The Importance of Transparency & Oversight of Federal Relief Funds

Thoughtware Alert Aug 05, 2020
Advisor and client meeting over paperwork

In 2019, the federal government spent $721 billion in federal aid for state and local governments to support activities such as education, transportation, infrastructure workforce initiatives, and community development. 1 Before COVID-19, it was estimated that state and local federal relief funds would reach more than $790 billion. According to a recent report from the Committee on Ways and Means, state and local governments have received $765 billion in federal Coronavirus spending alone.2 This of course doesn’t include any future monies that would come as a result of future relief legislation.

State and local governments have come to rely on federal funds to help provide citizens with various necessary services. Federal relief funds are especially important to help communities and individuals in times of need, which means state and local governments are under intense pressure to disperse relief funds as quickly as possible. This can be challenging, since not all relief funds are the same. Each federal funding source, e.g., disaster recovery, FEMA, CDBG, CARES Act, etc., has its own specific set of deadlines and reporting requirements. While each grant may come with its own unique compliance requirements and challenges, they all have one thing in common—the need for transparency and accountability.  

This article explores the key components states and localities should consider to help demonstrate transparency and oversight as they administer federal funds.

Developing Structure & Controls

When communities are hit with a crisis—whether it’s a natural disaster, health crisis, or economic recession—state and local governments must act fast to distribute the federal grant monies to the people in need and the programs designed to boost recovery. This requires government agencies to develop an action plan, policies and procedures, and management and reporting systems to administer grants effectively and efficiently. Developing structure and controls can help support the management and compliance required by granting agencies. 

Effective Management Through Methodical Tracking

One of the most important ways for states and localities to monitor relief funds is through methodical tracking. Key practices for effective tracking include:

  • Tracking relief funds separately from other types of funds   
  • Identifying all federal awards received and expended and the federal programs for which they were received
  • Creating new general ledger accounts for revenues and expenditures associated with federal relief funds 
  • Performing weekly reviews of expenditures incurred by appropriate levels of management and detailed reports of expenditures incurred versus reimbursements to date 

Use of Technology & Data Analytics

Grant reporting systems used for traditional grants may not be adequate to meet the greater transparency, auditing, and compliance needs of relief funds. The use of legacy systems can limit an agency’s ability to effectively manage programs and report progress, reducing transparency and accountability in the process. 

In its 2019 report on government oversight, the Bipartisan Policy Center Task Force recommended 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 in projects.
  • Ease of use – The portal must be easy to use and understandable for everyone required to use it.
  • Analytics – The site should allow for quick data analysis and reporting.

Prioritize & Apply Funding Properly

Since recovery work often is implemented and executed through multiple coordinated agencies, the primary recipient agency must work cooperatively with multiple partners to provide reporting data to fulfill all federal program requirements. Beyond the federal requirements, the public also puts pressure on the government to be transparent and open about where the funds are distributed and what outcomes result from those expenditures.

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 that state and local governments should 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 particular relief fund 
    • Identifying requirements imposed by the PTE so the award use complies with statutes, regulations, and 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 the subrecipient take 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 aren’t in place with respect to subrecipient monitoring, consider developing written policies that will address monitoring (including on-site visits, as well as review of cash draws/reimbursement requests) to help assess whether federal relief funds are properly reported going forward. 

Keep Accountability in Mind 

Transparency and oversight are the key to an agency’s accountability. 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. 

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.  

As you navigate this pandemic and prepare for what’s to come, we believe state and local government agencies deserve Unmatched Client Service® now more than ever. Let us help you meet your community’s needs. Our trusted advisors 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. 

For more information on transparency and oversight best practices, reach out to your BKD Trusted Advisor or use the Contact Us form below. 

Please note that this information is current as of the date of publication.

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https://www.whitehouse.gov/wp-content/uploads/2020/02/ap_14_state_and_local_fy21.pdf 
2 https://gop-waysandmeans.house.gov/state-and-local-governments-have-received-over-765-billion-in-federal-coronavirus-spending/ 

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