On June 18, 2020, OMB issued 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, to extend certain flexibilities outlined in a previous OMB memorandum, M-20-17. That memorandum, along with two related memoranda, which Venable previously reported on here and here, provided short-term flexibilities for administrative, financial, and audit requirements under the Uniform Guidance.
Now, as the country is beginning to recover and reopen, OMB recognizes that there is still uncertainty in the reopening process and the speed of the ramp-up of federally funded projects. M-20-26 seeks to provide recipients affected by the COVID-19 pandemic a "reasonable" transition to normal operations, while also bearing in mind the looming uncertainties, by providing extensions on two flexibilities provided in M-20-17, which expired on June 16, 2020.
Allowability of salaries and other project activities: Originally listed as item six in M-20-17, this item gives awarding agencies the flexibility to allow recipients to charge salaries, benefits, and other costs necessary to resume activities to the federal award. M-20-26 extends that flexibility through September 30, 2020. Additionally, M-20-26 adds two restrictions as a result of the limited funding resources available in each federal award. The first restriction sets out to prevent the federal government from paying the same expenditures twice by stating that payroll costs paid with the Paycheck Protection Program (PPP) loans or any other federal CARES Act programs cannot also be charged to current federal awards. The second restriction preserves federal funds for the ramp-up effort by requiring awarding agencies to require recipients to exhaust other available funding sources to sustain their workforce and implement necessary steps to save overall operational costs.
Extension of Single Audit submission: Under this item outlined in M-20-17, recipients and subrecipients that had not yet filed their single audits with the Federal Audit Clearinghouse as of March 19, 2020 that have normal due dates from March 30, 2020 through June 30, 2020 were permitted to delay the completion and submission of the Single Audit reporting package up to six months beyond the normal due date. M-20-26 included these flexibilities and added a three-month extension on audits due from July 31, 2020 through September 30, 2020. Of note, OMB stated that the extension does not require recipients or subrecipients to seek approval by the cognizant or oversight agency, but directed recipients to maintain documentation supporting the reason for their delayed filing.
Last, 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 in order to ensure there is adequate oversight of the COVID-19 Emergency Acts funding and programs. As with previous guidance, OMB is likely signaling that relaxed regulatory obligations in the near term will be followed by scrutiny, and recipients and subrecipients should be mindful of the importance of documenting any flexibilities they utilize.
M-20-26 effectively rescinds M-20-17 and M-20-20. M-20-11 will expire on July 26, 2020. The flexibilities provided in M-20-26 are likewise time limited and will expire on September 30, 2020.
Flexibilities Not Extended: M-20-26 is just as notable for the M-20-17 flexibilities, which OMB declined to extend. For example, M-20-17 permitted recipients to charge incurred costs related to the cancellation of events to the award, but that flexibility has expired. OMB also did not extend the previous encouragement for no-cost extensions. While it may be too soon to read the tea leaves, this could signal a potential tightening of leniency, and grant recipients should be mindful that the government may be expecting a return to business as usual.
As with previous OMB guidance relating to the government's response to COVID-19, we will continue to update you as things develop.
**A special thank-you to Anna Kaye for her contributions to this article.