COVID-19. According to Title V of the Act, $150 billion has been earmarked specifically for state, local and tribal governments, most of which will largely follow the channels already in place. The government’s main priority is to get these dollars to the people who need it most as quickly as possible. To help ensure this happens, the law contains a series of accountability provisions to monitor these funds’ use at the federal level and provide accountability and transparency to the public.

Why so much attention on transparency and oversight? While these two elements are nothing new to governmental agencies, they take an elevated role in times of crisis. Fraudsters use these times to up their game, and $2.2 trillion makes for a very tempting target. Proper oversight and transparency not only help prevent the loss of critical dollars to fraud and waste but show citizens and local businesses where and how they can get the help they need, as well as get funds to people quickly and efficiently. This becomes even more important on the state and local levels, since these agencies are on the front lines of distributing these funds. 

This article explores just a few ways states and localities can provide transparency and oversight as they administer federal funds through the CARES Act.

Tracking Federal Funds

One of the most important ways for states and localities to monitor CARES Act funds is through methodical tracking. When tracking such funds, states and localities should consider doing the following:

• Track CARES Act funds separately from other types of funds.   
• Identify all federal awards received and expended and the federal programs for which they were received.
• Create new general ledger accounts for revenues and expenditures associated with federal funds received and distributed through the CARES Act.
• Consider daily or weekly reviews of expenditures incurred by appropriate levels of management and detailed reports of expenditures incurred versus reimbursements to date. 

Pass-Through & Subrecipient Monitoring

When administering federal relief funds, much of the required transparency involves oversight of pass-through entities (PTE) and subrecipients. Here are a few best practices for state and local governments to keep in mind when dealing with pass-through funds. 

• Help ensure the PTE is providing communication of certain information (Section 200.331(a)): 
  • Clearly identifying the award – Specifically related to the CARES Act 
  • Identifying requirements imposed by the PTE so the award is used in compliance with statutes, regulations, terms and conditions
  • Identifying any additional requirements imposed to allow the PTE to meet the federal awarding agency requirements (reporting, special conditions, etc.):
    • Indirect cost rate information
    • Subrecipient permission for the PTE and auditors to access records
    • Closeout terms and conditions
• Help ensure the PTE is monitoring the subrecipient (§200.331(d)): 
  • Reviewing financial and programmatic reports required by the PTE – A best practice is to perform the review/monitoring on a more frequent basis, e.g., once a week given current economic conditions 
  • Following up to help ensure the subrecipient takes timely action on all deficiencies detected through audits, on-site reviews, etc.
  • Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE
• If written policies and procedures are not in place with respect to subrecipient monitoring, consider developing written policies that address monitoring (including on-site visits, as well as review of cash draws/reimbursement requests) to help ensure going forward that the federal funds expended under the CARES Act are properly reported. 

Technology & Data Analytics

In its 2019 report on government oversight, the Bipartisan Policy Center Task Force recommends the use of technology and data analytics in government oversight. According to this report, “combining technology and data—deriving the value from data, being able to use data for decision-making—has resulted in the ability to have a ‘canary in the coal mine’ viewpoint of programmatic risk, of operational risk, and of mission effectiveness, thus allowing oversight bodies to identify potential areas for failure much earlier.”  

Data mining software and analytics tools can help state and local governments comb through data and monitor performance more efficiently, and an online portal can provide a central point for data collection and reporting. Here are some things to consider when using an online portal:

• Security – The website should be built in a way that maintains data integrity and protects against cyberattacks. The system also should have internal control processes in place to safeguard sensitive data.
• Flexibility – Reporting will come from a variety of different organizations and businesses, so the portal must be able to accommodate different forms of data and changes to projects.
• Ease of use – The portal must be easy to use and understandable for everyone who is required to use it. 
• Analytics – The site should allow for quick data analysis and reporting.

Oversight is about more than just compliance. It involves developing a framework designed to improve performance and accountability. Transparency is what keeps government agencies accountable and constituents informed. There is much more to these two tasks than can be included in this article. For more information on transparency and oversight best practices, contact your BKD Trusted Advisor^™. They can draw from BKD’s public sector experience, top-tier data analytics tools, process knowledge and an understanding of the risks and challenges of working with federal relief funds to help you craft a transparency and oversight plan to meet your needs. 

At BKD, we believe that during this crisis, state and local government agencies need Unmatched Client Service^® now more than ever. Let us help you meet your community’s needs. As with most topics related to COVID-19, changes are being made rapidly. Please note that this information is current as of the date of publication. For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below.