Pennsylvania COVID-19 County Relief Block Grant program: key audit and compliance considerations

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020, and with it came the Coronavirus Relief Fund (established by Section 5001 of the CARES Act). Within the Commonwealth of Pennsylvania, Governor Tom Wolf signed Act 24 of 2020, which established the COVID-19 County Relief Block Grant (CRBG) program. The CRBG program provided CARES Act funding by means of block grants to Pennsylvania counties. Nearly all counties in the Commonwealth were eligible to receive CRBG funding, which was distributed to local governments based on population, with a minimum distribution of $1 million per county.

Many counties have been focused on how they can use these funds under the eligible expenditures, but as we get closer to fiscal year ends, it is important to understand both federal and state compliance implications, and be prepared for potential audit variances associated with relief funding.

Federal compliance considerations

From a federal standpoint, the Office of Management and Budget (OMB) Compliance Supplement (2 CFR Part 200, Appendix XI) governs the compliance requirements for this program. When evaluating the eligible uses for CRBG funding, it is important to ensure each individual program expenditure (1) is a necessary expenditure incurred due to COVID-19, (2) is not accounted for in the government’s most recently approved budget as of March 27, 2020 and (3) was incurred between March 1, 2020 and Dec. 30, 2020. Counties leveraging this program are required to maintain documentation sufficient to evidence the appropriate use of funding under these criteria. Furthermore, in cases where this funding was used to provide grants or sub-awards to other organizations, the pass-through entity requirements outlined in sections 200.330 and 200.331, including timely identification of the required data elements to sub-recipients, sub-recipient risk assessment evaluation and oversight requirements apply.

State compliance considerations

While the federal requirements do not explicitly outline eligible expenditures, Pennsylvania’s Department of Community and Economic Development (DCED) has established specific requirements for counties to follow. For starters, a key requirement established by DCED is the cap on administrative costs. DCED has set a cap of the lesser of (1) 2% of the award allocation or (2) $200,000 for administrative costs charged to the grant. Other allowable expenditures under this program include curbing the expenditures associated with direct county response to COVID-19, purchases of personal protective equipment (PPE), small business grant programs (for small businesses with fewer than 100 employees who did not receive CARES funding from another source, such as the payroll protection program [PPP]), tourism businesses adversely affected by the pandemic, behavioral health and substance use disorder treatment services, broadband deployment with priority to unserved or underserved areas, and not-for-profit assistance programs. DCED also requires a monthly Financial Status Report (FSR) to be submitted accompanied by a general ledger detail for all CRBG expenditures that began on or after Sept. 1, 2020.

Bringing it all together – key audit considerations

Pennsylvania’s CRBG program, like other COVID-19 relief funding programs, is comprised of significant federal financial assistance, and most county governments can expect that their CRBG funds will be audited as a major federal award program in their Dec. 31, 2020 single audits. The depth and clarity of compliance requirements under these programs can be daunting; the most important consideration when preparing for the single audit is to ensure there is sufficient documentation on-hand to support program expenditures. As a best practice, grant agreements should also be readily available, as well as any reports provided to the DCED or the Department of Treasury related to the CRBG program.

For more information, or to learn how Baker Tilly can help, contact our Pennsylvania county audit specialists.